-----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, OlbMUXSMZ6hhqC8JA5UONaoxIerVcLn+T6ZZzMnS7p7JtkVr6Q+gyx/SHn8+mgig c7rQi4Jn9gBTXPuUXvxV0w== 0000784961-99-000034.txt : 19991220 0000784961-99-000034.hdr.sgml : 19991220 ACCESSION NUMBER: 0000784961-99-000034 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19991217 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: VDC COMMUNICATIONS INC CENTRAL INDEX KEY: 0000784961 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 061524454 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-54351 FILM NUMBER: 99776665 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 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MORAN FREDERICK A CENTRAL INDEX KEY: 0001100178 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O VDC COMMUNICATIONS INC STREET 2: 75 HOLLY HILL LN CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2038695100 MAIL ADDRESS: STREET 1: C/O VDC COMMUNICATIONS INC STREET 2: 75 HOLLY HILL LN CITY: GREENWICH STATE: CT ZIP: 06830 SC 13D 1 OMB APPROVAL ------------ OMB Number: 3235-0145 Expires: August 31, 1999 Estimated average burden hours per response ....14.90 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. ... )* VDC Communications, Inc. - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock - -------------------------------------------------------------------------------- (Title of Class of Securities) 91821B 10 1 - -------------------------------------------------------------------------------- (CUSIP Number) Frederick A. Moran VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 (203) 869-5100 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) May 5, 1999 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [ ] Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss.204.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 2 of 13 Pages - -------------------------------------------------------------------------------- 1. Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Frederick A. Moran - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) (b) X - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) PF, OO - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) X - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization U.S.A. - -------------------------------------------------------------------------------- Number of 7. Sole Voting Power Shares Bene- ficially by 290,375 (1) Owned by Each -------------------------------------------------------------- Reporting 8. Shared Voting Power Person With 427,817 (1) -------------------------------------------------------------- 9. Sole Dispositive Power 290,375 (1) -------------------------------------------------------------- 10. Shared Dispositive Power 427,817(1) - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 3,502,814 (2), (3) - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 16.3% (4) - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) IN (1) As of the date of filing this statement (the "Statement"), Frederick A. Moran ("Mr. Moran") had sole dispositive and voting power with respect to 290,375 shares of VDC Communications, Inc. (the "Issuer") common stock, par value $.0001 per share (the "Common Stock") (including an option to purchase 40,000 shares of Issuer Common Stock held by Mr. Moran, individually, and vested as of December 1999) and shared dispositive and voting power with respect to 427,817 shares of Issuer Common Stock. As of May 15, 1999, the date which is ten days following the date of the event which requires filing this Statement, Mr. Moran had sole voting and dispositive power with respect to 282,675 shares and shared dispositive and voting power with respect to 427,817 shares of Issuer Common Stock. - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 3 of 13 Pages - -------------------------------------------------------------------------------- (2) Includes stock options to purchase 42,000 shares of Issuer Common Stock which vested in December 1999. The 3,502,814 shares are owned by the following individuals and entities in the following amounts: Frederick A. Moran (125,000 shares plus option to purchase 40,000 shares); Joan Moran (option to purchase 2,000 shares); Frederick A. Moran and Joan Moran (386,437 shares); Frederick A. Moran and Anne Moran (41,380 shares); the Moran Equity Fund, Inc. (938 shares); the Luke F. Moran Trust (1,328,660 shares); the Kent F. Moran Trust (1,328,810 shares); Luke F. Moran (22,102 shares); Kent F. Moran (15,671 shares); the Frederick A. Moran, IRA (85,998 shares); the Frederick Moran Trust (90 shares); the Anne Moran Trust (125 shares); the Luke Moran IRA (333 shares); the Kent Moran IRA (333 shares); the Joan Moran IRA (248 shares); Anne Moran (63,643 shares); and the Anne Moran IRA (61,046 shares). This Statement assumes that all shares referenced in the preceding paragraph are beneficially owned by Mr. Moran due to his family relationship and family association with the individuals and entities in the preceding paragraph and therefore the possibility that Mr. Moran is part of a "group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. Along these lines, the beneficial ownership of shares owned by Anne Moran, Mr. Moran's mother, and the Anne Moran IRA were included in Mr. Moran's beneficial ownership as of December 1999, contemporaneously with Anne Moran's decision to reside with Mr. Moran. However, it is important to note, as referenced in Items 7 through 10 of the cover page, that Mr. Moran has voting and dispositive power over a very limited number of shares. The filing of this Statement shall not be construed as an admission that Mr. Moran is, for purposes of Section 13(d), or 13(g) of the Act, the beneficial owner of any securities covered by the Statement. The filing of this Statement shall not be construed as an admission that Mr. Moran is part of any "group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. Moreover, Mr. Moran specifically disclaims that he is part of any such group. This disclaimer is based, in part, on the fact that there is neither an agreement, either orally or in writing, among the Moran individuals or Moran entities that Mr. Moran is associated with, nor is there a common plan or goal among such individuals and entities that would give rise to a "group." (3) As of May 15, 1999, the date that is ten days after the date of event which requires the filing of this Statement, Mr. Moran was the beneficial owner of 3,368,425 shares. As of May 15, 1999, the 3,368,425 shares were owned by the following individuals and entities in the following amounts: Frederick A. Moran (125,000 shares); Frederick A. Moran and Joan Moran (386,437 shares); Frederick A. Moran and Anne Moran (41,380 shares); the Moran Equity Fund, Inc. (27,938 shares); the Luke F. Moran Trust (1,328,660 shares); the Kent F. Moran Trust (1,328,810 shares); Luke F. Moran (22,102 shares); Kent F. Moran (20,971 shares); the Frederick A. Moran, IRA (85,998 shares); the Frederick Moran Trust (90 shares); the Anne Moran Trust (125 shares); the Luke Moran IRA (333 shares); the Kent Moran IRA (333 shares); and the Joan Moran IRA (248 shares). The beneficial ownership of 3,368,425 shares assumes that all shares referenced in the preceding paragraph were beneficially owned by Mr. Moran on May 15, 1999 due to his family relationship and family association with the individuals and entities in the preceding paragraph and therefore the possibility that Mr. Moran was part of a "group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. However, it is important to note, as referenced in Footnote (1) to the cover page, that as of May 15, 1999, Mr. Moran had voting and dispositive power over a very limited number of shares. The filing of this Statement shall not be construed as an admission that Mr. Moran was, for purposes of Section 13(d), or 13(g) of the Act, the beneficial owner of 3,368,425 shares on May 15, 1999. The filing of this Statement shall not be construed as an admission that Mr. Moran is or was part of any "group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. Moreover, Mr. Moran specifically disclaims that he is or was part of any such group. This disclaimer is based, in part, on the fact that there is and was neither an agreement, either orally or in writing, among the Moran individuals or Moran entities that Mr. Moran is associated with, nor is or was there a common plan or goal among such individuals and entities that would give rise to a "group." - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 4 of 13 Pages - -------------------------------------------------------------------------------- (4) Based upon 21,506,917 shares of Common Stock as reported in the Issuer's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 plus 42,000 shares of Issuer Common Stock underlying stock options. The relevant percentage for May 15, 1999 was 17.9% based upon 18,853,257 shares of Common Stock as reported in Issuer's Quarterly Report on Form 10-Q for the quarter ended March 30, 1999. This statement (the "Statement") relates to the common stock, par value $.0001 per share (the "Common Stock") of VDC Communications, Inc., a Delaware corporation (the "Issuer"). This Statement constitutes an initial filing of Schedule 13D for Frederick A. Moran ("Mr. Moran"). Item 1. Security and Issuer This Statement relates to the Issuer's Common Stock. The address of the Issuer's principal executive office is 75 Holly Hill Lane, Greenwich, CT 06830. Item 2. Identity and Background (a) The name of the person filing this Statement is Frederick A. Moran. (b-c) Mr. Moran's principal occupation is serving as Officer and Director of the Issuer. Mr. Moran's business address and the address of the Issuer is 75 Holly Hill Lane, Greenwich, Connecticut 06830. The Issuer's principal business is telecommunications. (d) During the last five years, Mr. Moran has not been convicted in any criminal proceeding. (e) In a civil action filed by the Securities and Exchange Commission ("SEC") during June 1995, Mr. Moran and Moran Asset Management, Inc., an investment advisory firm ("Moran Asset") were found by the United States District Court for the Southern District of New York to have violated Section 206(2) of the Investment Advisers Act of 1940 (the "Advisers Act") for negligently allocating shares of stock to Mr. Moran's personal, family and firm accounts at a slightly lower price than shares of stock purchased for Moran Asset's advisory clients the following day. The Court also found that Mr. Moran, Moran Asset and Moran & Associates, Inc. Securities Brokerage, an investment banking and securities brokerage firm ("Moran Brokerage") had violated the disclosure requirements of Section 204 of the Advisers Act and the corresponding broker-dealer registration requirements of Section 15(b) of the Securities Exchange Act of 1934 (the "Exchange Act") by willfully failing to disclose that Mr. Moran's two eldest sons were members of Moran Asset's and Moran Brokerage's board of directors. Mr. Moran was the President and principal portfolio manager of Moran Asset, as well as the President and Director of Research for Moran Brokerage. As a result of these findings, Mr. Moran, Moran Asset and Moran Brokerage were permanently enjoined from violating Sections 204, 206(2), and 207 of the Advisers Act and Section 15(b) of the Exchange Act. The Court ordered Moran Asset and Moran Brokerage to pay civil monetary penalties in the respective amounts of $50,000 and $25,000. The Court also ordered Mr. Moran to disgorge $9,551.17 plus prejudgment interest and pay a civil monetary penalty in the amount of $25,000. Although Mr. Moran and the other named parties accepted and fully complied with the findings of the District Court, they believe that the outcome of the matter and the sanctions imposed failed to take into account a number of mitigating circumstances, the first of which is that the basis for the violation of Section 206(2) of the Advisers Act was an isolated incident of negligence resulting in the allocation of 15,000 shares of stock to Moran family and firm accounts at a slightly lower price than those purchased for firm clients the following day, resulting in $9,551.17 in higher purchase cost incurred by these clients. In the opinion of Mr. Moran, the scope of this infraction was not properly considered in view of the following circumstances, among others: (i) the extraordinary volume of the daily business undertaken by Moran Asset and Moran Brokerage which, on the date in question, purchased approximately $34,000,000 of stocks for advisory clients and proprietary - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 5 of 13 Pages - -------------------------------------------------------------------------------- accounts; (ii) that the appropriate personnel had inadvertently allocated shares to certain personal and family accounts on the belief that all client purchases had been completed; and (iii) shares of an additional stock had been purchased that day for certain personal and family accounts at prices higher than those paid by advisory clients the following day. Second, with respect to the violation of the disclosure requirements of Section 204 of the Advisers Act and Section 15(b) of the Exchange Act, the Court found Mr. Moran and others to be liable for failure to disclose additional directors of Moran Asset and Moran Brokerage. However, the additional directors in question were Mr. Moran's two older sons who had been appointed as directors as a matter of clerical convenience. In fact, they never participated in any Board of Directors meetings, nor made any decisions concerning Moran Asset or Moran Brokerage, and were never informed that they were directors. Furthermore, if their directorships had been disclosed, as the Court had determined to be required, Mr. Moran believes that any such disclosure would have, in fact, enhanced the Form ADV of Moran Asset and the Form BD of Moran Brokerage, since both adult sons were professional securities analysts with major investment banks and held college degrees from prestigious universities. Third, during his twenty-four years as a full time investment professional, Mr. Moran has not otherwise been the subject of any SEC, NASD or other regulatory or judicial matters. Other than as described above, during the last five years, Mr. Moran has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction, as a result of which he was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Mr. Moran is a citizen of the United States of America. Item 3. Source and Amount of Funds or Other Consideration On May 5, 1999, Mr. Moran and his wife, Joan Moran, jointly purchased 280,000 shares of Issuer Common Stock for $840,000. The source of this purchase price was the personal funds of Mr. Moran and Joan Moran. Also on May 5, 1999, the Kent F. Moran Trust purchased 24,160 shares of Issuer Common Stock for $72,480. The source of this purchase price was the Trust's funds. Also on May 5, 1999, the Luke F. Moran Trust purchased 24,010 shares of Issuer Common Stock for $72,030. The source of this purchase price was the Trust's funds. The above-referenced acquisitions were part of an overall private placement conducted by the Issuer in May 1999 (the "May 1999 Private Placement") in which the Issuer sold 1,265,947 shares of Common Stock in a non-public offering exempt from registration pursuant to Section 4(2), and Rule 506 of Regulation D of the Securities Act of 1933 as follows:
Shareholder Number of Shares Consideration ($) Warrants(1) ----------- ---------------- ----------------- ----------- Adase Partners, L.P. 60,000 162,000.00 6,000 Alnilam Partners, LP 2,185 (2) Dean Brizel and Jeanne Brizel 20,000 54,000.00 2,000 Stephen Buell 20,000 54,000.00 2,000 Capital Opportunity Partners One, LP 20,000 54,000.00 2,000 Arthur Cooper and Joanie Cooper 40,000 108,000.00 4,000 Mark Eshman & Jill Eshman trustees for the 20,000 54,000.00 2,000 Eshman Living Trust dated 9/24/90 Jeffrey Feingold and Barbara Feingold 20,000 54,000.00 2,000 Fred Fraenkel 20,000 54,000.00 2,000 Torunn Garin 60,000 162,000.00 6,000 Henry D. Jacobs Jr. 37,037 99,999.90 3,703 Frederick A. Moran and Joan B. Moran 280,000 840,000.00 - - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 6 of 13 Pages - -------------------------------------------------------------------------------- Kent F. Moran Trust 24,160 72,480.00 - Luke F. Moran Trust 24,010 72,030.00 - Ernst Von Olnhausen 10,000 27,000.00 1,000 Paradigm Group, LLC 370,370 999,999.00 64,814 (3) PGP I Investors, LLC 185,185 499,999.50 18,518 Santa Fe Capital Group (NM), Inc. 3,000 (2) Scott Schenker and Randi Schenker 20,000 54,000.00 2,000 Michael Weissman 10,000 27,000.00 1,000 Robert Vicas 20,000 54,000.00 2,000 ------------ ------ --------- ----- Total 1,265,947 121,035
(1) The warrants have an exercise price of $6.00 per share and expire three years from the date of grant (May, 2002). (2) In consideration for investment banking services rendered in connection with private placement. (3) Includes warrant to purchase 27,777 shares granted in consideration for consulting services rendered in connection with private placement. The following paragraphs detail prior transactions that resulted in the acquisition of Issuer securities, certain of which are reflected in this Statement. In December 1998, Anne Moran, the Anne Moran IRA, Mr. Moran and Anne Moran, the Frederick A. Moran, IRA, the Joan Moran, IRA, Kent Moran, Luke Moran and the Moran Equity Fund, Inc. purchased shares of Issuer Common Stock in a non-public offering exempt from registration pursuant to Section 4(2) and Rule 506 of Regulation D of the Act as set forth below (the "December Private Placement"). For the individuals and entity referenced in this paragraph, certain other information required by this Item 3 is set forth in the table below.
Shareholder Number of Shares Purchase Price ($) Source of Funds - ----------- ---------------- ------------------ --------------- Anne Moran 35,310 127,998.75 N/A Anne Moran, IRA 49,379 178,998.87 N/A Frederick A. Moran & 41,380 150,002.50 Personal funds of Mr. Moran and Anne Moran Anne Moran Frederick A. Moran, IRA 331 1,199.875 Personal funds of Mr. Moran Frederick W. Moran 100,000 362,500 N/A Joan Moran, IRA 248 899 Personal funds of Joan Moran Kent Moran 8,221 29,801.13 Personal funds of Kent Moran Luke Moran 9,352 33,901 Personal funds of Luke Moran Moran Equity Fund, Inc. 938 3,400.25 Working capital --- TOTAL 245,159
In May 1998, Anne Moran, the Anne Moran Trust, the Anne Moran, IRA, the Moran Equity Fund, Inc., the Frederick A. Moran, IRA, Frederick A. Moran and Joan B. Moran, the Frederick A. Moran Trust, Kent Moran, the Kent Moran, IRA, Luke Moran, and the Luke Moran IRA purchased shares of Issuer Common Stock in a non-public offering exempt from registration pursuant to Section 4(2) and Rule 506 of Regulation D of the Act as set forth below (the "May Private Placement"). For the individuals and entities referenced in this paragraph, certain other information required by this Item 3 is set forth in the table below. - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 7 of 13 Pages - --------------------------------------------------------------------------------
Shareholder Number of Shares Purchase Price ($) Source of Funds - ----------- ---------------- ------------------ --------------- Lancer Offshore, Inc. 150,000 900,000 N/A Lancer Voyager Fund 25,000 150,000 N/A Anne Moran 39,333 235,998 N/A Anne Moran Trust 250 1,500 Trust funds Anne Moran, IRA 11,667 70,002 N/A Moran Equity Fund, Inc. 27,000 162,000 Working capital Frederick A. Moran, IRA 85,667 514,002 Personal funds of Mr. Moran Frederick A. Moran 23,667 142,002 Personal funds of Mr. Moran and & Joan B. Moran Joan Moran Frederick A. Moran Trust 180 1,080 Trust funds Frederick W. Moran 100,000 600,000 N/A Kent Moran 10,000 60,000 Personal funds of Kent Moran Kent Moran, IRA 333 1,998 Personal funds of Kent Moran Luke Moran 10,000 60,000 Personal funds of Luke Moran Luke Moran, IRA 333 1,998 Personal funds of Luke Moran Alan B. Snyder 100,000 600,000 N/A ------- TOTAL 583,430
Pursuant to the terms of an Amended and Restated Agreement and Plan of Merger, by and among VDC Corporation Ltd. ("VDC"), a Bermuda company, the Issuer (then known as VDC (Delaware), Inc.), Sky King Communications, Inc., a Connecticut corporation ("Sky King") and the Sky King shareholders (the "Merger Agreement"), as further amended by an Amendment to the Merger Agreement, dated March 6, 1998 (the "Amendment"), Sky King merged with and into the Issuer (the "Merger"). In exchange for their shares of Sky King common stock, Sky King shareholders were issued shares of preferred stock of the Issuer ("Preferred Stock"). As part of the Merger: (1) Mr. Moran and Joan Moran were jointly issued 82,670 shares of Preferred Stock; (2) Luke Moran was issued 1,304,650 shares of Preferred Stock; and (3) Kent Moran was issued 1,304,650 shares of Preferred Stock. In accordance with the terms of the Merger Agreement, all shares of Preferred Stock, including those shares held by Mr. Moran and Joan Moran, jointly, Kent Moran and Luke Moran, were converted into shares of Issuer Common Stock upon the merger of VDC with and into the Issuer on November 6, 1998. References to, and descriptions of, the Merger Agreement and the Amendment as set forth in this Item 3 are qualified in their entirety by reference to the copies of the Merger Agreement and the Amendment, included as Exhibits 4 and 5, respectively, and are incorporated in this Item 3 where such references and descriptions appear. Item 4. Purpose of the Transaction The securities acquired by Frederick A. Moran and Joan Moran, Frederick A. Moran and Anne Moran, the Moran Equity Fund, Inc., the Luke F. Moran Trust, the Kent F. Moran Trust, Luke F. Moran, Kent F. Moran, the Frederick A. Moran, IRA, the Frederick Moran Trust, the Anne Moran Trust, the Luke Moran IRA, the Kent Moran IRA, the Joan Moran IRA., Anne Moran, and the Anne Moran, IRA, as documented above in Item 3, were acquired for investment purposes. It should be noted, however, that the shares acquired by Mr. Moran and Joan Moran, Luke Moran and Kent Moran in the Merger were acquired in a transaction pursuant to which Sky King management, including Mr. Moran, assumed management control of VDC. That is, despite the fact that the shares acquired by such individuals were acquired for investment purposes, the shares were acquired as part of a transaction that specifically contemplated a change in management. Except as set forth below, Mr. Moran does not have any present plans or proposals which relate to, or would result in: (a) an acquisition by any person of additional securities of the Issuer, or the disposition of securities of the - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 8 of 13 Pages - -------------------------------------------------------------------------------- Issuer; (b) an extraordinary transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount of the assets of the Issuer or any of its subsidiaries; (d) any change in the present Board of Directors (the "Board") or management of the Issuer; (e) any material change in the present capitalization or dividend policy of the Issuer; (f) any other material change in the Issuer's business or corporate structure; (g) any changes in the Issuer's charter, bylaws, or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (h) causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to the Act; or (j) any action similar to those enumerated above. Mr. Moran in his capacity as an Officer and Director of the Issuer is constantly assessing enhancements to the Issuer's business. One possibility being considered is the use of the Internet as a means of augmenting the Issuer's carriage of telecommunications traffic or to otherwise complement the Issuer's business with Internet services. As an Officer and Director of the Issuer, Mr. Moran has influence over the corporate activities of the Issuer, including as may relate to transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Mr. Moran reserves the right to formulate purposes, plans, or proposals regarding the Issuer or its securities to the extent he deems advisable in light of his position as Chief Executive Officer, Chairman of the Board and Director of the Issuer. Mr. Moran reserves the right to acquire or sell securities of the Issuer to the extent he deems advisable in light of market conditions and other factors. Item 5. Interest in Securities of the Issuer (a) As of the date of the filing of this Statement, Mr. Moran is the beneficial owner of 3,502,814 shares of Issuer Common Stock (see Footnote 1 below)(which includes stock options to purchase 42,000 shares of Issuer Common Stock which vested in December 1999) which constitutes 16.3% of the issued and outstanding shares of Issuer Common Stock (based upon 21,506,917 shares of Common Stock as reported in the Issuer's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 plus 42,000 shares of Issuer Common Stock underlying stock options). As of May 15, 1999, the date that is ten days after the date of event which requires the filing of this Statement, Mr. Moran was the beneficial owner of 3,368,425 shares (see Footnote 2 below), which shares constituted 17.9% of the issued and outstanding shares of Issuer Common Stock (based upon 18,853,257 shares of Common Stock as reported in Issuer's Quarterly Report on Form 10-Q for the quarter ended March 30, 1999). (b) As of the date of filing this Statement, Mr. Moran had sole dispositive and voting power with respect to 290,375 shares of Issuer Common Stock (including option to purchase 40,000 shares of Issuer Common Stock held by Mr. Moran, individually, and vested as of December 1999) and shared dispositive and voting power with respect to 427,817 shares of Issuer Common Stock. As of May 15, 1999, the date which is ten days following the date of the event which requires filing this Statement, Mr. Moran had sole voting and dispositive power with respect to 282,675 shares and shared dispositive and voting power with respect to 427,817 shares of Issuer Common Stock. The following sets forth information with regards to each person with whom the power to vote or to direct the vote or to dispose or to direct the disposition of shares is shared: (i) Joan B. Moran. (a) Joan B. Moran is one of the individuals with whom Mr. Moran shares the power to vote or to direct the vote or to dispose or direct the disposition of shares. - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 9 of 13 Pages - -------------------------------------------------------------------------------- (b-c) Mrs. Moran's principal occupation is administrative and human resources assistant at the Issuer. Mrs. Moran's business address and the address of the Issuer is 75 Holly Hill Lane, Greenwich, Connecticut 06830. (d) During the last five years, Mrs. Moran has not been convicted in any criminal proceedings. (e) During the last five years, Mrs. Moran has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction, as a result of which she was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Mrs. Moran is a citizen of the United States of America. (ii) Anne Moran. (a) Anne Moran is one of the individuals with whom Mr. Moran shares the power to vote or to direct the vote or to dispose or direct the disposition of shares. (b-c) Mrs. Moran is not currently employed. Mrs. Moran's residence address is 25 Doubling Road, Greenwich, Connecticut 06830. (d) During the last five years Mrs. Moran has not been convicted in any criminal proceedings. (e) During the last five years, Mrs. Moran has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction, as a result of which she was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Mrs. Moran is a citizen of the United States of America. (c) Mr. Moran has not effected any transactions in the securities of the Issuer during the past sixty (60) days. (d) The 3,502,814 shares referenced in Item 5(a) are owned by the following individuals and entities in the following amounts: Frederick A. Moran (125,000 share plus option to purchase 40,000 shares); Joan Moran (option to purchase 2,000 shares); Frederick A. Moran and Joan Moran (386,437 shares); Frederick A. Moran and Anne Moran (41,380 shares); the Moran Equity Fund, Inc. (938 shares); the Luke F. Moran Trust (1,328,660 shares); the Kent F. Moran Trust (1,328,810 shares); Luke F. Moran (22,102 shares); Kent F. Moran (15,671 shares); the Frederick A. Moran, IRA (85,998 shares); the Frederick Moran Trust (90 shares); the Anne Moran Trust (125 shares); the Luke Moran IRA (333 shares); the Kent Moran IRA (333 shares); the Joan Moran IRA (248 shares); Anne Moran (63,643 shares); and the Anne Moran IRA (61,046 shares). Each of these individuals and entities has either the sole, or shares, the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, securities the beneficial ownership of which is attributed to them. The Kent F. Moran Trust and the Luke F. Moran Trust each separately owns more than five percent of the outstanding shares of Common Stock of the Issuer. This Statement assumes that all shares referenced in the preceding paragraph are beneficially owned by Mr. Moran due to his family relationship and family association with the individuals and entities in the preceding paragraph and therefore the possibility that Mr. Moran is part of a "group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 10 of 13 Pages - -------------------------------------------------------------------------------- thereunder. Along these lines, the beneficial ownership of shares owned by Anne Moran, Mr. Moran's mother, and the Anne Moran IRA were included in Mr. Moran's beneficial ownership as of December 1999, contemporaneously with Anne Moran's decision to reside with Mr. Moran. However, it is important to note, as referenced in Item 5(b), that Mr. Moran has voting and dispositive power over a very limited number of shares. The filing of this Statement shall not be construed as an admission that Mr. Moran is, for purposes of Section 13(d), or 13(g) of the Act, the beneficial owner of any securities covered by the Statement. The filing of this Statement shall not be construed as an admission that Mr. Moran is part of any "group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. Moreover, Mr. Moran specifically disclaims that he is part of any such group. This disclaimer is based, in part, on the fact that there is neither an agreement, either orally or in writing, among the Moran individuals or Moran entities that Mr. Moran is associated with, nor is there a common plan or goal among such individuals and entities that would give rise to a "group." Pursuant to the terms of a Settlement, Release and Discharge Agreement, dated November 19, 1998 by and among the Issuer, Dr. James C. Roberts, and Mr. Moran, Dr. Roberts transferred 125,000 shares of Issuer Common Stock to Mr. Moran, personally, and authorized Mr. Moran to sell said shares in order to satisfy certain indebtedness Dr. Roberts had to Mr. Moran and his wife, Mr. Moran, the Issuer, and a third-party landlord. According to the Agreement, the proceeds from the sale of said shares will go to pay off Dr. Roberts' indebtedness to the following individuals and entities in the following order: (1) Mr. Moran and his wife; (2) Mr. Moran; (3) the Issuer; and (4) a third-party landlord. (e) Not applicable. (1) The 3,502,814 shares are owned by the following individuals and entities in the following amounts: Frederick A. Moran (125,000 share plus option to purchase 40,000 shares); Joan Moran (option to purchase 2,000 shares); Frederick A. Moran and Joan Moran (386,437 shares); Frederick A. Moran and Anne Moran (41,380 shares); the Moran Equity Fund, Inc. (938 shares); the Luke F. Moran Trust (1,328,660 shares); the Kent F. Moran Trust (1,328,810 shares); Luke F. Moran (22,102 shares); Kent F. Moran (15,671 shares); the Frederick A. Moran, IRA (85,998 shares); the Frederick Moran Trust (90 shares); the Anne Moran Trust (125 shares); the Luke Moran IRA (333 shares); the Kent Moran IRA (333 shares); the Joan Moran IRA (248 shares); Anne Moran (63,643 shares); and the Anne Moran IRA (61,046 shares). This Statement assumes that all shares referenced in the preceding paragraph are beneficially owned by Mr. Moran due to his family relationship and family association with the individuals and entities in the preceding paragraph and therefore the possibility that Mr. Moran is part of a "group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. Along these lines, the beneficial ownership of shares owned by Anne Moran, Mr. Moran's mother, and the Anne Moran IRA were included in Mr. Moran's beneficial ownership as of December 1999, contemporaneously with Anne Moran's decision to reside with Mr. Moran. However, it is important to note, as referenced in Item 5(b), that Mr. Moran has voting and dispositive power over a very limited number of shares. The filing of this Statement shall not be construed as an admission that Mr. Moran is, for purposes of Section 13(d), or 13(g) of the Act, the beneficial owner of any securities covered by the Statement. The filing of this Statement shall not be construed as an admission that Mr. Moran is part of any "group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. Moreover, Mr. Moran specifically disclaims that he is part of any such group. This disclaimer is based, in part, on the fact that there is neither an agreement, either orally or in writing, among the Moran individuals or Moran entities that Mr. Moran is associated with, nor is there a common plan or goal among such individuals and entities that would give rise to a "group." (2) As of May 15, 1999, the 3,368,425 shares were owned by the following individuals and entities in the following amounts: Frederick A. Moran (125,000 shares); Frederick A. Moran and Joan Moran (386,437 shares); Frederick A. Moran and Anne Moran (41,380 shares); the Moran Equity Fund, Inc. (27,938 shares); the Luke F. Moran Trust (1,328,660 shares); the Kent F. Moran Trust (1,328,810 - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 11 of 13 Pages - -------------------------------------------------------------------------------- shares); Luke F. Moran (22,102 shares); Kent F. Moran (20,971 shares); the Frederick A. Moran, IRA (85,998 shares); the Frederick Moran Trust (90 shares); the Anne Moran Trust (125 shares); the Luke Moran IRA (333 shares); the Kent Moran IRA (333 shares); and the Joan Moran IRA (248 shares). The beneficial ownership of 3,368,425 shares assumes that all shares referenced in the preceding paragraph were beneficially owned by Mr. Moran on May 15, 1999 due to his family relationship and family association with the individuals and entities in the preceding paragraph and therefore the possibility that Mr. Moran was part of a "group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. However, it is important to note, as referenced in Item 5(b), that as of May 15, 1999, Mr. Moran had voting and dispositive power over a very limited number of shares. The filing of this Statement shall not be construed as an admission that Mr. Moran was, for purposes of Section 13(d), or 13(g) of the Act, the beneficial owner of 3,368,425 shares on May 15, 1999. The filing of this Statement shall not be construed as an admission that Mr. Moran is or was part of any "group" for the purposes of Section 13(d)(3) of the Act and Rule 13d-5(b)(1) thereunder. Moreover, Mr. Moran specifically disclaims that he is or was part of any such group. This disclaimer is based, in part, on the fact that there is and was neither an agreement, either orally or in writing, among the Moran individuals or Moran entities that Mr. Moran is associated with, nor is there a common plan or goal among such individuals and entities that would give rise to a "group." Item 6. Contracts, Arrangement, Understandings or Relationships with Respect to Securities Holder The information set forth in Item 3 is hereby incorporated by reference. A Form of Securities Purchase Agreement for the May 1999 Private Placement, the December Private Placement, and the May Private Placement are attached hereto as Exhibits 1, 2 and 3, respectively. All such Securities Purchase Agreements contained registration rights providing that the Issuer would use reasonable best efforts or best efforts to file a registration statement within a certain number of days of closing in which the shares subject to the Securities Purchase Agreement were included (subject to standard and customary underwriter scale-back provisions and other restrictions) with all registration expenses to be paid by the Issuer. Copies of the Merger Agreement and the Amendment are attached hereto as Exhibit 4 and 5, respectively. Mr. Moran has entered into an Incentive Stock Option Agreement with Issuer, dated October 1, 1999, representing an option to purchase 200,000 shares of Common Stock. The option exercise price is $1.25 per share. The option vests 20% per year over five years commencing on the first anniversary of the date of grant. The option expires five years from the date of grant. Mr. Moran has entered into an Incentive Stock Option Agreement with the Issuer, dated November 30, 1999, representing an option to purchase 450,000 shares of Common Stock. The option exercise price is $1.03125 per share. The option vests 20% per year over five years commencing on the first anniversary of the date of grant. The option expires five years from the date of grant. In connection with a personal loan made by Mr. Moran and his wife to Edwin B. Read and Mary K. Read, Mr. Read, an Issuer employee, has agreed to pledge his Issuer stock options as collateral to guarantee the repayment of the loan. This agreement is documented in a Contractual Short Term Loan Agreement by and between Edwin B. Read and Mary Karen Read and Frederick A. Moran and Joan Moran, dated June 25, 1998. The employee at issue currently has options to purchase 175,000 shares of Issuer Common Stock. Pursuant to the terms of Settlement, Release and Discharge Agreement, dated November 19, 1998 by and among the Issuer, Dr. James C. Roberts, and Mr. Moran, Dr. Roberts transferred 125,000 shares of Issuer Common Stock to Mr. Moran, personally, and authorized Mr. Moran to sell said shares in order to satisfy certain indebtedness Dr. Roberts had to Mr. Moran and his wife, Mr. - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 12 of 13 Pages - -------------------------------------------------------------------------------- Moran, the Issuer, and a third-party landlord. According to the Agreement, the proceeds from the sale of said shares will go to pay off Dr. Roberts' indebtedness to the following individuals and entities in the following order: (1) Mr. Moran and his wife; (2) Mr. Moran; (3) the Issuer; and (4) a third-party landlord. The Agreement further provides that to the extent more than 25,000 shares remain after satisfying the foregoing indebtedness, Mr. Moran will retain shares in excess of 25,000 for his personal ownership with the remaining 25,000 being surrendered to the Company for cancellation. Finally, the Agreement provides that to the extent 25,000 or fewer shares remain after satisfying the foregoing indebtedness, Mr. Moran will surrender all such remaining shares to the Company for cancellation. The descriptions of the above contracts and agreements do not purport to be complete and are qualified in their entirety by reference to the appropriate complete contract or agreement attached as an Exhibit to this Statement. Such Exhibits are incorporated in this Item 6 in their entirety to supplement the appropriate reference or description above. Item 7. Material to Be Filed as Exhibits 1. Form of Securities Purchase Agreement for May 1999 Private Placement. 2. Form of Securities Purchase Agreement for December Private Placement 3. Form of Securities Purchase Agreement for May Private Placement 4. Amended and Restated Agreement and Plan of Merger, by and among VDC Corporation Ltd., VDC (Delaware), Inc., Sky King Communications, Inc. and the shareholders of Sky King Communications, Inc., dated December 10, 1997. 5. Amendment to Amended and Restated Agreement and Plan of Merger, by and among VDC Corporation Ltd., VDC (Delaware), Inc., Sky King Communications, Inc. and the shareholders of Sky King Communications, Inc., dated March 6, 1998. 6. Incentive Stock Option Agreement by and between VDC Communications, Inc. and Frederick A. Moran, dated November 30, 1999. 7. Incentive Stock Option Agreement by and between VDC Communications, Inc. and Frederick A. Moran, dated October 1, 1999. 8. Contractual Short Term Loan Agreement by and between Edwin B. Read and Mary Karen Read and Frederick A. Moran and Joan Moran, dated June 25, 1998. 9. Settlement, Release and Discharge Agreement by and among, VDC Communications, Inc., Dr. James C. Roberts and Frederick A. Moran, dated November 19, 1998. Signature After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. December 17, 1999. - -------------------------------------------------------------------------------- Date /s/Frederick A. Moran - -------------------------------------------------------------------------------- Signature - -------------------------------------------------------------------------------- CUSIP No. 91821B 10 1 Page 13 of 13 Pages - -------------------------------------------------------------------------------- Frederick A. Moran - -------------------------------------------------------------------------------- Name/Title Attention: Intentional misstatements or omissions of fact constitute Federal criminal violations (See 18 U.S.C. 1001) EX-99.1 2 EX-99.1 EXHIBIT 1 The following form was used in connection with a private placement in May, 1999, pursuant to which: (i) Frederick A. Moran and Joan Moran, joint tenants, purchased 280,000 shares of Company common stock at $3.00 per share; (ii) the Kent F. Moran Trust purchased 24,160 shares of Company common stock at $3.00 per share; and (iii) the Luke F. Moran Trust purchased 24,010 shares of Company common stock at $3.00 per share. VDC COMMUNICATIONS, INC. ---------- SECURITIES PURCHASE AGREEMENT ---------- SHARES OF COMMON STOCK AT $3.00 PER SHARE ---------- MAY 5, 1999 1 CONFIDENTIAL - ------------ SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as of the 5th day of May, 1999, by and between VDC Communications, Inc., a Delaware corporation ("VDC" or the "Company"), and the investor whose name appears at the end of this Agreement ("Purchaser" or "Subscriber"). R E C I T A L S: ---------------- The Company wishes to obtain additional working capital and the Purchaser desires to provide such working capital to the Company through the purchase of certain shares of the Company's common stock, $.0001 par value per share (the "Common Stock"), being privately offered by the Company. NOW, THEREFORE, in consideration of the premises hereof and the agreements set forth herein below, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Sale and Purchase of Shares. Subject to the terms and conditions hereof, the Company agrees to issue and sell, and the Purchaser agrees to purchase that number of shares of Common Stock (the "Shares") identified on the signature page hereof at a purchase price of $3.00 per share. The total purchase price is set forth on the signature page hereof (the "Purchase Price"). The Purchase Price is payable upon subscription in cash, check or wire transfer. If paying by check, the check should be made payable to "VDC Communications, Inc." and delivered to VDC Communications, Inc. at 75 Holly Hill Lane, Greenwich, Connecticut, 06830. No broker, investment banker or any other person will receive from the Company any compensation as a broker, finder, adviser or in any other capacity in connection with the purchase of the Shares hereunder. 2. Description of the Shares. (a) Restricted Securities. The shares of Common Stock of the Company being offered hereby (the "Shares") shall be "restricted securities" as that term is defined under Rule 144 of the Securities Act of 1933, as amended (the "Act") and may not be offered for sale or sold or otherwise transferred in a transaction which would constitute a sale thereof within the meaning of the Act unless (i) such security has been registered for sale under the Act and registered or qualified under applicable state securities laws relating to the offer and sale of securities; or (ii) exemptions from the registration requirements of the Act and the registration or qualification requirements of all such state securities laws are available and the Company shall have received an opinion of counsel that the proposed sale or other disposition of such securities may be effected without registration under the Act and would not result in any violation of any applicable state securities laws relating to the registration or qualification of securities for sale, such counsel and such opinion to be satisfactory to the Company. 2 (b) Voting Rights; Dividends. Holders of Common Stock of the Company have equal rights to receive dividends when, as, and if declared by the Board of Directors out of funds legally available therefor. Holders of Common Stock of the Company have one vote for each share held of record and do not have cumulative voting rights. (c) Liquidation; Redemption. Holders of Common Stock of the Company are entitled upon liquidation of the Company to share ratably in the net assets available for distribution, subject to the rights, if any of holders of any preferred stock of the Company then outstanding. Shares of Common Stock of the Company are not redeemable and have no preemptive or similar rights. All outstanding shares of Common Stock of the Company are fully paid and nonassessable. (d) Restriction Upon Resale. The Subscriber hereby agrees that the Shares shall be subject to restrictions upon the transfer, sale, encumbrance or other disposition of the Shares. See "UNDERSTANDING OF INVESTMENT RISKS" AND "REGISTRATION RIGHTS". 