EXHIBIT 1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VDC CORPORATION LTD.
VDC (Delaware), INC.
AND
SKY KING COMMUNICATIONS, INC.
Effective Date: December 10, 1997
TABLE OF CONTENTS
ARTICLE I: MERGER OF SKY KING WITH AND INTO SUB AND RELATED MATTERS 1
1.1 The Merger. 2
1.2 Conversion of Stock. 3
1.3 Merger Consideration. 4
1.4 Additional Rights; Taking of Necessary Action; Further Action. 6
1.5 Dissenters' Rights. 6
1.6 No Further Rights or Transfers. 6
ARTICLE II: THE CLOSING 6
2.1 Closing Date. 6
2.2 Closing Transactions. 7
ARTICLE III: CERTAIN CORPORATE ACTION 9
3.1 Sky King Corporate Action. 10
3.2 Acquiror Corporate Action. 10
ARTICLE IV: REPRESENTATIONS AND WARRANTIES 10
4.1 Representations and Warranties of Sky King and the Sky King Shareholders. 10
4.2 Representations and Warranties of Acquiror and the Sub. 17
ARTICLE V: AGREEMENTS OF THE PARTIES 21
5.1 Issuance of Securities of Acquiror prior to the Closing. 21
5.2 Anticipated Domestication of Acquiror; Possible Follow-on Merger. 22
5.3 Access to Information. 23
5.4 Confidentiality; No Solicitation. 23
5.5 Interim Operations. 25
5.6 Consents. 28
5.7 Filings. 28
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5.8 All Reasonable Efforts. 28
5.9 Public Announcements. 28
5.10 Notification of Certain Matters. 29
5.11 Expenses. 29
5.12 Registration Rights. 29
5.13 Documents at Closing. 32
5.14 Prohibition on Trading in Acquiror and Sub Stock. 33
5.15 Anticipated Acquisition of the Principal Assets of PortaCom Wireless, Inc. 33
5.16 Production of Schedules and Exhibits. 34
5.17 Acknowledgment of Approvals. 34
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER 34
6.1 Conditions to Obligations of Sky King and the Sky King Shareholders. 35
6.2 Conditions to Acquiror's and the Sub's Obligations. 36
ARTICLE VII: INDEMNIFICATION 38
7.1 Indemnification. 38
ARTICLE VIII: TERMINATION 39
8.1 Termination. 39
8.2 Notice and Effect of Termination. 40
8.3 Extension; Waiver. 40
8.4 Amendment and Modification. 40
ARTICLE IX: MISCELLANEOUS 41
9.1 Survival of Representations and Warranties. 41
9.2 Notices. 41
9.3 Entire Agreement; Assignment. 42
9.4 Binding Effect; Benefit. 42
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9.5 Headings. 42
9.6 Counterparts. 42
9.7 Governing Law. 43
9.8 Arbitration. 43
9.9 Severability. 43
9.10 Release and Discharge. 43
9.11 Certain Definitions. 43
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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.
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the
"Agreement"), is made and entered into effective as of December 10, 1997, by and
among VDC CORPORATION LTD, a Bermuda Corporation ("Acquiror"), VDC (Delaware),
Inc., a Delaware corporation and wholly-owned subsidiary of Acquiror ("Sub"),
SKY KING COMMUNICATIONS, INC., a Connecticut corporation ("Sky King"), and those
individuals and entities whose names appear on the signature page hereof in
their capacity as holders of the outstanding common stock of Sky King (the "Sky
King Shareholders").
Recitals
WHEREAS, the parties hereto entered into an Agreement and Plan of
Merger effective as of the date thereof (the "Original Agreement") pursuant to
which Sub shall merger with and into Sky King (the "Merger");
WHEREAS, the parties hereto desire to amend the Original Agreement to
(i) amend the voting, conversion and other rights of holders of Sub's Series A
Convertible Preferred Stock to be issued as Merger Consideration in the Merger;
(ii) provide for the issuance of Sub's Series B Convertible Preferred Stock as
part of the Merger Consideration; (iii) change the manner in which the Merger
Consideration shall be paid and delivered to the Sky King shareholders; and (iv)
amend and restate entirely the Original Agreement;
WHEREAS, Acquiror and Sky King have determined that it is in the best
interests of their respective shareholders for Sky King to merge with and into
Sub upon the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of Acquiror and Sky King
have each approved this Agreement and the consummation of the transactions
contemplated hereby and approved the execution and delivery of this Agreement;
and
WHEREAS, for federal income tax purposes, it is intended that this
merger shall qualify as a tax-free reorganization under the provisions of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the Amended and Restated
Agreement and Plan of Merger shall be as follows:
ARTICLE I
MERGER OF SKY KING WITH AND INTO SUB
AND RELATED MATTERS
1.1 The Merger.
(a) Upon the terms and conditions of this Agreement, at
the "Effective Time" (as defined herein), Sky King shall be merged with and into
the Sub (the "Merger") in accordance with the provisions of the Connecticut
Business Corporation Act ("CBCA") and the Delaware General Corporation Law (the
"DGCL") and the separate corporate existence of Sky King shall cease, and the
Sub shall continue as the surviving corporation under the laws of the state of
Delaware with the corporate name "SKY KING COMMUNICATIONS, INC." (the
"Surviving Corporation").
(b) The Merger shall become effective as of the filing of
a certificate of merger (the "Certificate of Merger") with the Secretary of
State of Delaware and Articles of Merger with State Department of Assessments
and Taxation, in accordance with the provisions of Section 252 of the DGCL
and Section 33-821 of the CBCA, and the confirmation by the Certificate of
Merger that the Merger is effective as of such filing date. The date and time
when the Merger shall become effective is referred to herein as the "Effective
Time."
(c) At the Effective Time:
(i) the Sub shall continue its existence under
the laws of the State of Delaware as the Surviving Corporation;
(ii) the separate corporate existence of Sky King
shall cease;
(iii) all rights, title and interests to all
assets, whether tangible or intangible and any property or property rights owned
by Sky King shall be allocated to and vested in the Sub as the Surviving
Corporation without reversion or impairment, without further act or deed, and
without any transfer or assignment having occurred, but subject to any existing
liens or other encumbrances thereon, and all liabilities and obligations of Sky
King shall be allocated to the Sub as the Surviving Corporation which shall be
the primary obligor therefor and, except as otherwise provided by law or
contract, no other party to the Merger, other than the Sub as the Surviving
Corporation, shall be liable therefor;
(iv) the Certificate of Incorporation of the Sub
as in effect immediately prior to the consummation of the Merger, other than
the name of the Sub which shall be changed to "Sky King Communications, Inc."
in connection with the Merger, shall be the Certificate of Incorporation of
the Surviving Corporation, until thereafter amended as provided by law and such
Certificate of Incorporation;
(v) Each of Acquiror, Sub and Sky King shall
execute and deliver, and file or cause to be filed with the Secretary of State
of the State of Delaware, the Certificate of Merger and with the State
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Department of Assessments and Taxation, the Articles of Merger, with such
amendments thereto as the parties hereto shall deem mutually acceptable;
(vi) the Bylaws of Sub, as in effect immediately
prior to the consummation of the Merger, shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law and such Bylaws; and
(vii) the officers and directors of the Acquiror
shall be nominated and elected in accordance with the provisions of Sections 6.1
(g) hereof.
