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 2
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 10
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. 18
ARTICLE V: AGREEMENTS OF THE PARTIES 22
5.1 Issuance of Securities of Acquiror prior to the Closing. 22
5.2 Anticipated Domestication of Acquiror; Possible Follow-on Merger. 22
5.3 Access to Information. 23
5.4 Confidentiality; No Solicitation. 24
5.5 Interim Operations. 26
5.6 Consents. 29
i
TABLE OF CONTENTS
5.7 Filings. 29
5.8 All Reasonable Efforts. 29
5.9 Public Announcements. 29
5.10 Notification of Certain Matters. 30
5.11 Expenses. 30
5.12 Registration Rights. 30
5.13 Documents at Closing. 34
5.14 Prohibition on Trading in Acquiror and Sub Stock. 34
5.15 Anticipated Acquisition of the Principal Assets of PortaCom Wireless, Inc. 34
5.16 Production of Schedules and Exhibits. 35
5.17 Acknowledgment of Approvals. 36
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER 36
6.1 Conditions to Obligations of Sky King and the Sky King Shareholders. 36
6.2 Conditions to Acquiror's and the Sub's Obligations. 38
ARTICLE VII: INDEMNIFICATION 39
7.1 Indemnification. 39
ARTICLE VIII: TERMINATION 41
8.1 Termination. 41
8.2 Notice and Effect of Termination. 42
8.3 Extension; Waiver. 42
8.4 Amendment and Modification. 42
ARTICLE IX: MISCELLANEOUS 42
9.1 Survival of Representations and Warranties. 42
9.2 Notices. 43
ii
TABLE OF CONTENTS
9.3 Entire Agreement; Assignment. 44
9.4 Binding Effect; Benefit. 44
9.5 Headings. 44
9.6 Counterparts. 44
9.7 Governing Law. 44
9.8 Arbitration. 44
9.9 Severability. 45
9.10 Release and Discharge. 45
9.11 Certain Definitions. 45
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;
2
(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 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
3
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
(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:
o 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.
o Voting Rights. Prior to the conversion thereof, the Series
A Stock shall have no voting rights.
o 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:
4
o 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 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.
o Voting Rights. Prior to the conversion thereof, the Series
B Stock shall have no voting rights.
o 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
5
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").
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 Xxxxxxxx Xxxxxxxxx Professional Corporation.,
Eleven Penn Center, 0000 Xxxxxx Xxxxxx, 00xx
0
Xxxxx, Xxxxxxxxxxxx, XX 00000, 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.
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;
7
(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;
(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;
8
(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;
(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
Xxxxxxxxx X. Xxxxx and Xxxxx X. Xxxxxxx 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;
9
(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
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
10
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 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
11
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 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
12
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 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
13
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 xxxx or trade
name of any person, or any claims of any other person relating to any of the
intellectual property subject hereto, and to the knowledge of 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
14
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
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
15
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;
(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:
16
"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;
(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.
17
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 or obligations 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, 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,
18
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.
(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
19
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.
(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
20
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
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
21
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 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
22
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.
(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
23
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) 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,
24
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 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
25
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.
(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.
26
(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:
(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
27
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.
28
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.
29
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
30
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 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.
31
(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
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
32
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:
(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.
33
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.
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:
34
(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
(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.
35
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
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.
36
(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).
(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
Xxxxxxxxx X. Xxxxx and Xxxxx Xxxxxxx 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
37
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.
(b) On or before the Closing, Sky King shall have secured the
resignation of each of its directors and officers except Xxxxxx Xxxx who will
remain the President of Sky King.
(c) Acquiror shall have executed employment agreements with
Xxxxxxxxx X. Xxxxx and Xxxxx Xxxxxxx 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
38
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.
(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
39
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
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
40
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
(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.
41
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; 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
42
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:
Xxxx Xxxxx, Chairman
Sky King Communications, Inc.
00 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxx, President
Sky King Communications, Inc.
00 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
if to Acquiror or the Sub at:
Xxxxxx Xxxxxxxx Xxxxx
VDC Corporation Ltd.
Bishopscourt, Xxxx Xxxxxxx
Isles of Man
British Isles
with a copy to:
Xxxxxxx X. Xxxxx, Esquire
Xxxxxxxx Ingersoll Professional Corporation
Eleven Penn Center
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
43
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.
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
44
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");
(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
45
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.
By: By: /s/ Xxxxxx Xxxxxxxx Xxxxx
----------------------------- ----------------------------------
Xxxxxx Xxxxxxxx Lacey, President
Attest: VDC (DELAWARE), INC.
By: By: /s/ Xxxxxx Xxxxx
----------------------------- ---------------------------------
Xxxxxx Xxxxx, President
[signatures continue onto next page]
46
Attest: SKY KING COMMUNICATIONS, INC.