3. Shares Offered in a Private Placement Transaction. The Shares offered by this Securities Purchase Agreement are being offered as a non-public offering pursuant to Section 4(2) and Regulation D of the Act ("Regulation D"). 4. Binding Effect of Securities Purchase Agreement; The Closing. This Securities Purchase Agreement shall not be binding on the Company unless and until an authorized executive officer of the Company has evidenced acceptance thereof by executing the signature page at the end hereof. The Company may accept or reject this Securities Purchase Agreement in its sole discretion if the Purchaser does not meet the suitability standards established herein, or for any other reason. A closing (the "Closing") will occur contemporaneously with the execution of this Agreement by all parties hereto. 5. Representations and Warranties of the Purchaser. The Purchaser represents and warrants to the Company as follows: (a) Accredited Investor. The Purchaser has such knowledge and experience in business and financial matters such that the Purchaser is capable of evaluating the merits and risks of purchasing the Shares. The Purchaser is either an "accredited investor" as that term is defined in Rule 501 of Regulation D of the Act or a "qualified institutional buyer" as that term is defined in Rule 144A of the Act, and represents that he satisfies the suitability standards identified in Section 10 hereof; (b) Loss of Investment. The Purchaser's (i) overall commitment to investments which are not readily marketable is not disproportionate to his net worth; (ii) investment in the Company will not cause such overall commitment to become excessive; (iii) can afford to bear the loss of his entire investment in the Company; and (iv) has adequate means of providing for his current needs and personal contingencies and has no need for liquidity in his investment in the Company; (c) Special Suitability. The Purchaser satisfies any special suitability or other applicable requirements of his state of residence and/or the state in which the transaction b y which the Shares are purchased occurs; 3 (d) Investment Intent. The Purchaser hereby acknowledges that the Purchaser has been advised that this offering has not been registered with, or reviewed by, the Securities and Exchange Commission ("SEC") because this offering is intended to be a non-public offering pursuant to Section 4(2) and Regulation D of the Act. The Purchaser represents that the Purchaser's Shares are being purchased for the Purchaser's own account and not on behalf of any other person, for investment purposes only and not with a view towards distribution or resale to others. The Purchaser agrees that the Purchaser will not attempt to sell, transfer, assign, pledge or otherwise dispose of all or any portion of the Shares unless they are registered under the Act or unless in the opinion of counsel an exemption from such registration is available, such counsel and such opinion to be satisfactory to the Company. The Purchaser understands that the Shares have not been registered under the Act by reason of a claimed exemption under the provisions of the Act which depends, in part, upon the Purchaser's investment intention; (e) State Securities Laws. The Purchaser understands that no securities administrator of any state has made any finding or determination relating to the fairness of this investment and that no securities administrator of any state has recommended or endorsed, or will recommend or endorse, the offering of the Shares; (f) Authority; Power; No Conflict. The execution, delivery and performance by the Purchaser of the Agreement are within the powers of the Purchaser, have been duly authorized and will not constitute or result in a breach or default under, or conflict with, any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any agreement or other undertaking, to which the Purchaser is a party or by which the Purchaser is bound, and, if the Purchaser is not an individual, will not violate any provision of the charter documents, Bylaws, indenture of trust or partnership agreement, as applicable, of the Purchaser. The signatures on the Agreement are genuine, and the signatory, if the Purchaser is an individual, has legal competence and capacity to execute the same, or, if the Purchaser is not an individual, the signatory has been duly authorized to execute the same; and the Agreement constitutes the legal, valid and binding obligations of the Purchaser, enforceable in accordance with its terms; (g) No General Solicitation. The Purchaser acknowledges that no general solicitation or general advertising (including communications published in any newspaper, magazine or other broadcast) has been received by him and that no public solicitation or advertisement with respect to the offering of the Shares has been made to him; (h) Advice of Tax and Legal Advisors. The Purchaser has relied solely upon the advice of his own tax and legal advisors with respect to the tax and other legal aspects of this investment; (i) Broker Fees. Other than as provided for in Section 1, the Purchaser is not aware that any person, and has been advised that no person, will receive from the Company any compensation as a broker, finder, adviser or in any other capacity in connection with the purchase of the Shares other than as declared herein; (j) Access to Information. Purchaser has had access to all material and relevant information concerning the Company, its management, financial condition, capitalization, market information, properties and prospects necessary to enable Purchaser to make an informed investment decision with respect to its investment in the Shares. Purchaser has carefully read and reviewed, and is familiar with and understands the contents thereof and hereof, including, without limitation, the risk factors described in this Agreement. See "UNDERSTANDING OF INVESTMENT RISKS." Purchaser acknowledges that it has had the opportunity to ask questions of and receive answers from, and to obtain additional information from, representatives of the Company concerning the terms and conditions of the acquisition of the Shares and the present and proposed business and financial condition of the Company, and has had all such questions answered to its satisfaction and has been supplied all information requested; 4 (k) Review of Reports. The Purchaser acknowledges that it has been provided with an opportunity to review: (i) a copy of the Company's Annual Report on Form 10-K for the year ended June 30, 1998; (ii) a copy of the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1998; (iii) a copy of the Company's Registration Statement on Form S-4, pursuant to which VDC Corporation Ltd., a Bermuda company, merged with and into the Company; and (iv) all other recent reports filed by the Company with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (collectively, the "Reports"). (l) Understanding the Nature of Securities. The Purchaser understands and acknowledges that: (i) The Shares have not been registered under the Act or any state securities laws and are being issued and sold in reliance upon certain exemptions contained in the Act; (ii) The Shares are "restricted securities" as that term is defined in Rule 144 promulgated under the Act; (iii) The Shares cannot be sold or transferred without registration under the Act and applicable state securities laws, or unless the Company receives an opinion of counsel reasonably acceptable to it (as to both counsel and the opinion) that such registration is not necessary; and (iv) The Shares and any certificates issued in replacement therefor shall bear the following legend, in addition to any other legend required by law or otherwise: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF EXEMPTION FROM REGISTRATION, UNDER THE ACT, BASED ON AN OPINION LETTER OF COUNSEL SATISFACTORY TO THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION." 6. _____ Indemnification. The Purchaser shall indemnify and hold harmless the Company and the Company's officers, directors and employees from and against any and all loss, damage or liability (including attorneys' fees), due to, or arising out of, a breach or inaccuracy of any representation or warranty contained in Section 5. 5 7. Understanding of Investment Risks. Any investment in the Securities should not be made by a Purchaser who cannot afford the loss of his entire Purchase Price. THE PURCHASER ACKNOWLEDGES THAT THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSIONS, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ADEQUACY OR ACCURACY OF THIS SECURITIES PURCHASE AGREEMENT OR ANY EXHIBIT HERETO. PRIOR TO MAKING AN INVESTMENT IN THE SECURITIES, THE PURCHASER HAS FULLY CONSIDERED, AMONG OTHER THINGS, THE FINANCIAL AND OTHER INFORMATION SET FORTH IN THE REPORTS AS WELL AS THE RISK FACTORS ATTACHED HERETO AS EXHIBIT "A" AND ACKNOWLEDGES THAT SUCH INFORMATION HAS BEEN CONSIDERED PRIOR TO MAKING THIS INVESTMENT DECISION. 8. Registration Rights. The Company agrees that within sixty (60) days of the Closing, it will use its reasonable best efforts to prepare and file with the Securities and Exchange Commission, and use its reasonable best efforts to have declared effective thereafter, a Registration Statement on Form S-1 or other equivalent form pursuant to which the Company shall register the public resale of the Shares. The Company shall have the right to include within such Registration Statement any other securities on behalf of the Company or security holders. The expenses of such registration shall be borne by the Company. Notwithstanding the foregoing, the Company may: (A) delay filing the Registration Statement and may withhold efforts to cause the Registration Statement to become effective, if the Company determines in good faith that such registration rights might (i) interfere with or affect the negotiation or completion of any transaction that is being contemplated by the Company (whether or not a final decision has been made to undertake such transaction) at the time the right to delay is exercised, or (ii) involve initial or continuing disclosure obligations that might not be in the best interest of the Company's stockholders, and (B) not include the Shares in a Registration Statement covering an underwritten offering to the extent that the inclusion of the Shares would, in the opinion of the managing underwriter of such an offering, adversely affect such an offering or the market for the Company's securities. In the event that the Shares are not included in the Registration Statement in accordance with the provisions of clause (B) above, the Company agrees to register the Shares promptly after the completion of the underwritten offering described in clause (B) as may be permitted by the managing underwriter of such an offering. If, after the Registration Statement becomes effective, the Company advises the holders of registered Shares that the Company considers it appropriate for the Registration Statement to be amended, the holders of such Shares shall suspend any further sales of their registered Shares until the Company advises them that the Registration Statement has been amended. Each holder of Shares whose shares are registered pursuant to the Registration Statement set forth herein shall indemnify and hold harmless the Company, each of its directors and each of its officers from and against any and all claims, damages or liabilities, joint or several, to which they or any of them may become subject, including all legal and other expenses, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the Registration Statement or prospectus as from time to time amended or supplemented) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading in the circumstances in which they were made, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by such holder expressly for use therein. 6 In connection with the registration rights, the Company shall have no obligation: (i) to assist or cooperate in the offering or disposition of such Shares; (ii) to indemnify or hold harmless the holders of the securities being registered; (iii) to obtain a commitment from an underwriter relative to the sale of such Shares; or (iv) to include such Shares within an underwritten offering of the Company. 9. Representations and Warranties of the Company. The Company hereby represents and warrants to Purchaser as follows: (a) Organization and Standing of the Company. The Company is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware with adequate power and authority to conduct the business in which it is now engaged and has the corporate power and authority to enter into this Agreement, and is duly qualified and licensed to do business as a foreign corporation in such other jurisdictions as is necessary to enable it to carry on its business, except where failure to do so would not have a material adverse effect on its business; (b) Corporate Power and Authority. The execution and delivery of this Agreement and the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company. No other corporate act or proceeding on the part of the Company is necessary to authorize this Agreement or the consummation of the transactions contemplated hereby. When duly executed and delivered by the parties hereto, this Agreement will constitute a valid and legally binding obligation of the Company enforceable against it in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, moratorium, reorganization or other similar laws and legal and equitable principles limiting or affecting the rights of creditors generally; and/or (ii) general principles of equity, regardless of whether considered in a proceeding in equity or at law; (c) Noncontravention. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not, to the best of the Company's knowledge and belief, (i) permit the termination or acceleration of the maturity of any material indebtedness or material obligation of the Company; (ii) permit the termination of any material note, mortgage, indenture, license, agreement, contract, or other instrument to which the Company is a party or by which it is bound or the Certificate of Incorporation or Bylaws of the Company; (iii) except as expressly provided in this Agreement and except for state "blue sky" approvals that may be required and those consents and waivers which already have been obtained by the Company, require the consent, approval, waiver or authorization from or registration or filing with any party, including but not limited to any party to a material agreement to which the Company is a party or by which it is bound, or any regulatory or governmental agency, body or entity except where failure to obtain such consent, approval, waiver or authorization would not have a material adverse effect on the Company's business; (iv) result in the creation or imposition of any lien, claim or encumbrance of any kind or nature on any material properties or assets of the Company; or (v) violate in any material aspect any statue, law, rule, regulation or ordinance, or any judgment, decree, order, regulation or rule of any court, tribunal, administrative or governmental agency, body or entity to which the Company or its properties is subject except where such violation would not have a material adverse effect on the Company's business. 7 10. IMPORTANT CONSIDERATIONS: SUITABILITY STANDARDS - WHO SHOULD INVEST. INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL RESOURCES WHO HAVE NO NEED FOR LIQUIDITY IN THEIR INVESTMENT. A substantial number of state securities commissions have established investor suitability standards for the marketing within their respective jurisdictions of restricted securities. Some have also established minimum dollar levels for purchases in their states. The reasons for these standards appear to be, among others, the relative lack of liquidity of securities of such programs as compared with other securities investments. Investment in the Shares involves a high degree of risk and is suitable only for persons of substantial financial means who have no need for liquidity in their investments. The Company has adopted as a general investor suitability standard the requirement that each Subscriber for Shares represents in writing that the Subscriber: (a) is acquiring the Shares for investment and not with a view to resale or distribution; (b) can bear the economic risk of losing its entire investment; (c) its overall commitment to investments which are not readily marketable is not disproportionate to its net worth, and an investment in the Shares will not cause such overall commitment to become excessive; (d) has adequate means of providing for its current needs and personal contingencies and has no need for liquidity in this investment in the Shares; (e) has evaluated all the risks of investment in the Company; and (f) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of investing in the Company or is relying on its own purchaser representative in making an investment decision. In addition, all of the Subscribers for Shares must be: (1) extremely sophisticated investors with substantial net worth and experience in making investments of this nature; and (2) "accredited investors," as defined in Rule 501 of Regulation D under the Act, by meeting any of the following conditions: (i) he or she has an individual income in excess of $200,000 in each of the two most recent years or joint income with his or her spouse in excess of $300,000 in each of those years, and he or she reasonably expects an income in excess of the aforesaid levels in the current year, or (ii) he or she has an individual net worth, or a joint net worth with his or her spouse, at the time of his or her purchase, in excess of $1,000,000 (net worth for these purposes includes homes, home furnishings and automobiles), or (iii) he or she otherwise satisfies the Company that he or she is an accredited investor, as defined in Rule 501 under the Act. Other categories of investors included within the definition of accredited investor include the following: certain institutional investors, including certain banks, whether acting in their individual or fiduciary capacities; certain insurance companies; federally registered investment companies; business development companies (as defined under the Investment Company Act of 1940); Small Business Investment Companies licensed by the Small Business Administration; certain employee benefit plans; private business development companies (as defined in the Investment Advisers Act of 1940); tax exempt organizations (as defined in Section 501(c)(3) of the Internal Revenue Code) with total assets in excess of $5,000,000; entities in which all the equity owners are accredited investors; and certain affiliates of the Company. 8 A partnership Subscriber, which satisfies the requirements set forth in clauses (a) through (f) above shall satisfy the suitability standards if it is an accredited investor by reason of clause (iii) above, or if all of its partners are accredited investors. A corporate subscriber, which satisfies the requirements set forth in clauses (a) through (f) above shall satisfy the investor suitability standards if it is an accredited investor by reason of clause (iii) above, or if all of its shareholders are accredited investors. Corporate subscribers must have net worth of at least three (3) times the amount of their investment in the Shares. The suitability standards referred to above represent minimum suitability requirements for prospective purchasers and the satisfaction of such standards by a prospective purchaser does not necessarily mean that the Shares are a suitable investment for such purchaser. The Company may, in circumstances it deems appropriate, modify such requirements. The Company may also reject subscriptions for whatever reasons, in its sole discretion, it deems appropriate. Securities Purchase Agreements may not necessarily be accepted in the order in which received. Purchasers who are residents of certain states may be required to meet certain additional suitability standards. THE ACCEPTANCE OF A SUBSCRIPTION FOR SHARES BY THE COMPANY DOES NOT CONSTITUTE A DETERMINATION BY THE COMPANY THAT AN INVESTMENT IN THE SHARES IS SUITABLE FOR A PROSPECTIVE INVESTOR. THE FINAL DETERMINATION OF THE SUITABILITY OF INVESTMENT IN THE SHARES MUST BE MADE BY THE PROSPECTIVE INVESTOR AND HIS OR HER ADVISERS. 11. State Law Considerations for Residents of All States. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THE DESCRIPTION OF BUSINESS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. 12. Notices. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt), provided that a copy is mailed by registered mail, return receipt requested (provided that facsimile notice shall be deemed received on the next business day if received after 5:00 p.m. local time), or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by notice to the other parties): 9 If to the Company: VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Attention: Frederick A. Moran Chairman & C.E.O. Facsimile: (203) 552-0908 with a copy to: VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Attention: Louis D. Frost, Esq. VDC Corporate Counsel Facsimile: (203) 552-0908 If to Purchaser: to the address set forth at the end of this Agreement or to such other addresses as may be specified in accordance herewith from time to time. 13. Survival of Representations and Warranties. Representations and warranties contained herein shall survive the execution and delivery of this Agreement. 14. Parties in Interest. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the parties hereto, provided that this Agreement and the interests herein may not be assigned by either party without the express written consent of the other party. 15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Delaware without regard to the principles of conflict of laws. 16. Arbitration. All controversies which may arise between the parties including, but not limited to, those arising out of or related to this Agreement shall be determined by binding arbitration applying the laws of the State of Delaware. Any arbitration between the parties shall be conducted at the Company's offices in Greenwich, Connecticut, or at such other location designated by the Company, before the American Arbitration Association (the "AAA"). If the Parties are unable to agree on a single arbitrator with fifteen (15) days of a demand for arbitration being filed with the AAA by one of the parties, each party shall select an arbitrator and the two (2) arbitrators shall mutually select a third arbitrator, the three of whom shall serve as an arbitration panel. The decision of the arbitrator(s) shall be final and binding upon the Parties and shall not be required to include written findings of law and fact, and judgment may be obtained thereon by either party in a court of competent jurisdiction. Each party shall bear the cost of preparing and presenting its own case. The cost of the arbitration, including the fees and expenses of the arbitrator(s), shall be shared equally by the parties hereto unless the award otherwise provides. Nothing in this section will prevent either party from resorting to judicial proceedings if interim injunctive relief under the laws of the State of Delaware from a court is necessary to prevent serious and irreparable injury to one of the parties, and the parties hereto agree that the state courts in Stamford, Connecticut and the United States District Court in the District of Connecticut in Bridgeport, Connecticut shall have exclusive subject matter and in personam jurisdiction over the parties for purposes of obtaining interim injunctive relief. 10 17. Sections and Other Headings. The section and other headings contained in this Agreement are for the convenience of reference only, and do not constitute part of this Agreement or otherwise affect any of the provisions hereof. 18. Pronouns. Whenever the context of this Agreement may require, any pronoun will include the corresponding masculine, feminine and neuter form, and the singular form of nouns and pronouns will include the plural. 19. Counterpart Signatures. This Agreement may be signed in counterparts and all counterparts together shall become effective only when the counterpart(s) have been executed and delivered by and on behalf of the Company and the Purchaser. 20. Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. 21. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Purchaser make any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. 22. Construction. This Agreement and any related instruments will not be construed more strictly against one party then against the other by virtue of the fact that drafts may have been prepared by counsel for one of the parties, it being recognized that this Agreement and any related instruments are the product of negotiations between the parties and that both parties have contributed to the final preparation of this Agreement and all related instruments. 23. Agreement Read and Understood. Both parties hereto acknowledge that they have had an opportunity to consult with an attorney, and such other experts or consultants as they deem necessary or prudent, regarding this Agreement and that they, or their designated agents, have read and understand this Agreement. 24. United States Dollars. All dollar amounts stated herein refer to and are payable solely in United States Dollars. 11 IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have caused this Agreement to be signed. Purchaser: Shares/$ Number and dollar amount ____________________________________ of Shares purchased - Name (Signature) Purchase Price Address/Residence of Purchaser: ------------------------------------ ------------------------------------ ------------------------------------ Social Security No.: ----------------------- Accredited Investor Certification (Place initials on the appropriate line(s)) ____ (i) I am a natural person who had individual income of more than $200,000 in each of the most recent two years or joint income with my spouse in excess of $300,000 in each of the most recent two years and reasonably expect to reach that same income level for the current year ("income", for purposes hereof, should be computed as follows: individual adjusted gross income, as reported (or to be reported) on a federal income tax return, increased by (1) any deduction of long-term capital gains under Section 1202 of the Internal Revenue Code of 1986 (the "Code"), (2) any deduction for depletion under Section 611 et seq. of the Code, (3) any exclusion for interest under Section 103 of the Code and (4) any losses of a partnership as reported on Schedule E of Form 1040); _____ (ii) I am a natural person whose individual net worth (i.e., total assets in excess of total liabilities), or joint net worth with my spouse, will at the time of purchase of the Shares be in excess of $1,000,000; _____ (iii) The Purchaser is an investor satisfying the requirements of Section 501(a)(1), (2) or (3) of Regulation D promulgated under the Securities Act, which includes but is not limited to, a self-directed employee benefit plan where investment decisions are made solely by persons who are "accredited investors" as otherwise defined in Regulation D; _____ (iv) The Purchaser is a "qualified institutional buyer" as that term is defined in Rule 144A of the Securities Act; 12 _____ (v) The Purchaser is a trust, which trust has total assets in excess of $5,000,000, which is not formed for the specific purpose of acquiring the Shares offered hereby and whose purchase is directed by a sophisticated person as described in Rule 506(b)(ii) of Regulation D and who has such knowledge and experience in financial and business matters that he is capable of evaluating the risks and merits of an investment in the Shares; _____ (vi) I am a director or executive officer of the Company; or _____ (vii) The Purchaser is an entity (other than a trust) in which all of the equity owners meet the requirements of at least one of the above subparagraphs. Agreed and Accepted by VDC COMMUNICATIONS, INC. By: __________________________ Frederick A. Moran Chairman & C.E.O. Dated: _______________________ 13 EXHIBIT "A" RISK FACTORS An investment in Company Common Stock and Warrants to purchase Company Common Stock involves a high degree of risk. Purchasers of such securities should carefully review the following risk factors. This following Risk Factors contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although forward-looking statements are based on assumptions made, and information believed, by management to be reasonable, no assurance can be given that such statements will prove to be correct. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, projected or expected. Some, but not all, of such risks and uncertainties are described in the risk factors set forth below. 1. WE ARE A DEVELOPMENT STAGE COMPANY. We have only recently commenced our present operations, and therefore, have only a limited operating history upon which you can evaluate our business. We have strategically placed telecommunications equipment in cities that we believe will enable us to efficiently transport telecommunications services. Now we are building our customer base as rapidly as we can in order to achieve greater revenues and market penetration. We will also add additional telecommunications equipment in other areas of the world. We have not yet determined with certainty where those areas will be. 2. WE ARE LOSING MONEY. We have not yet experienced a profitable quarter and may not ever achieve profitability. By virtue of the early stage of our development, we have yet to build sufficient volume of telecommunications voice and facsimile traffic to reach profitability. Our current expenses are greater than our revenues. This will probably continue until we reach a greater level of maturity and it is possible that our revenues may never exceed our expenses. If operating losses continue for longer than the short-term, then our continued operation will be in jeopardy. However, we believe that what we have developed over the past year is valuable and has the potential to generate revenues greater than expenses. 3. NUMEROUS CONTINGENCIES COULD HAVE A MATERIAL ADVERSE EFFECT ON US. Because we are a development stage company, and because of the nature of the industry in which we operate, there are numerous contingencies over which we have little or no control, any one of which could have a material adverse effect on us. The contingencies include, but are not limited to, the addition or loss of major customers, whether through competition, merger, consolidation or otherwise; the loss of economically beneficial routing options for the termination of our telecommunications traffic; financial difficulties of major customers; pricing pressure resulting from increased competition; and technical difficulties with or failures of portions of our network that could impact our ability to provide service to or bill our customers. 4. OUR ABILITY TO IMPLEMENT OUR PLAN SUCCESSFULLY IS DEPENDENT ON A FEW KEY PEOPLE. We are particularly dependent upon Frederick A. Moran, Chairman, Chief Executive Officer, Chief Financial Officer, Secretary and Director of the Company. Mr. Moran is also a significant beneficial shareholder of the Company. The Company has an employment agreement with Mr. Moran. We believe the combination of his employment agreement and equity interest keeps Mr. Moran highly motivated to remain with the Company. 14 5. THE INTERNATIONAL TELECOMMUNICATIONS MARKET IS RISKY. The international nature of the our operations involves certain risks, such as changes in U.S. and foreign government regulations and telecommunications standards, dependence on foreign partners, tariffs, taxes and other trade barriers, the potential for nationalization and economic downturns and political instability in foreign countries. At the current time, we are particularly dependent on Central and North America. In addition, our business could be adversely affected by a reversal in the current trend toward the deregulation of the telecommunications industry. We will be increasingly subject to these risks to the extent that we proceed with the planned expansion of international operations. 6. OVERNMENT INVOLVEMENT IN INDUSTRY COULD HAVE AN ADVERSE EFFECT. We are subject to various U.S. and foreign laws, regulations, agency actions and court decisions. Our U.S. international telecommunications service offerings are subject to regulation by the Federal Communications Commission (the "FCC"). The FCC requires international carriers to obtain certificates of public convenience and necessity prior to acquiring international facilities by purchase or lease, or providing international service to the public. Prior FCC approval is also generally required to transfer control of a certificated carrier. We must file reports and contracts with the FCC and must pay regulatory and other fees, which are subject to change. We are also subject to the FCC policies and rules discussed below. The FCC could determine, by its own actions or in response to a third party's filing, that certain of our services, termination arrangements, agreements with foreign carriers, transit or refile arrangements or reports did not comply with FCC policies and rules. If this occurred, the FCC could order us to terminate arrangements, fine us or revoke our authorizations. Any of these actions could have a material adverse effect on our business, operating results and financial condition. 7. POTENTIAL FOR TECHNICAL FAILURE. Our services are dependent on our own and other companies' ability to successfully integrate technologies and equipment. In connecting with other companies' equipment we take the risk of not being able to provide service due to their error. In addition, there is the risk that our equipment may malfunction or that we could make an error which negatively affects our customers' service. We are also dependent on the protection of our hardware and other equipment from damage from natural disasters such as fires, floods, hurricanes and earthquakes, other catastrophic events such as civil unrest, terrorism and war and other sources of power loss and telecommunications failures. We have taken a number of steps to prevent our service from being affected by natural disasters, fire and the like. We have built redundant systems for power supply to our equipment. Even though, there can be no assurance that any such systems will prevent the switches from becoming disabled in the event of an earthquake, power outage or otherwise. The failure of our network, or a significant decrease in telephone traffic resulting from effects of a natural or man-made disaster, could have a material adverse effect on our relationship with our customers and our business, operating results and financial condition. 15 8. THE LONG DISTANCE AND INTERNATIONAL LONG DISTANCE TELEPHONE INDUSTRY IS HIGHLY COMPETITIVE. We are a small company in an industry with many companies that have more experience and greater resources than us. International telecommunications providers compete mainly on the basis of price, but also customer service, transmission quality, breadth of service offerings and value-added services. Our operating history is probably not long enough for you to make a judgment about our ability to compete in this industry. 9. TECHNOLOGICAL ADVANCEMENT COULD RENDER OUR INFRASTRUCTURE OBSOLETE. The international telecommunications industry is highly competitive and subject to the introduction of new services facilitated by advances in technology. We expect that the future will bring technological change. It is possible that these changes could result in more advanced telecommunications equipment that could render our current equipment obsolete. If this were to happen, we would most likely have to invest significant capital into this new technology. 10. WE HAVE LIMITED CAPITAL. Being a small company in a capital intensive industry, our position of limited capital is a significant risk to our future viability. We are currently seeking financing alternatives that would put us in a better position financially. There is no guarantee that we will be able to do this. We may sell additional shares of our stock in order to provide the capital needed for our operations. 11. WE HAVE A SIGNIFICANT INVESTMENT IN A PRIVATE COMPANY THAT WE DO NOT CONTROL. We have a non-controlling investment in a private company, Metromedia China Corporation ("MCC"). Since this company is private and in development, it is difficult to place a value on its worth. We currently value our ownership interest based on extrapolating the value placed on MCC by its majority shareholder, Metromedia International Group. As of March 31, 1999, that equaled $4.34 million. Our total assets were $13.7 million. The value of our interest in MCC may change in the future. The value of MCC may be unfavorably influenced by negative operating results, the Chinese telecommunications market and/or other factors. Furthermore, changes in governmental policy towards foreign investment in telecommunications in China could also adversely effect the value of our investment. We have decreased the value placed on this asset, in large part, due to the uncertainty of the future of foreign participation in the Chinese telecommunications market. Even so, there is still the possibility that this asset will be worth less in the future than we believe is a fair value currently. 12. OUR STOCK IS HIGHLY VOLATILE. Our stock price fluctuates significantly. We believe that this will most likely continue. Historically, the market prices for securities of emerging companies in the telecommunications industry have been highly volatile. Future announcements concerning us or our competitors, including results of operations, technological innovations, government regulations, proprietary rights or significant litigation, may have a significant impact on the market price of our stock. 13. ADDITIONAL SHARES WILL BE AVAILABLE FOR SALE IN THE PUBLIC MARKET. We registered stock in connection with the domestication merger of VDC Corporation Ltd. ("VDC Bermuda") with and into us (the "Domestication Merger"). The effect of the Domestication Merger was that members/shareholders of VDC Bermuda became shareholders of the Company which then became the publicly traded company. In addition, we issued shares in connection with the MCC investment and other additional business related matters. These stock issuances and future registration statements will have the effect of significantly increasing the number of shares eligible for public trading. Sales of substantial amounts of the stock in the public market could have an adverse effect on the price of the stock and may make it more difficult for us to sell stock in the future. Although it is impossible to predict market influences and prospective values for securities, it is possible that the substantial increase in the number of shares available for sale, in and of itself, could have a depressive effect on the price of our stock. 16 14. WE HAVE NOT PAID ANY DIVIDENDS TO OUR STOCKHOLDERS AND DO NOT EXPECT TO ANY TIME IN THE NEAR FUTURE. Instead, we plan to retain earnings for investment back into the company. 15. THE YEAR 2000 PROBLEM COULD HAVE A MATERIAL ADVERSE EFFECT ON US. The Year 2000 issue is a matter of worldwide concern for carriers and affects many aspects of telecommunications technology, including the computer systems and software applications that are essential for operations. A significant portion of the devices that we use to provide our basic services use date-sensitive processes which affect functions such as service activation, service assurance and billing processes. We are currently evaluating the Year 2000 readiness of our computer systems, software applications and telecommunications equipment. We are sending Year 2000 compliance inquiries to certain third parties (i.e. vendors, customers, outside contractors) with whom we have a relationship. These inquiries include, among other things, requests to provide documentation regarding the third party's Year 2000 programs, and questions regarding how the third party specifically examined the Year 2000 effect on their equipment and operations and what remedial actions will be taken with regard to these problems. Since we are a new company, our key systems have just recently been implemented. Most of the vendors of such systems have represented to us that the systems are compliant with the Year 2000 issues without any modification. We will, however, continue to require confirmation of Year 2000 compliance in our future requests for proposals from equipment and software vendors. The failure of the Company's computer systems and software applications to accommodate the Year 2000, could have a material adverse effect on our business, financial condition and results from operations. Further, if the software and equipment of those on whose services we depend are not Year 2000 functional, it could have a material adverse effect on our operations. While most major domestic telecommunications companies have announced that they expect all of their network and support systems to be Year 2000 functional by the middle of 1999, other domestic and international carriers may not be Year 2000 functional. We intend to continue to monitor the performance of our accounting, information and other systems and software applications to identify and resolve any Year 2000 issues. Currently, through our discovery process, we have identified an estimated $84,000 of expenditures associated with updating systems to be Year 2000 compliant. However, we expect we will find additional expenses pending the finalization of our Year 2000 investigation. We believe that the most reasonably likely worst case scenario resulting from the century change could be the inability to efficiently send voice and facsimile calls at current rates to desired locations. We do not know how long this might last. This would have a material adverse effect on our results from operations. 17 16. CERTAIN ANTI-TAKEOVER CONSIDERATIONS. Certain provisions of our Certificate of Incorporation, as amended (the "Certificate of Incorporation"), and Bylaws, as amended (the "Bylaws"), and the General Corporation Law of the State of Delaware (the "GCL") could deter a change in our management or render more difficult an attempt to obtain control of us. For example, we are subject to the provisions of the GCL that prohibit a public Delaware corporation from engaging in a broad range of business combinations with a person who, together with affiliates and associates, owns 15% or more of the corporation's outstanding voting shares (an "interested stockholder") for three years after the person became an interested stockholder, unless the business combination is approved in a prescribed manner. The Certificate of Incorporation includes undesignated Preferred Stock, which may enable the Board to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise. In addition, the Certificate of Incorporation provides for a classified Board of Directors such that approximately only one-third of the members of the Board will be elected at each annual meeting of stockholders. Classified boards may have the effect of delaying, deferring or discouraging changes in control of us. Further, certain other provisions of the Certificate of Incorporation and Bylaws and of the GCL could delay or make more difficult a merger, tender offer or proxy contest involving us. Additionally, certain federal regulations require prior approval of certain transfers of control of telecommunications companies, which could also have the effect of delaying, deferring or preventing a change in control. 18 EX-99.2 3 EX-99.2 EXHIBIT 2 The following form was used in connection with a private placement in December, 1998, pursuant to which the following individuals and entities were involved on the following terms:
Name Price Per Share Number of Shares - ---- --------------- ---------------- Moran Equity Fund, Inc. 3.625 938 Anne Moran, IRA 3.625 49,379 Luke Moran 3.625 9,352 Kent Moran 3.625 8,221 Anne Moran 3.625 35,310 Frederick A. Moran, IRA 3.625 331 Joan B. Moran, IRA 3.625 248 Anne Moran & Frederick A. Moran 3.625 41,380 Frederick W. Moran 3.625 100,000 ===== ======= TOTAL 245,159