1.2 Conversion of Stock.
At the Effective Time, and without any action on the part of
the parties hereto, the Sky King Shareholders or any other party:
(a) the shares representing 100% of the issued and
outstanding common stock of Sky King ("Sky King Common Stock") as of the
Closing (the "Closing") (as such term is defined in Section 2.1 below)
(other than "Dissenting Shares", as defined herein) shall, by virtue of the
Merger and without any action on the part of any holder thereof, be converted
into and represent the right to receive, and shall be exchangeable for the
merger consideration identified at Section 1.3 hereafter (the "Merger
Consideration);
(b) each share of capital stock of Sky King held in
treasury as of the Effective Time shall, by virtue of the Merger, be canceled
without payment of any consideration therefor and without any conversion
thereof;
(c) each share of common stock of the Sub that is issued
and outstanding as of the Effective Time shall continue to represent one share
of common stock of the Surviving Corporation after the Merger, which shares,
together with the 100 shares of common stock of Sub owned by Acquiror prior to
the Effective Time, shall thereafter constitute all of the issued and
outstanding shares of capital stock of the Surviving Corporation;
(d) Acquiror shall pay all charges and expenses,
including those of any exchange agent and the National Association of Securities
Dealers, Inc., if any, in connection with the issuance or exchange of the
shares in connection with the Merger;
(e) from and after the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of shares of
Sky King Common Stock (or any warrants or other rights to acquire any of the
same) that were outstanding immediately prior to the Effective Time. After the
Effective Time, certificates for shares of Sky King Common Stock (or any
warrants or other rights to acquire any of the same) that were outstanding
immediately prior to the Effective Time shall be canceled and exchanged for the
consideration to be received therefor in connection with the Merger as provided
in this Agreement; and
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(f) no fractional shares of stock shall be issued in the
Merger, and each holder of Sky King Common Stock entitled to receive as part of
the Merger Consideration fractional shares shall receive that number of shares
of stock rounded to the nearest whole number.
1.3 Merger Consideration.
(a) The Merger Consideration consisting of the total
purchase price payable to the holders of 100% of the Sky King Common Stock in
connection with the acquisition by merger of Sky King shall consist exclusively
of the following:
(i) newly issued shares of Sub's Series A
Convertible Preferred Stock (the "Series A Stock") which are subject to the
following salient features:
(1) Conversion Rights. The Series A
Stock shall automatically convert into an aggregate of 5,500,000 shares of Sub
Common Stock upon the occurrence of the domestication of Acquiror pursuant to
Section 5.2 of this Agreement. If the domestication of Acquiror does not occur
within one (1) year after the Effective Time, all, but not less than all of the
Series A Stock may be convertible at any time thereafter by the holders thereof
into, or exchangeable for, 5,500,000 shares of Acquiror Common Stock. The
Series A Stock shall also automatically convert into shares of Sub Common
Stock upon the occurrence of: (i) a liquidation event, dissolution or winding
up of Sub, (ii) the sale of all or substantially all of the assets or business
of Sub or (iii) a merger, plan of reorganization or consolidation in which Sub
is not the surviving corporation.
(2) Voting Rights. Prior to the
conversion thereof, the Series A Stock shall have no voting rights.
(3) Dividends. The Series A Stock will
share pari-passu with all dividends on Sub Common Stock and will otherwise have
no dividend rights.
The definitive terms of the Series A Stock are set
forth within the Certificate of Designation for the Series A Convertible
Preferred Stock attached hereto as Exhibit 1.3(a)(i) (the "Series A
Certificate of Designation"). The Series A Certificate of Designation shall
indicate Acquiror's consent to the terms of the Series A Stock as set forth in
this Subsection 1.3(a)(i); and
(ii) newly issued shares of Sub's Series B
Convertible Preferred Stock (the "Series B Stock"; the Series A Stock and the
Series B Stock shall be collectively referred to herein as the "Sub Preferred
Stock") which are subject to the following salient features:
(1) Conversion Rights. The Series B
Stock shall automatically convert into an aggregate of 4,500,000 shares of Sub
Common Stock upon the occurrence of the domestication of Acquiror pursuant to
Section 5.2 of this Agreement. If the domestication of Acquiror does not occur
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within one (1) year after the Effective Time, all, but not less than all of the
Series B Stock may be convertible at any time thereafter by the holders thereof
into, or exchangeable for, 4,500,000 shares of Acquiror Common Stock. The
Series B Stock shall also automatically convert into shares of Sub Common
Stock upon the occurrence of: (i) a liquidation event, dissolution or
winding up of Sub, (ii) the sale of all or substantially all of the assets or
business of Sub or (iii) a merger, plan of reorganization or consolidation in
which Sub is not the surviving corporation.
(2) Voting Rights. Prior to the
conversion thereof, the Series B Stock shall have no voting rights.
(3) Dividends. The Series B Stock will
share pari-passu with all dividends on Sub Common Stock and will otherwise have
no dividend rights.
The definitive terms of the Series B Stock are set forth within the Certificate
of Designation for the Series B Convertible Preferred Stock attached hereto as
Exhibit 1.3(a)(ii) (the "Series B Certificate of Designation"). The Series B
Certificate of Designation shall indicate Acquiror's consent to the terms of the
Series B Stock as set forth in this Subsection 1.3(a)(ii).
(b) The Merger Consideration shall be allocated among the
holders of 100% of the Sky King Common Stock in the proportion of their share
ownership of the outstanding common stock of Sky King as of the date of the
Closing.
(c) The Merger Consideration shall be paid and delivered
in the following manner:
(i) At the Closing, shares of Series A Stock
convertible into an aggregate of 5,500,000 shares of Sub Common Stock shall
be delivered to the Sky King Shareholders; and
(ii) At the Closing, Acquiror shall issue in the
name of the Sky King Shareholders shares of Series B Stock (the "Escrow
Shares") and shall deliver such shares to the Escrow Agent to be held in
accordance with the terms and conditions of the Escrow Agreement attached hereto
as Exhibit 1.3(c)(ii) and made a part hereto (the "Escrow Agreement").
(d) The shares of Series A Stock to be delivered at the
Closing and the shares of Series B Stock released from escrow by the Escrow
Agent (as well as shares of Acquiror Common Stock that may be issued pursuant to
Section 5.2(b) hereof) shall be fully paid and non-assessable and shall be free
and clear of all liens, levies and encumbrances except that all of such Series A
Stock, Series B Stock, shares of common stock issuable upon conversion of the
Series A Stock, Series B Stock and any shares of Acquiror Common Stock shall be
"restricted securities" pursuant to Rule 144, promulgated under the Securities
Act of 1933, as amended (the "Act").
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1.4 Additional Rights; Taking of Necessary Action; Further Action.
Each of Acquiror, Sub, Sky King and Sky King Shareholders,
respectively, shall use their best efforts to take all such action as may be
necessary and appropriate to effectuate the Merger under the CBCA and DGCL as
promptly as possible, including, without limitation, the filing of the
Certificate of Merger and the Articles of Merger consistent with the terms of
this Agreement. If at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
in Sub as the Surviving Corporation full right, title and possession to all
assets, property, rights, privileges, powers and franchises of Sky King, the
officers of such corporations are fully authorized in the name of their
corporations or otherwise, and notwithstanding the Merger, to take, and shall
take, all lawful and necessary action.
1.5 Dissenters' Rights.
Each of Sky King and the Sky King Shareholders acknowledge
that dissenters' rights are available to each of the Sky King Shareholders
pursuant to the CBCA and that (i) Sky King has complied with the provisions of
the CBCA in notifying each Sky King Shareholder of the availability of such
rights; and (ii) pursuant to the provisions of the CBCA, if the appropriate
procedures and guidelines are followed, any dissenting shareholders ("Dissenting
Shareholders"), in lieu of the Merger Consideration, shall be entitled to
receive the fair value of their shares in accordance with the provisions of the
CBCA.
1.6 No Further Rights or Transfers.
At and after the Effective Time, the shares of capital stock
of Sky King outstanding immediately prior to the Effective Time shall cease to
provide any rights to the shareholders of Sky King or the Surviving Corporation,
except for the right to surrender the certificate or certificates representing
such shares and to receive the Merger Consideration as provided in this
Agreement.
ARTICLE II
THE CLOSING
2.1 Closing Date.
Subject to satisfaction or waiver of all conditions precedent
set forth in Article VI of this Agreement, the closing of the Merger (the
"Closing") shall take place at the offices of Xxxxxxxx Xxxxxxxxx Professional
Corporation., Eleven Penn Center, 0000 Xxxxxx Xxxxxx, 00xx 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.
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2.2 Closing Transactions.