By: By: /s/ Xxxxxxxxx X. Xxxxx
----------------------------- -----------------------------------
Xxxxxxxxx X. Xxxxx, Chairman
Attest:
By: /s/ Xxxxx Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx, Chief Operating
Officer
By:
-----------------------------
Witness SKY KING SHAREHOLDERS
/s/ Xxxxxxxxx X. Xxxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxxxxxxx X. Xxxxx
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 14.2%
Witness
/s/ Xxxxxxx X. Xxxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxxxxx X. Xxxxx
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 14.2%
Witness
/s/ Xxxx X. Xxxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxx X. Xxxxx
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 13.0%
[signatures continue onto next page]
47
Witness
/s/ Xxxx X. Xxxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxx X. Xxxxx
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 13.0%
Witness
/s/ Xxxxxxxxx X. Xxxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature (Xxxxxxxxx X. Xxxxx)
Address:________________________
/s/ Xxxx X. Xxxxx
-------------------------------- ---------------------
Name: __________________________ Signature (Xxxx X. Xxxxx)
Address:_______________________ Name: Xxxxxxxxx X. and Xxxx X. Xxxxx
________________________________ Address: 00 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Ownership Percentage: .83%
Witness
/s/ Xxxxxx Xxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxxxx Xxxx
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .55%
Witness
/s/ Xxxxx X. Xxxxxxx, Trustee
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxxxxx Family Trust
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 27.5%
[signatures continued onto next page]
48
Witness
/s/ Xxxxx Xxxxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxxx Xxxxxx
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .72%
Witness
/s/ Xxxx X. Xxxxxxxxx
--------------------------------------
-------------------------------- Signature
Name:___________________________ Name: Watchung Road Associates, L.P.
Address:________________________ By: Xxxx X. Xxxxxxxxx, General Partner
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: 1.1%
Witness
/s/ Xxxxx Xxxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxxx Xxxxx
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .66%
Witness
/s/ Xxxxx Xxxxxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxxx Xxxxxxx
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .07%
[signatures continue onto next page]
49
Witness
/s/ Xxxxxxx Xxxxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxxxxx Xxxxxx
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .27%
Witness
/s/ Xxxxxx xx Xxxx
-------------------------------- --------------------------------------
Name:___________________________ Signature
Address:________________________ Name: Xxxxxx xx Xxxx XXX
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .27%
Witness
/s/ Xxxx Xxxxxxx
--------------------------------------
-------------------------------- Signature
Name:___________________________ Name: Xxxxxxx Tech, LLC
Address:________________________ By: Xxxx Xxxxxxx, Managing Partner
________________________________ Address: _____________________________
______________________________________
Ownership Percentage: .11%
Witness
/s/ Xxxx Xxxxxxxx Xxxxxx
--------------------------------------
-------------------------------- Signature
Name:___________________________ Name: Xxxx Xxxxxxxx Xxxxxx
Address:________________________ Address: Xxx Xxxxxx Xxxxxxxxx 00
________________________________ Xxxxxxxxx - Xxx xx Xxxxxxx
Xxxxxx Cep 26535
______________________________________
Ownership Percentage: .8%
[signatures continue onto next page]
50
Witness
/s/ Xxxxx Xxxxxxx, Trustee
--------------------------------------
-------------------------------- Signature
Name:___________________________ Name: Capital Growth Trust
Address:________________________ Xxxxx Xxxxxxx, Trustee
________________________________ Address: 0000 Xxxxx Xxx Xxxx
Xxxxxxxx, XX 00000
Ownership Percentage: 6.0%
Witness
/s/ Xxxxxx Xxxxxx
--------------------------------------
-------------------------------- Signature
Name:___________________________ Name: Xxxxxx Finance Ltd.
Address:________________________ Xxxxxx Xxxxxx
________________________________ Title: Financial Controller
Address: Xxxxxxxxx Xxxxx
Xxxxx Xxxx Xxxxxxxxxx Xxxxxx
Xxxxx Road
Xxxxx Xxxxx
Stockport, Xxxxxxxx Xxxxxxx XX0 0XX
______________________________________
Ownership Percentage: 3.6%
Witness
/s/ Xxxxx XxXxxxxxx
--------------------------------------
-------------------------------- Signature
Name:___________________________ Name: Gibralt Holdings Ltd.
Address:________________________ By: Xxxxx XxXxxxxxx
________________________________ Title: Vice President
Address: 0000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
______________________________________
Ownership Percentage: 3.0%
51
Schedule 4.1(m)
Lease between Sky King Communications, Inc. as lessee and D. Loschiava, trustee,
as lessor for a residence located at 00 Xxxx Xxxxxx, Xxxxxxxxx, XX for Xxxxx X.
Xxxxxxx. The term of the lease is from February 1998 through June 1998, and the
monthly rental payment is $4,150.
52
Schedule 4.1(p)
1. Lease between Sky King Communications, Inc. as lessee and D. Loschiava,
trustee, as lessor for a residence located at 00 Xxxx Xxxxxx, Xxxxxxxxx, XX for
Xxxxx X. Xxxxxxx. 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 Xxxxx X. Xxxxxxx a $25,000 sign-on bonus
in January 1998 after he became Sky King's Chief Operating Officer in December
1997.
53
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
54
Schedule 4.2(g)
None
55
Schedule 5.5(a)(ix)
Sky King Communications, Inc. plans to acquire Blue Sky International LLC and
the Sakalin Telecom Group of companies.
56