VDC COMMUNICATIONS, INC. ---------- SECURITIES PURCHASE AGREEMENT ---------- SHARES OF COMMON STOCK at $3.625 per Share ---------- December 23, 1998 1 CONFIDENTIAL - ------------ SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as of the 23rd day of December, 1998, by and between VDC Communications, Inc., a Delaware corporation ("VDC" or the "Company"), and the investor whose name appears at the end of this Agreement ("Purchaser" or "Subscriber"). R E C I T A L S: ---------------- The Company wishes to obtain additional working capital and the Purchaser desires to provide such working capital to the Company through the purchase of certain shares of the Company's common stock, $.0001 par value per share (the "Common Stock"), being privately offered by the Company. NOW, THEREFORE, in consideration of the premises hereof and the agreements set forth herein below, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Sale and Purchase of Shares. Subject to the terms and conditions hereof, the Company agrees to issue and sell, and the Purchaser agrees to purchase, ______ shares of Common Stock at a purchase price of $3.625 per share. The purchase price is payable upon subscription in cash, check or wire transfer. If paying by check, the check should be made payable to "VDC Communications, Inc." and delivered to VDC Communications, Inc. at 75 Holly Hill Lane, Greenwich, Connecticut, 06830. No broker, investment banker or any other person will receive from the Company any compensation as a broker, finder, adviser or in any other capacity in connection with the purchase of the Shares. 2. Description of the Shares. (a) Restricted Securities. The shares of Common Stock of the Company being offered hereby (the "Shares") shall be "restricted securities" as that term is defined under Rule 144 of the Securities Act of 1933, as amended (the "Act") and may not be offered for sale or sold or otherwise transferred in a transaction which would constitute a sale thereof within the meaning of the Act unless (i) such security has been registered for sale under the Act and registered or qualified under applicable state securities laws relating to the offer and sale of securities; or (ii) exemptions from the registration requirements of the Act and the registration or qualification requirements of all such state securities laws are available and the Company shall have received an opinion of counsel that the proposed sale or other disposition of such securities may be effected without registration under the Act and would not result in any violation of any applicable state securities laws relating to the registration or qualification of securities for sale, such counsel and such opinion to be satisfactory to the Company. (b) Voting Rights; Dividends. Holders of Common Stock of the Company have equal rights to receive dividends when, as, and if declared by the Board of Directors out of funds legally available therefor. Holders of Common Stock of the Company have one vote for each share held of record and do not have cumulative voting rights. 2 (c) Liquidation; Redemption. Holders of Common Stock of the Company are entitled upon liquidation of the Company to share ratably in the net assets available for distribution, subject to the rights, if any of holders of any preferred stock of the Company then outstanding. Shares of Common Stock of the Company are not redeemable and have no preemptive or similar rights. All outstanding shares of Common Stock of the Company are fully paid and nonassessable. (d) Restriction Upon Resale. The Subscriber hereby agrees that the Shares shall be subject to restrictions upon the transfer, sale, encumbrance or other disposition of the Shares. See "UNDERSTANDING OF INVESTMENT RISKS" AND "REGISTRATION RIGHTS". 3. Shares Offered in a Private Placement Transaction. The Shares offered by this Securities Purchase Agreement are being offered as a non-public offering pursuant to Section 4(2) and Regulation D of the Act ("Regulation D"). 4. Binding Effect of Securities Purchase Agreement; The Closing. This Securities Purchase Agreement shall not be binding on the Company unless and until an authorized executive officer of the Company has evidenced acceptance thereof by executing the signature page at the end hereof. The Company may accept or reject this Securities Purchase Agreement in its sole discretion if the Purchaser does not meet the suitability standards established herein, or for any other reason. A closing (the "Closing") will occur contemporaneously with the execution of this Agreement by all parties hereto. 5. Representations and Warranties of the Purchaser. The Purchaser represents and warrants to the Company as follows: (a) Accredited Investor. The Purchaser has such knowledge and experience in business and financial matters such that the Purchaser is capable of evaluating the merits and risks of purchasing the Shares. The Purchaser is either an "accredited investor" as that term is defined in Rule 501 of Regulation D of the Act or a "qualified institutional buyer" as that term is defined in Rule 144A of the Act, and represents that he satisfies the suitability standards identified in Section 9 hereof; (b) Loss of Investment. The Purchaser(`s) (i) overall commitment to investments which are not readily marketable is not disproportionate to his net worth; (ii) investment in the Company will not cause such overall commitment to become excessive; (iii) can afford to bear the loss of his entire investment in the Company; and (iv) has adequate means of providing for his current needs and personal contingencies and has no need for liquidity in his investment in the Company; (c) Special Suitability. The Purchaser satisfies any special suitability or other applicable requirements of his state of residence and/or the state in which the transaction by which the Shares are purchased occurs; 3 (d) Investment Intent. The Purchaser hereby acknowledges that the Purchaser has been advised that this offering has not been registered with, or reviewed by, the Securities and Exchange Commission ("SEC") because this offering is intended to be a non-public offering pursuant to Section 4(2) and Regulation D of the Act. The Purchaser represents that the Purchaser's Shares are being purchased for the Purchaser's own account and not on behalf of any other person, for investment purposes only and not with a view towards distribution or resale to others. The Purchaser agrees that the Purchaser will not attempt to sell, transfer, assign, pledge or otherwise dispose of all or any portion of the Shares unless they are registered under the Act or unless in the opinion of counsel an exemption from such registration is available, such counsel and such opinion to be satisfactory to the Company. The Purchaser understands that the Shares have not been registered under the Act by reason of a claimed exemption under the provisions of the Act which depends, in part, upon the Purchaser's investment intention; (e) State Securities Laws. The Purchaser understands that no securities administrator of any state has made any finding or determination relating to the fairness of this investment and that no securities administrator of any state has recommended or endorsed, or will recommend or endorse, the offering of the Shares; (f) Authority; Power; No Conflict. The execution, delivery and performance by the Purchaser of the Agreement are within the powers of the Purchaser, have been duly authorized and will not constitute or result in a breach or default under, or conflict with, any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any agreement or other undertaking, to which the Purchaser is a party or by which the Purchaser is bound, and, if the Purchaser is not an individual, will not violate any provision of the charter documents, Bylaws, indenture of trust or partnership agreement, as applicable, of the Purchaser. The signatures on the Agreement are genuine, and the signatory, if the Purchaser is an individual, has legal competence and capacity to execute the same, or, if the Purchaser is not an individual, the signatory has been duly authorized to execute the same; and the Agreement constitutes the legal, valid and binding obligations of the Purchaser, enforceable in accordance with its terms; (g) No General Solicitation. The Purchaser acknowledges that no general solicitation or general advertising (including communications published in any newspaper, magazine or other broadcast) has been received by him and that no public solicitation or advertisement with respect to the offering of the Shares has been made to him; (h) Advice of Tax and Legal Advisors. The Purchaser has relied solely upon the advice of his own tax and legal advisors with respect to the tax and other legal aspects of this investment; (i) No Broker Fees. The Purchaser is not aware that any person, and has been advised that no person, will receive from the Company any compensation as a broker, finder, adviser or in any other capacity in connection with the purchase of the Shares other than as declared herein; (j) Access to Information. Purchaser has had access to all material and relevant information concerning the Company, its management, financial condition, capitalization, market information, properties and prospects necessary to enable Purchaser to make an informed investment decision with respect to its investment in the Shares. Purchaser has carefully read and reviewed, and is familiar with and understands the contents thereof and hereof, including, without limitation, the risk factors described in this Agreement. See "UNDERSTANDING OF INVESTMENT RISKS." Purchaser acknowledges that it has had the opportunity to ask questions of and receive answers from, and to obtain additional information from, representatives of the Company concerning the terms and conditions of the acquisition of the Shares and the present and proposed business and financial condition of the Company, and has had all such questions answered to its satisfaction and has been supplied all information requested; 4 (k) Review of Exchange Act Reports. The Purchaser acknowledges that it has been provided with an opportunity to review: (i) a copy of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998; (ii) a copy of the Company's Registration Statement on Form S-4, in accordance with which VDC Bermuda LTD., a Bermuda company merged with and into the Company; and (iii) all other relevant reports filed by the Company with the Securities and Exchange Commission under the Securities Exchange Act of 1934. (l) Understanding the Nature of Securities. The Purchaser understands and acknowledges that: (i) The Shares have not been registered under the Act or any state securities laws and are being issued and sold in reliance upon certain exemptions contained in the Act; (ii) The Shares are "restricted securities" as that term is defined in Rule 144 promulgated under the Act; (iii) The Shares cannot be sold or transferred without registration under the Act and applicable state securities laws, or unless the Company receives an opinion of counsel reasonably acceptable to it (as to both counsel and the opinion) that such registration is not necessary; and (iv) The Shares and any certificates issued in replacement therefor shall bear the following legend, in addition to any other legend required by law or otherwise: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED OR DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE SECURITIES ACT OF 1933, AS AMENDED, OR THE RULES AND REGULATIONS THEREUNDER." 6. Understanding of Investment Risks. Any investment in the Shares should not be made by a Purchaser who cannot afford the loss of his entire Purchase Price. THE PURCHASER ACKNOWLEDGES THAT THE SHARES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSIONS, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ADEQUACY OR ACCURACY OF THIS SECURITIES PURCHASE AGREEMENT OR ANY EXHIBIT HERETO. PRIOR TO MAKING AN INVESTMENT IN THE SHARES, THE PURCHASER HAS FULLY CONSIDERED, AMONG OTHER THINGS, THE FINANCIAL AND OTHER INFORMATION SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998, AND ACKNOWLEDGES THAT SUCH INFORMATION HAVE BEEN CONSIDERED PRIOR TO MAKING THIS INVESTMENT DECISION. 5 7. Registration Rights. The Company agrees that within one hundred twenty (120) days of the Closing, it will use its reasonable best efforts to prepare and file with the Securities and Exchange Commission, and use its reasonable best efforts to have declared effective thereafter, a Registration Statement on Form S-1 or other equivalent form pursuant to which the Company shall register the public resale of the Shares. The Company shall have the right to include within such Registration Statement any other securities on behalf of the Company or security holders. The expenses of such registration shall be borne by the Company. Notwithstanding the foregoing, the Company may: (A) delay filing the Registration Statement and may withhold efforts to cause the Registration Statement to become effective, if the Company determines in good faith that such registration rights might (i) interfere with or affect the negotiation or completion of any transaction that is being contemplated by the Company (whether or not a final decision has been made to undertake such transaction) at the time the right to delay is exercised, or (ii) involve initial or continuing disclosure obligations that might not be in the best interest of the Company's stockholders, and (B) not include the Shares in a Registration Statement covering an underwritten offering to the extent that the inclusion of the Shares would, in the opinion of the managing underwriter of such an offering, adversely affect such an offering or the market for the Company's securities. In the event that the Shares are not included in the Registration Statement in accordance with the provisions of clause (B) above, the Company agrees to register the Shares promptly after the completion of the underwritten offering described in clause (B) as may be permitted by the managing underwriter of such an offering. If, after the Registration Statement becomes effective, the Company advises the holders of registered Shares that the Company considers it appropriate for the Registration Statement to be amended, the holders of such Shares shall suspend any further sales of their registered Shares until the Company advises them that the Registration Statement has been amended. Each holder of Shares whose shares are registered pursuant to the Registration Statement set forth herein shall indemnify and hold harmless the Company, each of its directors and each of its officers from and against any and all claims, damages or liabilities, joint or several, to which they or any of them may become subject, including all legal and other expenses, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the Registration Statement or prospectus as from time to time amended or supplemented) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading in the circumstances in which they were made, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by such holder expressly for use therein. The liability of any such holder shall be limited to the aggregate price at which such holder's Shares of the Company is sold. In connection with the registration rights, the Company shall have no obligation: (i) to assist or cooperate in the offering or disposition of such Shares; (ii) to indemnify or hold harmless the holders of the securities being registered; (iii) to obtain a commitment from an underwriter relative to the sale of such Shares; or (iv) to include such Shares within an underwritten offering of the Company. 6 8. Representations and Warranties of the Company. The Company hereby represents and warrants to Purchaser as follows: (a) Organization and Standing of the Company. The Company is a duly organized and validly existing corporation in good standing under the laws of the State of Delaware with adequate power and authority to conduct the business in which it is now engaged and has the corporate power and authority to enter into this Agreement, and is duly qualified and licensed to do business as a foreign corporation in such other jurisdictions as is necessary to enable it to carry on its business, except where failure to do so would not have a material adverse effect on its business; (b) Corporate Power and Authority. The execution and delivery of this Agreement and the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company. No other corporate act or proceeding on the part of the Company is necessary to authorize this Agreement or the consummation of the transactions contemplated hereby. When duly executed and delivered by the parties hereto, this Agreement will constitute a valid and legally binding obligation of the Company enforceable against it in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, moratorium, reorganization or other similar laws and legal and equitable principles limiting or affecting the rights of creditors generally; and/or (ii) general principles of equity, regardless of whether considered in a proceeding in equity or at law; (c) Noncontravention. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not, to the best of the Company's knowledge and belief, (i) permit the termination or acceleration of the maturity of any material indebtedness or material obligation of the Company; (ii) permit the termination of any material note, mortgage, indenture, license, agreement, contract, or other instrument to which the Company is a party or by which it is bound or the Certificate of Incorporation or Bylaws of the Company; (iii) except as expressly provided in this Agreement and except for state "blue sky" approvals that may be required and those consents and waivers which already have been obtained by the Company, require the consent, approval, waiver or authorization from or registration or filing with any party, including but not limited to any party to a material agreement to which the Company is a party or by which it is bound, or any regulatory or governmental agency, body or entity except where failure to obtain such consent, approval, waiver or authorization would not have a material adverse effect on the Company's business; (iv) result in the creation or imposition of any lien, claim or encumbrance of any kind or nature on any material properties or assets of the Company; or (v) violate in any material aspect any statue, law, rule, regulation or ordinance, or any judgment, decree, order, regulation or rule of any court, tribunal, administrative or governmental agency, body or entity to which the Company or its properties is subject except where such violation would not have a material adverse effect on the Company's business. 9. IMPORTANT CONSIDERATIONS: SUITABILITY STANDARDS - WHO SHOULD INVEST. INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL RESOURCES WHO HAVE NO NEED FOR LIQUIDITY IN THEIR INVESTMENT. 7 A substantial number of state securities commissions have established investor suitability standards for the marketing within their respective jurisdictions of restricted securities. Some have also established minimum dollar levels for purchases in their states. The reasons for these standards appear to be, among others, the relative lack of liquidity of securities of such programs as compared with other securities investments. Investment in the Shares involves a high degree of risk and is suitable only for persons of substantial financial means who have no need for liquidity in their investments. The Company has adopted as a general investor suitability standard the requirement that each Subscriber for Shares represents in writing that the Subscriber: (a) is acquiring the Shares for investment and not with a view to resale or distribution; (b) can bear the economic risk of losing its entire investment; (c) its overall commitment to investments which are not readily marketable is not disproportionate to its net worth, and an investment in the Shares will not cause such overall commitment to become excessive; (d) has adequate means of providing for its current needs and personal contingencies and has no need for liquidity in this investment in the Shares; (e) has evaluated all the risks of investment in the Company; and (f) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of investing in the Company or is relying on its own purchaser representative in making an investment decision. In addition, all of the Subscribers for Shares must be: (1) extremely sophisticated investors with substantial net worth and experience in making investments of this nature; and (2) "accredited investors," as defined in Rule 501 of Regulation D under the Act, by meeting any of the following conditions: (i) he or she has an individual income in excess of $200,000 in each of the two most recent years or joint income with his or her spouse in excess of $300,000 in each of those years, and he or she reasonably expects an income in excess of the aforesaid levels in the current year, or (ii) he or she has an individual net worth, or a joint net worth with his or her spouse, at the time of his or her purchase, in excess of $1,000,000 (net worth for these purposes includes homes, home furnishings and automobiles), or (iii) he or she otherwise satisfies the Company that he or she is an accredited investor, as defined in Rule 501 under the Act. Other categories of investors included within the definition of accredited investor include the following: certain institutional investors, including certain banks, whether acting in their individual or fiduciary capacities; certain insurance companies; federally registered investment companies; business development companies (as defined under the Investment Company Act of 1940); Small Business Investment Companies licensed by the Small Business Administration; certain employee benefit plans; private business development companies (as defined in the Investment Advisers Act of 1940); tax exempt organizations (as defined in Section 501(c)(3) of the Internal Revenue Code) with total assets in excess of $5,000,000; entities in which all the equity owners are accredited investors; and certain affiliates of the Company. A partnership Subscriber, which satisfies the requirements set forth in clauses (a) through (f) above shall satisfy the suitability standards if it is an accredited investor by reason of clause (iii) above, or if all of its partners are accredited investors. A corporate subscriber, which satisfies the requirements set forth in clauses (a) through (f) above shall satisfy the investor suitability standards if it is an accredited investor by reason of clause (iii) above, or if all of its shareholders are accredited investors. Corporate subscribers must have net worth of at least three (3) times the amount of their investment in the Shares. 8 The suitability standards referred to above represent minimum suitability requirements for prospective purchasers and the satisfaction of such standards by a prospective purchaser does not necessarily mean that the Shares are a suitable investment for such purchaser. The Company may, in circumstances it deems appropriate, modify such requirements. The Company may also reject subscriptions for whatever reasons, in its sole discretion, it deems appropriate. Securities Purchase Agreements may not necessarily be accepted in the order in which received. Purchasers who are residents of certain states may be required to meet certain additional suitability standards. THE ACCEPTANCE OF A SUBSCRIPTION FOR SHARES BY THE COMPANY DOES NOT CONSTITUTE A DETERMINATION BY THE COMPANY THAT AN INVESTMENT IN THE SHARES IS SUITABLE FOR A PROSPECTIVE INVESTOR. THE FINAL DETERMINATION OF THE SUITABILITY OF INVESTMENT IN THE SHARES MUST BE MADE BY THE PROSPECTIVE INVESTOR AND HIS OR HER ADVISERS. 10. State Law Considerations for Residents of All States. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THE DESCRIPTION OF BUSINESS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. 11. Notices. All notices, requests, consents or other communications required or permitted hereunder shall be in writing and shall be hand delivered or mailed first class postage prepaid, registered or certified mail, to the following addresses: If to the Company: VDC Communications, Inc. 75 Holly Hill Lane Greenwich, CT 06830 Attention: Frederick A. Moran Chairman & C.E.O. 9 In the case of Purchaser: To the address set forth at the end of this Agreement or to such other addresses as may be specified in accordance herewith from time to time. Unless specified otherwise, such notices and other communications shall for all purposes of this Agreement be treated as being effective upon being delivered personally or, if sent by mail, five days after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed as set forth above, and postage prepaid. 12. Survival of Representations and Warranties. Representations and warranties contained herein shall survive the execution and delivery of this Agreement. 13. Parties in Interest. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the parties hereto, provided that this Agreement and the interests herein may not be assigned by either party without the express written consent of the other party. 14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the jurisdiction of incorporation of the Company without regard to the principles of conflict of laws. The parties hereto hereby submit to the exclusive jurisdiction of the courts located in the jurisdiction of incorporation of the Company with respect to any dispute arising under this Agreement, the agreements entered into in connection herewith or the transactions contemplated hereby or thereby. 15. Sections and Other Headings. The section and other headings contained in this Agreement are for the convenience of reference only, and do not constitute part of this Agreement or otherwise affect any of the provisions hereof. 16. Counterpart Signatures. This agreement may be signed in counterparts and all counterparts together shall become effective only when the counterpart(s) have been executed and delivered by and on behalf of the Company and the Purchaser. 17. Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. 18. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Purchaser make any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. 19. United States Dollars. All dollar amounts stated herein refer to and are payable solely in United States Dollars. 10 IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have caused this Agreement to be signed by their duly authorized officers. Purchaser: Shares/$ - --------------------- Number and dollar amount ____________________________________ of Shares purchased - Name (Signature) Purchase Price Address/Residence of Purchaser: ------------------------------------ ------------------------------------ ------------------------------------ Social Security No.: ----------------- Accredited Investor Certification (Place initials on the appropriate line(s)) ____ (i) I am a natural person who had individual income of more than $200,000 in each of the most recent two years or joint income with my spouse in excess of $300,000 in each of the most recent two years and reasonably expect to reach that same income level for the current year ("income", for purposes hereof, should be computed as follows: individual adjusted gross income, as reported (or to be reported) on a federal income tax return, increased by (1) any deduction of long-term capital gains under Section 1202 of the Internal Revenue Code of 1986 (the "Code"), (2) any deduction for depletion under Section 611 et seq. of the Code, (3) any exclusion for interest under Section 103 of the Code and (4) any losses of a partnership as reported on Schedule E of Form 1040); _____ (ii) I am a natural person whose individual net worth (i.e., total assets in excess of total liabilities), or joint net worth with my spouse, will at the time of purchase of the Shares be in excess of $1,000,000; _____ (iii) The Purchaser is an investor satisfying the requirements of Section 501(a)(1), (2) or (3) of Regulation D promulgated under the Securities Act, which includes but is not limited to, a self-directed employee benefit plan where investment decisions are made solely by persons who are "accredited investors" as otherwise defined in Regulation D; _____ (iv) The Purchaser is a "qualified institutional buyer" as that term is defined in Rule 144A of the Securities Act; _____ (v) The Purchaser is a trust, which trust has total assets in excess of $5,000,000, which is not formed for the specific purpose of acquiring the Shares offered hereby and whose purchase is directed by a sophisticated person as described in Rule 506(b)(ii) of Regulation D and who has such knowledge and experience in financial and business matters that he is capable of evaluating the risks and merits of an investment in the Shares; 11 _____ (vi) I am a director or executive officer of the Company; or _____ (vii) The Purchaser is an entity (other than a trust) in which all of the equity owners meet the requirements of at least one of the above subparagraphs. Agreed and Accepted by VDC COMMUNICATIONS, INC. By: _______________________ Frederick A. Moran Chairman & C.E.O. Dated:______________________ 12 EX-99.3 4 EX-99.3 EXHIBIT 3 The following form was used in connection with a private placement in May, 1998, pursuant to which the following individuals and entities were involved on the following terms:
Shareholder Number of Shares Price Per Share - ----------- ---------------- --------------- Lancer Offshore, Inc. 150,000 $6.00 Lancer Voyager Fund 25,000 $6.00 Anne Moran 39,333 $6.00 Anne Moran Trust 250 $6.00 Anne Moran, IRA 11,667 $6.00 Moran Equity Fund, Inc. 27,000 $6.00 Frederick A. Moran 85,667 $6.00 Frederick A. Moran 23,667 $6.00 & Joan B. Moran Frederick A. Moran Trust 180 $6.00 Frederick W. Moran 100,000 $6.00 Kent Moran 10,000 $6.00 Kent Moran, IRA 333 $6.00 Luke Moran 10,000 $6.00 Luke Moran, IRA 333 $6.00 Alan B. Snyder 100,000 $6.00 ------- TOTAL 583,430
VDC CORPORATION LTD. ----------------------------------------------------------- Form of Securities Purchase Agreement ----------------------------------------------------------- Shares of Common Stock at $6.00 per Share ------------------------------------------------------------- May 27, 1998 CONFIDENTIAL - ------------ SECURITIES PURCHASE AGREEMENT THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as of the 27th day of May, 1998, by and between VDC Corporation Ltd., a Bermuda corporation ("VDC" or the "Company"), and the investor whose name appears at the end of this Agreement ("Purchaser" or "Subscriber"). R E C I T A L S: ---------------- The Company wishes to obtain additional working capital and the Purchaser desires to provide such working capital to the Company through the purchase of certain shares of the Company's common stock, $2.00 par value per share (the "Common Stock"), being privately offered by the Company. NOW, THEREFORE, in consideration of the premises hereof and the agreements set forth herein below, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Sale and Purchase of Shares. Subject to the terms and conditions hereof, the Company agrees to issue and sell, and the Purchaser agrees to purchase, 85,667 shares of Common Stock at a purchase price of $6.00 per share. The purchase price is payable upon subscription in cash, check or wire transfer. If paying by check, the check should be made payable to "VDC Corporation Ltd." and delivered to VDC Corporation Ltd. at 27 Doubling Road, Greenwich, CT 06830. No broker, investment banker or any other person will receive from the Company any compensation as a broker, finder, adviser or in any other capacity in connection with the purchase of the Shares. 2. Description of the Shares. (a) Restricted Securities. The shares of Common Stock of the Company being offered hereby (the "Shares") shall be "restricted securities" as that term is defined under Rule 144 of the Securities Act of 1933, as amended (the "Act") and may not be offered for sale or sold or otherwise transferred in a transaction which would constitute a sale thereof within the meaning of the Act unless (i) such security has been registered for sale under the Act and registered or qualified under applicable state securities laws relating to the offer and sale of securities; or (ii) exemptions from the registration requirements of the Act and the registration or qualification requirements of all such state securities laws are available and the Company shall have received an opinion of counsel that the proposed sale or other disposition of such securities may be effected without registration under the Act and would not result in any violation of any applicable state securities laws relating to the registration or qualification of securities for sale, such counsel and such opinion to be satisfactory to the Company. (b) Voting Rights; Dividends. Holders of Common Stock of the Company have equal rights to receive dividends when, as, and if declared by the Board of Directors out of funds legally available therefor. Holders of Common Stock of the Company have one vote for each share held of record and do not have cumulative voting rights. (c) Liquidation; Redemption. Holders of Common Stock of the Company are entitled upon liquidation of the Company to share ratably in the net assets available for distribution, subject to the rights, if any of holders of any preferred stock of the Company then outstanding. Shares of Common Stock of the Company are not redeemable and have no preemptive or similar rights. All outstanding shares of common stock of the Company are fully paid and nonassessable. (d) Restrictions Upon Resale. The Subscriber hereby agrees that the Shares shall be subject to restrictions upon the transfer, sale, encumbrance or other disposition of the Shares. See "Understanding of Investment Risks" and "Registration Rights". 3. Shares Offered in a Private Placement Transaction. The Shares offered by this Securities Purchase Agreement are being offered as a non-public offering pursuant to Section 4(2) and Regulation D of the Act ("Regulation D"). 4. Binding Effect of Securities Purchase Agreement; the Closing. This Securities Purchase Agreement shall not be binding on the Company unless and until an authorized executive officer of the Company has evidenced acceptance thereof by executing the signature page at the end hereof. The Company may accept or reject this Securities Purchase Agreement in its sole discretion if the Purchaser does not meet the suitability standards established herein, or for any other reason. A closing (the "Closing") will occur contemporaneously with the execution of this Agreement by all parties hereto. 5. Representations and Warranties of the Purchaser. The Purchaser represents and warrants to the Company as follows: (a) Accredited Investor. The Purchaser has such knowledge and experience in business and financial matters such that the Purchaser is capable of evaluating the merits and risks of purchasing the Shares. The Purchaser is either an "accredited investor" as that term is defined in Rule 501 of Regulation D of the Act or a "qualified institutional buyer" as that term is defined in Rule 144A of the Act, and represents that he satisfies the suitability standards identified in Section 9 hereof; (b) Loss of Investment. The Purchaser('s) (i) overall commitment to investments which are not readily marketable is not disproportionate to his net worth; (ii) investment in the Company will not cause such overall commitment to become excessive; (iii) can afford to bear the loss of his entire investment in the Company; and (iv) has adequate means of providing for his current needs and personal contingencies and has no need for liquidity in his investment in the Company; (c) Special Suitability. The Purchaser satisfies any special suitability or other applicable requirements of his state of residence and/or the state in which the transaction by which the Shares are purchased occurs; 2 (d) Investment Intent. The Purchaser hereby acknowledges that the Purchaser has been advised that this offering has not been registered with, or reviewed by, the Securities and Exchange Commission ("SEC") because this offering is intended to be a non-public offering pursuant to Section 4(2) and Regulation D of the Act. The Purchaser represents that the Purchaser's Shares are being purchased for the Purchaser's own account and not on behalf of any other person, for investment purposes only and not with a view towards distribution or resale to others. The Purchaser agrees that the Purchaser will not attempt to sell, transfer, assign, pledge or otherwise dispose of all or any portion of the Shares unless they are registered under the Act or unless in the opinion of counsel an exemption from such registration is available, such counsel and such opinion to be satisfactory to the Company. The Purchaser understands that the Shares have not been registered under the Act by reason of a claimed exemption under the provisions of the Act which depends, in part, upon the Purchaser's investment intention; (e) State Securities Laws. The Purchaser understands that no securities administrator of any state has made any finding or determination relating to the fairness of this investment and that no securities administrator of any state has recommended or endorsed, or will recommend or endorse, the offering of the Shares; (f) Authority; Power; No Conflict. The execution, delivery and performance by the Purchaser of the Agreement are within the powers of the Purchaser, have been duly authorized and will not constitute or result in a breach or default under, or conflict with, any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any agreement or other undertaking, to which the Purchaser is a party or by which the Purchaser is bound, and, if the Purchaser is not an individual, will not violate any provision of the charter documents, By-Laws, indenture of trust or partnership agreement, as applicable, of the Purchaser. The signatures on the Agreement are genuine, and the signatory, if the Purchaser is an individual, has legal competence and capacity to execute the same, or, if the Purchaser is not an individual, the signatory has been duly authorized to execute the same; and the Agreement constitutes the legal, valid and binding obligations of the Purchaser, enforceable in accordance with its terms; (g) No General Solicitation. The Purchaser acknowledges that no general solicitation or general advertising (including communications published in any newspaper, magazine or other broadcast) has been received by him and that no public solicitation or advertisement with respect to the offering of the Shares has been made to him; (h) Advice of Tax and Legal Advisors. The Purchaser has relied solely upon the advice of his own tax and legal advisors with respect to the tax and other legal aspects of this investment; (i) No Brokers Fees. The Purchaser is not aware that any person, and has been advised that no person, will receive from the Company any compensation as a broker, finder, adviser or in any other capacity in connection with the purchase of the Shares other than as declared herein; (j) Access to Information. Purchaser has had access to all material and relevant information concerning the Company, its management, 3 financial condition, capitalization, market information, properties and prospects necessary to enable Purchaser to make an informed investment decision with respect to its investment in the Shares. Purchaser has carefully read and reviewed, and is familiar with and understands the contents thereof and hereof, including, without limitation, the risk factors described in this Agreement. See "Understanding of Investment Risks." Purchaser acknowledges that it has had the opportunity to ask questions of and receive answers from, and to obtain additional information from, representatives of the Company concerning the terms and conditions of the acquisition of the Shares and the present and proposed business and financial condition of the Company, and has had all such questions answered to its satisfaction and has been supplied all information requested; (k) Review of Exchange Act Reports. The Purchaser acknowledges that it has been provided with an opportunity to review: (i) a copy of the Company's Current Report on Form 8-K, which provides details as to the Company's recent merger with Sky King Communications, which copy is attached hereto as Exhibit "A"; (ii) a copy of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, which is attached hereto as Exhibit "B"; and (iii) all other relevant reports filed by the Company with the Securities and Exchange Commission under the Securities Exchange Act of 1934. (l) Understanding the Nature of Securities. The Purchaser understands and acknowledges that: (i) The Shares have not been registered under the Act or any state securities laws and are being issued and sold in reliance upon certain exemptions contained in the Act; (ii) The Shares are "restricted securities" as that term is defined in Rule 144 promulgated under the Act; (iii) The Shares cannot be sold or transferred without registration under the Act and applicable state securities laws, or unless the Company receives an opinion of counsel reasonably acceptable to it (as to both counsel and the opinion) that such registration is not necessary; and (iv) the Shares and any certificates issued in replacement therefor shall bear the following legend, in addition to any other legend required by law or otherwise: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED OR DISPOSED OF WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT VIOLATE THE 4 SECURITIES ACT OF 1933, AS AMENDED, OR THE RULES AND REGULATIONS THEREUNDER." 6. Understanding of Investment Risks. An investment in the Shares should not be made by a Purchaser who cannot afford the loss of his entire Purchase Price. The Purchaser acknowledges that the Shares offered hereby have not been approved or disapproved by the Securities and Exchange Commission, or any state securities commissions, nor has the Securities and Exchange Commission or any state securities commission passed upon the adequacy or accuracy of this Securities Purchase Agreement or any exhibit hereto. Prior to making an investment in the Shares, the Purchaser has fully considered, among other things, the financial and other information set forth in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (a copy of which is attached hereto as Exhibit "B"), and acknowledges that such information have been considered prior to making this investment decision. 7. Registration Rights. The Company agrees that within ninety (90) days of the Closing, it will prepare and file with the Securities and Exchange Commission, and use its best efforts to have declared effective thereafter, a Registration Statement on Form SB-2 or other equivalent form pursuant to which the Company shall register the public resale of the Shares. The Company shall have the right to include within such Registration Statement any other securities on behalf of the Company or other security holders. The expenses of such registration shall be borne by the Company. Notwithstanding the foregoing, the Company may: (A) delay filing the Registration Statement and may withhold efforts to cause the Registration Statement to become effective, if the Company determines in good faith that such registration rights might (i) interfere with or affect the negotiation or completion of any transaction that is being contemplated by the Company (whether or not a final decision has been made to undertake such transaction) at the time the right to delay is exercised, or (ii) involve initial or continuing disclosure obligations that might not be in the best interest of the Company's stockholders, and (B) not include the Shares in a Registration Statement covering an underwritten offering to the extent that the inclusion of the Shares would, in the opinion of the managing underwriter of such an offering, adversely affect such an offering or the market for the Company's securities. In the event that the Shares are not included in the Registration Statement in accordance with the provisions of clause (B) above, the Company agrees to register the Shares promptly after the completion of the underwritten offering described in clause (B) as may be permitted by the managing underwriter of such an offering. If, after the Registration Statement becomes effective, the Company advises the holders of registered Shares that the Company considers it appropriate for the Registration Statement to be amended, the holders of such Shares shall suspend any further sales of their registered Shares until the Company advises them that the Registration Statement has been amended. Each holder of Shares whose shares are registered pursuant to the Registration Statement set forth herein shall indemnify and hold harmless the Company, each of its directors and each of its officers from and against any and all claims, damages or liabilities, joint or several, to which they or any of them may become subject, including all legal and other expenses, 5 arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the Registration Statement or prospectus as from time to time amended or supplemented) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading in the circumstances in which they were made, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by such holder expressly for use therein. The liability of any such holder shall be limited to the aggregate price at which such holder's Shares of the Company is sold. In connection with the registration rights, the Company shall have no obligation: (i) to assist or cooperate in the offering or disposition of such Shares; (ii) to indemnify or hold harmless the holders of the securities being registered; (iii) to obtain a commitment from an underwriter relative to the sale of such Shares; or (iv) to include such Shares within an underwritten offering of the Company. 8. Representations and Warranties of the Company. The Company hereby represents and warrants to Purchaser as follows: (a) Organization and Standing of the Company. The Company is a duly organized and validly existing corporation in good standing under the laws of the Commonwealth of Bermuda with adequate power and authority to conduct the business in which it is now engaged and has the corporate power and authority to enter into this Agreement, and is duly qualified and licensed to do business as a foreign corporation in such other jurisdictions as is necessary to enable it to carry on its business, except where failure to do so would not have a material adverse effect on its business; (b) Corporate Power and Authority. The execution and delivery of this Agreement and the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company. No other corporate act or proceeding on the part of the Company is necessary to authorize this Agreement or the consummation of the transactions contemplated hereby. When duly executed and delivered by the parties hereto, this Agreement will constitute a valid and legally binding obligation of the Company enforceable against it in accordance with its terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, moratorium, reorganization or other similar laws and legal and equitable principles limiting or affecting the rights of creditors generally; and/or (ii) general principles of equity, regardless of whether considered in a proceeding in equity or at law; (c) Noncontravention. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not, to the best of the Company's knowledge and belief, (i) permit the termination or acceleration of the maturity of any material indebtedness or material obligation of the Company; (ii) permit the termination of any material note, mortgage, indenture, license, agreement, contract, or other instrument to which the Company is a party or by which it is bound or the Memorandum of Association or Bye-Laws of the Company; (iii) except as expressly provided in this Agreement and except for state "blue sky" approvals that may be required and those consents and waivers which already have been obtained by the Company, require 6 the consent, approval, waiver or authorization from or registration or filing with any party, including but not limited to any party to a material agreement to which the Company is a party or by which it is bound, or any regulatory or governmental agency, body or entity except where failure to obtain such consent, approval, waiver or authorization would not have a material adverse effect on the Company's business; (iv) result in the creation or imposition of any lien, claim or encumbrance of any kind or nature on any material properties or assets of the Company; or (v) violate in any material aspect any statute, law, rule, regulation or ordinance, or any judgment, decree, order, regulation or rule of any court, tribunal, administrative or governmental agency, body or entity to which the Company or its properties is subject except where such violation would not have a material adverse effect on the Company's business; and (d) Reservation of Securities. The requisite number of shares of Common Stock of the Company have been duly authorized and reserved for issuance upon the Company's receipt and acceptance of payment therefor, and no further corporate action is required for the valid issuance of such Shares. 9. IMPORTANT CONSIDERATIONS: SUITABILITY STANDARDS - WHO SHOULD INVEST. INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL RESOURCES WHO HAVE NO NEED FOR LIQUIDITY IN THEIR INVESTMENT. A substantial number of state securities commissions have established investor suitability standards for the marketing within their respective jurisdictions of restricted securities. Some have also established minimum dollar levels for purchases in their states. The reasons for these standards appear to be, among others, the relative lack of liquidity of securities of such programs as compared with other securities investments. Investment in the Shares involves a high degree of risk and is suitable only for persons of substantial financial means who have no need for liquidity in their investments. The Company has adopted as a general investor suitability standard the requirement that each Subscriber for Shares represents in writing that the Subscriber: (a) is acquiring the Shares for investment and not with a view to resale or distribution; (b) can bear the economic risk of losing its entire investment; (c) its overall commitment to investments which are not readily marketable is not disproportionate to its net worth, and an investment in the Shares will not cause such overall commitment to become excessive; (d) has adequate means of providing for its current needs and personal contingencies and has no need for liquidity in this investment in the Shares; (e) has evaluated all the risks of investment in the Company; and (f) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of investing in the Company or is relying on its own purchaser representative in making an investment decision. In addition, all of the Subscribers for Shares must be: (1) extremely sophisticated investors with substantial net worth and experience in making investments of this nature; and (2) "accredited investors," as defined in 7 Rule 501 of Regulation D under the Act, by meeting any of the following conditions: (i) he or she has an individual income in excess of $200,000 in each of the two most recent years or joint income with his or her spouse in excess of $300,000 in each of those years, and he or she reasonably expects an income in excess of the aforesaid levels in the current year, or (ii) he or she has an individual net worth, or a joint net worth with his or her spouse, at the time of his or her purchase, in excess of $250,000 (net worth for these purposes includes homes, home furnishings and automobiles), or (iii) he or she otherwise satisfies the Company that he or she is an accredited investor, as defined in Rule 501 under the Act. Other categories of investors included within the definition of accredited investor include the following: certain institutional investors, including certain banks, whether acting in their individual or fiduciary capacities; certain insurance companies; federally registered investment companies; business development companies (as defined under the Investment Company Act of 1940); Small Business Investment Companies licensed by the Small Business Administration; certain employee benefit plans; private business development companies (as defined in the Investment Advisers Act of 1940); tax exempt organizations (as defined in Section 501(c)(3) of the Internal Revenue Code) with total assets in excess of $5,000,000; entities in which all the equity owners are accredited investors; and certain affiliates of the Company. A partnership Subscriber, which satisfies the requirements set forth in clauses (a) through (f) above shall satisfy the suitability standards if it is an accredited investor by reason of clause (iii) above, or if all of its partners are accredited investors. A corporate subscriber, which satisfies the requirements set forth in clauses (a) through (f) above shall satisfy the investor suitability standards if it is an accredited investor by reason of clause (iii) above, or if all of its shareholders are accredited investors. Corporate subscribers must have net worth of at least three (3) times the amount of their investment in the Shares. The suitability standards referred to above represent minimum suitability requirements for prospective purchasers and the satisfaction of such standards by a prospective purchaser does not necessarily mean that the Shares are a suitable investment for such purchaser. The Company may, in circumstances it deems appropriate, modify such requirements. The Company may also reject subscriptions for whatever reasons, in its sole discretion, it deems appropriate. Securities Purchase Agreements may not necessarily be accepted in the order in which received. Purchasers who are residents of certain states may be required to meet certain additional suitability standards. THE ACCEPTANCE OF A SUBSCRIPTION FOR SHARES BY THE COMPANY DOES NOT CONSTITUTE A DETERMINATION BY THE COMPANY THAT AN INVESTMENT IN THE SHARES IS SUITABLE FOR A PROSPECTIVE INVESTOR. THE FINAL DETERMINATION OF THE 8 SUITABILITY OF INVESTMENT IN THE SHARES MUST BE MADE BY THE PROSPECTIVE INVESTOR AND HIS OR HER ADVISERS. 10. State Law Considerations for Residents of All States. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THE DESCRIPTION OF BUSINESS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. 11. Notices. All notices, requests, consents or other communications required or permitted hereunder shall be in writing and shall be hand delivered or mailed first class postage prepaid, registered or certified mail, to the following addresses: If to the Company: VDC Corporation Ltd. 27 Doubling Road Greenwich, CT 06830 Attention: Frederick A. Moran, Chief Executive Officer With a copy to: Stephen M. Cohen, Esquire Buchanan Ingersoll Professional Corporation Eleven Penn Center 1835 Market Street, 14th Floor Philadelphia, PA 19103 In the case of Purchaser: To the address set forth at the end of this Agreement or to such other addresses as may be specified in accordance herewith from time to time. Unless specified otherwise, such notices and other communications shall for all purposes of this Agreement be treated as being effective upon being delivered personally or, if sent by mail, five days after 9 the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed as set forth above, and postage prepaid. 12. Survival of Representations and Warranties. Representations and warranties contained herein shall survive the execution and delivery of this Agreement. 13. Parties in Interest. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the parties hereto, provided that this Agreement and the interests herein may not be assigned by either party without the express written consent of the other party. 14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the jurisdiction of incorporation of the Company without regard to the principles of conflict of laws. The parties hereto hereby submit to the exclusive jurisdiction of the courts located in the jurisdiction of incorporation of the Company with respect to any dispute arising under this Agreement, the agreements entered into in connection herewith or the transactions contemplated hereby or thereby. 15. Sections and Other Headings. The section and other headings contained in this Agreement are for the convenience of reference only, and do not constitute part of this Agreement or otherwise affect any of the provisions hereof. 16. Counterpart Signatures. This Agreement may be signed in counterparts and all counterparts together shall become effective only when the counterpart(s) have been executed and delivered by and on behalf of the Company and the Purchaser. 17. Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. 18. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Purchaser make any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. 19. United States Dollars. All dollar amounts stated herein refer to and are payable solely in United States Dollars. IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have caused this Agreement to be signed by their duly authorized officers. Purchaser: By: --------------------------------- 10 Shares/ ------------------------------------ - ------ --------- Name (Signature) Number and dollar amount of Shares purchased - Purchase Price Address/Residence of Purchaser: ------------------------------------ ------------------------------------ Social Security No. ----------------- Accredited Investor Certification (Place initials on the appropriate line(s)) (i) I am a natural person who had individual income of - --- more than $200,000 in each of the most recent two years or joint income with my spouse in excess of $300,000 in each of the most recent two years and reasonably expect to reach that same income level for the current year ("income", for purposes hereof, should be computed as follows: individual adjusted gross income, as reported (or to be reported) on a federal income tax return, increased by (1) any deduction of long-term capital gains under section 1202 of the Internal Revenue Code of 1986 (the "Code"), (2) any deduction for depletion under Section 611 et seq. of the Code, (3) any exclusion for interest under Section 103 of the Code and (4) any losses of a partnership as reported on Schedule E of Form 1040); (ii) I am a natural person whose individual net worth - --- (i.e., total assets in excess of total liabilities), or joint net worth with my spouse, will at the time of purchase of the Shares be in excess of $250,000; (iii) The Purchaser is an investor satisfying the - --- requirements of Section 501(a)(1), (2) or (3) of Regulation D promulgated under the Securities Act, which includes but is not limited to, a self-directed employee benefit plan where investment decisions are made solely by persons who are "accredited investors" as otherwise defined in Regulation D; (iv) The Purchaser is a "qualified institutional buyer" - --- as that term is defined in Rule 144A of the Securities Act; (v) The Purchaser is a trust, which trust has total - --- assets in excess of $5,000,000, which is not formed for the specific purpose of acquiring the Shares offered hereby and whose purchase is directed by a sophisticated person as described in Rule 506(b)(ii) of Regulation D and who has such knowledge and 11 experience in financial and business matters that he is capable of evaluating the risks and merits of an investment in the Shares; (vi) I am a director or executive officer of the Company; - --- or (vii) The Purchaser is an entity (other than a trust) in - --- which all of the equity owners meet the requirements of at least one of the above subparagraphs. Agreed and Accepted by VDC CORPORATION LTD. By: --------------------------------- Frederick A. Moran, Chief Executive Officer DATED: ------------------------ 12 EXHIBIT "A" VDC CORPORATION LTD. CURRENT REPORT ON FORM 8-K EXHIBIT "B" VDC CORPORATION LTD. FORM 10-Q EX-99.4 5 EX-99.4 EXHIBIT 4 AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER BY AND AMONG VDC CORPORATION LTD. VDC (Delaware), INC. AND SKY KING COMMUNICATIONS, INC. Effective Date: December 10, 1997
TABLE OF CONTENTS ARTICLE I: MERGER OF SKY KING WITH AND INTO SUB AND RELATED MATTERS 1 1.1 The Merger. 2 1.2 Conversion of Stock. 3 1.3 Merger Consideration. 4 1.4 Additional Rights; Taking of Necessary Action; Further Action. 6 1.5 Dissenters' Rights. 6 1.6 No Further Rights or Transfers. 6 ARTICLE II: THE CLOSING 6 2.1 Closing Date. 6 2.2 Closing Transactions. 7 ARTICLE III: CERTAIN CORPORATE ACTION 9 3.1 Sky King Corporate Action. 10 3.2 Acquiror Corporate Action. 10 ARTICLE IV: REPRESENTATIONS AND WARRANTIES 10 4.1 Representations and Warranties of Sky King and the Sky King Shareholders. 10 4.2 Representations and Warranties of Acquiror and the Sub. 17 ARTICLE V: AGREEMENTS OF THE PARTIES 21 5.1 Issuance of Securities of Acquiror prior to the Closing. 21 5.2 Anticipated Domestication of Acquiror; Possible Follow-on Merger. 22 5.3 Access to Information. 23 5.4 Confidentiality; No Solicitation. 23 5.5 Interim Operations. 25 5.6 Consents. 28 5.7 Filings. 28 i 5.8 All Reasonable Efforts. 28 5.9 Public Announcements. 28 5.10 Notification of Certain Matters. 29 5.11 Expenses. 29 5.12 Registration Rights. 29 5.13 Documents at Closing. 32 5.14 Prohibition on Trading in Acquiror and Sub Stock. 33 5.15 Anticipated Acquisition of the Principal Assets of PortaCom Wireless, Inc. 33 5.16 Production of Schedules and Exhibits. 34 5.17 Acknowledgment of Approvals. 34 ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER 34 6.1 Conditions to Obligations of Sky King and the Sky King Shareholders. 35 6.2 Conditions to Acquiror's and the Sub's Obligations. 36 ARTICLE VII: INDEMNIFICATION 38 7.1 Indemnification. 38 ARTICLE VIII: TERMINATION 39 8.1 Termination. 39 8.2 Notice and Effect of Termination. 40 8.3 Extension; Waiver. 40 8.4 Amendment and Modification. 40 ARTICLE IX: MISCELLANEOUS 41 9.1 Survival of Representations and Warranties. 41 9.2 Notices. 41 9.3 Entire Agreement; Assignment. 42 9.4 Binding Effect; Benefit. 42 ii 9.5 Headings. 42 9.6 Counterparts. 42 9.7 Governing Law. 43 9.8 Arbitration. 43 9.9 Severability. 43 9.10 Release and Discharge. 43 9.11 Certain Definitions. 43
iii
EXHIBITS AND SCHEDULES EXHIBITS - -------- Exhibit 1.3(a)(i) Series A Certificate of Designation Exhibit 1.3(a)(ii) Series B Certificate of Designation Exhibit 1.3(c)(ii) Escrow Agreement Exhibit 2.2(a)(ii) Investment Letter Exhibit 2.2(b)(xii) Employment Agreement SCHEDULES - --------- Schedule 4.1(a) Articles of Incorporation and Bylaws of Sky King Communications, Inc. Schedule 4.1(d) Options, etc. - Sky King Communications, Inc. Schedule 4.1(g) Litigation - Sky King Communications, Inc. Schedule 4.1(l) Names and Service Marks - Sky King Communications, Inc. Schedule 4.1(m) Leases and Agreements - Sky King Communications, Inc. Schedule 4.1(n) Conflicting Interests - Sky King Communications, Inc. Schedule 4.1(p) Certain Changes and Events - Sky King Communications, Inc. Schedule 4.2(a) Memorandum of Association and Byelaws of VDC Corporation Ltd. and Articles of Incorporation and Bylaws of VDC (Delaware), Inc. Schedule 4.2(d)(i) VDC Corporation Ltd. Warrants Schedule 4.2(g) Legal Violations of VDC Corporation Ltd. and its Subsidiaries Schedule 4.2(i) Litigation - VDC Corporation Ltd. Schedule 5.5(a)(ix) Acquisitions by Sky King Communications, Inc.
iv AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and entered into effective as of December 10, 1997, by and among VDC CORPORATION LTD, a Bermuda Corporation ("Acquiror"), VDC (Delaware), Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Sub"), SKY KING COMMUNICATIONS, INC., a Connecticut corporation ("Sky King"), and those individuals and entities whose names appear on the signature page hereof in their capacity as holders of the outstanding common stock of Sky King (the "Sky King Shareholders"). Recitals WHEREAS, the parties hereto entered into an Agreement and Plan of Merger effective as of the date thereof (the "Original Agreement") pursuant to which Sub shall merger with and into Sky King (the "Merger"); WHEREAS, the parties hereto desire to amend the Original Agreement to (i) amend the voting, conversion and other rights of holders of Sub's Series A Convertible Preferred Stock to be issued as Merger Consideration in the Merger; (ii) provide for the issuance of Sub's Series B Convertible Preferred Stock as part of the Merger Consideration; (iii) change the manner in which the Merger Consideration shall be paid and delivered to the Sky King shareholders; and (iv) amend and restate entirely the Original Agreement; WHEREAS, Acquiror and Sky King have determined that it is in the best interests of their respective shareholders for Sky King to merge with and into Sub upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, the respective Boards of Directors of Acquiror and Sky King have each approved this Agreement and the consummation of the transactions contemplated hereby and approved the execution and delivery of this Agreement; and WHEREAS, for federal income tax purposes, it is intended that this merger shall qualify as a tax-free reorganization under the provisions of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"). NOW, THEREFORE, in consideration of the foregoing premises and representations, warranties and agreements contained herein, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Amended and Restated Agreement and Plan of Merger shall be as follows: ARTICLE I MERGER OF SKY KING WITH AND INTO SUB AND RELATED MATTERS 1.1 The Merger. (a) Upon the terms and conditions of this Agreement, at the "Effective Time" (as defined herein), Sky King shall be merged with and into the Sub (the "Merger") in accordance with the provisions of the Connecticut Business Corporation Act ("CBCA") and the Delaware General Corporation Law (the "DGCL") and the separate corporate existence of Sky King shall cease, and the Sub shall continue as the surviving corporation under the laws of the state of Delaware with the corporate name "SKY KING COMMUNICATIONS, INC." (the "Surviving Corporation"). (b) The Merger shall become effective as of the filing of a certificate of merger (the "Certificate of Merger") with the Secretary of State of Delaware and Articles of Merger with State Department of Assessments and Taxation, in accordance with the provisions of Section 252 of the DGCL and Section 33-821 of the CBCA, and the confirmation by the Certificate of Merger that the Merger is effective as of such filing date. The date and time when the Merger shall become effective is referred to herein as the "Effective Time." (c) At the Effective Time: (i) the Sub shall continue its existence under the laws of the State of Delaware as the Surviving Corporation; (ii) the separate corporate existence of Sky King shall cease; (iii) all rights, title and interests to all assets, whether tangible or intangible and any property or property rights owned by Sky King shall be allocated to and vested in the Sub as the Surviving Corporation without reversion or impairment, without further act or deed, and without any transfer or assignment having occurred, but subject to any existing liens or other encumbrances thereon, and all liabilities and obligations of Sky King shall be allocated to the Sub as the Surviving Corporation which shall be the primary obligor therefor and, except as otherwise provided by law or contract, no other party to the Merger, other than the Sub as the Surviving Corporation, shall be liable therefor; (iv) the Certificate of Incorporation of the Sub as in effect immediately prior to the consummation of the Merger, other than the name of the Sub which shall be changed to "Sky King Communications, Inc." in connection with the Merger, shall be the Certificate of Incorporation of the Surviving Corporation, until thereafter amended as provided by law and such Certificate of Incorporation; (v) Each of Acquiror, Sub and Sky King shall execute and deliver, and file or cause to be filed with the Secretary of State of the State of Delaware, the Certificate of Merger and with the State 2 Department of Assessments and Taxation, the Articles of Merger, with such amendments thereto as the parties hereto shall deem mutually acceptable; (vi) the Bylaws of Sub, as in effect immediately prior to the consummation of the Merger, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided by law and such Bylaws; and (vii) the officers and directors of the Acquiror shall be nominated and elected in accordance with the provisions of Sections 6.1 (g) hereof. 1.2 Conversion of Stock. At the Effective Time, and without any action on the part of the parties hereto, the Sky King Shareholders or any other party: (a) the shares representing 100% of the issued and outstanding common stock of Sky King ("Sky King Common Stock") as of the Closing (the "Closing") (as such term is defined in Section 2.1 below) (other than "Dissenting Shares", as defined herein) shall, by virtue of the Merger and without any action on the part of any holder thereof, be converted into and represent the right to receive, and shall be exchangeable for the merger consideration identified at Section 1.3 hereafter (the "Merger Consideration); (b) each share of capital stock of Sky King held in treasury as of the Effective Time shall, by virtue of the Merger, be canceled without payment of any consideration therefor and without any conversion thereof; (c) each share of common stock of the Sub that is issued and outstanding as of the Effective Time shall continue to represent one share of common stock of the Surviving Corporation after the Merger, which shares, together with the 100 shares of common stock of Sub owned by Acquiror prior to the Effective Time, shall thereafter constitute all of the issued and outstanding shares of capital stock of the Surviving Corporation; (d) Acquiror shall pay all charges and expenses, including those of any exchange agent and the National Association of Securities Dealers, Inc., if any, in connection with the issuance or exchange of the shares in connection with the Merger; (e) from and after the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of shares of Sky King Common Stock (or any warrants or other rights to acquire any of the same) that were outstanding immediately prior to the Effective Time. After the Effective Time, certificates for shares of Sky King Common Stock (or any warrants or other rights to acquire any of the same) that were outstanding immediately prior to the Effective Time shall be canceled and exchanged for the consideration to be received therefor in connection with the Merger as provided in this Agreement; and 3 (f) no fractional shares of stock shall be issued in the Merger, and each holder of Sky King Common Stock entitled to receive as part of the Merger Consideration fractional shares shall receive that number of shares of stock rounded to the nearest whole number. 1.3 Merger Consideration. (a) The Merger Consideration consisting of the total purchase price payable to the holders of 100% of the Sky King Common Stock in connection with the acquisition by merger of Sky King shall consist exclusively of the following: (i) newly issued shares of Sub's Series A Convertible Preferred Stock (the "Series A Stock") which are subject to the following salient features: (1) Conversion Rights. The Series A Stock shall automatically convert into an aggregate of 5,500,000 shares of Sub Common Stock upon the occurrence of the domestication of Acquiror pursuant to Section 5.2 of this Agreement. If the domestication of Acquiror does not occur within one (1) year after the Effective Time, all, but not less than all of the Series A Stock may be convertible at any time thereafter by the holders thereof into, or exchangeable for, 5,500,000 shares of Acquiror Common Stock. The Series A Stock shall also automatically convert into shares of Sub Common Stock upon the occurrence of: (i) a liquidation event, dissolution or winding up of Sub, (ii) the sale of all or substantially all of the assets or business of Sub or (iii) a merger, plan of reorganization or consolidation in which Sub is not the surviving corporation. (2) Voting Rights. Prior to the conversion thereof, the Series A Stock shall have no voting rights. (3) Dividends. The Series A Stock will share pari-passu with all dividends on Sub Common Stock and will otherwise have no dividend rights. The definitive terms of the Series A Stock are set forth within the Certificate of Designation for the Series A Convertible Preferred Stock attached hereto as Exhibit 1.3(a)(i) (the "Series A Certificate of Designation"). The Series A Certificate of Designation shall indicate Acquiror's consent to the terms of the Series A Stock as set forth in this Subsection 1.3(a)(i); and (ii) newly issued shares of Sub's Series B Convertible Preferred Stock (the "Series B Stock"; the Series A Stock and the Series B Stock shall be collectively referred to herein as the "Sub Preferred Stock") which are subject to the following salient features: (1) Conversion Rights. The Series B Stock shall automatically convert into an aggregate of 4,500,000 shares of Sub Common Stock upon the occurrence of the domestication of Acquiror pursuant to Section 5.2 of this Agreement. If the domestication of Acquiror does not occur 4 within one (1) year after the Effective Time, all, but not less than all of the Series B Stock may be convertible at any time thereafter by the holders thereof into, or exchangeable for, 4,500,000 shares of Acquiror Common Stock. The Series B Stock shall also automatically convert into shares of Sub Common Stock upon the occurrence of: (i) a liquidation event, dissolution or winding up of Sub, (ii) the sale of all or substantially all of the assets or business of Sub or (iii) a merger, plan of reorganization or consolidation in which Sub is not the surviving corporation. (2) Voting Rights. Prior to the conversion thereof, the Series B Stock shall have no voting rights. (3) Dividends. The Series B Stock will share pari-passu with all dividends on Sub Common Stock and will otherwise have no dividend rights. The definitive terms of the Series B Stock are set forth within the Certificate of Designation for the Series B Convertible Preferred Stock attached hereto as Exhibit 1.3(a)(ii) (the "Series B Certificate of Designation"). The Series B Certificate of Designation shall indicate Acquiror's consent to the terms of the Series B Stock as set forth in this Subsection 1.3(a)(ii). (b) The Merger Consideration shall be allocated among the holders of 100% of the Sky King Common Stock in the proportion of their share ownership of the outstanding common stock of Sky King as of the date of the Closing. (c) The Merger Consideration shall be paid and delivered in the following manner: (i) At the Closing, shares of Series A Stock convertible into an aggregate of 5,500,000 shares of Sub Common Stock shall be delivered to the Sky King Shareholders; and (ii) At the Closing, Acquiror shall issue in the name of the Sky King Shareholders shares of Series B Stock (the "Escrow Shares") and shall deliver such shares to the Escrow Agent to be held in accordance with the terms and conditions of the Escrow Agreement attached hereto as Exhibit 1.3(c)(ii) and made a part hereto (the "Escrow Agreement"). (d) The shares of Series A Stock to be delivered at the Closing and the shares of Series B Stock released from escrow by the Escrow Agent (as well as shares of Acquiror Common Stock that may be issued pursuant to Section 5.2(b) hereof) shall be fully paid and non-assessable and shall be free and clear of all liens, levies and encumbrances except that all of such Series A Stock, Series B Stock, shares of common stock issuable upon conversion of the Series A Stock, Series B Stock and any shares of Acquiror Common Stock shall be "restricted securities" pursuant to Rule 144, promulgated under the Securities Act of 1933, as amended (the "Act"). 5 1.4 Additional Rights; Taking of Necessary Action; Further Action. Each of Acquiror, Sub, Sky King and Sky King Shareholders, respectively, shall use their best efforts to take all such action as may be necessary and appropriate to effectuate the Merger under the CBCA and DGCL as promptly as possible, including, without limitation, the filing of the Certificate of Merger and the Articles of Merger consistent with the terms of this Agreement. If at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest in Sub as the Surviving Corporation full right, title and possession to all assets, property, rights, privileges, powers and franchises of Sky King, the officers of such corporations are fully authorized in the name of their corporations or otherwise, and notwithstanding the Merger, to take, and shall take, all lawful and necessary action. 1.5 Dissenters' Rights. Each of Sky King and the Sky King Shareholders acknowledge that dissenters' rights are available to each of the Sky King Shareholders pursuant to the CBCA and that (i) Sky King has complied with the provisions of the CBCA in notifying each Sky King Shareholder of the availability of such rights; and (ii) pursuant to the provisions of the CBCA, if the appropriate procedures and guidelines are followed, any dissenting shareholders ("Dissenting Shareholders"), in lieu of the Merger Consideration, shall be entitled to receive the fair value of their shares in accordance with the provisions of the CBCA. 1.6 No Further Rights or Transfers. At and after the Effective Time, the shares of capital stock of Sky King outstanding immediately prior to the Effective Time shall cease to provide any rights to the shareholders of Sky King or the Surviving Corporation, except for the right to surrender the certificate or certificates representing such shares and to receive the Merger Consideration as provided in this Agreement. ARTICLE II THE CLOSING 2.1 Closing Date. Subject to satisfaction or waiver of all conditions precedent set forth in Article VI of this Agreement, the closing of the Merger (the "Closing") shall take place at the offices of Buchanan Ingersoll Professional Corporation., Eleven Penn Center, 1835 Market Street, 14th Floor, Philadelphia, PA 19103, at 10:00 a.m., local time on the later of: (i) the first Business Day following the day upon which all appropriate Acquiror corporate action and Sky King corporate action has been taken in accordance with Article III of this Agreement; or (ii) the day on which the last of the conditions precedent set forth in Article VI of this Agreement is fulfilled or waived, or (b) at such other time, date and place as the parties may agree, but in no event shall such date be later than March 10, 1998, unless such date is extended by the mutual written agreement of the parties. 6 2.2 Closing Transactions. At the Closing, the following transactions shall occur, all of such transactions being deemed to occur simultaneously: (a) Sky King and all holders of the Sky King Common Stock shall take, or shall cause to be taken, the following actions: (i) Each of the holders of Sky King Common Stock (other than Dissenting Shareholders) shall surrender and deliver to the Sub as the Surviving Corporation the certificate or certificates representing all of their shares of Sky King Common Stock; (ii) Each of the holders of Sky King Common Stock (other than Dissenting Shareholders) shall, to the extent necessary to comply with applicable federal and state securities laws (including, if applicable, Rule 145 promulgated under the Act), execute and deliver at the Closing a copy of an investment letter in a form mutually agreed upon by the parties and attached to this Agreement as Exhibit 2.2(a)(ii) ("Investment Letter"); (iii) Any outstanding shareholder agreements relating to Sky King Common Stock shall have been terminated and evidence of such termination satisfactory to Acquiror shall have been delivered to Acquiror; (iv) Sky King and the holders of Sky King Common Stock shall execute and deliver, and file or cause to be filed with the Secretary of State of the State of Connecticut, the Certificate of Merger with such amendments thereto as the parties hereto shall deem mutually acceptable; (v) A certificate shall be executed by Sky King and the holders of Sky King Common Stock to the effect that all representations and warranties made by Sky King and the Sky King Shareholders under this Agreement are true and correct as of the Closing, as though originally given to Acquiror and Sub on said date; (vi) A certificate of good standing shall be delivered by Sky King from the Secretary of State of the State of Connecticut, dated at or about the Closing, to the effect that such corporation is in good standing under the laws of such state; (vii) An incumbency certificate shall be delivered by Sky King signed by all of the officers thereof dated at or about the Closing; 7 (viii) Certified Articles of Incorporation shall be delivered by Sky King dated at or about the Closing and a copy of the Bylaws of Sky King certified by the Secretary of Sky King dated at or about the Closing; (ix) Certified Board and shareholder resolutions shall be delivered by the Secretary of Sky King dated at or about the Closing authorizing the transactions contemplated under this Agreement; (x) Sky King and the holders of Sky King Common Stock shall execute and deliver the Escrow Agreement to Acquiror and the Escrow Agent; and (xi) Each of the parties to this Agreement shall have otherwise executed whatever documents and agreements, provided whatever consents or approvals and taken all such actions as are required under this Agreement. (b) Acquiror and/or Sub shall take, or shall cause to be taken, the following actions: (i) Acquiror shall deliver or shall cause to be delivered to all of the holders of the Sky King Common Stock (other than Dissenting Shareholders) a certificate or certificates representing the number of shares of that portion of an aggregate number of 5,500,000 shares of Series A Stock as such holder is entitled to receive at the Closing in connection with the Merger; (ii) Acquiror shall, on behalf of itself and the Sky King Shareholders, deliver or shall cause to be delivered to the Escrow Agent certificates representing 4,500,000 shares of Series B Stock; (iii) Acquiror and the Sub shall execute and deliver, and file or cause to be filed with the Secretary of the State of Delaware, the Certificate of Merger with such amendments thereto as the parties hereto shall deem mutually acceptable; (iv) Sub shall receive from the Secretary of State of Delaware a final Certificate of Merger; (v) The Acquiror's Board of Directors will be reconstituted to consist of a maximum of five (5) members. Each of the existing members of Acquiror's Board of Directors will tender his resignation and nominate to the Board two (2) individuals consisting of designees of the holders of the Sub Preferred Stock and one (1) designee of the former Acquiror Board members ("VDC Designee"). The newly constituted Board of Directors will hold office in accordance with the DGCL and will appoint executive officers in accordance with the DGCL; 8 (vi) A certificate for each of the Acquiror and the Sub shall be executed by their respective Presidents to the effect that all of the respective representations and warranties of the Acquiror and Sub under this Agreement are true and correct as of the Closing, as though originally given to Sky King on said date; (vii) A certificate of good standing shall be delivered by Sub from the Secretary of State of the State of Delaware, dated at or about the Closing, stating that Sub is in good standing under the laws of such state; (viii) A certificate of good standing shall be delivered by Acquiror from the Commonwealth of Bermuda, dated at or about the Closing, stating that Acquiror is in good standing under the laws of such commonwealth; (ix) An incumbency certificate shall be delivered by each of Acquiror and Sub signed by all of their respective officers dated at or about the Closing; (x) Certified Certificates of Incorporation shall be delivered by Acquiror and Sub dated at or about the Closing, and a copy of the Bylaws of Acquiror and Sub certified by the respective Secretary of Acquiror and Sub dated at or about the Closing; (xi) Certified Board resolutions shall be delivered by the respective Secretary of the Acquiror and Sub dated at or about the Closing authorizing the transactions contemplated under this Agreement; (xii) Acquiror will deliver an Employment Agreement to each of Frederick A. Moran and James C. Roberts upon the terms and conditions identified upon Exhibit 2.2(b)(xii) to this Agreement; (xiii) A Certificate of Designation shall be filed with the Secretary of State of Delaware in accordance with the DGCL, designating the terms of the Sub Preferred Stock; (xiv) Acquiror shall execute and deliver the Escrow Agreement to Sky King and the Escrow Agent; and (xv) Each of the parties to this Agreement shall have otherwise executed whatever documents and agreements, provided whatever consents or approvals and taken all such actions as are required under this Agreement. ARTICLE III CERTAIN CORPORATE ACTION 9 3.1 Sky King Corporate Action. Sky King shall cause to occur all corporate action necessary to effect the Merger and to consummate the other transactions contemplated hereby. 3.2 Acquiror Corporate Action. Acquiror and the Sub shall cause to occur all corporate action necessary on behalf of either of them to effect the Merger and to consummate the other transactions contemplated hereby. ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of Sky King and the Sky King Shareholders. As a material inducement to Acquiror and Sub to execute this Agreement and consummate the Merger and other transactions contemplated hereby, Sky King and the Sky King Shareholders, jointly and severally, hereby make the following representations and warranties to Acquiror and Sub. The representations and warranties are true and correct in all material respects at this date, and will be true and correct in all material respects on the Closing as though made on and as of such date. (a) Corporate Existence and Power. Sky King is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Connecticut, and has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have any of the foregoing would not have a Material Adverse Effect. Sky King is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. True, correct and complete copies of the Articles of Incorporation and Bylaws of Sky King as amended to date are attached hereto as Schedule 4.1(a) and are made a part hereof. There are currently no subsidiaries of Sky King. (b) Due Authorization. This Agreement has been duly authorized, executed and delivered by Sky King and the Sky King Shareholders and constitutes a valid and binding agreement of Sky King and the Sky King Shareholders, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and other similar laws relating to, limiting or affecting the enforcement of creditors' rights generally or by the application of equitable principles. As of 10 the Closing all corporate action on the part of Sky King required under applicable law in order to consummate the Merger will have occurred. (c) No Contravention. Neither the execution and delivery of the Agreement nor the consummation of the transactions contemplated thereby will: (i) conflict with or result in any violation of any provision of the Articles of Incorporation or Bylaws of Sky King; or (ii) conflict with or result in any violation or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of a right or obligation or loss under, any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Sky King and the Sky King Shareholders or their properties or assets, or result in the creation or imposition of any mortgage, lien, pledge, charge or security interest of any kind ("Encumbrance") on any assets of Sky King, except such as is not reasonably likely to have a Material Adverse Effect or prevent Sky King or the Sky King Shareholders from consummating the transactions contemplated by this Agreement. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, is required by or with respect to Sky King in connection with the execution and delivery of this Agreement by Sky King and the Sky King Shareholders or the consummation by Sky King and the Sky King Shareholders of the transactions contemplated hereby, except the filing of the Articles of Merger with the States of Delaware and Connecticut. (d) Capitalization and Share Ownership. The authorized capital stock of Sky King will upon the Closing consist of no more than 2,000 shares of common stock ("Sky King Common Stock"). There are currently outstanding approximately 1,692 shares of Sky King Common Stock. The outstanding shares of capital stock of Sky King have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive rights. Except as described on Schedule 4.1(d) hereto, there are outstanding (A) no shares of preferred stock or other voting securities of Sky King, (B) no securities of Sky King convertible into or exchangeable for shares of capital stock or voting securities of Sky King and (C) no options, warrants or other rights to acquire from Sky King, and no obligation of Sky King to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of Sky King, and there are no agreements or commitments to do any of the foregoing. There are no voting trusts or voting agreements applicable to any capital stock of Sky King. The Sky King Common Stock to be surrendered in the Merger will be owned of record and beneficially by the Sky King Shareholders, free and clear of all liens and encumbrances of any kind and nature, and have not been sold, pledged, assigned or otherwise transferred. There are no agreements (other than this Agreement) to sell, pledge, assign or otherwise transfer such securities. (e) Financial Statements. Within fifteen (15) days after the execution hereof, Sky King will provide Acquiror with unaudited annual and interim financial statements (the "Financial Statements") such that would comply with Regulation S-X of the Securities Exchange Act of 1934 if such Financial Statements were provided on an audited basis. Such Financial Statements will have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods reported upon and fairly present in all material respects the financial position of Sky King 11 as of the date thereof and the results of operations for the periods then ended (subject to normal year-end adjustments). On or before the Closing, Sky King shall deliver audited Financial Statements to the Acquiror (the "Audited Financial Statements") covering the same periods as the Financial Statements, that reflect no material negative adjustments or differences from the Financial Statements. (f) No Contingent Liabilities. Except as set forth in the Financial Statements, at the Closing, Sky King shall have no liabilities, whether related to tax or non-tax matters, known or unknown, due or not yet due, liquidated or unliquidated, fixed or contingent, determined or determinable in amount or otherwise and, to the knowledge of Sky King after due inquiry, there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability, except as and to the extent reflected on: (i) the Financial Statements; (ii) this Agreement or any Schedule or Exhibit hereto; or (iii) liabilities incurred since the date of the Financial Statements solely in the ordinary course of business and as accurately reflected on the books and records of Sky King; provided, however, that no liability shall be incurred from and after the date hereof which is in contravention of any negative covenant contained herein and applicable to Sky King. (g) Litigation. Except as described on Schedule 4.1(g) hereto, there is no action, suit, investigation or proceeding (or, to the knowledge of Sky King, any basis therefor) pending against, or to the knowledge of Sky King threatened, against or affecting Sky King or any of its properties before any court or arbitrator or any governmental body, agency or official that (i) if adversely determined against Sky King, would have a Material Adverse Effect or (ii) in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Merger or any of the other transactions contemplated by the Agreement. (h) Taxes. Sky King has timely filed all tax returns required to be filed by it, and will timely file when due all tax returns required to be filed by it between the date hereof and the Closing. Sky King has paid in a timely fashion or will pay when due in a timely fashion, all taxes required to be paid in respect of the periods covered by such returns, and the books and the financial statements of Sky King reflect, or will reflect, adequate reserves for all taxes payable by Sky King which have been, or will be, accrued but are not yet due. Sky King is not delinquent in the payment of any material tax, assessment or governmental charge. No deficiencies for any taxes have been proposed, asserted or assessed against Sky King, Sky King and the Sky King Shareholders are not aware of any facts which would constitute the basis for the proposal or assertion of any such deficiency and there is no action, suit, proceeding, audit or claim now pending or threatened against Sky King. All taxes which Sky King is required by law to withhold and collect have been duly withheld and collected, and have been timely paid over to the proper authorities to the extent due and payable. For the purposes of this Agreement, the term "tax" shall include all federal state, local and foreign income, property, sales, excise and other taxes of any nature whatsoever. Neither Sky King nor any member of any affiliated or combined group of which Sky King is or has been a member has granted any extension or waiver of the limitation period applicable to any tax returns. There are no Encumbrances for taxes upon the assets of Sky King, except Encumbrances for current taxes not yet due. There are no tax sharing or tax allocation agreements to which Sky King is now or ever has been a party. Sky King will not be required under Section 481(c) of the Code, of 1986, to include any material adjustment in 12 taxable income for any period subsequent to the Merger. Sky King (a) has not been a member of an affiliated group filing a consolidated federal income tax return (other than a group the common parent of which was Sky King) and (b) has no liability for the taxes of any person (other than Sky King) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise. (i) Compliance with Laws. Sky King is not in violation of, and has not violated, any applicable provisions of any laws, statues, ordinances or regulations, other than as would not be reasonably likely to have a Material Adverse Effect or constitute a felony. No such laws, statutes, ordinances or regulations require or are reasonably expected to require capital expenditures by Sky King that are reasonably likely to have a Material Adverse Effect. Without limiting the generality of the foregoing, Sky King has all licenses, permits, certificates and authorizations needed or required for the conduct of Sky King's business as presently conducted and for the use of its properties and premises occupied by it, except where the failure to obtain a licenses, permit, certificate or authorization would not have a Material Adverse Effect. (j) Investment Banking Fees. There is no investment banker, broker, finder or other similar intermediary which has been retained by, or is authorized by, Sky King or the Sky King Shareholders to act on its or their behalf who might be entitled to any fee or commission from Sky King, the Sky King Shareholders, Acquiror or the Sub or any of their respective affiliates upon consummation of the transactions contemplated by this Agreement. (k) Personal Property. Sky King has good and valid title to all of its personal property, tangible and intangible, reflected on the Financial Statements and to all other personal property owned by it, free and clear of any Encumbrance. Sky King is the owner of all of its personal property now located in or upon its leased premises and of all personal property which is used in the operation of its business. All such equipment, furniture and fixtures and other tangible personal property is in good operating condition and repair and none require any repairs other than normal routine maintenance to maintain such property in good operating condition and repair. All inventory as reflected on the Financial Statements is useable in the ordinary course of business free from material defects. Sky King owns no motor vehicles. (l) Intellectual Property; Intangible Property. The corporate names of Sky King and the trade names and service marks listed on Schedule 4.1(l) are the only names and service marks which are used by Sky King in the operation of its business (the "Names and Service Marks"). Sky King has not done business and has not been known by any other name other than by its Names and Service Marks. Sky King owns and has the exclusive right to use all intellectual property presently in use by it and necessary for the operation of its business as now being conducted, which intellectual property includes, but is not limited to, patents, trademarks, trade names, service marks, copyrights, trade secrets, customer lists, inventions, formulas, methods, processes and other proprietary information. There are no outstanding licenses or consents granting third parties the right to use any intellectual property owned by Sky King. No royalties or fees are payable by Sky King to any third party by reason of the use of any of its intellectual property. Sky King has received no notice of any adversely held patent, invention, trademark, copyright, service mark or trade name of any person, or any claims of any other person relating 13 to any of the intellectual property subject hereto, and to the knowledge of Sky King, there is no reasonable basis for any such charge or claim. There is no presently known threatened use or encroachment of any such intellectual property. (m) Contracts, Leases, Agreements and Other Commitments. Sky King is not a party to or bound by any oral, written or implied contracts, agreements, licenses, leases, employment agreements, powers of attorney, guaranties, surety arrangements or other commitments, except for the following (which are hereinafter collectively called the "Corporation Agreements"): (i) The leases and agreements described on Schedules 4.1(m); and (ii) Agreements involving a maximum possible liability or obligation on the part of Sky King of less than Twenty-Five Thousand Dollars ($25,000) in the aggregate. The Corporation Agreements constitute all of the agreements and instruments which are necessary and desirable to operate the business as currently conducted by Sky King. True, correct and complete copies of each Corporation Agreement described and listed under Subsection 4.1(m) will be made available to Acquiror within fifteen (15) days after the date hereof. The term "Corporation Agreement" excludes purchase orders entered into in the ordinary course for personalty or inventory which may be returned to the vendor without penalty. All of the Corporation Agreements are valid, binding and enforceable against the respective parties thereto in accordance with their respective terms. Following the Merger, the Surviving Corporation shall become entitled to all rights of Sky King under such of the Corporation Agreements as if the Surviving Corporation were the original party to such Corporation Agreements. All parties to all of the Corporation Agreements have performed all obligations required to be performed to date under such Corporation Agreements, and no party is in default or in arrears under the terms thereof, and no condition exists or event has occurred which, with the giving of notice or lapse of time or both, would constitute a default thereunder. The consummation of this Agreement and the Merger will not result in an impairment or termination of any of the rights of Sky King under any Corporation Agreement. None of the terms or provisions of any Corporation Agreement materially adversely affects the business, prospects, financial condition or results of operations of Sky King. (n) Conflicting Interests. Except as set forth on Schedule 4.1(n), no director, officer, employee or Sky King Shareholder, and no relative or affiliate of any of the foregoing (i) sells or purchases goods or services from Sky King or has any pecuniary interest in any supplier or client of any of the foregoing or in any other business enterprise with which Sky King conducts business or with which any of the foregoing is in competition, or (ii) is indebted to Sky King except for money borrowed and as set forth on the Financial Statements. (o) Environmental Protection. Neither Sky King nor the Sky King Shareholders have been notified by any governmental authority, agency or third party, and Sky King and the Sky King Shareholders have no knowledge, of any violation by Sky King of any Environmental Statute (as defined below). All registrations by Sky King with, licenses from or permits issued by governmental agencies pursuant to environmental, health and safety laws are in full force and 14 effect. The term "Environmental Statutes" means all statutes, ordinances, regulations, orders and requirements of common law concerning discharges to the air, soil, surface water or groundwater and concerning the storage, treatment or disposal of any waste or hazardous substance. There is no hazardous substance at any premises currently or previously occupied by Sky King. Sky King has not received any notice or any request for information, notice of claim, demand or other notification that it may be potentially responsible with respect to any investigation or clean-up of any threatened or actual release of hazardous substances. All hazardous wastes and substances have been stored, treated, disposed of and transported in conformance with all requirements applicable to such hazardous substances and wastes. (p) Absence of Certain Changes or Events. Except as and to the extent set forth on the Financial Statements, to the extent contained in this Agreement, or as set forth on Schedule 4.1(p), there has not been (i) any material adverse change in the business, assets, properties, results of operations, financial condition or prospects of Sky King; (ii) any entry by Sky King into any material commitment or transaction which is not in the ordinary course of business; (iii) any change by Sky King in accounting principles or methods except insofar as may be required by a change in generally accepted accounting principles; (iv) any declaration, payment or setting aside for payment of any dividends or other distributions (whether in cash, stock or property) in respect of capital stock of Sky King or any Subsidiary, or any direct or indirect redemption, purchase or any other type of acquisition by Sky King of any shares of its capital stock or any other securities for an aggregate sum in excess of $5,000; (v) any agreement by Sky King, whether in writing or otherwise, to take any action which, if taken prior to the date of this Agreement, would have made any representation or warranty in this Section 4.1 untrue or incorrect; (vi) any acquisition of the assets of Sky King, other than in the ordinary course of business and consistent with past practice and in excess of $5,000 in the aggregate; or (vii) any execution of any agreement with any executive officer of Sky King providing for his or her employment, or any increase in the compensation or in severance or termination benefits payable or to become payable by Sky King to its officers or key employees, or any material increase in benefits under any collective bargaining agreement or in benefits under any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, insurance or other plan or arrangement or understanding (whether or not legally binding) providing benefits to any present or former employee of Sky King. Since the date of the Financial Statements, there has not been and there is not threatened, any material adverse change in financial condition, business, results of operations or prospects of the business or any material physical damage or loss to any of the properties or assets of the business or to the premises occupied in connection with the business, whether or not such loss is covered by insurance. (q) Investment Intent. (i) Except with respect to the registration rights granted to the Sky King Shareholders pursuant to the terms of this Agreement, the shares of Sub Preferred Stock are not being registered under the Act on the basis of the statutory exemption provided by Section (4)2 thereof, relating to transactions not involving a public offering, and the Acquiror's reliance on the statutory exemption thereof is based in part on the representations contained in this Agreement; 15 (ii) The Sky King Shareholders represent (a) that they have reviewed such quarterly, annual and periodic reports of the Acquiror (the "Reports") as have been filed with the Securities and Exchange Commission (the "SEC") and that they have such knowledge and experience in financial and business matters that they are capable of utilizing the information set forth therein concerning Acquiror to evaluate the risk of investing in the Acquiror; (b) that they have been advised that the shares of Sub Preferred Stock or Acquiror Common Stock to be issued to each of them by the Acquiror constitute "restricted securities" as defined in Rule 144 promulgated under the Act and accordingly, have not been and will not be registered under the Act, except as otherwise provided in this Agreement, and therefore, the Sky King Shareholders may not be able to sell or otherwise dispose of such shares except if such shares are subject to an effective registration statement filed with the SEC, in compliance with Rule 144 or otherwise pursuant to an exemption from registration under the Act; (c) that the shares of Sub Preferred Stock or Acquiror Common Stock are being acquired by them for their own benefit and on their own behalf for investment purposes and not with a view to, or for sale or resale in connection with, a public offering or distribution thereof; (d) that the shares of Sub Preferred Stock or Acquiror Common Stock so issued will not be sold (I) without registration thereof under the Act (unless such shares are subject to registration or in the opinion of counsel acceptable to the Acquiror, an exemption from such registration is available), or (II) in violation of any law; and (e) that the certificate or certificates representing the shares of Sub Preferred Stock or Acquiror Common Stock to be issued will be imprinted with a legend in form and substance substantially as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION LETTER OF COUNSEL FOR THE COMPANY OR A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION." and Acquiror is hereby authorized to notify its transfer agent of the status of the shares of Sub Preferred Stock or Acquiror Common Stock, and to take such other action including, but not limited to, the placing of a "stop-transfer" order on the transfer agent's books and records to ensure compliance with the foregoing. (iii) Sky King and the Sky King Shareholders have been afforded the opportunity to review and are familiar with the Reports and have based their decision to invest solely on the information contained therein, and the information contained within this Agreement and the associated exhibits and schedules, and have not been furnished with any other literature, prospectus or other information except as included in the Reports or this Agreement; 16 (iv) The Sky King Shareholders are able to bear the economic risks of an investment in the shares of Sub Preferred Stock or Acquiror Common Stock and that their overall commitment to their investments which are not readily marketable is not disproportionate to their net worth; and (v) The Sky King Shareholders understand that no federal or state agency has approved or disapproved the shares of Sub Preferred Stock or Acquiror Common Stock, passed upon or endorsed the merits of the transfer of such shares set forth within this Agreement or made any finding or determination as to the fairness of such shares for investment. (r) Statements And Other Documents Not Misleading. Neither this Agreement, including all exhibits and schedules and other closing documents, nor any other financial statement, document or other instrument heretofore or hereafter furnished by Sky King or the Sky King Shareholders to Acquiror or Sub in connection with the Merger or the other transactions contemplated hereby, contains or will contain any untrue statement of any material fact or omit or will omit to state any material fact required to be stated in order to make such statement, information, document or other instruments, in light of the circumstances in which they are made, not misleading. There is no fact known to Sky King or the Sky King Shareholders which may have a Material Adverse Effect on the business, prospects, financial condition or results of operations of Sky King or of any of its properties or assets which has not been set forth in this Agreement as an exhibit or schedule hereto. 4.2 Representations and Warranties of Acquiror and the Sub. As a material inducement to Sky King and the Sky King Shareholders to execute this Agreement and to consummate the Merger and the other transactions contemplated hereby, Acquiror and Sub hereby make the following representations and warranties to Sky King and the Sky King Shareholders. (a) Corporate Existence and Power. Acquiror is a corporation duly incorporated, validly existing and in good standing under the laws of Bermuda, and the Sub is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each of Acquiror and the Sub has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, except where the failure to have any of the foregoing would not have a Material Adverse Effect on their respective businesses. Each of Acquiror and the Sub is duly qualified to do business and is in good standing in each jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary, except for those jurisdictions where the failure to be so qualified would not, individually or in the aggregate, have a Material Adverse Effect. Acquiror owns all of the issued and outstanding shares of capital stock of the Sub, and there are no other rights orobligations of Acquiror or the Sub to issue any other shares of capital stock of the Sub. The Sub has conducted no business activity other than in connection with the transactions contemplated by this Agreement. True, complete and correct copies of the Memorandum of Association and Byelaws of Acquiror and the Articles of Incorporation and Bylaws of Sub, 17 each as amended to date, are attached hereto as Schedule 4.2(a) and are made a part hereof. (b) Due Authorization. This Agreement has been duly authorized, executed and delivered by Acquiror and the Sub and constitutes a valid and binding agreement of Acquiror and the Sub, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and other similar laws relating to, limiting or affecting the enforcement of creditors' rights generally or by the application of equitable principles. As of the Closing all corporate action on the part of Acquiror and the Sub required under applicable law in order to consummate the Merger will have occurred. (c) No Contravention. Neither the execution and delivery of the Agreement nor the consummation of the transactions contemplated thereby will: (i) conflict with or result in any violation of any provision of the Memorandum of Association or Byelaws of Acquiror or the Articles of Incorporation or Bylaws of Sub or (ii) conflict with or result in any violation or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of an right or obligation or to loss or a benefit under, any provision of the Memorandum of Association or Byelaws of Acquiror or the Articles of Incorporation or Bylaws of Sub or any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Acquiror or its properties or assets, or result in the creation or imposition of any Encumbrance on any asset of Acquiror, except, only as to clause (ii) above, such as is not reasonably likely to have a Material Adverse Effect or prevent Acquiror or Sub from consummating the transactions contemplated by this Agreement. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, is required by or with respect to Acquiror or the Sub in connection with the execution and delivery of this Agreement by either of them or the consummation by either of them of the transactions contemplated hereby, except the filing of the Certificate of Merger with the Secretary of the State of Delaware. (d) Capitalization. As of the Closing, Acquiror shall have outstanding no more than that number of shares of common stock equal to 3,700,000 less the number of Surrendered Shares (as such term is defined in Section 5.15(b)(i)(A) below), if any, in addition to those shares discussed at Section 5.1, as well as no more than 750,000 Warrants identified upon Schedule 4.2(d)(i). All outstanding shares of capital stock of Acquiror have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive rights. The shares of Sub Preferred Stock to be issued in the Merger will be duly authorized, validly issued, fully paid and nonassessable. Except as otherwise set forth herein, there will be outstanding (A) no shares of capital stock or other voting securities of Acquiror, (B) no securities of Acquiror convertible into or exchangeable for shares of capital stock or voting securities of Acquiror and (C) no options, warrants or other rights to acquire from Acquiror, and no obligation of Acquiror to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of Acquiror and there are no agreements or commitments, to do any of the foregoing. 18 (e) SEC Filings. (i) Upon request Acquiror will make available to Sky King copies of its periodic reports filed pursuant to the Securities Exchange Act of 1934, as well as its proxy or information statements relating to meetings of, or actions taken without a meeting by the stockholders of Acquiror held since 1994 and all of its other reports, statements, schedules and registration statements filed with the SEC since inception, other than pre-effective amendments to such registration statements. The documents referred to in the preceding sentence are sometimes referred to herein as the "SEC Documents." (ii) As of its filing date, to the knowledge of Acquiror, each such SEC Documents did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. (f) Financial Statements. The financial statements contained within the SEC Documents fairly present in all material respects the results of operations, retained earnings and changes in financial position, as the case may be, of the Acquiror at and for the periods set forth therein (subject, in the case of unaudited statements, to normal year-end audit adjustments which will not be material to the Acquiror, taken as a whole, in amount or effect), in each case in accordance with generally accepted accounting principles consistently applied during the periods involved, except as may be noted therein. The books and records, financial and other, of the Acquiror are, to the knowledge of the Acquiror, in all material respects complete and correct and have been maintained in accordance with good business and accounting practices. (g) No Violations. Except as described on Schedule 4.2(g) hereto, neither Acquiror or any of its Subsidiaries has received any written notice from any governmental entity having jurisdiction over it or over any of the real property leased by it of any violation by Acquiror or any of its Subsidiaries of any law, regulation or ordinance relating to zoning, environmental matters, local building or fire codes or similar matters relating to any of the real property leased by Acquiror or any of its Subsidiaries. (h) No Contingent Liabilities. Except as set forth in the financial statements referred to in Section 4.2(f) above, as of the Closing, Acquiror and each of its Subsidiaries shall have no liabilities, whether related to tax or non-tax matters, known or unknown, due or not yet due, liquidated or unliquidated, fixed or contingent, determined or determinable in amount or otherwise and, to the knowledge of Acquiror after due inquiry, there is no existing condition, situation or set of circumstances which could reasonably be expected to result in such a liability except as and to the extent reflected on: (i) the SEC Documents; (ii) this Agreement or any Schedule or Exhibit thereto; or (iii) liabilities incurred since the date of the most recent SEC Document solely in the ordinary course of business (or in connection with the transactions contemplated hereby) and as accurately reflected on the books and records of Acquiror; provided however, that no liability shall be incurred from and after the date hereof which is in contravention of any negative covenant contained herein and applicable to Acquiror. 19 (i) Litigation. Except as set forth in any of the SEC Documents or Schedule 4.2(i), there is no action, suit, investigation or proceeding (or, to the knowledge of Acquiror, any basis therefor) pending against, or to the knowledge of Acquiror threatened, against or affecting Acquiror, any of its Subsidiaries or any of their properties before any court or arbitrator or any governmental body, agency or official that (i) if adversely determined against Acquiror, would have a Material Adverse Effect on Acquiror and its Subsidiaries, taken as a whole, or (ii) in any manner challenges or seeks to prevent, enjoin, alter or materially delay the Merger or any of the other transactions contemplated by the Agreement. (j) Taxes. (i) Acquiror and each of its Subsidiaries have timely filed all tax returns required to be filed by them, and will timely file when due all tax returns required to be filed by them between the date hereof and the Closing. Acquiror and each of its Subsidiaries have paid in a timely fashion or will pay when due in a timely fashion, all taxes required to be paid in respect of the periods covered by such returns, and the books and the financial statements of Acquiror and each of its Subsidiaries reflect, or will reflect, adequate reserves for all taxes payable by Acquiror and each of its Subsidiaries which have been, or will be, accrued but are not yet due. Acquiror and each of its Subsidiaries are not delinquent in the payment of any material tax, assessment or governmental charge. No deficiencies for any taxes have been proposed, asserted or assessed against Acquiror and each of its Subsidiaries, Acquiror and each of its Subsidiaries are not aware of any facts which would constitute the basis for the proposal or assertion of any such deficiency and there is no action, suit, proceeding, audit or claim now pending, or to Acquiror's knowledge, threatened against Acquiror and each of its Subsidiaries. All taxes which Acquiror and each of its Subsidiaries are required by law to withhold and collect have been duly withheld and collected, and have been timely paid over to the proper authorities to the extent due and payable. For the purposes of this Agreement, the term "tax" shall include all federal state, local and foreign income, property, sales, excise and other taxes of any nature whatsoever. Neither Acquiror or any of its Subsidiaries nor any member of any affiliated or combined group of which Acquiror is or has been a member has granted any extension or waiver of the limitation period applicable to any tax returns. There are no Encumbrances for taxes upon the assets of Acquiror or any of its Subsidiaries, except Encumbrances for current taxes not yet due. There are no tax sharing or tax allocation agreements to which Acquiror or any of its Subsidiaries is now or ever has been a party. Acquiror will not be required under Section 481(c) of the Code, to include any material adjustment in taxable income for any period subsequent to the Merger. Neither Acquiror nor any of its Subsidiaries (A) has been a member of an affiliated group filing a consolidated federal income tax return (other than a group the common parent of which was Acquiror or a Subsidiary of Acquiror) and (b) has no liability for the taxes of any person (other than Acquiror or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise. (ii) For federal income tax purposes, the Merger shall constitute a tax-free reorganization under the provisions of Section 368 of the Code, provided, however, that the Sky King Shareholders recognize and acknowledge that receipt of shares of Acquiror Common Stock (rather than Sub 20 Preferred or Common Stock) will not qualify as a tax-free reorganization at the time of the receipt of such shares of Acquiror Common Stock. (k) Compliance with Laws. To the best knowledge of Acquiror and Sub, neither Acquiror nor any of its Subsidiaries is in violation of, or has violated, any applicable provisions of any laws, statutes, ordinances or regulations, which taken as a whole would be reasonably likely to have a Material Adverse Effect on Acquiror and its Subsidiaries, or which would constitute a felony. No such laws, statutes, ordinances or regulations require or are reasonably expected to require capital expenditures that are reasonably likely to have a Material Adverse Effect on Acquiror and its Subsidiaries, taken as a whole. Without limiting the generality of the foregoing, Acquiror and Sub have all licenses, permits, certificates and authorizations needed or required for the conduct of Acquiror's or Sub's business as presently conducted and for the use of its properties and premises occupied by it, except where the failure to obtain a license, permit, certificate or authorization would not have a Material Adverse Effect. (l) Investment Banking Fees. Acquiror has retained and agreed upon the Closing hereof to pay an investment banking firm a stock fee in the amount equal to 5.00% of the Merger Consideration, or 500,000 shares of Acquiror Common Stock, for arranging this transaction. (m) Statements and Other Documents Not Misleading. Neither this Agreement, including all exhibits and schedules and other closing documents, nor any other financial statement, document or other instrument heretofore or hereafter furnished by Acquiror or Sub to Sky King and the Sky King Shareholders in connection with the Merger or the other transactions contemplated hereby, or any information furnished by Acquiror and Sub taken as a whole contains or will contain any untrue statement of any material fact or omit or will omit to state any material fact required to be stated in order to make such statement, information, document or other instruments, in light of the circumstances in which they are made, not misleading. There is no fact known to Acquiror and Sub taken as a whole which may have a Material Adverse Effect on the business, prospects, financial condition or results of operations of Acquiror and Sub taken as a whole or of any of their properties or assets which has not been set forth in this Agreement as an exhibit or schedule hereto. ARTICLE V AGREEMENTS OF THE PARTIES 5.1 Issuance of Securities of Acquiror prior to the Closing. Between the date hereof and the Closing, Acquiror contemplates that it may be caused to issue up to 5,300,000 additional shares of Acquiror Common Stock in connection with certain acquisition transaction (the "Acquisition Transaction") that is presently being evaluated or are under contract as set forth in Section 5.15. No investment banker, broker, finder or other similar intermediary has been retained by, or is authorized by, Acquiror to act on its behalf who might be entitled to any fee or commission from 21 Acquiror or any of its affiliates in connection with the Acquisition Transaction or the transactions contemplated thereby. 5.2 Anticipated Domestication of Acquiror; Possible Follow-on Merger. (a) Acquiror shall use diligent efforts to domesticate by merger or other permissible means into Sub within one (1) year after the Closing. Upon Acquiror's domestication into Sub, the Series A Stock will automatically convert into shares of Sub Common Stock such that the holders thereof will at that time own the same percentage of outstanding Sub Common Stock as they would have owned in Acquiror had they originally received an aggregate of 5,500,000 shares of Acquiror Common Stock upon the Closing, and the Series B Stock will automatically convert into shares of Sub Common Stock such that the holders thereof will at that time own the same percentage of outstanding Sub Common Stock as they would have owned in Acquiror had they originally received an aggregate of 4,500,000 shares of Acquiror Common Stock upon the Closing. Upon the domestication of Acquiror into Sub, the number of shares of common stock resulting from the conversion of the Escrow Shares by the Escrow Agent as of such conversion date shall be held in escrow as Escrow Shares pursuant to the terms of the Escrow Agreement. (b) If the domestication of Acquiror described in Section 5.2(a) above does not occur within one (1) year from the Effective Date, the Series A Stock may, at the discretion of the holders thereof, be converted into, or exchangeable for, an aggregate of 5,500,000 shares of Acquiror Common Stock, and the Series B Stock may, at the discretion of the holders thereof, be converted into, or exchangeable for, an aggregate of 4,500,000 shares of Acquiror Common Stock. Upon such discretionary conversion, the number of shares of common stock resulting from the conversion of the Escrow Shares as of such conversion date shall be held in escrow by the Escrow Agent as Escrow Shares pursuant to the terms of the Escrow Agreement. (c) Acquiror and Sub covenant and agree that as to Sub, prior to the domestication of Acquiror described in Section 5.2 hereof: (i) Dividends; Changes in Stock. Sub shall not and shall not propose to (a) split, combine or reclassify any of its capital stock or issue, authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; or (b) redeem, repurchase or otherwise acquire any shares of its capital stock or (c) otherwise change its capitalization. (ii) Issuance of Securities. Except as contemplated by this Agreement, Sub shall not sell, issue, pledge, authorize or propose the sale or issuance of, pledge or purchase or propose the purchase of, any shares of its capital stock of any class or securities convertible into, or rights, warrants or options to acquire, any such shares or other convertible securities. (iii) Sale of Stock by Acquiror. Acquiror shall not sell, pledge or authorize or propose the sale, pledge or purchase of, the shares of common stock of Sub owned by Acquiror prior to the Effective Time. 22 (d) Sky King and the Sky King Shareholders acknowledge that they have been advised that this domestication may not occur until a Registration Statement on Form S-4 is filed with, and declared effective by, the SEC. 5.3 Access to Information. At all times prior to the Closing or the earlier termination of this Agreement in accordance with the provisions of Article VIII, and in each case subject to Section 5.4 below, each of the parties hereto shall provide to the other parties (and the other parties' authorized representatives) full access during normal business hours and upon reasonable prior notice to the premises, properties, books, records, assets, liabilities, operations, contracts, personnel, financial information and other data and information of or relating to such party (including without limitation all written proprietary and trade secret information and documents, and other written information and documents relating to intellectual property rights and matters), and will cooperate with the other party in conducting its due diligence investigation of such party. 5.4 Confidentiality; No Solicitation. (a) Confidentiality of Acquiror-Related Information. With respect to information concerning Sky King that is made available to Acquiror pursuant to the terms of this Agreement, Acquiror agrees that, except in connection with the private placement and other securities purchase agreements associated therewith, it shall hold such information in strict confidence, shall not use such information except for the sole purpose of evaluating the Merger and related transactions and shall not disseminate or disclose any of such information other than to its directors, officers, employees, shareholders, affiliates, agents and representatives who need to know such information for the sole purpose of evaluating the Merger and the related transactions (each of whom shall be informed in writing by Acquiror of the confidential nature of such information and directed by Acquiror in writing to treat such information confidentially). If this Agreement is terminated pursuant to the provisions of Article VIII, Acquiror shall immediately return all such information, all copies thereof and all information prepared by Acquiror based upon the same; provided, however, that one copy of all such material may be retained by Acquiror's outside legal counsel for purposes only of resolving any disputes under this Agreement. The above limitations on use, dissemination and disclosure shall not apply to information that (i) is learned by Acquiror from a third party entitled to disclose it; (ii) become known publicly other than through Acquiror or any party who received the same through Acquiror, provided that Acquiror has no knowledge that the disclosing party was subject to an obligation of confidentiality; (iii) is required by law or court order to be disclosed by Acquiror; or (iv) is disclosed with the express prior written consent thereto of Sky King or the Sky King Shareholders. Acquiror shall undertake all necessary steps to ensure that the secrecy and confidentiality of such information will be maintained in accordance with the provisions of this paragraph (a). Notwithstanding anything contained herein to the contrary, in the event a party is required by court order or subpoena to disclose information which is otherwise deemed to be confidential or subject to the confidentiality obligations hereunder, prior to such disclosure, the disclosing party shall: (i) promptly notify the non-disclosing party and, if having received a court order or subpoena, deliver a copy of the same to the non-disclosing party; (ii) 23 cooperate with the non-disclosing party, at the expense of the non-disclosing party in obtaining a protective or similar order with respect to such information; and (iii) provide only such of the confidential information as the disclosing party is advised by its counsel is necessary to strictly comply with such court order or subpoena. (b) Confidentiality of Sky King-Related Information. With respect to information concerning Acquiror that is made available to Sky King and the Sky King Shareholders pursuant to the provisions of this Agreement, Sky King and the Sky King Shareholders agree that they shall hold such information in strict confidence, shall not use such information except for the sole purpose of evaluating the Merger and the related transactions and shall not disseminate or disclose any of such information other than to their directors, officers, employees, shareholders, affiliates, agents and representatives who need to know such information for the sole purpose of evaluating the Merger and the related transactions (each of whom shall be informed in writing by Sky King or the Sky King Shareholders of the confidential nature of such information and directed by such party in writing to treat such information confidentially). If this Agreement is terminated pursuant to the provisions of Article VIII, Sky King and the Sky King Shareholders agree to return immediately all such information, all copies thereof and all information prepared by either of them based upon the same; provided, however, that one copy of all such material may be retained by Sky King's outside legal counsel for purposes only of resolving any disputes under this Agreement. The above limitations on use, dissemination and disclosure shall not apply to information that (i) is learned by Sky King or the Sky King Shareholders from a third party entitled to disclose it; (ii) becomes known publicly other than through Sky King, the Sky King Shareholders or any party who received the same through Sky King or the Sky King Shareholders, provided that Sky King or the Sky King Shareholders have no knowledge that the disclosing party was subject to an obligation of confidentiality; (iii) is required by law or court order to be disclosed by Sky King; or (iv) is disclosed with the express prior written consent thereto of Acquiror. Sky King or the Sky King Shareholders agree to undertake all necessary steps to ensure that the secrecy and confidentiality of such information will be maintained in accordance with the provisions of this paragraph (b). Notwithstanding any thing contained herein to the contrary, in the event a party is required by court order or subpoena to disclose information which is otherwise deemed to be confidential or subject to the confidentiality obligations hereunder, prior to such disclosure, the disclosing party shall: (i) promptly notify the non-disclosing party and, if having received a court order or subpoena, deliver a copy of the same to the non-disclosing party; (ii) cooperate with the non-disclosing party at the expense of the non-disclosing party in obtaining a protective or similar order with respect to such information; and (iii) provide only such of the confidential information as the disclosing party is advised by its counsel is necessary to strictly comply with such court order or subpoena. (c) Nondisclosure. Neither Sky King, the Sky King Shareholders, the Sub nor Acquiror shall disclose to the public or to any third party the existence of this Agreement or the transactions contemplated hereby or any other material non-public information concerning or relating to the other party hereto, other than with the express prior written consent of the other parties hereto, except as may be required by law or court order or to enforce the rights of such disclosing party under this Agreement, in which event the contents of any proposed disclosure shall be discussed with the other party before release; provided, however, that notwithstanding anything to the contrary 24 contained in this Agreement, any party hereto may disclose this Agreement to any of its directors, officers, employees, shareholders, affiliates, agents and representatives who need to know such information for the sole purpose of evaluating the Merger, and to any party whose consent is required in connection with the Merger or this Agreement. The parties anticipate issuing a mutually acceptable, joint press release announcing the execution of this Agreement and the consummation of the Merger. (d) No Solicitation. In consideration of the substantial expenditure of time, effort and money to be undertaken by Acquiror in connection with the transactions contemplated by this Agreement, neither the Sky King Shareholders, Sky King nor any affiliate thereof will, prior to the earlier of the Closing or ninety (90) days after the termination of this Agreement, directly or indirectly, through any officer, director, agent or otherwise: (i) solicit, initiate or encourage the submission of inquiries, proposals or offers from any person or entity relating to any acquisition or purchase of assets of or any equity interest in Sky King or any affiliate thereof or any tender offer (including a self-tender offer), exchange offer, merger, consolidation, business combination, sale of a substantial amount of assets or sale of securities, liquidation, dissolution or similar transaction involving Sky King or its affiliates (a "Transaction Proposal"); (b) enter into or participate in any discussions or negotiations regarding a Transaction Proposal, or furnish to any other person or entity any information with respect to the business, properties or assets of Sky King or its affiliates in connection with a Transaction Proposal; or (c) otherwise cooperate in any way with, or assist or participate in, facilitate or encourage any effort or attempt by any other person to do or seek a Transaction Proposal. Sky King or the Sky King Shareholders shall promptly notify Acquiror if any such proposal or offer, or any inquiry or contact with any person or entity with respect thereto is made. 5.5 Interim Operations. During the period from the date of this Agreement and continuing until the Closing: (a) Interim Operations of Sky King. Sky King agrees (except as expressly contemplated by this Agreement, including any Exhibits and Schedules hereto, or to the extent that Acquiror shall otherwise consent in writing) that as to Sky King: (i) Ordinary Course. Sky King shall carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent with such business, use all reasonable efforts to preserve intact its present business organization, keep available the services of its present officers and employees and preserve its relationships with customers, suppliers and others having business dealings with it; (ii) Dividends; Changes in Stock. Sky King shall not and shall not propose to (a) declare, set aside or pay any dividend, on, or make other distributions in respect of, any of its capital stock, (b) split, combine or reclassify any of its capital stock or issue, authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock (c) redeem, repurchase or otherwise acquire any shares of its capital stock or (d) otherwise change its capitalization. 