At the Closing, the following transactions shall occur, all of
such transactions being deemed to occur simultaneously:
(a) Sky King and all holders of the Sky King Common
Stock shall take, or shall cause to be taken, the following actions:
(i) Each of the holders of Sky King Common
Stock (other than Dissenting Shareholders) shall surrender and deliver to the
Sub as the Surviving Corporation the certificate or certificates representing
all of their shares of Sky King Common Stock;
(ii) Each of the holders of Sky King Common
Stock (other than Dissenting Shareholders) shall, to the extent necessary to
comply with applicable federal and state securities laws (including, if
applicable, Rule 145 promulgated under the Act), execute and deliver at the
Closing a copy of an investment letter in a form mutually agreed upon by the
parties and attached to this Agreement as Exhibit 2.2(a)(ii) ("Investment
Letter");
(iii) Any outstanding shareholder agreements
relating to Sky King Common Stock shall have been terminated and evidence of
such termination satisfactory to Acquiror shall have been delivered to Acquiror;
(iv) Sky King and the holders of Sky King Common
Stock shall execute and deliver, and file or cause to be filed with the
Secretary of State of the State of Connecticut, the Certificate of Merger
with such amendments thereto as the parties hereto shall deem mutually
acceptable;
(v) A certificate shall be executed by Sky King
and the holders of Sky King Common Stock to the effect that all representations
and warranties made by Sky King and the Sky King Shareholders under this
Agreement are true and correct as of the Closing, as though originally given to
Acquiror and Sub on said date;
(vi) A certificate of good standing shall be
delivered by Sky King from the Secretary of State of the State of Connecticut,
dated at or about the Closing, to the effect that such corporation is in good
standing under the laws of such state;
(vii) An incumbency certificate shall be delivered
by Sky King signed by all of the officers thereof dated at or about the Closing;
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(viii) Certified Articles of Incorporation shall be
delivered by Sky King dated at or about the Closing and a copy of the Bylaws of
Sky King certified by the Secretary of Sky King dated at or about the Closing;
(ix) Certified Board and shareholder resolutions
shall be delivered by the Secretary of Sky King dated at or about the Closing
authorizing the transactions contemplated under this Agreement;
(x) Sky King and the holders of Sky King Common
Stock shall execute and deliver the Escrow Agreement to Acquiror and the Escrow
Agent; and
(xi) Each of the parties to this Agreement shall
have otherwise executed whatever documents and agreements, provided whatever
consents or approvals and taken all such actions as are required under this
Agreement.
(b) Acquiror and/or Sub shall take, or shall cause to be
taken, the following actions:
(i) Acquiror shall deliver or shall cause to be
delivered to all of the holders of the Sky King Common Stock (other than
Dissenting Shareholders) a certificate or certificates representing the number
of shares of that portion of an aggregate number of 5,500,000 shares of Series A
Stock as such holder is entitled to receive at the Closing in connection with
the Merger;
(ii) Acquiror shall, on behalf of itself and the
Sky King Shareholders, deliver or shall cause to be delivered to the Escrow
Agent certificates representing 4,500,000 shares of Series B Stock;
(iii) Acquiror and the Sub shall execute and
deliver, and file or cause to be filed with the Secretary of the State of
Delaware, the Certificate of Merger with such amendments thereto as the parties
hereto shall deem mutually acceptable;
(iv) Sub shall receive from the Secretary of
State of Delaware a final Certificate of Merger;
(v) The Acquiror's Board of Directors will be
reconstituted to consist of a maximum of five (5) members. Each of the existing
members of Acquiror's Board of Directors will tender his resignation and
nominate to the Board two (2) individuals consisting of designees of the
holders of the Sub Preferred Stock and one (1) designee of the former Acquiror
Board members ("VDC Designee"). The newly constituted Board of Directors will
hold office in accordance with the DGCL and will appoint executive officers in
accordance with the DGCL;
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(vi) A certificate for each of the Acquiror and
the Sub shall be executed by their respective Presidents to the effect that all
of the respective representations and warranties of the Acquiror and Sub under
this Agreement are true and correct as of the Closing, as though originally
given to Sky King on said date;
(vii) A certificate of good standing shall be
delivered by Sub from the Secretary of State of the State of Delaware, dated at
or about the Closing, stating that Sub is in good standing under the laws of
such state;
(viii) A certificate of good standing shall be
delivered by Acquiror from the Commonwealth of Bermuda, dated at or about the
Closing, stating that Acquiror is in good standing under the laws of such
commonwealth;
(ix) An incumbency certificate shall be delivered
by each of Acquiror and Sub signed by all of their respective officers dated at
or about the Closing;
(x) Certified Certificates of Incorporation
shall be delivered by Acquiror and Sub dated at or about the Closing, and a
copy of the Bylaws of Acquiror and Sub certified by the respective Secretary
of Acquiror and Sub dated at or about the Closing;
(xi) Certified Board resolutions shall be
delivered by the respective Secretary of the Acquiror and Sub dated at or about
the Closing authorizing the transactions contemplated under this Agreement;
(xii) Acquiror will deliver an Employment
Agreement to each of 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;
(xiv) Acquiror shall execute and deliver the
Escrow Agreement to Sky King and the Escrow Agent; and
(xv) Each of the parties to this Agreement shall
have otherwise executed whatever documents and agreements, provided whatever
consents or approvals and taken all such actions as are required under this
Agreement.
ARTICLE III
CERTAIN CORPORATE ACTION
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3.1 Sky King Corporate Action.
Sky King shall cause to occur all corporate action necessary
to effect the Merger and to consummate the other transactions contemplated
hereby.
3.2 Acquiror Corporate Action.
Acquiror and the Sub shall cause to occur all corporate action
necessary on behalf of either of them to effect the Merger and to consummate the
other transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Sky King and the Sky King
Shareholders.
As a material inducement to Acquiror and Sub to execute this
Agreement and consummate the Merger and other transactions contemplated hereby,
Sky King and the Sky King Shareholders, jointly and severally, hereby make the
following representations and warranties to Acquiror and Sub. The
representations and warranties are true and correct in all material respects at
this date, and will be true and correct in all material respects on the Closing
as though made on and as of such date.
(a) Corporate Existence and Power. Sky King is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Connecticut, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted, except where the failure to have any of
the foregoing would not have a Material Adverse Effect. Sky King is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. True, correct
and complete copies of the Articles of Incorporation and Bylaws of Sky King
as amended to date are attached hereto as Schedule 4.1(a) and are made a part
hereof. There are currently no subsidiaries of Sky King.
(b) Due Authorization. This Agreement has been duly
authorized, executed and delivered by Sky King and the Sky King Shareholders and
constitutes a valid and binding agreement of Sky King and the Sky King
Shareholders, enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium, and
other similar laws relating to, limiting or affecting the enforcement of
creditors' rights generally or by the application of equitable principles. As of
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the Closing all corporate action on the part of Sky King required under
applicable law in order to consummate the Merger will have occurred.
(c) No Contravention. Neither the execution and delivery
of the Agreement nor the consummation of the transactions contemplated
thereby will: (i) conflict with or result in any violation of any provision
of the Articles of Incorporation or Bylaws of Sky King; or (ii) conflict with or
result in any violation or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of a right or obligation or loss under, any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Sky King and the
Sky King Shareholders or their properties or assets, or result in the
creation or imposition of any mortgage, lien, pledge, charge or security
interest of any kind ("Encumbrance") on any assets of Sky King, except such as
is not reasonably likely to have a Material Adverse Effect or prevent Sky
King or the Sky King Shareholders from consummating the transactions
contemplated by this Agreement. No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, is required by or with respect to Sky King in connection
with the execution and delivery of this Agreement by Sky King and the Sky
King Shareholders or the consummation by Sky King and the Sky King
Shareholders of the transactions contemplated hereby, except the filing of
the Articles of Merger with the States of Delaware and Connecticut.