25 (iii) Issuance of Securities. Except as contemplated by this Agreement, Sky King shall not sell, issue, pledge, authorize or propose the sale or issuance of, pledge or purchase or propose the purchase of, any shares of its capital stock of any class or securities convertible into, or rights, warrants or options to acquire, any such shares or other convertible securities. (iv) Governing Documents. Sky King shall not amend its certificate of incorporation or its Bylaws. (v) No Dispositions. Sky King shall not sell, lease, pledge, encumber or otherwise dispose of or agree to sell, lease, pledge, encumber or otherwise dispose of, any of its assets that are material to its business or any other assets except in the ordinary course of business consistent with prior practice. (vi) Indebtedness. Sky King shall not incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities of Sky King or guarantee any debt securities of others other than in the ordinary course of business consistent with prior practice. (vii) Benefit Plans; Etc. Sky King shall not adopt or amend in any material respect any collective bargaining agreement or Employee Benefit Plan (as defined herein). (viii) Executive Compensation. Sky King shall not grant to any executive officer any increase in compensation or in severance or termination pay, or enter into any employment agreement with any executive officer. (ix) Acquisitions. Except as set forth on Schedule 5.5(a)(ix), Sky King shall not acquire (by merger, consolidation or acquisition of stock or assets or otherwise) any corporation, partnership or other business organization or subdivision thereof, or make any investment by either purchase of stock or securities, contributions to capital, property transfer or, except in the ordinary course of business, purchase of any property or assets, of any other individual or entity. (x) Tax Elections. Sky King shall not make any material tax election or settle or compromise any material federal, state, local or foreign tax liability. (xi) Waivers and Releases. Sky King shall not waive, release, grant or transfer any rights of material value or modify or change in any material respect any Corporation Agreement other than in the ordinary course of business and consistent with past practice. (xii) Other Actions. Sky King shall not enter into any agreement or arrangement to do any of the foregoing. Sky King shall not take any action, or fail to take any action, that is reasonably likely to result in any of the representations and warranties of Sky King set forth in this Agreement becoming untrue in any material respect. (b) Interim Operations of Acquiror and Sub. Acquiror and Sub jointly and severally agree (except as expressly contemplated by this Agreement, including any Exhibits and Schedules hereto, or to the extent that Sky King and the Sky King Shareholders shall otherwise consent in writing or to the extent required to permit Acquiror to meet its obligations under Section 5) that: 26 (i) Ordinary Course. Acquiror shall carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent with such business, use all reasonable efforts to preserve intact its present business organization (provided that such obligation shall not relate to the officers and employees of Acquiror or any of its Subsidiaries including the Sub) and preserve its relationships with customers, suppliers and others having business dealings with it. The Sub shall conduct no business activity other than in connection with the transactions contemplated by this Agreement in connection with the Merger. (ii) Dividends; Changes in Stock. Neither Acquiror nor the Sub shall (and shall not propose to) (a) declare or pay any dividend, on, or make other distributions in respect of, any of its capital stock, (b) split, combine or reclassify any of its capital stock or issue, authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (c) repurchase or otherwise acquire any shares of its capital stock or (d) otherwise change its capitalization. (iii) Issuance of Securities. Except as provided for in Article V, neither Acquiror nor the Sub shall sell, issue, pledge, authorize or propose the sale or issuance of, pledge or purchase or propose the purchase of, any shares of its capital stock of any class or securities convertible into, or rights, warrants or options to acquire, any such shares or other convertible securities. (iv) No Dispositions. Acquiror shall not sell, lease, pledge, encumber or otherwise dispose of, or agree to sell, lease, pledge, encumber or otherwise dispose of, any of its assets that are material to its business, or any other assets except in the ordinary course of business consistent with prior practice. (v) Indebtedness. Neither Acquiror nor the Sub shall incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities or guarantee any debt securities of others other than in the ordinary course of business consistent with prior practice. (vi) Benefit Plans, Etc. Neither Acquiror nor the Sub shall adopt or amend in any material respect any collective bargaining agreement or Employee Benefit Plan (as defined herein). (vii) Executive Compensation. Neither Acquiror nor the Sub shall grant to any executive officer any increase in compensation, or enter into any employment agreement with any executive officer, other than any of the same the material terms of which have been disclosed to Sky King on or before the date hereof. Other Actions. Neither Acquiror nor the Sub shall enter into any agreement or arrangement to do any of the foregoing. Neither Acquiror nor the Sub shall take any action, or fail to take any action, that is reasonably likely to result in any of their representations and warranties set forth in this Agreement becoming untrue in any material respect. 27 5.6 Consents. Acquiror, Sub, Sky King and the Sky King Shareholders shall cooperate and use their best efforts to obtain, prior to the Closing, all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts as are necessary for the consummation of the transactions contemplated by this Agreement; provided, however, that no loan agreement or contract for borrowed monies shall be repaid and no contract shall be amended materially to increase the amount payable thereunder or otherwise to be materially more burdensome in order to obtain any such consent, approval or authorization without first obtaining the written approval of the other parties hereto. 5.7 Filings. Acquiror, the Sub, Sky King and the Sky King Shareholders shall, as promptly as practicable, make any required filing, and any other required submissions, under any law, statute, order rule or regulation with respect to the Merger and the related transactions and shall cooperate with each other with respect to the foregoing and any shareholder of the Acquiror who has an obligation to file a Schedule 13D shall do so prior to the Closing. 5.8 All Reasonable Efforts. Subject to the terms and conditions of this Agreement and to the fiduciary duties and obligations of the boards of directors of the parties hereto to their respective shareholders, as advised by their counsel, each of the parties to this Agreement shall use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, or to remove any injunctions or other impediments or delays, legal or otherwise, as soon as reasonable practicable, to consummate the Merger and the other transactions contemplated by this Agreement. 5.9 Public Announcements. Acquiror, the Sub, Sky King and the Sky King Shareholders shall consult with each other before issuing any press release or otherwise making any public statements with respect to the Merger, this Agreement or the other transactions contemplated by this Agreement and shall not issue any other press release or make any other public statement without prior consultation with the other parties, except as may be required by law or, with respect to Acquiror, by obligations pursuant to any listing agreement with an national securities exchange. 28 5.10 Notification of Certain Matters. Sky King and the Sky King Shareholders shall give prompt notice to Acquiror, and Acquiror and the Sub shall give prompt notice to Sky King and the Sky King Shareholders, of (a) the occurrence or non-occurrence of any event, the occurrence or non-occurrence of which would cause any of their representations or warranties in this Agreement to be untrue or inaccurate in any material respect, as to Sky King and the Sky King Shareholders, at or prior to the Closing, and, as to Acquiror and Sub, as of the Closing and (b) any material failure of Sky King and the Sky King Shareholders, on the one hand, or Acquiror or the Sub, on the other hand, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by them under this Agreement; provided, however, that the delivery of any notice pursuant to this Section shall not limit or otherwise affect the remedies available to the party receiving such notice under this Agreement as expressly provided in this Agreement. 5.11 Expenses. Except as otherwise expressly provided herein, all costs and expenses incurred in connection with the Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses whether or not the Merger is consummated. 5.12 Registration Rights. (a) Registrable Securities (i) Promptly after the domestication of Acquiror into a Delaware corporation by virtue of merging with and into Sub and the corresponding conversion of Sub Preferred Stock into shares of Sub Common Stock, Sub shall use its best efforts to prepare and file with the SEC, and use its best efforts to have declared effective, a registration statement (the "Registration Statement") registering under the Act and the securities statutes and regulations of certain states as provided herein, for resale at market, the shares of Sub Common Stock then to be held by the Sky King Shareholders (the "Registrable Securities") and thereafter, subject to the terms and conditions of this Agreement, Sub shall use its best efforts to keep such Registration Statement effective for a period of three (3) years. The Registration Statement may also include other securities of Sub, whether on behalf of Sub or certain other selling stockholders. Restrictions on the resale of the Registrable Securities are identified at Section 5.12(j). From time to time, Sub shall amend or supplement such Registration Statement and the prospectus contained therein as and to the extent necessary to comply with the Act and any applicable state securities statute or regulation. (ii) In the event that the Acquiror is not domesticated by merger into the Sub within one year from the Effective Date, and if thereafter the holders of Sub Preferred Stock elect to exchange such shares of Sub Preferred Stock for shares of Acquiror Common Stock, in the manner and to the extent provided for in the Series A and Series B Certificates of Designation, then the Acquiror shall register the resale of the shares of Acquiror Common Stock received by the holders of the Sub Preferred Stock in the manner discussed in this Section 5.12 as if the obligations of Sub were 29 those of Acquiror. In that event, the terms "Registrable Securities" and "Sub Common Stock" as used in this Section 5.12 shall refer to those shares of Acquiror Common Stock received by the holders of Sub Preferred Stock. (b) Sub shall pay all expenses of the Sub relating to such registration, other than brokerage or underwriting discounts or commissions, if any. (c) It shall be a condition precedent to the obligations of Sub to take any action pursuant to this Section 5.12 that each of the holders of Registrable Securities whose shares are so to be registered shall furnish to Sub in a timely fashion such information regarding such holder, such holder's Registrable Securities and such other factual information as shall be reasonably required to effect the registration of such shares. (d) To the maximum extent permitted by law, Sub shall indemnify and hold harmless each such holder of Registrable Securities from and against any and all claims, damages or liabilities, joint or several, to which such holder becomes subject under the Act or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse each such holder for any legal or other expenses reasonably incurred by such holder in connection with investigating or defending any actions, whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the registration statement or prospectus as from time to time amended or supplement by Sub) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statement therein not misleading in the circumstances in which they were made, unless such untrue preliminary or amended preliminary prospectus or prospectus in reliance upon and in conformity with information furnished in writing to Sub in connection therewith by such holder expressly for use therein. Promptly after receipt by any such holder of notice of the commencement of any action in respect of which indemnity may be sought against Sub, such holder shall notify Sub in writing of the commencement thereof, and, subject to the provisions of this Section 5.12, Sub shall assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to such holder), and the payment of expenses insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against Sub. Sub shall not be liable to indemnify any such holder for any settlement of any such action effected with Sub's prior written consent. Sub shall not, except with the approval of each party being indemnified under this Section 5.12, consent to entry of any judgment or enter into any settlement of any claim or litigation in connection with which provisions of this Section 5.12 have been applied which does not include an unconditional term thereof the giving by such claimant or plaintiff to the parties being so indemnified of a release from all liability in respect to such claim or litigation. (e) Each holder whose shares of Registrable Securities are registered pursuant to the provisions of this Section 5.12 shall indemnify and hold harmless Sub, each of its directors and each of its officers from and against any and all claims, damages or liabilities, joint or several, to which 30 they or any of them may become subject under the Act or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse Sub and each director and officer for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any actions, whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the prospectus (or the registration statement or prospectus as from time to time amended or supplemented) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading in the circumstances in which they were made, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to Sub in connection therewith by such holder expressly for use therein. Promptly after receipt of notice of the commencement of any action in respect of which indemnity may be sought against such holder, Sub shall notify such holder in writing of the commencement thereof, and such holder shall, subject to the provisions of this Section 5.12, assume the defense of such action (including the employment of counsel, who shall be counsel reasonably satisfactory to Sub) and the payment of expenses insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against such holder. Such holder shall not be liable to indemnify Sub, any director, officer or other person for any settlement of any such action effected without such holder's consent. Such holder shall not, except with the approval of the parties being indemnified under this Section 5.12, consent to entry of any judgment or enter into any settlement of any claim or litigation in connection with which provision of this Section 5.12 have been applied which does not include as an unconditional term thereof the giving by the claimant or plaintiff to the parties being so indemnified of a release from all liability in respect to such claim or litigation. The liability of any such holder under this Section 5.12 shall be limited to the aggregate price at which such holder's shares of Sub Common Stock is sold. (f) In connection with its obligations to register the Registrable Securities as provided in this Section 5.12, Sub shall have no obligation: (i) to assist or cooperate in the offering or disposition of such shares; (ii) except as expressly provided in this Section 5.12, to indemnify or hold harmless the holders of such securities being registered or any underwriter designated by such holders; (iii) to obtain a commitment from an underwriter relative to the sale of such shares; or (iv) to include such Registrable Securities within an underwritten offering of Sub conducted on a firm basis. (g) If in the opinion of a lead or managing underwriter retained by Sub to conduct an underwriting on a firm basis, the resale of such Registrable Securities covered by the registration statement would have an adverse effect upon the completion of an underwritten sale of securities, on behalf of Sub, then, in that event, the holders of the Registrable Securities to be included in such registration statement do hereby agree to the restrictions upon resale requested by a managing underwriter. (h) In connection with its obligations to register the Registrable Securities as provided in this Section 5.12, Sub shall also: 31 (i) furnish to each holder of shares of Registrable Securities that are registered or to be registered pursuant to the provisions of this Section 5.12, such copies of each preliminary and final prospectus and any and all supplements and such other documents as such holder may reasonably request to facilitate the public offering of the shares of Registrable Securities; (ii) use its best efforts to register or qualify such Registrable Securities covered by such registration statement under the applicable securities or "Blue Sky" laws of such jurisdiction in the United States as such holder may reasonably request (not to exceed an aggregate of 10 such jurisdictions); provided, however, that Acquiror shall not be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to the service of process in suits other than those arising out of the offer or sale of the securities covered by the registration statement in any jurisdiction where it is not then so subject; and (iii) furnish to each such holder upon request a copy of all documents filed and all correspondence from and to the SEC in connection with any such offering. (i) The registration and other rights granted to the holders of Registrable Securities in this Section 5.12 may not be assigned or transferred by such holder without the prior written consent of Sub thereto. (j) The Registrable Securities shall be subject to the following restrictions upon resale: (i) With respect to Sky King Shareholders other than principal shareholders of Sky King (over 10% shareholders) or individuals who become directors or officers of Acquiror or Sub, resale shall be limited to: 25% of the holder's Sub Common Stock no earlier than six (6) months following the Closing; an additional 25% of the holder's Sub Common Stock no earlier than twelve (12) months following the Closing; and the remaining 50% of the holder's Sub Common Stock no earlier than eighteen (18) months following the Closing. (ii) With respect to all principal (over 10%) shareholders of Sky King and individuals who become directors or officers of Acquiror or Sub, no resales shall commence until eighteen (18) months after the Closing. 5.13 Documents at Closing. Each party to this Agreement agrees to execute and deliver at the Closing those documents identified in Section 2.2 which are required to be executed and delivered by such party. 32 5.14 Prohibition on Trading in Acquiror and Sub Stock. Sky King and the Sky King Shareholders acknowledge that the United States securities laws prohibit any person who has received material non-public information concerning the matters which are the subject matter of this Agreement from purchasing or selling the securities of the Acquiror or Sub, or from communicating such information to any person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities of the Acquiror or Sub. Accordingly, the Sky King Shareholders agree that they will not purchase or sell any securities of the Acquiror or Sub, or communicate such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell securities of the Acquiror or Sub, until no earlier than 72 hours following the dissemination of a Current Report on Form 8-K to the SEC announcing the Closing pursuant to this Agreement. 5.15 Anticipated Acquisition of the Principal Assets of PortaCom Wireless, Inc. (a) Acquiror has entered into an Asset Purchase Agreement with PortaCom Wireless, Inc. ("PortaCom") to purchase from PortaCom all of its interest in and to 2,000,000 shares of the common stock and 4,000,000 warrants of Metromedia Asia Corporation (the "PortaCom Transaction") in consideration for 5,300,000 shares of Acquiror Common Stock and up to $700,000 in immediately available funds. A copy of the Asset Purchase Agreement shall be attached as an Exhibit to this Agreement. Acquiror will continue to take whatever reasonable measures are necessary to complete the PortaCom Transaction. Sky King has been advised that there can be no assurances that the PortaCom Transaction will be completed timely, if at all, since a closing thereunder is dependent upon PortaCom shareholder and regulatory approvals, as well as securing certain waivers from Metromedia Asia Corporation ("MAC") permitting transfer of the MAC shares and warrants. (b) In connection with the PortaCom Transaction, Acquiror has agreed to advance amounts up to $700,000 to PortaCom (the "PortaCom Advances") to be applied by PortaCom against certain of its outstanding indebtedness. Towards that end, as of the date of the Closing hereof, Acquiror must have funded at least $300,000 of the PortaCom Advances. In recognition of the possibility that Acquiror may need to fund up to $400,000 of the PortaCom Advances after the Closing hereof, the parties hereto agree as follows: (i) In the event that on the date of the Closing, Acquiror has not advanced all of the PortaCom Advances to PortaCom, then: (A) On or before the Closing, one or more shareholders of Acquiror shall voluntarily surrender to Acquiror, without payment therefor, that number of shares of Acquiror Common Stock (the "Surrendered Shares") valued at the amount of the remainder of the PortaCom Advances (the "Remaining PortaCom Advances"). For the purposes of this paragraph, the shares of Acquiror Common Stock shall be valued at $3.00 per share; and 33 (B) From the date of the Closing and until the date of the closing of the PortaCom Transaction, Acquiror shall use diligent efforts to sell the Surrendered Shares in one or more private placement transactions (the "Private Placement Transactions") in order to, and only to the extent required to, secure cash proceeds sufficient to satisfy the obligation to advance the Remaining PortaCom Advances to PortaCom. (1) If and to the extent that Acquiror fails to receive the entire amount of the Remaining PortaCom Advances through the Private Placement Transactions by the date of the closing of the PortaCom Transaction, then Acquiror shall make any such remaining payment out of its then-existing cash assets. Thereafter, Acquiror shall be entitled to sell any remaining Surrendered Shares to reimburse itself for funds expended in connection with the payment of the Remaining PortaCom Advances or retain any remaining Surrendered Shares in its treasury. (2) In the event that Acquiror receives through the Private Placement Transactions more than the amount of the Remaining PortaCom Advances, then Acquiror shall deliver to the former holder(s) of the Surrendered Shares (in the proportion of their shares so surrendered), any such excess amount. (3) In the event that Acquiror raises sufficient funds from the Private Placement Transactions to pay or advance the entire amount of the Remaining PortaCom Advances before all of the Surrendered Shares are sold through the Private Placement Transactions, then Acquiror shall, for no consideration therefor, re-issue to the former holder(s) of the Surrendered Shares (in the proportion of their shares so surrendered), any such remaining Surrendered Shares. 5.16 Production of Schedules and Exhibits. Within fifteen (15) days of the execution of this Agreement each of the parties hereto shall produce to the other parties, to the extent not previously done, all of the Schedules and Exhibits required to be produced pursuant to this Agreement. The Schedules and Exhibits produced subsequent to the execution of this Agreement, shall be given such force and effect as though such Schedules and Exhibits were produced upon execution of this Agreement. 5.17 Acknowledgment of Approvals. By virtue of their respective signatures to this Agreement, Acquiror, Sub, Sky King and the Sky King Shareholders acknowledge their approval of this Agreement and their consent to the consummation of the transactions identified herein. ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER 34 6.1 Conditions to Obligations of Sky King and the Sky King Shareholders. The obligations of Sky King and the Sky King Shareholders to consummate the Merger and the other transactions contemplated to be consummated by it at the Closing are subject to the satisfaction (or waiver by Sky King and the Sky King Shareholders) at or prior to the Closing (or at such other time prior thereto as may be expressly provided in this Agreement) of each of the following conditions: (a) Acquiror shall have sold, transferred or otherwise disposed of all of its present assets and shall as of the Closing have assets consisting of at least: (i) $1 million in cash or other liquid assets; and (ii) notes receivable of not less than $4 million with maturities on or before 1 August, 1999. (b) Acquiror shall have settled and/or satisfied all outstanding obligations or liabilities so that as of the Closing Acquiror shall have no obligations or liabilities except trade payables incurred in connection with this transaction, those in connection with the PortaCom Transaction and those in the ordinary course, which in the aggregate shall not exceed $250,000. Notwithstanding anything to the contrary contained in the foregoing sentence, if Acquiror has not advanced the entire amount of the PortaCom Advances to PortaCom on or before the date of the Closing, then on or before the date of the Closing, Acquiror shall have (i) advanced a minimum of $300,000 of the PortaCom Advances to PortaCom and (ii) satisfied the provisions of Section 5.15(b)(i)(A). (c) On or before the Closing, Acquiror shall have secured general releases from each of its directors and officers agreeing to release Acquiror from any and all claims, liabilities, obligations and demands in connection with the transactions contemplated by this Agreement. (d) The representations and warranties of Acquiror and the Sub set out in this Agreement shall be true and correct in all material respects at and as of the time of the Closing as though such representations and warranties were made at and as of such time. (e) Each of Acquiror and the Sub shall have complied in a timely manner and in all material respects with the respective covenants and agreements set out in this Agreement. (f) The Merger shall have been approved by Sky King and the Sky King Shareholders in accordance with the provisions of the CBCA. (g) On or before the Closing, the officers and directors of Acquiror shall have tendered their immediate resignations from office and shall have in conjunction therewith reconstituted the Board of Directors to consist of a maximum of five (5) members and shall have nominated to Acquiror's Board of Directors two (2) individuals designated by the holders of the Sub Preferred Stock and the VDC Designee shall have been designated by the Acquiror's Board of Directors (as such Board was constituted immediately prior to the Closing). 35 (h) Sky King and the Sky King Shareholders shall be reasonably satisfied that the Merger results in a tax-free reorganization under Section 368 of the Code. (i) Acquiror shall enter into Employment Agreements with each of Frederick A. Moran and James Roberts substantially in accordance with the terms contained within Exhibit 2.2(b)(xii). (j) Acquiror shall have executed and delivered the Escrow Agreement to Sky King and the Escrow Agent. (k) There shall be delivered to Sky King and the Sky King Shareholders an officer's certificate of Acquiror and Sub to the effect that all of the respective representations and warranties of Acquiror and Sub set forth herein are true and complete in all material respects as of the Closing, and the Acquiror and Sub have complied in all material respects with their covenants and agreements set forth herein that are required to be complied with by the Closing. (l) Sky King shall have completed prior to the Closing, to its satisfaction, a due diligence review of the financial condition, results of operations, properties, assets, liabilities, business and prospects of Acquiror. (m) All director, shareholder, lender, lessor and other parties' consents and approvals, as well as all filings with, and all necessary consents or approvals of, all federal, state and local governmental authorities and agencies, as are required under this Agreement, applicable law or any applicable contract or agreement (other than as contemplated by this Agreement) to complete the Merger shall have been secured. (n) No statute, rule, regulation, executive order, decree, injunction or restraining order shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or governmental authority that prohibits or restricts the consummation of the Merger or the related transactions. 6.2 Conditions to Acquiror's and the Sub's Obligations. The obligations of Acquiror and the Sub to consummate the Merger and the other transactions contemplated to be consummated by it at the Closing are subject to the satisfaction (or waiver by Acquiror) at or prior to the Closing (or at such other time prior thereto as may be expressly provided in this Agreement) of each of the following conditions: (a) On or before the Closing, Sky King shall have secured general releases from each of its directors, officers, consultants, employees and shareholders agreeing to: (i) release Sky King, Acquiror and Sub from any and all claims, liabilities, obligations and demands; (ii) terminate any employment agreements; and (iii) terminate any shareholder agreements. 36 (b) On or before the Closing, Sky King shall have secured the resignation of each of its directors and officers except George Finn who will remain the President of Sky King. (c) Acquiror shall have executed employment agreements with Frederick A. Moran and James Roberts substantially in accordance with the terms contained within Exhibit 2.2(b)(xii). (d) No Sky King Shareholder shall have filed with Sky King, prior to the Sky King shareholder meeting at which a vote is to be taken with respect to a proposal to approve this Agreement, a written notice of intent to demand payment for his shares if the proposed action is effectuated, as required by Section 33-861 of the CBCA in order for such shareholder to perfect the right to dissent from such proposed action. (e) The representations and warranties of Sky King and the Sky King Shareholders set out in this Agreement shall be true and correct in all material respects at and as of the time of the Closing as though such representations and warranties were made at and as of such time. (f) Sky King and the Sky King Shareholders shall have complied in a timely manner and in all material respects with its covenants and agreements set out in this Agreement. (g) There shall be delivered to Acquiror and Sub an officer's certificate of Sky King to the effect that all of the representations and warranties of Sky King set forth herein are true and complete in all respects as of the Closing, and that Sky King has complied in all material respects with covenants and agreements set forth herein required to be complied with by the Closing, and there shall be delivered to Acquiror and Sub a certificate signed by the Sky King Shareholders to the effect that the representations and warranties of the Sky King Shareholders set forth herein are true and correct in all material respects and that the Sky King Shareholders have complied in all material respects with their covenants and agreements set forth herein required to be complied with by Closing. (h) Sky King and the Sky King Shareholders shall have executed and delivered the Escrow Agreement to Acquiror and the Escrow Agent. (i) Acquiror and Sub shall have completed prior to the Closing, to their satisfaction, a due diligence review of the financial condition, results of operations, properties, assets, liabilities, businesses and prospects of Sky King. (j) All director, shareholder, lender, lessor and other parties' consents and approvals, as well as all filings with, and all necessary consents or approvals of, all federal, state and local governmental authorities and agencies, as are required under this Agreement, applicable law or any applicable contract or agreement (other than as contemplated by this Agreement) to complete the Merger shall have been secured. 37 (k) No statute, rule, regulation, executive order, decree, injunction or restraining order shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or governmental authority that prohibits or restricts the consummation of the Merger or the related transactions. (l) Acquiror's and Sub's Board of Directors, and shareholders to the extent necessary, shall have approved the Merger in accordance with the DGCL. (m) The Board of Directors and Sky King Shareholders shall have approved the Merger in accordance with the CBCA. ARTICLE VII INDEMNIFICATION 7.1 Indemnification. (a) Sky King Shareholders. The Sky King Shareholders shall indemnify, defend and hold harmless Acquiror and Sub from and against any and all demands, claims, actions or causes of action, judgments, assessments, losses, liabilities, damages or penalties and reasonable attorneys' fees and related disbursements (collectively, "Claims") incurred by Acquiror or Sub which arise out of or result from a misrepresentation, breach of warranty, or breach of any covenant of Sky King or the Sky King Shareholders contained herein or in the Schedules annexed hereto or in any deed, exhibit, closing certificate, schedule or any ancillary certificates or other documents or instruments furnished by Sky King or the Sky King Shareholders pursuant hereto or in connection with the transactions contemplated hereby or thereby. (b) Acquiror and Sub. Acquiror and Sub shall indemnify, defend and hold harmless Sky King and the Sky King Shareholders from and against any and all Claims, as defined at Subsection 7.1(a) above, incurred by Sky King and/or the Sky King Shareholders which arise out of or result from a misrepresentation, breach of warranty or breach of any covenant of Acquiror and Sub contained herein or in the Schedules annexed hereto or in any deed, exhibit, closing certificate, schedule or any ancillary certificates or other documents or instruments furnished by Acquiror or the Sub pursuant hereto or in connection with the transactions contemplated hereby or thereby. (c) Methods of Asserting Claims for Indemnification. All claims for indemnification under this Agreement shall be asserted as follows: (i) Third Party Claims. In the event that any Claim for which a party (the "Indemnitee") would be entitled to indemnification under this Agreement is asserted against or sought to be collected from the Indemnitee by a third party the Indemnitee shall promptly notify the other party (the "Indemnitor") of such Claim, specifying the nature thereof, the applicable 38 provision in this Agreement or other instrument under which the Claim arises, and the amount or the estimated amount thereof (the "Claim Notice"). The Indemnitor shall have thirty (30) days (or, if shorter, a period to a date not less than ten (10) days prior to when a responsive pleading or other document is required to be filed but in no event less than ten (10) days from delivery or mailing of the Claim Notice) (the "Notice Period") to notify the Indemnitee (a) whether or not it disputes the Claim and (b) if liability hereunder is not disputed, whether or not it desires to defend the Indemnitee. If the Indemnitor elects to defend by appropriate proceedings, such proceedings shall be promptly settled or prosecuted to a final conclusion in such a manner as to avoid any risk of damage to the Indemnitee; and all costs and expenses of such proceedings and the amount of any judgment shall be paid by the Indemnitor. If the Indemnitee desires to participate in, but not control, any such defense or settlement, it may do so at its sole cost and expense. If the Indemnitor has disputed the Claim, as provided above, and shall not defend such Claim, the Indemnitee shall have the right to control the defense or settlement of such Claim, in its sole discretion, and shall be reimbursed by the Indemnitor for its reasonable costs and expenses of such defense. (ii) Non-Third Party Claims. In the event that the Indemnitee should have a Claim for indemnification hereunder which does not involve a Claim being asserted against it or sought to be collected by a third party, the Indemnitee shall promptly send a Claim Notice with respect to such Claim to the Indemnitor. If the Indemnitor does not notify the Indemnitee within the Notice Period that it disputes such Claim, the Indemnitor shall pay the amount thereof to the Indemnitee. If the Indemnitor disputes the amount of such Claim, the controversy in question shall be submitted to arbitration pursuant to Section 9.8 hereafter. ARTICLE VIII TERMINATION 8.1 Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Closing: (a) by mutual written consent of the board of directors of Acquiror, the Sub, Sky King and the Sky King Shareholders: (b) by any of Acquiror, the Sub, Sky King or the Sky King Shareholders: (i) if the Closing shall not have occurred on or before March 31, 1998; provided, however, that the right to terminate this Agreement under this Section 8.1(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before that date; or 39 (ii) if any court of competent jurisdiction, or any governmental body, regulatory or administrative agency or commission having appropriate jurisdiction shall have issued an order, decree or filing or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and non-appealable. (c) by Sky King and the Sky King Shareholders if any of the conditions specified in Section 6.1 have not been met and the sole remedy of Sky King and the Sky King Shareholders in that event, shall be either to waive such failure and proceed to close hereunder, or to terminate this Agreement in which event neither Sky King and the Sky King Shareholders nor Acquiror shall have any claim or action against the other; or (d) by Acquiror and Sub if any of the conditions specified in Section 6.2 have not been met and the sole remedy of Acquiror and Sub in that event, shall be either to waive such failure and proceed to close hereunder, or to terminate this Agreement in which event neither Acquiror and the Sub nor Sky King and the Sky King Shareholders shall have any claim or action against the other. 8.2 Notice and Effect of Termination. In the event of the termination and abandonment of this Agreement pursuant to Section 8.1, written notice thereof shall forthwith be given to the other party or parties specifying the provision pursuant to which such termination is made, and this Agreement shall forthwith become void and have no effect without any liability on the part of any party or its directors, officers or shareholders, except for the provisions of this Section 8.2 and Sections 5.4, 5.9 and 5.11, which shall survive any termination of this Agreement. Nothing contained in this Section 8.2 shall relieve any party from any liability for any breach of this Agreement provided that the sole remedy available to Sky King and the Sky King Shareholders for any breach of this Agreement by Acquiror or Sub shall be as set forth in Section 7.1 hereof. 8.3 Extension; Waiver. Any time prior to the Closing, the parties may (a) extend the time for the performance of any of the obligations or other acts of any other party under or relating to this Agreement; (b) waive any inaccuracies in the representations or warranties by any other party or (c) waive compliance with any of the agreements of any other party or with any conditions to its own obligations. Any agreement on the part of any other party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. 8.4 Amendment and Modification. This Agreement may be amended, whether before or after the vote of the Sky King Shareholders or shareholders of Acquiror, by written agreement of Acquiror, the Sub, Sky King and the Sky King Shareholders; 40 provided, however, that after the approval, if any, of this Agreement by the Sky King Shareholders, no such amendment shall reduce or change the consideration to be received by any Sky King Shareholder in connection with the Merger as set out in Section 1.3 hereof or shall otherwise adversely affect the rights under this Agreement of the Sky King Shareholders without the approval of such adversely affected shareholders. This Agreement may not be amended except by an instrument in writing signed on behalf of Acquiror, the Sub, Sky King and the Sky King Shareholders. ARTICLE IX MISCELLANEOUS 9.1 Survival of Representations and Warranties. The respective representations and warranties of Acquiror, the Sub, Sky King and the Sky King Shareholders shall not be deemed waived or otherwise affected by any investigation made by any party. Each representation and warranty shall survive the Closing through all applicable statutes of limitations. 9.2 Notices. All notices requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given on the date if delivered personally, or upon the second business day after it shall have been deposited by certified or registered mail with postage prepaid, or sent by telex, telegram or telecopier, as follows (or at such other address or facsimile number for a party as shall be specified by like notice): (a) if to Sky King at: Fred Moran, Chairman Sky King Communications, Inc. 25 Doubling Road Greenwich, CT 06830 Facsimile: (203) 869-1430 with a copy to: George Finn, President Sky King Communications, Inc. 25 Doubling Road Greenwich, CT 06830 Facsimile: (203) 869-1430 41 if to Acquiror or the Sub at: Graham Ferguson Lacey VDC Corporation Ltd. Bishopscourt, Kirk Michael Isles of Man British Isles with a copy to: Stephen M. Cohen, Esquire Buchanan Ingersoll Professional Corporation Eleven Penn Center 1835 Market Street, 14th Floor Philadelphia, PA 19103 Facsimile: (215) 665-8760 9.3 Entire Agreement; Assignment. This Agreement, including all Exhibits and Schedules hereto, constitutes the entire Agreement among the parties with respect to its subject matter and supersedes all prior agreements and understandings, both written and oral, among the parties or any of them with respect to such subject matter and shall not be assigned by operation of law or otherwise. 9.4 Binding Effect; Benefit. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and assigns. Nothing in this Agreement is intended to confer on any person other than the parties to this Agreement or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. 9.5 Headings. The descriptive headings of the sections of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. 9.6 Counterparts. This Agreement may be executed in two or more counterparts and delivered via facsimile, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. 42 9.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the laws that might otherwise govern under principles of conflicts of laws applicable thereto. 9.8 Arbitration. If a dispute arises as to the interpretation of this Agreement, it shall be decided finally in an arbitration proceeding conforming to the Rules of the American Arbitration Association applicable to commercial arbitration then in effect at the time of the dispute. The arbitration shall take place in Philadelphia, Pennsylvania. The decision of the Arbitrators shall be conclusively binding upon the parties and final, and such decision shall be enforceable as a judgment in any court of competent jurisdiction. The parties shall share equally the costs of the arbitration. 9.9 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 9.10 Release and Discharge. By virtue of their execution of this Agreement, as of the Closing and thereafter, any and all Sky King directors, officers and shareholders hereby agree to release, remise and forever discharge Sky King from and against any and all debts, obligations, liabilities and amounts owing from Sky King prior to the Closing, and Sky King is not obligated to take any action or make any payments to third parties on behalf of the Sky King Shareholders. 9.11 Certain Definitions. As used herein: (a) "Act" means the Securities Act of 1933, as amended; (b) "Affiliate" shall have the meanings ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended to date (the "Exchange Act"); 43 (c) "Business Day" shall mean any day other than a Saturday, Sunday or a day on which federally chartered financial institutions are not open for business in the City of Philadelphia; (d) "Dissenting Shares" shall mean the shares of Sky King Common Stock held by the Dissenting Shareholders, as such term is defined in Section 1.5; (e) "Employee Benefit Plan" means any employee benefit plan (as defined in ss. 3(3) of the Employee Retirement Income Security Act of 1974, as amended, or any employment contract, employee loan, incentive compensation, profit sharing, retirement, pension, deferred compensation, severance, termination pay, stock option or purchase plan, guaranteed annual income plan, fund or arrangement, payroll incentive, policy, fund, agreement or arrangement, non-competition or consulting agreement, hospitalization, disability, life or other insurance plan, or other employee fringe benefit program or plan, or any other plan, payroll practice, policy fund agreement or arrangement similar to or in the nature of the foregoing, oral or written; (f) "Escrow Agent" means that person or entity mutually agreed upon by the parties hereto to act as escrow agent to hold, safeguard and disburse the Escrow Shares (as such term is defined in Section 1.3) pursuant to the terms and conditions of this Agreement; (g) "Knowledge" shall mean the actual current knowledge of the executive management of the party to this Agreement to whom knowledge is ascribed together with the knowledge such executive management should reasonably be expected to have in the performance of its duties and responsibilities; (h) "Material Adverse Effect" shall mean any adverse effect on the business, condition (financial or otherwise) or results of operation of the relevant party and its subsidiaries, if any, which is material to such party and its subsidiaries, if any, taken as a whole; (i) "Person" means any individual, corporation, partnership, association, trust or other entity or organization, including a governmental or political subdivision or any agency or institution thereof; and (j) "Subsidiary" shall mean, when used with reference to an entity, any corporation, a majority of the outstanding voting securities of which is owned directly or indirectly, or a majority of the board of directors of which may be elected, by such entity. IN WITNESS WHEREOF, Acquiror, Sub, Sky King and the Sky King Shareholders have caused this Agreement to be signed by their respective officers hereunto duly authorized, effective as of the date first written above.
Attest: VDC CORPORATION LTD. 44 By:____________________________ By: /s/ Graham Ferguson Lacey -------------------------------- Graham Ferguson Lacey, President Attest: VDC (DELAWARE), INC. By:____________________________ By: /s/ Andrew Panzo -------------------------------- Andrew Panzo, President [signatures continue onto next page] Attest: SKY KING COMMUNICATIONS, INC. By:____________________________ By: /s/ Frederick A. Moran -------------------------------- Frederick A. Moran, Chairman Attest: By: /s/ James Roberts -------------------------------- By:____________________________ James Roberts, Chief Operating Officer Witness SKY KING SHAREHOLDERS _____________________________________ /s/ Frederick W. Moran -------------------------------- Name:________________________________ Signature Address:______________________________ Name: Frederick W. Moran _____________________________________ Address: :_____________________________ --------------------------------------- Ownership Percentage: 14.2% Witness _____________________________________ /s/ Clayton E. Moran -------------------------------- Name:________________________________ Signature Address:______________________________ Name: Clayton E. Moran _____________________________________ Address:_____________________________ ------------------------------------- Ownership Percentage: 14.2% Witness _____________________________________ /s/ Kent F. Moran -------------------------------- Name:________________________________ Signature Address:______________________________ Name: Kent F. Moran _____________________________________ Address:_____________________________ ------------------------------------- 45 Ownership Percentage: 13.0% [signatures continue onto next page] 46 Witness _____________________________________ /s/ Luke F. Moran -------------------------------- Name:________________________________ Signature Address:______________________________ Name: Luke F. Moran _____________________________________ Address:_____________________________ Ownership Percentage: 13.0% Witness _____________________________________ /s/ Frederick A. Moran -------------------------------- Name:________________________________ Signature (Frederick A. Moran) Address:______________________________ _____________________________________ /s/ Joan B. Moran -------------------------------- Name:________________________________ Signature (Joan B. Moran) Address:______________________________ Name: Frederick A. and Joan B. Moran _____________________________________ Address: 25 Doubling Road Greenwich, CT 06830 Ownership Percentage: .83% Witness /s/ George Finn -------------------------------- _____________________________________ Signature Name:________________________________ Name: George Finn Address:______________________________ Address:_____________________________ - ------------------------------------- ------------------------------------- Ownership Percentage: .55% Witness /s/ James C. Roberts, Trustee -------------------------------- _____________________________________ Signature Name:________________________________ Name: Roberts Family Trust Address:______________________________ Address:_____________________________ - ------------------------------------- ------------------------------------- Ownership Percentage: 27.5% [signatures continue onto next page] 47 Witness /s/ Henry Jacobs -------------------------------- _____________________________________ Signature Name:________________________________ Name: Henry Jacobs Address:______________________________ Address:_____________________________ - ------------------------------------- ------------------------------------- Ownership Percentage: .72% Witness /s/ Leon G. Cooperman -------------------------------- _____________________________________ Signature Name:________________________________ Name: Watchung Road Associates, L.P. Address:______________________________ By: Leon G. Cooperman, General Partner _____________________________________ Address:_____________________________ ------------------------------------- Ownership Percentage: 1.1% Witness /s/ Wayne Perry -------------------------------- _____________________________________ Signature Name:________________________________ Name: Wayne Perry Address:______________________________ Address:_____________________________ - ------------------------------------- ------------------------------------- Ownership Percentage: .66% Witness /s/ David Wheeler -------------------------------- _____________________________________ Signature Name:________________________________ Name: David Wheeler Address:______________________________ Address:_____________________________ - ------------------------------------- ------------------------------------- Ownership Percentage: .07% [signatures continue onto next page] 48 Witness /s/ Charles Glazer -------------------------------- _____________________________________ Signature Name:________________________________ Name: Charles Glazer Address:______________________________ Address:_____________________________ - ------------------------------------- ------------------------------------- Ownership Percentage: .27% Witness /s/ Robert de Rose -------------------------------- _____________________________________ Signature Name:________________________________ Name: Robert de Rose IRA Address:______________________________ Address:_____________________________ - ------------------------------------- ------------------------------------- Ownership Percentage: .27% Witness /s/ Jack Daniels -------------------------------- _____________________________________ Signature Name:________________________________ Name: Daniels Tech, LLC Address:______________________________ By: Jack Daniels, Managing Partner _____________________________________ Address:_____________________________ Ownership Percentage: .11% [signatures continue onto next page] Witness /s/ Jose Carvalho Soares -------------------------------- _____________________________________ Signature Name:________________________________ Name: Jose Carvalho Soares Address:______________________________ Address: Rua Carlos Benedetti 78 _____________________________________ Nilopolis - Rio de Janeiro Brazil Cep 26535 Ownership Percentage: .8% [signatures continue onto next page] 49 Witness /s/ Vicki Walters, Trustee -------------------------------- _____________________________________ Signature Name:________________________________ Name: Capital Growth Trust Address:______________________________ Vicki Walters, Trustee _____________________________________ Address: 2028 Ryans Run Road Lansdale, PA 19446 Ownership Percentage: 6.0 % Witness /s/ Harold Chaffe -------------------------------- _____________________________________ Signature Name:________________________________ Name: Godwin Finance Ltd. Address:______________________________ Name: Harold Chaffe _____________________________________ Title: Financial Controller Address: Whitehill House Newby Road Industrial Estate Newby Road Hazel Grove Stockport, Cheshire England SK7 5DA Ownership Percentage: 3.6% Witness /s/ Bruno DiSpirito -------------------------------- _____________________________________ Signature Name:________________________________ Name: Gibralt Holdings Ltd. Address:______________________________ By: Bruno DiSpirito _____________________________________ Title: Vice President Address: 1177 Hastings Street Suite 2000 Vancouver, British Columbia V6E 2K3 Ownership Percentage: 3.0%
50 Schedule 4.1(m) --------------- Lease between Sky King Communications, Inc. as lessee and D. Loschiava, trustee, as lessor for a residence located at 71 Long Meadow, Riverside, CT for James C. Roberts. The term of the lease is from February 1998 through June 1998, and the monthly rental payment is $4,150. 51 Schedule 4.1(p) --------------- 1. Lease between Sky King Communications, Inc. as lessee and D. Loschiava, trustee, as lessor for a residence located at 71 Long Meadow, Riverside, CT for James C. Roberts. The term of the lease is from February 1998 through June 1998, and the monthly rental payment is $4,150. 2. Sky King Communications, Inc. paid James C. Roberts a $25,000 sign-on bonus in January 1998 after he became Sky King's Chief Operating Officer in December 1997. 52
Schedule 4.2(d)(i) ------------------ VDC Corporation Ltd. Warrants ----------------------------- Number of Warrants Expiration Date Exercise Price - ------------------ --------------- -------------- 455,000 June 30, 1998 $4 per share 250,000 September 30, 1998 $4 per share 45,000 June 30, 1998 $5 per share
53 Schedule 4.2(g) --------------- None 54 Schedule 5.5(a)(ix) ------------------- Sky King Communications, Inc. plans to acquire Blue Sky International LLC and the Sakalin Telecom Group of companies. 55 EX-99.5 6 EX-99.5 EXHIBIT 5 AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER THIS AMENDMENT TO AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the "Amendment"), is made and entered into as of March 6, 1998, by and among VDC CORPORATION LTD., a Bermuda corporation ("Acquiror"), VDC (DELAWARE), INC., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Sub"), SKY KING COMMUNICATIONS, INC., a Connecticut corporation ("Sky King"), and those individuals and entities whose names appear on the signature page hereof in their capacity as holders of the outstanding common stock of Sky King (the "Sky King Shareholders"). R E C I T A L S: ---------------- WHEREAS, the parties hereto have entered into an Amended and Restated Agreement and Plan of Merger effective as of December 10, 1997 (the "Merger Agreement") pursuant to which Sub shall merge with and into Sky King (the "Merger"); WHEREAS, the parties hereto desire to amend the Merger Agreement in the manner set forth herein effective as of the date hereof; and WHEREAS, any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Merger Agreement. NOW, THEREFORE, in consideration of the foregoing premises and agreements contained herein, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree that the Merger Agreement is hereby amended as follows: 1. Section 6.1(a)(i) of the Merger Agreement is amended to require that Acquiror shall have assets at the Closing consisting of at least $600,000.00 in cash or other liquid assets and the right to receive $370,000.00 in immediately available funds from Tasmin Limited by March 13, 1998. In the event the remaining funds are not timely received from Tasmin Limited, the Acquiror may draw upon such number of Investment Banking Shares as are necessary to satisfy any such deficiency in funding to the extent of Investment Banking Shares at the rate of $2.00 per share. Assets available at Closing will also include approximately 50,000 shares of the Common Stock of PortaCom that were acquired for approximately $30,000. 2. Wayne Perry, a Sky King Shareholder, shall be deemed to have not given any of the representations and warranties of Sky King and the Sky King Shareholders set forth in Article IV of the Merger Agreement. 3. Schedule 4.2(d)(i) to the Merger Agreement is hereby amended and restated in its entirety by the following Schedule: Schedule 4.2(d)(i) ------------------ VDC Corporation Ltd. Warrants -----------------------------
Number of Warrants Exercise Price Expiration Date ------------------ -------------- --------------- 45,000 $5.00 Aug. 30, 1998 85,000 $4.00 Aug. 30, 1998 41,110 $4.00 Aug. 30, 1998 90,909 $4.00 Aug. 30, 1998 90,909 $4.00 Aug. 30, 1998 9,890 $4.00 Aug. 30, 1998 250,000 $4.00 Aug. 30, 1998 30,000 $4.00 Aug. 30, 1998 100,000 $4.00 Aug. 30, 1998 145,728 $4.00 Aug. 30, 1998 50,000 $4.00 Aug. 30, 1998 ------ 938,546
4. Paragraph 5.15 of the Merger Agreement shall be amended to provide that Acquiror has funded at least $240,000 of the PortaCom Advances. Subparagraph (i)(A) of Paragraph 5.15 shall be amended to provide that the Investment Banking Shares shall serve as an escrow fund for the payment of the Remaining PortaCom Advances or that the Remaining PortaCom Advances may be satisfied upon the early collection of outstanding subscriptions receivable. See Paragraph 5 below. The remainder of Paragraph 5.15 shall remain in full force and effect. 5. Paragraph 4.2(L) of the Merger Agreement provides that the Acquiror has agreed to pay an investment banking fee in stock equal to 5% of the Merger Consideration or 500,000 shares of Acquiror Common Stock for arranging this transaction (the "Investment Banking Shares"). This Amendment will confirm that the Investment Banking Shares will be paid through the issuance by Acquiror following the transaction of 500,000 shares of Common Stock to the following persons: FAC Enterprises, Inc. - 185,000 shares; KAB Investments, Inc. - 185,000 shares; SPH Investments, Inc. - 70,000 shares; and SPH Equities, Inc. - 60,000 shares. Notwithstanding the above, the Investment Banking Shares will not be distributed at the Closing, and instead, will be subject to offset in the following manner: (i) to the extent the Remaining PortaCom Advances are not satisfied by the early collection of outstanding subscriptions receivable, the Investment Banking Shares will serve as an escrow fund upon which the Acquiror will be able to draw from these shares in order to sell shares in one or more private placement transactions in order to, and to the extent necessary, to secure cash proceeds sufficient to satisfy the obligation to advance the Remaining PortaCom Advances identified within Subparagraph 5.15(b)(i)(A) of the Merger Agreement. To the extent the Remaining PortaCom Advances are satisfied, then, with the exception of Investment Banking Shares that are otherwise serving as an escrow fund under Paragraph 1 hereof, the remaining Investment Banking Shares may be issued in the manner identified above. 2 6. Notwithstanding anything to the contrary in the Merger Agreement, the Merger shall become effective as of the filing of a Certificate of Merger with the Secretary of State of the State of Connecticut in accordance with Section 38-821 of the CBCA and a Certificate of Merger with the Secretary of State of the State of Delaware in accordance with Section 252 of the DGCL; and confirmation that both Certificates of Merger have become effective as of such filing date; and at such time the Merger shall be deemed completed and such time shall be referred to herein as the "Effective Time." 7. Except as otherwise set forth herein, the terms of the Merger Agreement shall remain in full force and effect. 8. This Amendment may be executed in two or more counterparts and delivered via facsimile, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. 9. This Amendment shall be governed by and construed in accordance with the laws of Bermuda, without regard to the laws that might otherwise govern under principles of conflicts of laws applicable thereto. IN WITNESS WHEREOF, Acquiror, Sub, Sky King and the Sky King Shareholders have caused this Amendment to be signed by their respective officers hereunto duly authorized, effective as of the date first written above. VDC CORPORATION LTD. By: /s/ Graham Ferguson Lacey ----------------------------- Graham Ferguson Lacey, President VDC (DELAWARE), INC. By: /s/ Andrew Panzo --------------------- Andrew Panzo, President [Signatures continue on next page] 3 SKY KING COMMUNICATIONS, INC. By: /s/ Frederick A. Moran --------------------------- Frederick A. Moran, Chief Executive Officer By: /s/ James Roberts ---------------------- James Roberts, Chief Operating Officer SKY KING SHAREHOLDERS (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Frederick W. Moran (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Clayton F. Moran (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Kent F. Moran (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Luke F. Moran (*) /s/ Frederick A. Moran ---------------------------- Signature (Frederick A. Moran) (*) /s/ Frederick A. Moran ---------------------------- Signature (Joan B. Moran) Name: Frederick A. and Joan B. Moran [Signatures continue on next page] 4 (*) /s/ Frederick A. Moran ---------------------------- Signature Name: George Finn (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Roberts Family Trust (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Henry Jacobs (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Watchung Road Associates, L.P. By: Leon G. Cooperman, General Partner (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Wayne Perry (*) /s/ Frederick A. Moran ---------------------------- Signature Name: David Wheeler (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Charles Glazer (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Robert de Rose IRA By: Cowen & Co., Trustee [Signatures continue on next page] 5 (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Daniels Tech, LLC By: Jack Daniels, Managing Partner (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Jose Carvalho Soares (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Capital Growth Trust By: Vicki Walters, Trustee (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Godwin Finance Ltd. By: Harold Chaffe, Financial Controller (*) /s/ Frederick A. Moran ---------------------------- Signature Name: Gibralt Holdings Ltd. By: Bruno DiSpirito Title: Vice President (*) By Power of Attorney granted to Frederick A. Moran. 6 EX-99.6 7 EX-99.6 EXHIBIT 6 1999-OP18 Frederick A. Moran Optionee VDC COMMUNICATIONS, INC. ------------------------ INCENTIVE STOCK OPTION AGREEMENT UNDER THE VDC COMMUNICATIONS, INC. 1998 STOCK INCENTIVE PLAN, AS AMENDED (the "Plan") This Agreement is made as of November 30, 1999, (the "Grant Date") by and between VDC Communications, Inc., a Delaware corporation (the "Corporation") and Frederick A. Moran (the "Optionee"). WHEREAS, Optionee is an employee of the Corporation or one of its subsidiaries and the Corporation considers it desirable and in its best interest that Optionee be given an inducement to acquire a proprietary interest in the Corporation and an incentive to advance the interests of the Corporation by granting the Optionee an option to purchase shares of common stock of the Corporation (the "Common Stock"); NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree that as of the Grant Date, the Corporation hereby grants Optionee an option to purchase from it, upon the terms and conditions set forth in the Plan (a copy of which is attached hereto) and this Agreement, that number of shares of the authorized and unissued Common Stock of the Corporation as is set forth on Schedule A hereto. 1. Terms of Stock Option. The option to purchase Common Stock granted herein is subject to the terms, conditions, and covenants set forth in the Plan as well as the following: (a) This option shall constitute an Incentive Stock Option which is intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended; (b) The per share exercise price for the shares subject to this option shall be 110% of the Fair Market Value (as defined in the Plan) of the Common Stock on the Grant Date, which exercise price is set forth on Schedule A hereto; 1 (c) This option shall vest in accordance with the vesting schedule set forth on Schedule A hereto; and (d) No portion of this option may be exercised more than five (5) years from the Grant Date. 2. Payment of Exercise Price. The option may be exercised, in part or in whole, only by written request to the Corporation accompanied by payment of the exercise price in full either: (i) in cash for the shares with respect to which it is exercised; (ii) by delivering to the Corporation a notice of exercise with an irrevocable direction to a broker-dealer registered under the Securities Exchange Act of 1934, as amended, to sell a sufficient portion of the shares and deliver the sale proceeds directly to the Corporation to pay the exercise price; (iii) in the discretion of the Plan Administrator, through the delivery to the Corporation of previously-owned shares of Common Stock having an aggregate Fair Market Value equal to the option exercise price of the shares being purchased pursuant to the exercise of the Option; provided, however, that shares of Common Stock delivered in payment of the option price must have been held by the Optionee for at least six (6) months in order to be utilized to pay the option price; (iv) in the discretion of the Plan Administrator, through an election to have shares of Common Stock otherwise issuable to the Optionee withheld to pay the exercise price of such Option; or (v) in the discretion of the Plan Administrator, through any combination of the payment procedures set forth in Subsections (i) - (iv) of this paragraph. 3. Miscellaneous. -------------- (a) This Agreement and the options represented hereby may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. (b) This Agreement will be governed and interpreted in accordance with the laws of the State of Connecticut, and may be executed in more than one counterpart, each of which shall constitute an original document. (c) No alterations, amendments, changes or additions to this agreement will be binding upon either the Corporation or Optionee unless reduced to writing and signed by both parties. (d) All controversies or claims arising out of this Agreement shall be determined by binding arbitration, conducted at the Corporation's offices in Greenwich, Connecticut, or at such other location designated by the Corporation, before the American Arbitration Association. 2 (e) No rule of construction requiring interpretation against the drafting party shall apply to the interpretation of this Agreement. (f) If any provision of this Agreement is held to be invalid, the remaining provisions shall remain in full force and effect. In witness whereof, the parties have executed this Agreement as of the Grant Date. VDC COMMUNICATIONS, INC. By:/s/ Frederick A. Moran ---------------------- Frederick A. Moran Chief Executive Officer OPTIONEE /s/ Frederick A. Moran ---------------------- Frederick A. Moran 3 Frederick A. Moran Optionee Schedule A 1. Grant Date: November 30, 1999 2. Number of Shares of Common Stock covered by the Option: 450,000 3. Exercise Price (110% of Fair Market Value of Common Stock on the Grant Date): $1.03125 4. The Option shall vest in accordance with the following schedule: (i) 90,000 shares shall vest on the first anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2000; (ii) 90,000 shares shall vest on the second anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2001; (iii) 90,000 shares shall vest on the third anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2002; (iv) 90,000 shares shall vest on the fourth anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2003; and (v) 90,000 shares shall vest on the fifth anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2004. 4 EX-99.7 8 EX-99.7 EXHIBIT 7 1998-OP5/A Frederick A. Moran Optionee THIS AGREEMENT SUPERSEDES AND RENDERS NULL AND VOID A PRIOR INCENTIVE STOCK OPTION AGREEMENT BETWEEN THE PARTIES MADE AS OF DECEMBER 8, 1998. VDC COMMUNICATIONS, INC. ------------------------ INCENTIVE STOCK OPTION AGREEMENT UNDER THE VDC COMMUNICATIONS, INC. 1998 STOCK INCENTIVE PLAN, AS AMENDED (the "Plan") This Agreement is made as of October 1, 1999, (the "Grant Date") by and between VDC Communications, Inc., a Delaware corporation (the "Corporation") and Frederick A. Moran (the "Optionee"). WHEREAS, Optionee is an employee of the Corporation or one of its subsidiaries and the Corporation, in December 1998, considered it desirable and in its best interest that Optionee be given an inducement to acquire a proprietary interest in the Corporation and an incentive to advance the interests of the Corporation and granted the Optionee an option to purchase shares of common stock of the Corporation (the "Common Stock"); and WHEREAS, the parties entered into an Incentive Stock Option Agreement dated December 8, 1998 (the "December Option Agreement") representing an option to purchase 200,000 shares of Corporation Common Stock (the "December Option"); WHEREAS, the Board of Directors of the Corporation has repriced the per share exercise price for the shares subject to the December Option; and WHEREAS, the parties wish to enter into a new agreement that reflects the new exercise price, and supersedes and renders null and void the December Option Agreement and the December Option. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree that as of the Grant Date, the Corporation hereby grants Optionee an option to purchase from it, upon the terms and conditions set forth in the Plan (a copy of which is attached hereto) and this Agreement, that number of shares of the authorized and unissued Common Stock of the Corporation as is set forth on Schedule A hereto. 1. Terms of Stock Option. The option to purchase Common Stock granted herein is subject to the terms, conditions, and covenants set forth in the Plan as well as the following: (a) This option shall constitute an Incentive Stock Option which is intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended; (b) The per share exercise price for the shares subject to this option shall be higher than 110% of the Fair Market Value (as defined in the Plan) of the Common Stock on the Grant Date, which exercise price is set forth on Schedule A hereto; (c) This option shall vest in accordance with the vesting schedule set forth on Schedule A hereto; and (d) No portion of this option may be exercised more than five (5) years from December 8, 1998. 2. Payment of Exercise Price. The option may be exercised, in part or in whole, only by written request to the Corporation accompanied by payment of the exercise price in full either: (i) in cash for the shares with respect to which it is exercised; (ii) by delivering to the Corporation a notice of exercise with an irrevocable direction to a broker-dealer registered under the Securities Exchange Act of 1934, as amended, to sell a sufficient portion of the shares and deliver the sale proceeds directly to the Corporation to pay the exercise price; (iii) in the discretion of the Plan Administrator, through the delivery to the Corporation of previously-owned shares of Common Stock having an aggregate Fair Market Value equal to the option exercise price of the shares being purchased pursuant to the exercise of the Option; provided, however, that shares of Common Stock delivered in payment of the option price must have been held by the Optionee for at least six (6) months in order to be utilized to pay the option price; (iv) in the discretion of the Plan Administrator, through an election to have shares of Common Stock otherwise issuable to the Optionee withheld to pay the exercise price of such Option; or (v) in the discretion of the Plan Administrator, through any combination of the payment procedures set forth in Subsections (i) - (iv) of this paragraph. 3. Miscellaneous. (a) This Agreement and the option represented hereby may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. (b) This Agreement will be governed and interpreted in accordance with the laws of the State of Connecticut, and may be executed in more than one counterpart, each of which shall constitute an original document. (c) No alterations, amendments, changes or additions to this agreement will be binding upon either the Corporation or Optionee unless reduced to writing and signed by both parties. (d) All controversies or claims arising out of this Agreement shall be determined by binding arbitration, conducted at the Corporation's offices in Greenwich, Connecticut, or at such other location designated by the Corporation, before the American Arbitration Association (the "AAA"). (e) No rule of construction requiring interpretation against the drafting party shall apply to the interpretation of this Agreement. (f) This Agreement supersedes and renders null and void the December Option Agreement and the December Option. (g) The recitals to this Agreement constitute a part of this Agreement. (h) If any provision of this Agreement is held to be invalid, the remaining provisions shall remain in full force and effect. In witness whereof, the parties have executed this Agreement as of the Grant Date. CORPORATION: VDC COMMUNICATIONS, INC. By:/s/ Frederick A. Moran --------------------------- Frederick A. Moran Chief Executive Officer OPTIONEE: /s/ Frederick A. Moran ------------------------------ Frederick A. Moran Frederick A. Moran Optionee Schedule A 1. Grant Date: October 1, 1999 2. Number of Shares of Common Stock covered by the Option: 200,000 3. Exercise Price (higher than 110% of Fair Market Value of Common Stock on the Grant Date): $1.38 4. The Option shall vest in accordance with the following schedule: (i) 40,000 shares shall vest on December 8, 1999, provided Optionee remains continuously employed by the Corporation from December 8, 1998 through December 7, 1999; (ii) 40,000 shares shall vest on December 8, 2000, provided Optionee remains continuously employed by the Corporation from December 8, 1998 through December 7, 2000; (iii) 40,000 shares shall vest on December 8, 2001, provided Optionee remains continuously employed by the Corporation from December 8, 1998 through December 7, 2001; (iv) 40,000 shares shall vest on December 8, 2002, provided Optionee remains continuously employed by the Corporation from December 8, 1998 through December 7, 2002; and (v) 40,000 shares shall vest on December 8, 2003, provided Optionee remains continuously employed by the Corporation from December 8, 1998 through December 7, 2003. EX-99.8 9 EX-99.8 EXHIBIT 8 Contractual Short Term Loan Agreement ------------------------------------- This contractual agreement is made this 25th day of June, 1998 between Edwin B. Read and Mary Karen Read (hereinafter referred to as "Read") of 805 Harvard St. Rochester, NY 14610 and Frederick A. and Joan Moran (hereinafter referred to as "Moran") of 25 Doubling Road, Greenwich, CT 06830. The purpose of this agreement is to provide necessary funds to Read to allow Read to purchase a home in Fairfield County, CT. Read will reimburse Moran the funds it has borrowed, plus interest charged Moran account at DLJ (IMS division) for the funds Moran borrowed from DLJ to provide funds to Read. Moran has set up a separate margin brokerage account in Moran's name at DLJ, solely for the purpose of lending these funds to Read. This account has been funded by Moran exclusively with shares of stock. There will be no cash or borrowed funds in the account at inception. Funds will only be withdrawn from the account for Read's benefit. Therefore, the total borrowings of the account will constitute the funds borrowed by Read and the interest charged by DLJ upon those borrowings. Therefore, Read will repay Moran by placing into this account the funds necessary to eliminate the margin debt in the account in full; that is both principal withdrawn, plus interest charged by DLJ. If the structure of the account should be altered by sales of stock or cash infusion by Moran, the principal borrowed plus interest at the rate charged by DLJ must still be repaid by Read. It is anticipated that Read will borrow up to about $190,000 from the account. VDC Corporation, Ltd. will guarantee Moran repayment of Moran's loan to Read upon Read's failure to repay same. As collateral, Read will deliver a second mortgage on it's new house plus Read's option to purchase VDC Corporation common stock to VDC Corporation Ltd. These mortgage and options will be held in escrow by VDC. Upon Read's repayment in full of Moran, the mortgage and options shall be automatically returned to Read by VDC. If Read fails to repay Moran within 36 months, VDC shall thereafter immediately repay these funds to Moran and may foreclose upon the house and cancel the options or reissue them to another person. This contract constitutes the entire agreement between the parties and supercedes any prior understandings or agreements. This agreement can only be altered by a mutually agreed upon written agreement. The Parties hereby agree to all of the terms herein. June 25, 1998 /s/ Edwin B. Read ----------------------------------- Edwin B. Read June 25, 1998 /s/ Mary Karen Read ----------------------------------- Mary Karen Read June 25, 1998 /s/ Frederick A. Moran ----------------------------------- Frederick A. Moran June 25, 1998 /s/ Joan B. Moran ----------------------------------- Joan B. Moran EX-99.9 10 EX-99.9 EXHIBIT 9 SETTLEMENT, RELEASE AND DISCHARGE AGREEMENT ------------------------------------------- THIS SETTLEMENT, RELEASE AND DISCHARGE AGREEMENT (the "Agreement"), made this 19th day of November, 1998 (the "Date of this Agreement"), by and among VDC COMMUNICATIONS, INC. (the "Company"), a corporation organized and existing under the laws of the State of Delaware, DR. JAMES C. ROBERTS ("Roberts"), an individual presently residing within the State of Connecticut and FREDERICK A. MORAN, an individual presently residing within the State of Connecticut ("Moran"). WITNESSETH: ----------- WHEREAS, VDC Corporation Ltd., a Bermuda corporation which merged with and into the Company on or about November 6, 1998 ("VDC Bermuda"), and Roberts are parties to an employment agreement dated as of March 3, 1998 (the "Employment Agreement") pursuant to which Roberts served as an officer and director of VDC Bermuda and the Company; WHEREAS, as a result of the merger of VDC Bermuda with and into the Company on or about November 6, 1998 (the "Domestication Merger"), the Company is the successor-in-interest to all of the assets, liabilities and agreements of VDC Bermuda, including, without limitation, the Employment Agreement; WHEREAS, during his term of employment, Roberts, directly or indirectly, was a principal stockholder of the Company; WHEREAS, the Company and Roberts desire to adjust his stock ownership in the Company and terminate the Employment Agreement, together with any and all other arrangements, agreements or understandings between them, and except as otherwise set forth herein, to terminate any and all claims that relate in any manner to any matters arising out of or relating in any way to Roberts' employment with or severance from the Company, or that otherwise relate to Roberts' relationship with the Company, and to take the other actions as provided below; WHEREAS, in conjunction with the termination of all such agreements and arrangements, Roberts does hereby tender his resignation as set forth in Paragraph 1 hereafter; WHEREAS, on or about June 24, 1998, Moran and Joan B. Moran, husband and wife, entered into a loan agreement with Roberts which was secured by a pledge of stock by the Trust and Moran, individually, has loaned Roberts certain funds for moving expenses (collectively the "Moran Loans"); and WHEREAS, Roberts and Moran would like to provide for the repayment of the Moran Loans as set forth herein. NOW, THEREFORE, in consideration of the mutual premises and covenants contained herein, the parties hereto, intending to be legally bound hereunder, agree as follows: 1. Resignation and Termination of Services. ---------------------------------------- 1.1 Roberts hereby resigns as an officer, director and employee of the Company, effective as of November 19, 1998, and the Company hereby accepts such resignation. Roberts and the Company further agree to terminate, effective November 19, 1998, the Employment Agreement, together with any and all other arrangements, agreements and understandings between them relating in any way or manner to Roberts' employment by the Company or services on behalf of the Company; provided, however, that the provisions of Paragraph 7 of the Employment Agreement shall survive the termination thereof. 1.2 Roberts hereby resigns as an officer and director of VDC Bermuda, effective as of November 19, 1998, and the VDC Bermuda hereby accepts such resignation. 1.3 Roberts hereby resigns from all positions he held with Voice & Data Communications (Hong Kong) Limited, including, but not limited to director, as of the Date of this Agreement. 1.4 Roberts hereby resigns from all positions he held, if any, with Masatepe Communications, U.S.A., L.L.C. 2. Release of Obligations. ----------------------- 2.1 By Roberts. ----------- (a) Except for the Company's obligations set forth herein and subject to the Company fulfilling its obligations as set forth herein, Roberts, for and in consideration of the undertakings set forth herein, and intending to be legally bound, does hereby REMISE, RELEASE AND FOREVER DISCHARGE the Company and its subsidiaries, component and affiliated entities, individually and collectively, its and their respective officers, directors, employees and agents (including but not limited to Frederick A. Moran, Clayton F. Moran, Joan Moran, Anthony DeJesus, Louis D. Frost, Charles Mulloy, Dr. Hussein Elkholy, James Dittman, Leonard Hausman, William Zimmerling, James Glenn, and Robert Warner), and its and their predecessors, successors and assigns, heirs, executors and administrators, of and from any and all manner of actions and causes of actions, suits, debts, claims and demands whatsoever in law or in equity, which Roberts ever had, now has, or hereafter may have, or which his heirs, executors or administrators hereafter may have by reason of any matter, cause or thing whatsoever from the beginning of the world to the Date of this Agreement and, particularly, but without limitation of the foregoing terms, any claims concerning or relating in any way to Roberts' status as an employee, officer or director of the Company or VDC Bermuda, or any of its subsidiaries, or to Roberts' employment relationship and/or the termination of his employment relationship with the Company and/or its predecessors, component and/or affiliated corporate entities including, but not limited to, any claims which have been or could have been asserted, or could be asserted now or in the future against the Company and/or its trustees, officers, directors, employees and agents including any claims arising under any and all federal, state or local 2 statutory or common laws including, but not limited to, any claims arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C. ss. 2000e, Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et seq., the Americans with Disabilities Act, 42 U.S.C. ss. 12101, et seq., the Employee Retirement Income Security Act, 29 U.S.C. ss. 1001, et seq., any contract with the Company or its subsidiaries, and any and all other claims arising out of Roberts' employment at the Company and termination thereof, including any claims for counsel fees and costs. It is expressly understood and agreed that this Agreement shall operate as a clear and unequivocal waiver by Roberts of any claim for accrued or future wages, benefits or any other type of payment. (b) Roberts further agrees and covenants that neither he, nor any person, organization or other entity on his behalf, will file, charge, claim, sue or cause or permit to be filed, charged or claimed any action for legal or equitable relief (including damages, injunctive, declaratory, monetary or other relief) involving any matter related in any way whatsoever to Roberts' employment relationship with the Company or VDC Bermuda or involving any continuing effects of any acts or practices which may have arisen or occurred during Roberts' employment relationship or thereafter in connection with the termination of his employment relationship with the Company or VDC Bermuda. (c) This Agreement does not prevent Roberts from filing a charge of discrimination with the Equal Employment Opportunity Commission, although by signing this Agreement Roberts waives his right to recover any damages or other relief in any claim or suit brought by or through the Equal Employment Opportunity Commission or any other state or local agency on his behalf under any federal or state discrimination law, except where prohibited by law. Roberts agrees to release and discharge the Company not only from any and all claims which he could make on his own behalf but also specifically waives any right to become, and promises not to become, a member of any class in any proceeding or case in which a claim or claims against the Company may arise, in whole or in part, from any event which occurred as of the Date of this Agreement. Roberts agrees to pay for any legal fees or costs incurred by the Company as a result of any breach of the promises in this paragraph. The parties agree that if Roberts, by no action of his own, becomes a mandatory member of any class from which he cannot, by operation of law or order of court, opt out, he shall not be required to pay for any legal fees or costs incurred by the Company as a result. 