(d) Capitalization and Share Ownership. The authorized
capital stock of Sky King will upon the Closing consist of no more than 2,000
shares of common stock ("Sky King Common Stock"). There are currently
outstanding approximately 1,692 shares of Sky King Common Stock. The outstanding
shares of capital stock of Sky King have been duly authorized and validly issued
and are fully paid and nonassessable and free of preemptive rights. Except as
described on Schedule 4.1(d) hereto, there are outstanding (A) no shares of
preferred stock or other voting securities of Sky King, (B) no securities of
Sky King convertible into or exchangeable for shares of capital stock or
voting securities of Sky King and (C) no options, warrants or other rights to
acquire from Sky King, and no obligation of Sky King to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of Sky King, and there are no agreements or
commitments to do any of the foregoing. There are no voting trusts or voting
agreements applicable to any capital stock of Sky King. The Sky King Common
Stock to be surrendered in the Merger will be owned of record and beneficially
by the Sky King Shareholders, free and clear of all liens and encumbrances
of any kind and nature, and have not been sold, pledged, assigned or otherwise
transferred. There are no agreements (other than this Agreement) to sell,
pledge, assign or otherwise transfer such securities.
(e) Financial Statements. Within fifteen (15) days after
the execution hereof, Sky King will provide Acquiror with unaudited annual
and interim financial statements (the "Financial Statements") such that would
comply with Regulation S-X of the Securities Exchange Act of 1934 if such
Financial Statements were provided on an audited basis. Such Financial
Statements will have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods reported upon
and fairly present in all material respects the financial position of Sky King
11
as of the date thereof and the results of operations for the periods then ended
(subject to normal year-end adjustments). On or before the Closing, Sky King
shall deliver audited Financial Statements to the Acquiror (the "Audited
Financial Statements") covering the same periods as the Financial Statements,
that reflect no material negative adjustments or differences from the Financial
Statements.
(f) No Contingent Liabilities. Except as set forth in the
Financial Statements, at the Closing, Sky King shall have no liabilities,
whether related to tax or non-tax matters, known or unknown, due or not yet due,
liquidated or unliquidated, fixed or contingent, determined or determinable in
amount or otherwise and, to the knowledge of Sky King after due inquiry, there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, except as and to the
extent reflected on: (i) the Financial Statements; (ii) this Agreement or any
Schedule or Exhibit hereto; or (iii) liabilities incurred since the date of the
Financial Statements solely in the ordinary course of business and as accurately
reflected on the books and records of Sky King; provided, however, that no
liability shall be incurred from and after the date hereof which is in
contravention of any negative covenant contained herein and applicable to Sky
King.
(g) Litigation. Except as described on Schedule 4.1(g)
hereto, there is no action, suit, investigation or proceeding (or, to the
knowledge of Sky King, any basis therefor) pending against, or to the knowledge
of Sky King threatened, against or affecting Sky King or any of its properties
before any court or arbitrator or any governmental body, agency or official
that (i) if adversely determined against Sky King, would have a Material Adverse
Effect or (ii) in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the Merger or any of the other transactions contemplated by the
Agreement.
(h) Taxes. Sky King has timely filed all tax returns
required to be filed by it, and will timely file when due all tax returns
required to be filed by it between the date hereof and the Closing. Sky King
has paid in a timely fashion or will pay when due in a timely fashion, all taxes
required to be paid in respect of the periods covered by such returns, and the
books and the financial statements of Sky King reflect, or will reflect,
adequate reserves for all taxes payable by Sky King which have been, or will be,
accrued but are not yet due. Sky King is not delinquent in the payment of
any material tax, assessment or governmental charge. No deficiencies for
any taxes have been proposed, asserted or assessed against Sky King, Sky
King and the Sky King Shareholders are not aware of any facts which would
constitute the basis for the proposal or assertion of any such deficiency and
there is no action, suit, proceeding, audit or claim now pending or threatened
against Sky King. All taxes which Sky King is required by law to withhold and
collect have been duly withheld and collected, and have been timely paid over
to the proper authorities to the extent due and payable. For the purposes of
this Agreement, the term "tax" shall include all federal state, local and
foreign income, property, sales, excise and other taxes of any nature
whatsoever. Neither Sky King nor any member of any affiliated or combined group
of which Sky King is or has been a member has granted any extension or waiver of
the limitation period applicable to any tax returns. There are no Encumbrances
for taxes upon the assets of Sky King, except Encumbrances for current taxes
not yet due. There are no tax sharing or tax allocation agreements to which Sky
King is now or ever has been a party. Sky King will not be required under
Section 481(c) of the Code, of 1986, to include any material adjustment in
12
taxable income for any period subsequent to the Merger. Sky King (a) has not
been a member of an affiliated group filing a consolidated federal income tax
return (other than a group the common parent of which was Sky King) and (b) has
no liability for the taxes of any person (other than Sky King) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor, by contract or otherwise.
(i) Compliance with Laws. Sky King is not in violation
of, and has not violated, any applicable provisions of any laws, statues,
ordinances or regulations, other than as would not be reasonably likely to
have a Material Adverse Effect or constitute a felony. No such laws, statutes,
ordinances or regulations require or are reasonably expected to require capital
expenditures by Sky King that are reasonably likely to have a Material Adverse
Effect. Without limiting the generality of the foregoing, Sky King has all
licenses, permits, certificates and authorizations needed or required for the
conduct of Sky King's business as presently conducted and for the use of its
properties and premises occupied by it, except where the failure to obtain a
licenses, permit, certificate or authorization would not have a Material Adverse
Effect.
(j) Investment Banking Fees. There is no investment
banker, broker, finder or other similar intermediary which has been retained by,
or is authorized by, Sky King or the Sky King Shareholders to act on its or
their behalf who might be entitled to any fee or commission from Sky King, the
Sky King Shareholders, Acquiror or the Sub or any of their respective affiliates
upon consummation of the transactions contemplated by this Agreement.
(k) Personal Property. Sky King has good and valid title
to all of its personal property, tangible and intangible, reflected on the
Financial Statements and to all other personal property owned by it, free and
clear of any Encumbrance. Sky King is the owner of all of its personal property
now located in or upon its leased premises and of all personal property which is
used in the operation of its business. All such equipment, furniture and
fixtures and other tangible personal property is in good operating condition and
repair and none require any repairs other than normal routine maintenance to
maintain such property in good operating condition and repair. All inventory as
reflected on the Financial Statements is useable in the ordinary course of
business free from material defects. Sky King owns no motor vehicles.
(l) Intellectual Property; Intangible Property. The
corporate names of Sky King and the trade names and service marks listed on
Schedule 4.1(l) are the only names and service marks which are used by Sky King
in the operation of its business (the "Names and Service Marks"). Sky King has
not done business and has not been known by any other name other than by its
Names and Service Marks. Sky King owns and has the exclusive right to use all
intellectual property presently in use by it and necessary for the operation of
its business as now being conducted, which intellectual property includes, but
is not limited to, patents, trademarks, trade names, service marks, copyrights,
trade secrets, customer lists, inventions, formulas, methods, processes and
other proprietary information. There are no outstanding licenses or consents
granting third parties the right to use any intellectual property owned by
Sky King. No royalties or fees are payable by Sky King to any third party by
reason of the use of any of its intellectual property. Sky King has received no
notice of any adversely held patent, invention, trademark, copyright, service
xxxx or trade name of any person, or any claims of any other person relating
13
to any of the intellectual property subject hereto, and to the knowledge of Sky
King, there is no reasonable basis for any such charge or claim. There is no
presently known threatened use or encroachment of any such intellectual
property.
(m) Contracts, Leases, Agreements and Other Commitments.
Sky King is not a party to or bound by any oral, written or implied contracts,
agreements, licenses, leases, employment agreements, powers of attorney,
guaranties, surety arrangements or other commitments, except for the following
(which are hereinafter collectively called the "Corporation Agreements"):
(i) The leases and agreements described on
Schedules 4.1(m); and
(ii) Agreements involving a maximum possible
liability or obligation on the part of Sky King of less than Twenty-Five
Thousand Dollars ($25,000) in the aggregate.
The Corporation Agreements constitute all of the agreements
and instruments which are necessary and desirable to operate the business as
currently conducted by Sky King. True, correct and complete copies of each
Corporation Agreement described and listed under Subsection 4.1(m) will be made
available to Acquiror within fifteen (15) days after the date hereof. The term
"Corporation Agreement" excludes purchase orders entered into in the ordinary
course for personalty or inventory which may be returned to the vendor without
penalty. All of the Corporation Agreements are valid, binding and enforceable
against the respective parties thereto in accordance with their respective
terms. Following the Merger, the Surviving Corporation shall become entitled to
all rights of Sky King under such of the Corporation Agreements as if the
Surviving Corporation were the original party to such Corporation Agreements.
All parties to all of the Corporation Agreements have performed all obligations
required to be performed to date under such Corporation Agreements, and no party
is in default or in arrears under the terms thereof, and no condition exists or
event has occurred which, with the giving of notice or lapse of time or both,
would constitute a default thereunder. The consummation of this Agreement and
the Merger will not result in an impairment or termination of any of the rights
of Sky King under any Corporation Agreement. None of the terms or provisions of
any Corporation Agreement materially adversely affects the business, prospects,
financial condition or results of operations of Sky King.
(n) Conflicting Interests. Except as set forth on
Schedule 4.1(n), no director, officer, employee or Sky King Shareholder, and no
relative or affiliate of any of the foregoing (i) sells or purchases goods or
services from Sky King or has any pecuniary interest in any supplier or client
of any of the foregoing or in any other business enterprise with which Sky King
conducts business or with which any of the foregoing is in competition, or
(ii) is indebted to Sky King except for money borrowed and as set forth on the
Financial Statements.
(o) Environmental Protection. Neither Sky King nor the
Sky King Shareholders have been notified by any governmental authority, agency
or third party, and Sky King and the Sky King Shareholders have no knowledge, of
any violation by Sky King of any Environmental Statute (as defined below). All
registrations by Sky King with, licenses from or permits issued by governmental
agencies pursuant to environmental, health and safety laws are in full force and
14
effect. The term "Environmental Statutes" means all statutes, ordinances,
regulations, orders and requirements of common law concerning discharges to the
air, soil, surface water or groundwater and concerning the storage, treatment or
disposal of any waste or hazardous substance. There is no hazardous substance at
any premises currently or previously occupied by Sky King. Sky King has not
received any notice or any request for information, notice of claim, demand or
other notification that it may be potentially responsible with respect to any
investigation or clean-up of any threatened or actual release of hazardous
substances. All hazardous wastes and substances have been stored, treated,
disposed of and transported in conformance with all requirements applicable to
such hazardous substances and wastes.
(p) Absence of Certain Changes or Events. Except as and
to the extent set forth on the Financial Statements, to the extent contained
in this Agreement, or as set forth on Schedule 4.1(p), there has not been
(i) any material adverse change in the business, assets, properties, results of
operations, financial condition or prospects of Sky King; (ii) any entry by Sky
King into any material commitment or transaction which is not in the ordinary
course of business; (iii) any change by Sky King in accounting principles or
methods except insofar as may be required by a change in generally accepted
accounting principles; (iv) any declaration, payment or setting aside for
payment of any dividends or other distributions (whether in cash, stock or
property) in respect of capital stock of Sky King or any Subsidiary, or any
direct or indirect redemption, purchase or any other type of acquisition by Sky
King of any shares of its capital stock or any other securities for an aggregate
sum in excess of $5,000; (v) any agreement by Sky King, whether in writing or
otherwise, to take any action which, if taken prior to the date of this
Agreement, would have made any representation or warranty in this Section 4.1
untrue or incorrect; (vi) any acquisition of the assets of Sky King, other than
in the ordinary course of business and consistent with past practice and in
excess of $5,000 in the aggregate; or (vii) any execution of any agreement with
any executive officer of Sky King providing for his or her employment, or any
increase in the compensation or in severance or termination benefits payable or
to become payable by Sky King to its officers or key employees, or any material
increase in benefits under any collective bargaining agreement or in benefits
under any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other plan or arrangement or understanding (whether or not legally
binding) providing benefits to any present or former employee of Sky King. Since
the date of the Financial Statements, there has not been and there is not
threatened, any material adverse change in financial condition, business,
results of operations or prospects of the business or any material physical
damage or loss to any of the properties or assets of the business or to the
premises occupied in connection with the business, whether or not such loss is
covered by insurance.
(q) Investment Intent.
(i) Except with respect to the registration
rights granted to the Sky King Shareholders pursuant to the terms of this
Agreement, the shares of Sub Preferred Stock are not being registered under
the Act on the basis of the statutory exemption provided by Section (4)2
thereof, relating to transactions not involving a public offering, and the
Acquiror's reliance on the statutory exemption thereof is based in part on the
representations contained in this Agreement;
15
(ii) The Sky King Shareholders represent (a) that
they have reviewed such quarterly, annual and periodic reports of the Acquiror
(the "Reports") as have been filed with the Securities and Exchange Commission
(the "SEC") and that they have such knowledge and experience in financial and
business matters that they are capable of utilizing the information set forth
therein concerning Acquiror to evaluate the risk of investing in the Acquiror;
(b) that they have been advised that the shares of Sub Preferred Stock or
Acquiror Common Stock to be issued to each of them by the Acquiror constitute
"restricted securities" as defined in Rule 144 promulgated under the Act and
accordingly, have not been and will not be registered under the Act, except as
otherwise provided in this Agreement, and therefore, the Sky King Shareholders
may not be able to sell or otherwise dispose of such shares except if such
shares are subject to an effective registration statement filed with the SEC,
in compliance with Rule 144 or otherwise pursuant to an exemption from
registration under the Act; (c) that the shares of Sub Preferred Stock or
Acquiror Common Stock are being acquired by them for their own benefit and on
their own behalf for investment purposes and not with a view to, or for sale
or resale in connection with, a public offering or distribution thereof; (d)
that the shares of Sub Preferred Stock or Acquiror Common Stock so issued will
not be sold (I) without registration thereof under the Act (unless such shares
are subject to registration or in the opinion of counsel acceptable to the
Acquiror, an exemption from such registration is available), or (II) in
violation of any law; and (e) that the certificate or certificates representing
the shares of Sub Preferred Stock or Acquiror Common Stock to be issued will be
imprinted with a legend in form and substance substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. THESE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF REGISTRATION, OR THE
AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION, UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, BASED ON AN OPINION LETTER OF
COUNSEL FOR THE COMPANY OR A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION."
and Acquiror is hereby authorized to notify its transfer agent of the
status of the shares of Sub Preferred Stock or Acquiror Common Stock, and to
take such other action including, but not limited to, the placing of a
"stop-transfer" order on the transfer agent's books and records to ensure
compliance with the foregoing.
(iii) Sky King and the Sky King Shareholders have
been afforded the opportunity to review and are familiar with the Reports and
have based their decision to invest solely on the information contained therein,
and the information contained within this Agreement and the associated exhibits
and schedules, and have not been furnished with any other literature, prospectus
or other information except as included in the Reports or this Agreement;
16
(iv) The Sky King Shareholders are able to bear
the economic risks of an investment in the shares of Sub Preferred Stock or
Acquiror Common Stock and that their overall commitment to their investments
which are not readily marketable is not disproportionate to their net worth; and
(v) The Sky King Shareholders understand that no
federal or state agency has approved or disapproved the shares of Sub Preferred
Stock or Acquiror Common Stock, passed upon or endorsed the merits of the
transfer of such shares set forth within this Agreement or made any finding
or determination as to the fairness of such shares for investment.
(r) Statements And Other Documents Not Misleading.
Neither this Agreement, including all exhibits and schedules and other
closing documents, nor any other financial statement, document or other
instrument heretofore or hereafter furnished by Sky King or the Sky King
Shareholders to Acquiror or Sub in connection with the Merger or the other
transactions contemplated hereby, contains or will contain any untrue statement
of any material fact or omit or will omit to state any material fact required
to be stated in order to make such statement, information, document or other
instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to Sky King or the Sky King Shareholders
which may have a Material Adverse Effect on the business, prospects, financial
condition or results of operations of Sky King or of any of its properties or
assets which has not been set forth in this Agreement as an exhibit or schedule
hereto.
4.2 Representations and Warranties of Acquiror and the Sub.
As a material inducement to Sky King and the Sky King
Shareholders to execute this Agreement and to consummate the Merger and the
other transactions contemplated hereby, Acquiror and Sub hereby make the
following representations and warranties to Sky King and the Sky King
Shareholders.