2.2 By the Company. --------------- (a) Except for the Roberts's obligations set forth herein and subject to the Roberts fulfilling his obligations as set forth herein, the Company, for and in consideration of the undertakings set forth herein, and intending to be legally bound, does hereby REMISE, RELEASE AND FOREVER DISCHARGE Roberts and his heirs, executors and administrators, of and from any and all manner of actions and causes of actions, suits, debts, claims and demands whatsoever in law or in equity, which the Company ever had, now has, or hereafter may have, or which its successors or assigns hereafter may have by reason of any matter, cause or thing whatsoever from the beginning of the world to the Date of this Agreement and, particularly, but without limitation of the foregoing terms, any claims concerning or relating in any way to Roberts' status as an employee, officer or director of the Company or VDC Bermuda, or any of its subsidiaries, or to Roberts' employment relationship and/or the termination of his employment relationship with the Company and/or its 3 predecessors, component and/or affiliated corporate entities including, but not limited to, any claims which have been or could have been asserted, or could be asserted now or in the future against Roberts or his heirs, executors and administrators including any claims arising under any and all federal, state or local statutory or common laws. (b) The Company also agrees that it will not file any claim for legal or equitable relief against Roberts for any matter related in any way whatsoever to Roberts' employment relationship with the Company or involving any continuing effects of any acts or practices which may have arisen or occurred during Roberts' employment relationship or thereafter in connection with the termination of his employment relationship with the Company or VDC Bermuda. This provision, however, is not intended to restrict the Company's ability to cooperate in any manner it deems appropriate with any enforcement agency with any analysis, investigation or prosecution related in any way to Roberts' employment with the Company or VDC Bermuda. 3. Non-Competition and Confidentiality. ------------------------------------ (a) Roberts agrees, that for and in consideration of compliance by the Company of the mutual covenants and premises contained herein, for a period of two (2) years after the date hereof, he shall not directly or indirectly: (i) engage in or carry on any business or in any way become associated with any business which is similar to or is in competition with the Business of the Company (as such term is used and defined below); (ii) solicit the business of any person or entity, on behalf of himself or any other person or entity, which is or has been at any time during the term of the Employment Agreement a material customer or material supplier of the Company including, but not limited to, former or present customers or suppliers with whom Roberts has had personal contact during, or by reason of, his relationship with the Company; (iii) be or become an employee, agent, consultant, representative, director or officer of, or be otherwise in any manner associated with, any person, firm, corporation, association or other entity which is engaged in or is carrying on any business which is similar to or in competition with the Business of the Company; (iv) solicit for employment or employ any person employed by the Company or VDC Bermuda at any time during the 24-month period immediately preceding such solicitation or employment; or (v) be or become a shareholder, joint venturer, owner (in whole or in part), partner, or be or become associated with or have any proprietary or financial interest in or of any firm, corporation, association or other entity which is engaged in or is carrying on any business which is similar to or in competition with the Business of the Company. Notwithstanding the preceding sentence above, passive equity investments by Roberts of $25,000 or less in any entity or affiliated group of any entity which is engaged in or is carrying on any business which is similar to or in competition with the Business of the Company, shall not be deemed to violate this Paragraph 3. As used in this Agreement, the term "Business of the Company" shall include all material business activities in which the Company is engaged now which consists of (i) telecommunications gateways in the United States, Nicaragua, Hong Kong, Egypt, Costa Rica, Honduras, El Salvador, South Korea, Russia and Poland; (ii) international and domestic long distance telecommunications services in the United States, Nicaragua, Hong Kong, Egypt, Costa Rica, Honduras, El Salvador, South Korea, Russia and Poland; and (iii) prepaid telephone calling cards. 4 (b) Roberts acknowledges that the restrictions contained herein in view of the nature of the business in which the Company is and has been engaged, and in consideration of the financial value of the settlement provisions of Paragraphs 4 and 5 hereof, are reasonable and necessary to protect the legitimate interests of the Company, and that any violation of any of these restrictions would result in irreparable injury to the Company. Roberts acknowledges that, in the event of a violation of any of these restrictions, the Company shall be entitled to preliminary and permanent injunctive relief as well as an equitable accounting of all earnings, profits and other benefits arising from such violation which rights or remedies shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that Roberts shall engage, directly or indirectly, in any business in competition with the business of the Company, the period of non-competition referred to above shall be extended by a period of time equal to that period beginning when such violation commenced, and ending when the activities constituting such a violation shall have finally been terminated in good faith. (c) In addition, Roberts shall not disclose Confidential Information of or about the Company, VDC Bermuda, VDC Telecommunications, Inc., Voice & Data Communications (Hong Kong) Limited, Masatepe Communications, U.S.A., L.L.C., Masatepe Communiciones S.A., World Connect and their subsidiaries and affiliates to any other person, entity, corporation, trust, association or partnership. For the purposes of this Agreement, the term "Confidential Information" shall include, without limitation, information obtained while Roberts was employed by the Company or VDC Bermuda as an officer or director or in any other capacity, relating to the Company's financial condition, its systems, know-how, designs, formulas, processes, devices, patents (pending or otherwise), inventions, research and development, projects, technologies, communications with third parties such as governmental agencies, customers or suppliers, methods of doing business, agreements with customers or suppliers or other aspects of the Business of the Company which information is generally not available outside of the Company to persons who are not authorized to have such information or which information is otherwise treated as confidential or which is sufficiently secret to derive economic value from not being disclosed. (d) Notwithstanding anything to the contrary contained herein, in the event that any court of equity determines that the time period and/or scope of this restrictive covenant is held to be unenforceably long or broad, as the case may be, then, and in either such event, neither the enforceability nor the validity of this paragraph as a whole shall be affected. Rather, the time period and/or scope of the restriction as affected shall be reduced to the maximum permitted by law. 4. Consideration. -------------- 4.1 Severance Pay and Medical Benefits. The Company ----------------------------------- shall: (a) pay Roberts the amount of $5,208.34, less any state, local and federal withholding, employment or income taxes payable with respect thereto, payable on each of the following dates: November 30, 1998, December 15, 1998, and December 30, 1998. This total gross sum of $15,625.02 represents payment of Roberts' annual salary of $125,000 as set forth in the 5 Employment Agreement for the period commencing as of November 16, 1998 and ending December 30, 1998; and (b) at its own expense, from the period commencing November 19, 1998 through December 31, 1998, maintain Roberts as a participant in his current major medical or group health insurance plan. 4.2 Transfer, Surrender and Conversion of Stock. -------------------------------------------- (a) Upon the execution of this Agreement by Roberts and the Company, Roberts, as settlor and co-trustee of The Roberts Family Trust (the "Trust"), shall deliver to the Company: (x) VDC Corporation Ltd. Stock Certificate Number VDC1635, representing 1,512,500 shares of common stock of VDC Corporation Ltd. in the name of the Trust (the "VDC Corp. Shares") (which by virtue of the Domestication Merger are exchangeable for 1,512,500 shares of common stock of the Company); and (y) a stock power duly executed disposing of the VDC Corp. Shares upon the following terms: (i) 637,500 of the VDC Corp. Shares shall be exchanged for Company common stock and issued in the name of the Company (the "First Series Shares"); (ii) 700,000 of the VDC Corp. Shares shall be exchanged for Company common stock and issued in the name of the Trust (the "Trust Shares"); (iii) 125,000 of the VDC Corp. Shares shall be exchanged for Company common stock and issued in the name of Frederick A. Moran (the "Payment Shares"), and (iv) 50,000 of the VDC Corp. Shares shall be exchanged for Company common stock and issued in the name of the Trust (the "Additional Consulting Fee Shares"). The First Series Shares shall be delivered and surrendered to the Company within twenty (20) business days of the Date of this Agreement. The Trust Shares shall be delivered to Roberts within twenty (20) business days of the Date of this Agreement. The Payment Shares and Additional Consulting Fee Shares shall be delivered to Moran within twenty (20) business days of the Date of this Agreement. (b) Upon the execution of this Agreement by Roberts and the Company, Roberts, as settlor and co-trustee of the Trust, shall deliver to the Company a duly executed stock power transferring to the Company the 1,237,500 shares of the Company preferred stock owned by the Trust (which by virtue of the Domestication Merger are convertible into 1,237,500 shares of the Company's common stock) represented by stock certificate number PB7 of VDC (Delaware), Inc. (n/k/a VDC Communications, Inc.). Said shares shall be converted into Company common stock and delivered and surrendered to the Company within twenty (20) business days of the Date of this Agreement. (c) Of the 700,000 Trust Shares, the parties hereby agree that 50,000 of the Trust Shares shall be payment for Advisory Services (as defined below) in accordance with Paragraph 6.1(a)(i). In addition to any 6 restrictions on the sale, offering or transfer of the Trust Shares pursuant to federal or state securities laws, the Trust Shares shall be subject to certain restrictions as set forth in Paragraphs 4.2(d) and 4.2(f). As such, all stock certificates for the Trust Shares shall bear the following restrictive legend: The Shares represented by this certificate are subject to a Settlement, Release and Discharge Agreement dated November 19, 1998, by and among James C. Roberts, VDC Communications, Inc., and Frederick A. Moran, and may not be transferred or encumbered except in accordance with the terms of that Agreement. (d) Subject to the condition set forth in Paragraph 4.2(e), Roberts covenants that none of the Trust Shares shall be sold by the Trust, Roberts or any other person or entity until the one year anniversary of the Date of this Agreement; provided, however, that a sale of the Trust Shares by a brokerage or securities firm pledgee of such shares during the one year period following the Date of this Agreement shall not be considered a breach of this Paragraph if such sale is made as a result of a foreclosure or margin call of such shares by said pledgee. Roberts further covenants that during the one year period following the Date of this Agreement: (x) neither the Trust nor Roberts, nor any person or entity on their behalf, shall margin more than 300,000 Trust Shares; (y) the Trust, Roberts, and any person or entity on their behalf, shall margin the Trust Shares only with brokerage and securities firms ("Selected Firms") that are willing to lend funds at the rate of 40% or greater of the aggregate value, calculated as set forth below on the day the Trust Shares are margined with the respective Selected Firm, of the Trust Shares margined with a Selected Firm; and (z) that during the one year period following the Date of this Agreement, neither the Trust nor Roberts, nor any person or entity on their behalf, shall margin the Trust Shares for more than 25% of the aggregate value, calculated as set forth below on the day the Trust Shares are margined with the respective Selected Firm, of the Trust Shares margined with the respective Selected Firm. For the purposes of this Paragraph, the value of a Trust Share on a given day shall be determined as follows: (A) if the Company's common stock is traded in the over-the-counter market and not on any national securities exchange nor in the NASDAQ Reporting System, the value shall be the last bid price per share, as reported by the National Quotation Bureau, Inc. or an equivalent generally accepted reporting service, for the most recent trading day, or if not so reported, the closing bid price for a share of the Company's common stock for the most recent trading day as furnished to the Company by any member of the National Association of Securities Dealers, Inc., selected by the Company for that purpose; or (B) if the Company's common stock is traded on a national securities exchange or in the NASDAQ Reporting System, the value shall be the closing price at which a share of the Company's common stock traded, as quoted on a national or other major stock exchange or the NASDAQ Reporting System for the most recent trading day. (e) The restrictions and covenants set forth in Paragraph 4.2(d) hereof shall immediately terminate if the market price of Company common stock is $7.00 or more on at least 30 trading days during any 120 consecutive trading day period following the Date of this Agreement. For the purposes of this Paragraph, the market price of a share of Company common stock on a given day shall be determined as follows: (A) if the Company's common stock is traded in the over-the-counter market and not on any national securities exchange nor in the NASDAQ Reporting System, the market price shall be the last bid price per share, as reported by the National Quotation Bureau, 7 Inc. or an equivalent generally accepted reporting service, for the most recent trading day, or if not so reported, the closing bid price for a share of the Company's common stock for the most recent trading day as furnished to the Company by any member of the National Association of Securities Dealers, Inc., selected by the Company for that purpose; or (B) if the Company's common stock is traded on a national securities exchange or in the NASDAQ Reporting System, the market price shall be the closing price at which a share of the Company's common stock traded, as quoted on a national or other major stock exchange or the NASDAQ Reporting System for the most recent trading day. (f) If the restrictions and covenants set forth in Paragraph 4.2(d) are terminated in accordance with Paragraph 4.2(e), then, in addition to any restrictions on the sale, offering or transfer of the Trust Shares pursuant to federal or state securities laws, the resale of the Trust Shares shall be subject to the following restrictions: (i) 33% of the Trust Shares may be sold, offered or transferred immediately; (ii) 33% of the Trust Shares may not be sold, offered or transferred until the six month anniversary of the Date of this Agreement; and (iii) 34% of the Trust Shares may not be sold, offered or transferred until the twelve month anniversary of the Date of this Agreement. Notwithstanding the restrictions in this Paragraph 4.2(f), a sale of shares pledged in accordance with Paragraph 4.2(d) by a brokerage or securities firm pledgee shall not be considered a breach of this Paragraph if such sale is made as a result of a foreclosure or margin call of such shares by said pledgee. (g) For thirty (30) days from the Date of this Agreement, the Company shall provide Roberts with whatever reasonable assistance is necessary to permit Roberts to pledge his Company stock in accordance with the terms of this Paragraph 4.2; said assistance may include reasonable modifications on the restrictions contained in this Paragraph 4.2. (h) Stock certificates representing the Payment Shares and the Additional Consulting Fee Shares shall be delivered to Moran who shall hold the Payment Shares and the Additional Consulting Fee Shares in escrow to be disbursed pursuant to the terms hereof. The Payment Shares (consisting, in part, of 100,000 shares of VDC Corporation Ltd. common stock that Roberts had previously pledged to Moran and Joan Moran (the "Pledge") to secure the Residential Loan (as defined below)) shall be disbursed in accordance with the provisions of Paragraph 5.2 hereof to satisfy certain obligations of Roberts, and the Additional Consulting Fee Shares shall be disbursed, in accordance with the terms of Paragraph 6.1, to compensate Roberts for providing consulting services to the Company as set forth in Paragraph 6.1. (i) Roberts hereby agrees that Moran will hold the Payment Shares and Additional Consulting Fee Shares in escrow, Moran hereby agrees to hold and disburse such shares, and the remaining parties hereto agree to such arrangement. 8 (ii) Moran shall not be under any duty to give the property held by him hereunder any greater care than it gives its own similar property. (iii) Moran may act in reliance upon advice of counsel in reference to any matter connected herewith, and shall not be liable for any mistake of fact or error of judgment. (iv) Moran shall have the right to vote all shares held in escrow. (v) The Company, Roberts and the Roberts Family Trust, and their respective employees, representatives, agents, heirs, beneficiaries, successors and assigns, hereby waive any suit, claim, demand or cause of action of any kind which any of them may have or may assert against Moran arising out of or relating to the execution or performance by Moran of this Agreement. The Company, Roberts and the Roberts Family Trust hereby irrevocably covenant not to sue or commence or join in any proceedings, whether legal, equitable or otherwise, against Moran on account of any act or omission to act on the part of Moran. Further, to induce Moran to act hereunder, Roberts and the Roberts Family Trust hereto agree to hold Moran harmless from any liability incurred by any action taken or omission by Moran. 5. Cancellation of Loan - Return of Securities - Tower Lease --------------------------------------------------------- 5.1 The Company shall forgive the indebtedness owed to it by Roberts under that certain Promissory Note, dated December 8, 1997, in the original principal amount of $164,175, made in connection with the Subscription Agreement, dated December 8, 1997, between Roberts and Sky King Communications, Inc. (predecessor-in-interest to the Company). 5.2 Moran shall hold the Payment Shares and the proceeds derived from the sale thereof in escrow pursuant to the terms hereof and shall dispose of the Payment Shares as follows: (a) Each of the parties hereto authorizes Moran to sell as soon as is practicable and judicious, in the sole discretion of Moran, that number of Payment Shares Moran determines, in his sole discretion, is necessary in order to repay a loan of approximately $270,000 made by Frederick A. and Joan B. Moran, husband and wife, to Roberts in connection with the lease and/or purchase of a residence (the "Residence") in Greenwich, Connecticut by Roberts (the "Residential Loan"); (b) Each of the parties hereto authorizes Moran to sell that number of Payment Shares Moran determines, in his sole discretion, is necessary to repay a loan in the original principal amount of $5,000 made by Frederick A. Moran to Roberts on the date hereof for moving expenses (the "Moving Loan"). (c) Each of the parties hereto authorizes Moran to sell, as soon as is practicable and from time to time, that number of Payment Shares Moran determines, in his sole discretion, is necessary to satisfy certain of Roberts' rental or lease obligations associated with the Residence which 9 obligations consist solely of monthly rental payments of approximately $18,000 for the six month period following the Date of this Agreement, which rental obligations shall equal approximately $108,000 in the aggregate (the "Rental Obligation"). (d) Each of the parties hereto authorizes Moran to sell that number of Payment Shares Moran determines, in his sole discretion, is necessary to reimburse any expenses incurred by the Company and/or VDC Bermuda in connection with expediting the consummation of the Domestication Merger between the Company and VDC Bermuda on behalf of Roberts, which expenses include but are not limited to, expedited fees for filing the certificate of merger with the Secretary of State of Delaware and courier and postal fees for documents related to the Domestication Merger (the "Merger Expedition Fees"); (e) Moran shall apply the proceeds from the sale of the Payment Shares first to the repayment of the Residential Loan; second, to the repayment of the Moving Loan; third, to reimbursement of the Company for the Merger Expedition Fees; and fourth, to the satisfaction of the Rental Obligation. (f) Upon the satisfaction in full of the Residential Loan, the Lease Obligations, the Merger Expedition Fees and Moving Loan as set forth herein, the parties hereby authorize Moran to distribute the remaining Payment Shares (the "Remaining Payment Shares") as follows: (i) If there are more than 25,000 Remaining Payment Shares, Moran shall be entitled to any Remaining Payment Shares in excess of 25,000 as satisfaction of the Moran Loans; provided, however, that in no event shall such shares be distributed to Moran until January 1, 1999. Moran shall surrender the 25,000 Remaining Payment Shares to the Company for cancellation on the Company's books and records. (ii) If there are 25,000 or fewer Remaining Payment Shares, Moran shall surrender the said Remaining Payment Shares to the Company for cancellation on the books and records of the Company. 5.3 The Company agrees to indemnify and hold Roberts harmless against any liability of Roberts arising under the Agreement of Lease between Tower Realty Operating Partnership, L.P. and VDC Bermuda, dated July, 1998 (the "Tower Lease") and Roberts' Good Guy Guaranty of the Tower Lease. The Company shall use diligent and good faith efforts to release Roberts from his Good Guy Guaranty of the Tower Lease. 6. Affirmative Covenants. ---------------------- 6.1 Advisory Services. ------------------ (a) For a period of twenty-four months from the date hereof, Roberts agrees to provide advisory services (the "Advisory Services") on a limited basis, to, or on behalf of, the Company as set forth below. As compensation for providing these services, Roberts shall be entitled to the following: 10 (i) 50,000 shares of Company common stock (which shall be issued as part of the 700,000 Trust Shares), for Advisory Services to be rendered during the first 12 months; and (ii) 50,000 of Additional Consulting Fee Shares on the twelve month anniversary of the Date of this Agreement for Advisory Services to be rendered during the second 12 months. All of the Additional Consulting Fee Shares shall be subject to the same restrictions as the Trust Shares as set forth in Paragraphs 4.2(d) and 4.2(f). (b) Roberts shall be required to respond to telephonic inquiries of employees or officers of the Company, particularly the C.E.O., and to otherwise provide general assistance in connection with business matters as they relate to the Company. (c) Roberts shall cooperate with the Company in connection with confirming matters or providing information relative to matters for which he had principal responsibility while in the employ of the Company. (d) Roberts will cooperate with the Company's auditors in connection with the preparation of financial statements. (e) On most occasions Roberts may provide such assistance or confirmation telephonically; however, he may on an occasional basis be required to meet personally with Company personnel at the offices of the Company or in the general surrounding area, or be requested to provide confirmations to third parties. (f) The Company shall reimburse Roberts for any out-of-pocket expenses, preapproved by the Company in writing, incurred by Roberts in rendering Advisory Services. 6.2 Return of Company Materials. ---------------------------- Roberts has, or will upon the execution hereof, deliver to the Company any and all Company property in his possession or under his control. For the purpose of this paragraph, the term "property" means all files, memoranda, minutes of Board meetings, employee files, documents, papers, agreements, keys, credit cards, items, records, computer hardware, computer software, computer apparatus, items of personal property, machinery and equipment or other materials, that belong to the Company, were taken from the premises of the Company or were purchased with funds or in the name of the Company. The Company may, at the request of Roberts, make copies of certain non-confidential files of a personal nature that he may retain for his records. 6.3 Full and Complete Accounting; Responsibility for ----------------------------------------------------- Expenses. --------- 11 (a) Roberts agrees to reimburse the Company for all personal expenses incurred by the Company on his behalf since March 6, 1998, and to henceforth refrain from charging any items of personal expense to the account of the Company. Roberts shall immediately return the two (2) Sprint cellular telephones the Company has permitted Roberts to use and all unused DHL envelopes. Any other personal expenses incurred by the Company on behalf of Roberts, since March 6, 1998, shall be offset on a pro-rata basis against the remaining payments of consideration set forth at Paragraph 4.1 hereof. Prior to offset, however, the Company shall provide Roberts with reasonable notice of any such items in question so that Roberts may designate the character of such terms. To the extent that any of the items to be offset exceed the total amount of consideration due hereunder, Roberts shall immediately reimburse the Company for such amounts. To the extent that Roberts and the Company cannot agree on the nature or amount of an expense in question, they agree to submit the matter to arbitration in the manner provided for at Paragraph 9 hereunder. 6.4 Roberts agrees that he shall not make or publish, or assist anyone else to make or publish, any negative, critical, disparaging, slanderous, or libelous statements about the Company or its subsidiaries or any of their respective officers, directors, agents, employees, or representatives, and unless (and then only to the extent) required by law, shall not disclose the terms and provisions of the Agreement to any third party without the Company's consent. Roberts agrees that he will provide no assistance, advisory services or efforts to any third parties in connection with any disputes, claims or legal proceedings between such third parties and the Company. 6.5 The Company agrees that neither it nor its officers, directors, agents, employees, or representatives shall make or publish any negative, critical, disparaging, slanderous, or libelous statements about Roberts, and unless (and then only to the extent) required by law, shall not disclose the terms and provisions of this Agreement to any third party, without Roberts' consent. The Company agrees that it will provide no assistance or advisory services (unless required by law) to any third parties in connection with any disputes between such third parties and Roberts. 6.6 Roberts agrees to execute and deliver any documents or make any representation reasonably required by the Company in order to facilitate the termination of Roberts' employment with the Company. 6.7 Roberts agrees to serve as a witness for the Company, and otherwise assist and cooperate with the Company, in any dispute between the Company, or its subsidiaries, and BDO Seidman, or its subsidiaries, affiliates or divisions. The Company shall reimburse Roberts for any out-of-pocket expenses, preapproved by the Company in writing, incurred by Roberts in serving as a witness for the Company or otherwise assisting or cooperating with the Company, in any dispute between the Company, or its subsidiaries, and BDO Seidman, or its subsidiaries, affiliates or divisions. 6.8 Roberts covenants and agrees to indemnify, defend and hold harmless the Company and each of its shareholders, officers, directors, employees, attorneys, and/or agents, individually and collectively (the "Indemnified Parties"), against and in respect of any claim, liability, loss, 12 cost, damage or expense (including attorneys' fees and costs of investigation incurred in defending against or settling any such claim, liability, loss, cost, damage or expense, and any amounts paid in settlement thereof) imposed on, incurred or sustained by the Company and/or the Indemnified Parties as a result of any inaccuracy or breach of Roberts' representations and warranties set forth in Paragraph 7 or the subsections thereof or any breach of any obligations of Roberts under this Agreement. 7. Representations and Warranties of Roberts. ------------------------------------------ Roberts does hereby provide the following representations and warranties to the Company and the Company does hereby rely upon the accuracy and truthfulness of such representations and warranties for the purpose of this Agreement. 7.1 Roberts has delivered, or will upon the execution hereof, deliver to the Company any and all files, memoranda, documents, records, employee files, minutes of Board meetings, keys, credit cards, items of personal property, computer hardware, software or other apparatus, machinery or equipment, or any other materials which belong to the Company or were paid for with Company funds, which Roberts has in his possession or control, which he knows are in the possession or control of his spouse or which were removed from the premises of the Company by him or his spouse. 7.2 He knows of no action or failure to act on the part of the Company (including its directors, officers, employees and other agents and representatives) condition, event, occurrence or the like, which could form the basis for a claim or complaint against the Company, its subsidiaries or other entities or individuals described above, by any third party and has not committed or contracted the Company to any obligations. 7.3 Roberts has not during the term of his employment, alone or with others, disclosed to third parties, without the knowledge or permission of the Company, Confidential Information about the Company, its technologies, formulations, customers, or suppliers, nor has he undertaken any act or omission to act in a manner which breaches Paragraph 7 of his employment agreement, which was effective during the term of his employment, nor has he knowingly misrepresented the Company to any entity. 7.4 Roberts agrees that he shall not represent to any individual or entity that he or any of his family members is an officer or director of the Company. Furthermore, Roberts agrees that he shall not represent to any third party that he has the authority or ability to execute contracts or other documents or make decisions or take actions on behalf of the Company, any of its subsidiaries or any of their respective officers, directors, employees or agents. 7.5 The Rental Obligation, described more particularly in Paragraph 5.2(c), does not exceed, in the aggregate, $108,000. 7.6 Roberts and Lynne Roberts, as Co-Trustees of the Trust, have the sole requisite authority to execute this Agreement on behalf of the Trust and bind the Trust thereto. 13 The foregoing representations and warranties shall be deemed to be in the nature of an obligation of Roberts in so far as the falsehood of same shall be deemed to be a breach by Roberts of his obligations hereunder. 8. Standstill Provision. --------------------- For and in consideration of the mutual covenants and premises contained herein, during the term of this Agreement, and for a period of one (1) year thereafter, (which period shall lapse in the event of the breach of this Agreement by the Company), neither Roberts nor any family member (defined for this purpose to include his spouse and children) or company, partnership or trust in which Roberts (or such family member) owns five (5%) percent or more of its equity or voting interests or for which Roberts serves as an employee, agent, officer, director or partner will: (i) for the purposes of subparagraphs (ii) or (iii) hereafter, acquire, offer to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, any voting securities or direct or indirect rights or options to acquire any voting securities of the Company; (ii) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" to vote (as such terms are interpreted in the proxy rules of the Securities and Exchange Commission), or seek to advise or influence any person or entity with respect to the voting of any voting securities of the Company, or (iii) form, join or in any way participate in a "group" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, with respect to any voting securities of the Company for the purpose of seeking to control the management, Board of Directors or policies of the Company. Further, the parties acknowledge that the Company would not have an adequate remedy at law for money damages in the event that this covenant were not performed in accordance with its terms and therefore Roberts agrees that the Company shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which it may be entitled, at law or in equity. 9. Arbitration. ------------ Any dispute between the parties hereunder shall be determined by binding arbitration applying the laws of the State of Connecticut. Any arbitration pursuant to this Agreement shall be conducted in Stamford, Connecticut before the American Arbitration Association in accordance with its arbitration rules. The arbitration shall be final and binding upon all the parties (so long as the award was not procured by corruption, fraud or undue means) and the arbitrator's award shall not be required to include factual findings or legal reasoning. Nothing in this Paragraph 9 will prevent either party from resorting to judicial proceedings if interim injunctive relief under the laws of the State of Connecticut from a court is necessary to prevent serious and irreparable injuries to one of the parties, and the parties hereto agree that the federal and state courts located in Stamford, Connecticut shall have exclusive subject matter and in personam jurisdiction over the parties and any such claims or disputes arising from the subject matter contained herein. 10. Notice. ------- Any notice, demand, or communication given in connection with this Agreement shall be in writing and shall be deemed received (a) when delivered if given in person or by courier or courier service, or (b) on the 14 date and at the time of transmission if sent by facsimile (receipt confirmed) or (c) five (5) business days after being deposited in the mail postage prepaid. 11. Applicable Law. --------------- This Agreement shall be construed in accordance with the laws of the State of Connecticut without regard to principles of conflict of laws. 12. Entire Agreement. ----------------- This instrument contains the entire agreement of the parties. It may not be changed orally but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. 13. Rule of Construction. --------------------- No rule of construction requiring interpretation against the drafting party shall apply to the interpretation of this Agreement. 14. Agreement Read and Understood. ------------------------------ Both parties hereto acknowledge that they have had an opportunity to consult with an attorney regarding this Agreement and that they, or their designated agents, have read and understand this Agreement. 15. Review and Revocation Period. Roberts acknowledges that he has been informed that he has the right to consider this Agreement for a period of at least twenty-one (21) days prior to entering the Agreement. He also understands that he has the right to revoke this Agreement for a period of seven (7) days following his execution of the Agreement by giving written notice to the Chief Executive Officer of the Company at its principal offices. Such notice shall be effective upon receipt by the Company's Chief Executive Officer. 16. Signatures in Counterpart and Facsimile. ---------------------------------------- This Agreement may be executed in multiple counterparts and by facsimile signature, each of which shall constitute an original, but all of which counterparts taken together shall constitute one and the same instrument. 15 IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. ATTEST: VDC COMMUNICATIONS, INC. /s/ Louis D. Frost By: /s/ Frederick A. Moran - ------------------ ------------------------ Frederick A. Moran, C.E.O. WITNESS: /s/ Lynne Roberts /s/ James C. Roberts - ------------------ --------------------- James C. Roberts WITNESS: /s/ Louis D. Frost /s/ Frederick A. Moran - ------------------ ----------------------- Frederick A. Moran Accepted and agreed this 19th day of November, 1998 THE ROBERTS FAMILY TRUST By: /s/ Dr. James C. Roberts ------------------------ Dr. James C. Roberts, Co-Trustee By: /s/ Lynne Roberts ------------------------ Lynne Roberts, Co-Trustee 16 -----END PRIVACY-ENHANCED MESSAGE-----