(a) Corporate Existence and Power. Acquiror is a
corporation duly incorporated, validly existing and in good standing under
the laws of Bermuda, and the Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Each of
Acquiror and the Sub has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted, except where the failure to have any of the foregoing would not
have a Material Adverse Effect on their respective businesses. Each of Acquiror
and the Sub is duly qualified to do business and is in good standing in each
jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Acquiror
owns all of the issued and outstanding shares of capital stock of the Sub, and
there are no other rights orobligations of Acquiror or the Sub to issue any
other shares of capital stock of the Sub. The Sub has conducted no business
activity other than in connection with the transactions contemplated by this
Agreement. True, complete and correct copies of the Memorandum of Association
and Byelaws of Acquiror and the Articles of Incorporation and Bylaws of Sub,
17
each as amended to date, are attached hereto as Schedule 4.2(a) and are made a
part hereof.
(b) Due Authorization. This Agreement has been duly
authorized, executed and delivered by Acquiror and the Sub and constitutes a
valid and binding agreement of Acquiror and the Sub, enforceable in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, moratorium, and other similar laws relating to, limiting
or affecting the enforcement of creditors' rights generally or by the
application of equitable principles. As of the Closing all corporate action on
the part of Acquiror and the Sub required under applicable law in order to
consummate the Merger will have occurred.
(c) No Contravention. Neither the execution and delivery
of the Agreement nor the consummation of the transactions contemplated thereby
will: (i) conflict with or result in any violation of any provision of the
Memorandum of Association or Byelaws of Acquiror or the Articles of
Incorporation or Bylaws of Sub or (ii) conflict with or result in any violation
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of an right or
obligation or to loss or a benefit under, any provision of the Memorandum of
Association or Byelaws of Acquiror or the Articles of Incorporation or Bylaws of
Sub or any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Acquiror or its properties or assets, or result in the creation or imposition of
any Encumbrance on any asset of Acquiror, except, only as to clause (ii) above,
such as is not reasonably likely to have a Material Adverse Effect or prevent
Acquiror or Sub from consummating the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, is
required by or with respect to Acquiror or the Sub in connection with the
execution and delivery of this Agreement by either of them or the consummation
by either of them of the transactions contemplated hereby, except the filing of
the Certificate of Merger with the Secretary of the State of Delaware.
(d) Capitalization. As of the Closing, Acquiror shall
have outstanding no more than that number of shares of common stock equal to
3,700,000 less the number of Surrendered Shares (as such term is defined in
Section 5.15(b)(i)(A) below), if any, in addition to those shares discussed at
Section 5.1, as well as no more than 750,000 Warrants identified upon Schedule
4.2(d)(i). All outstanding shares of capital stock of Acquiror have been duly
authorized and validly issued and are fully paid and nonassessable and free of
preemptive rights. The shares of Sub Preferred Stock to be issued in the Merger
will be duly authorized, validly issued, fully paid and nonassessable. Except as
otherwise set forth herein, there will be outstanding (A) no shares of capital
stock or other voting securities of Acquiror, (B) no securities of Acquiror
convertible into or exchangeable for shares of capital stock or voting
securities of Acquiror and (C) no options, warrants or other rights to acquire
from Acquiror, and no obligation of Acquiror to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Acquiror and there are no agreements or commitments, to do
any of the foregoing.
18
(e) SEC Filings.
(i) Upon request Acquiror will make available
to Sky King copies of its periodic reports filed pursuant to the Securities
Exchange Act of 1934, as well as its proxy or information statements relating
to meetings of, or actions taken without a meeting by the stockholders of
Acquiror held since 1994 and all of its other reports, statements, schedules and
registration statements filed with the SEC since inception, other than
pre-effective amendments to such registration statements. The documents
referred to in the preceding sentence are sometimes referred to herein as the
"SEC Documents."
(ii) As of its filing date, to the knowledge of
Acquiror, each such SEC Documents did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(f) Financial Statements. The financial statements
contained within the SEC Documents fairly present in all material respects the
results of operations, retained earnings and changes in financial position, as
the case may be, of the Acquiror at and for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material to the Acquiror, taken as a whole, in
amount or effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein. The books and records, financial and other, of the Acquiror are,
to the knowledge of the Acquiror, in all material respects complete and correct
and have been maintained in accordance with good business and accounting
practices.
(g) No Violations. Except as described on Schedule 4.2(g)
hereto, neither Acquiror or any of its Subsidiaries has received any written
notice from any governmental entity having jurisdiction over it or over any of
the real property leased by it of any violation by Acquiror or any of its
Subsidiaries of any law, regulation or ordinance relating to zoning,
environmental matters, local building or fire codes or similar matters relating
to any of the real property leased by Acquiror or any of its Subsidiaries.
(h) No Contingent Liabilities. Except as set forth in the
financial statements referred to in Section 4.2(f) above, as of the Closing,
Acquiror and each of its Subsidiaries shall have no liabilities, whether related
to tax or non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise and, to the knowledge of Acquiror after due inquiry, there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability except as and to the extent reflected on:
(i) the SEC Documents; (ii) this Agreement or any Schedule or Exhibit thereto;
or (iii) liabilities incurred since the date of the most recent SEC Document
solely in the ordinary course of business (or in connection with the
transactions contemplated hereby) and as accurately reflected on the books and
records of Acquiror; provided however, that no liability shall be incurred from
and after the date hereof which is in contravention of any negative covenant
contained herein and applicable to Acquiror.
19
(i) Litigation. Except as set forth in any of the SEC
Documents or Schedule 4.2(i), there is no action, suit, investigation or
proceeding (or, to the knowledge of Acquiror, any basis therefor) pending
against, or to the knowledge of Acquiror threatened, against or affecting
Acquiror, any of its Subsidiaries or any of their properties before any court or
arbitrator or any governmental body, agency or official that (i) if adversely
determined against Acquiror, would have a Material Adverse Effect on Acquiror
and its Subsidiaries, taken as a whole, or (ii) in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the Merger or any of the
other transactions contemplated by the Agreement.
(j) Taxes.
(i) Acquiror and each of its Subsidiaries have
timely filed all tax returns required to be filed by them, and will timely
file when due all tax returns required to be filed by them between the date
hereof and the Closing. Acquiror and each of its Subsidiaries have paid in a
timely fashion or will pay when due in a timely fashion, all taxes required to
be paid in respect of the periods covered by such returns, and the books and the
financial statements of Acquiror and each of its Subsidiaries reflect, or will
reflect, adequate reserves for all taxes payable by Acquiror and each of its
Subsidiaries which have been, or will be, accrued but are not yet due. Acquiror
and each of its Subsidiaries are not delinquent in the payment of any material
tax, assessment or governmental charge. No deficiencies for any taxes have been
proposed, asserted or assessed against Acquiror and each of its Subsidiaries,
Acquiror and each of its Subsidiaries are not aware of any facts which would
constitute the basis for the proposal or assertion of any such deficiency and
there is no action, suit, proceeding, audit or claim now pending, or to
Acquiror's knowledge, threatened against Acquiror and each of its Subsidiaries.
All taxes which Acquiror and each of its Subsidiaries are required by law to
withhold and collect have been duly withheld and collected, and have been timely
paid over to the proper authorities to the extent due and payable. For the
purposes of this Agreement, the term "tax" shall include all federal state,
local and foreign income, property, sales, excise and other taxes of any nature
whatsoever. Neither Acquiror or any of its Subsidiaries nor any member of any
affiliated or combined group of which Acquiror is or has been a member has
granted any extension or waiver of the limitation period applicable to any tax
returns. There are no Encumbrances for taxes upon the assets of Acquiror or any
of its Subsidiaries, except Encumbrances for current taxes not yet due. There
are no tax sharing or tax allocation agreements to which Acquiror or any of its
Subsidiaries is now or ever has been a party. Acquiror will not be required
under Section 481(c) of the Code, to include any material adjustment in
taxable income for any period subsequent to the Merger. Neither Acquiror nor
any of its Subsidiaries (A) has been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent
of which was Acquiror or a Subsidiary of Acquiror) and (b) has no liability
for the taxes of any person (other than Acquiror or any of its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or otherwise.
(ii) For federal income tax purposes, the Merger
shall constitute a tax-free reorganization under the provisions of Section 368
of the Code, provided, however, that the Sky King Shareholders recognize and
acknowledge that receipt of shares of Acquiror Common Stock (rather than Sub
20
Preferred or Common Stock) will not qualify as a tax-free reorganization at the
time of the receipt of such shares of Acquiror Common Stock.
(k) Compliance with Laws. To the best knowledge of
Acquiror and Sub, neither Acquiror nor any of its Subsidiaries is in violation
of, or has violated, any applicable provisions of any laws, statutes,
ordinances or regulations, which taken as a whole would be reasonably likely
to have a Material Adverse Effect on Acquiror and its Subsidiaries, or which
would constitute a felony. No such laws, statutes, ordinances or regulations
require or are reasonably expected to require capital expenditures that are
reasonably likely to have a Material Adverse Effect on Acquiror and its
Subsidiaries, taken as a whole. Without limiting the generality of the
foregoing, Acquiror and Sub have all licenses, permits, certificates and
authorizations needed or required for the conduct of Acquiror's or Sub's
business as presently conducted and for the use of its properties and premises
occupied by it, except where the failure to obtain a license, permit,
certificate or authorization would not have a Material Adverse Effect.
(l) Investment Banking Fees. Acquiror has retained and
agreed upon the Closing hereof to pay an investment banking firm a stock fee
in the amount equal to 5.00% of the Merger Consideration, or 500,000 shares of
Acquiror Common Stock, for arranging this transaction.
(m) Statements and Other Documents Not Misleading.
Neither this Agreement, including all exhibits and schedules and other
closing documents, nor any other financial statement, document or other
instrument heretofore or hereafter furnished by Acquiror or Sub to Sky King
and the Sky King Shareholders in connection with the Merger or the other
transactions contemplated hereby, or any information furnished by Acquiror and
Sub taken as a whole contains or will contain any untrue statement of any
material fact or omit or will omit to state any material fact required to be
stated in order to make such statement, information, document or other
instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to Acquiror and Sub taken as a whole which
may have a Material Adverse Effect on the business, prospects, financial
condition or results of operations of Acquiror and Sub taken as a whole or of
any of their properties or assets which has not been set forth in this Agreement
as an exhibit or schedule hereto.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 Issuance of Securities of Acquiror prior to the Closing.
Between the date hereof and the Closing, Acquiror contemplates
that it may be caused to issue up to 5,300,000 additional shares of Acquiror
Common Stock in connection with certain acquisition transaction (the
"Acquisition Transaction") that is presently being evaluated or are under
contract as set forth in Section 5.15. No investment banker, broker, finder or
other similar intermediary has been retained by, or is authorized by, Acquiror
to act on its behalf who might be entitled to any fee or commission from
21
Acquiror or any of its affiliates in connection with the Acquisition Transaction
or the transactions contemplated thereby.
5.2 Anticipated Domestication of Acquiror; Possible Follow-on
Merger.
(a) Acquiror shall use diligent efforts to domesticate by
merger or other permissible means into Sub within one (1) year after the
Closing. Upon Acquiror's domestication into Sub, the Series A Stock will
automatically convert into shares of Sub Common Stock such that the holders
thereof will at that time own the same percentage of outstanding Sub Common
Stock as they would have owned in Acquiror had they originally received an
aggregate of 5,500,000 shares of Acquiror Common Stock upon the Closing, and the
Series B Stock will automatically convert into shares of Sub Common Stock such
that the holders thereof will at that time own the same percentage of
outstanding Sub Common Stock as they would have owned in Acquiror had they
originally received an aggregate of 4,500,000 shares of Acquiror Common Stock
upon the Closing. Upon the domestication of Acquiror into Sub, the number of
shares of common stock resulting from the conversion of the Escrow Shares by the
Escrow Agent as of such conversion date shall be held in escrow as Escrow Shares
pursuant to the terms of the Escrow Agreement.
(b) If the domestication of Acquiror described in Section
5.2(a) above does not occur within one (1) year from the Effective Date, the
Series A Stock may, at the discretion of the holders thereof, be converted into,
or exchangeable for, an aggregate of 5,500,000 shares of Acquiror Common Stock,
and the Series B Stock may, at the discretion of the holders thereof, be
converted into, or exchangeable for, an aggregate of 4,500,000 shares of
Acquiror Common Stock. Upon such discretionary conversion, the number of shares
of common stock resulting from the conversion of the Escrow Shares as of such
conversion date shall be held in escrow by the Escrow Agent as Escrow Shares
pursuant to the terms of the Escrow Agreement.
(c) Acquiror and Sub covenant and agree that as to Sub,
prior to the domestication of Acquiror described in Section 5.2 hereof:
(i) Dividends; Changes in Stock. Sub shall not
and shall not propose to (a) split, combine or reclassify any of its capital
stock or issue, authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock; or
(b) redeem, repurchase or otherwise acquire any shares of its capital stock or
(c) otherwise change its capitalization.
(ii) Issuance of Securities. Except as
contemplated by this Agreement, Sub shall not sell, issue, pledge, authorize or
propose the sale or issuance of, pledge or purchase or propose the purchase
of, any shares of its capital stock of any class or securities convertible into,
or rights, warrants or options to acquire, any such shares or other convertible
securities.
(iii) Sale of Stock by Acquiror. Acquiror shall
not sell, pledge or authorize or propose the sale, pledge or purchase of, the
shares of common stock of Sub owned by Acquiror prior to the Effective Time.
22
(d) Sky King and the Sky King Shareholders acknowledge
that they have been advised that this domestication may not occur until a
Registration Statement on Form S-4 is filed with, and declared effective by, the
SEC.
5.3 Access to Information.
At all times prior to the Closing or the earlier termination
of this Agreement in accordance with the provisions of Article VIII, and in each
case subject to Section 5.4 below, each of the parties hereto shall provide to
the other parties (and the other parties' authorized representatives) full
access during normal business hours and upon reasonable prior notice to the
premises, properties, books, records, assets, liabilities, operations,
contracts, personnel, financial information and other data and information of or
relating to such party (including without limitation all written proprietary and
trade secret information and documents, and other written information and
documents relating to intellectual property rights and matters), and will
cooperate with the other party in conducting its due diligence investigation of
such party.
5.4 Confidentiality; No Solicitation.
(a) Confidentiality of Acquiror-Related Information. With
respect to information concerning Sky King that is made available to Acquiror
pursuant to the terms of this Agreement, Acquiror agrees that, except in
connection with the private placement and other securities purchase agreements
associated therewith, it shall hold such information in strict confidence, shall
not use such information except for the sole purpose of evaluating the Merger
and related transactions and shall not disseminate or disclose any of such
information other than to its directors, officers, employees, shareholders,
affiliates, agents and representatives who need to know such information for the
sole purpose of evaluating the Merger and the related transactions (each of whom
shall be informed in writing by Acquiror of the confidential nature of such
information and directed by Acquiror in writing to treat such information
confidentially). If this Agreement is terminated pursuant to the provisions of
Article VIII, Acquiror shall immediately return all such information, all copies
thereof and all information prepared by Acquiror based upon the same; provided,
however, that one copy of all such material may be retained by Acquiror's
outside legal counsel for purposes only of resolving any disputes under this
Agreement. The above limitations on use, dissemination and disclosure shall not
apply to information that (i) is learned by Acquiror from a third party entitled
to disclose it; (ii) become known publicly other than through Acquiror or any
party who received the same through Acquiror, provided that Acquiror has no
knowledge that the disclosing party was subject to an obligation of
confidentiality; (iii) is required by law or court order to be disclosed by
Acquiror; or (iv) is disclosed with the express prior written consent thereto of
Sky King or the Sky King Shareholders. Acquiror shall undertake all necessary
steps to ensure that the secrecy and confidentiality of such information will be
maintained in accordance with the provisions of this paragraph (a).
Notwithstanding anything contained herein to the contrary, in the event a party
is required by court order or subpoena to disclose information which is
otherwise deemed to be confidential or subject to the confidentiality
obligations hereunder, prior to such disclosure, the disclosing party shall: (i)
promptly notify the non-disclosing party and, if having received a court order
or subpoena, deliver a copy of the same to the non-disclosing party; (ii)
23
cooperate with the non-disclosing party, at the expense of the non-disclosing
party in obtaining a protective or similar order with respect to such
information; and (iii) provide only such of the confidential information as the
disclosing party is advised by its counsel is necessary to strictly comply with
such court order or subpoena.
(b) Confidentiality of Sky King-Related Information. With
respect to information concerning Acquiror that is made available to Sky King
and the Sky King Shareholders pursuant to the provisions of this Agreement, Sky
King and the Sky King Shareholders agree that they shall hold such information
in strict confidence, shall not use such information except for the sole purpose
of evaluating the Merger and the related transactions and shall not disseminate
or disclose any of such information other than to their directors, officers,
employees, shareholders, affiliates, agents and representatives who need to know
such information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by Sky King or the Sky
King Shareholders of the confidential nature of such information and directed by
such party in writing to treat such information confidentially). If this
Agreement is terminated pursuant to the provisions of Article VIII, Sky King and
the Sky King Shareholders agree to return immediately all such information, all
copies thereof and all information prepared by either of them based upon the
same; provided, however, that one copy of all such material may be retained by
Sky King's outside legal counsel for purposes only of resolving any disputes
under this Agreement. The above limitations on use, dissemination and disclosure
shall not apply to information that (i) is learned by Sky King or the Sky King
Shareholders from a third party entitled to disclose it; (ii) becomes known
publicly other than through Sky King, the Sky King Shareholders or any party who
received the same through Sky King or the Sky King Shareholders, provided that
Sky King or the Sky King Shareholders have no knowledge that the disclosing
party was subject to an obligation of confidentiality; (iii) is required by law
or court order to be disclosed by Sky King; or (iv) is disclosed with the
express prior written consent thereto of Acquiror. Sky King or the Sky King
Shareholders agree to undertake all necessary steps to ensure that the secrecy
and confidentiality of such information will be maintained in accordance with
the provisions of this paragraph (b). Notwithstanding any thing contained herein
to the contrary, in the event a party is required by court order or subpoena to
disclose information which is otherwise deemed to be confidential or subject to
the confidentiality obligations hereunder, prior to such disclosure, the
disclosing party shall: (i) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (ii) cooperate with the non-disclosing party at the
expense of the non-disclosing party in obtaining a protective or similar order
with respect to such information; and (iii) provide only such of the
confidential information as the disclosing party is advised by its counsel is
necessary to strictly comply with such court order or subpoena.
(c) Nondisclosure. Neither Sky King, the Sky King
Shareholders, the Sub nor Acquiror shall disclose to the public or to any third
party the existence of this Agreement or the transactions contemplated hereby or
any other material non-public information concerning or relating to the other
party hereto, other than with the express prior written consent of the other
parties hereto, except as may be required by law or court order or to enforce
the rights of such disclosing party under this Agreement, in which event the
contents of any proposed disclosure shall be discussed with the other party
before release; provided, however, that notwithstanding anything to the contrary
24
contained in this Agreement, any party hereto may disclose this Agreement to any
of its directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Merger, and to any party whose consent is required in connection
with the Merger or this Agreement. The parties anticipate issuing a mutually
acceptable, joint press release announcing the execution of this Agreement and
the consummation of the Merger.
(d) No Solicitation. In consideration of the substantial
expenditure of time, effort and money to be undertaken by Acquiror in connection
with the transactions contemplated by this Agreement, neither the Sky King
Shareholders, Sky King nor any affiliate thereof will, prior to the earlier of
the Closing or ninety (90) days after the termination of this Agreement,
directly or indirectly, through any officer, director, agent or otherwise: (i)
solicit, initiate or encourage the submission of inquiries, proposals or offers
from any person or entity relating to any acquisition or purchase of assets of
or any equity interest in Sky King or any affiliate thereof or any tender offer
(including a self-tender offer), exchange offer, merger, consolidation, business
combination, sale of a substantial amount of assets or sale of securities,
liquidation, dissolution or similar transaction involving Sky King or its
affiliates (a "Transaction Proposal"); (b) enter into or participate in any
discussions or negotiations regarding a Transaction Proposal, or furnish to any
other person or entity any information with respect to the business, properties
or assets of Sky King or its affiliates in connection with a Transaction
Proposal; or (c) otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage any effort or attempt by any other person to do or
seek a Transaction Proposal. Sky King or the Sky King Shareholders shall
promptly notify Acquiror if any such proposal or offer, or any inquiry or
contact with any person or entity with respect thereto is made.
5.5 Interim Operations.
During the period from the date of this Agreement and
continuing until the Closing:
(a) Interim Operations of Sky King. Sky King agrees
(except as expressly contemplated by this Agreement, including any Exhibits and
Schedules hereto, or to the extent that Acquiror shall otherwise consent in
writing) that as to Sky King:
(i) Ordinary Course. Sky King shall carry on
its business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and, to the extent consistent with such
business, use all reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it;
(ii) Dividends; Changes in Stock. Sky King shall
not and shall not propose to (a) declare, set aside or pay any dividend, on,
or make other distributions in respect of, any of its capital stock, (b) split,
combine or reclassify any of its capital stock or issue, authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (c) redeem, repurchase or otherwise
acquire any shares of its capital stock or (d) otherwise change its
capitalization.
25
(iii) Issuance of Securities. Except as
contemplated by this Agreement, Sky King shall not sell, issue, pledge,
authorize or propose the sale or issuance of, pledge or purchase or propose the
purchase of, any shares of its capital stock of any class or securities
convertible into, or rights, warrants or options to acquire, any such shares or
other convertible securities.
(iv) Governing Documents. Sky King shall not
amend its certificate of incorporation or its Bylaws.
(v) No Dispositions. Sky King shall not sell,
lease, pledge, encumber or otherwise dispose of or agree to sell, lease, pledge,
encumber or otherwise dispose of, any of its assets that are material to its
business or any other assets except in the ordinary course of business
consistent with prior practice.
(vi) Indebtedness. Sky King shall not incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities of Sky King or guarantee any debt securities of others
other than in the ordinary course of business consistent with prior practice.
(vii) Benefit Plans; Etc. Sky King shall not
adopt or amend in any material respect any collective bargaining agreement or
Employee Benefit Plan (as defined herein).
(viii) Executive Compensation. Sky King shall not
grant to any executive officer any increase in compensation or in severance or
termination pay, or enter into any employment agreement with any executive
officer.
(ix) Acquisitions. Except as set forth on
Schedule 5.5(a)(ix), Sky King shall not acquire (by merger, consolidation or
acquisition of stock or assets or otherwise) any corporation, partnership
or other business organization or subdivision thereof, or make any investment
by either purchase of stock or securities, contributions to capital, property
transfer or, except in the ordinary course of business, purchase of any property
or assets, of any other individual or entity.
(x) Tax Elections. Sky King shall not make any
material tax election or settle or compromise any material federal, state, local
or foreign tax liability.
(xi) Waivers and Releases. Sky King shall not
waive, release, grant or transfer any rights of material value or modify or
change in any material respect any Corporation Agreement other than in the
ordinary course of business and consistent with past practice.
(xii) Other Actions. Sky King shall not enter
into any agreement or arrangement to do any of the foregoing. Sky King shall
not take any action, or fail to take any action, that is reasonably likely to
result in any of the representations and warranties of Sky King set forth
in this Agreement becoming untrue in any material respect.
(b) Interim Operations of Acquiror and Sub. Acquiror and
Sub jointly and severally agree (except as expressly contemplated by this
Agreement, including any Exhibits and Schedules hereto, or to the extent that
Sky King and the Sky King Shareholders shall otherwise consent in writing or
to the extent required to permit Acquiror to meet its obligations under Section
5) that:
26
(i) Ordinary Course. Acquiror shall carry on
its business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and, to the extent consistent with such
business, use all reasonable efforts to preserve intact its present business
organization (provided that such obligation shall not relate to the officers
and employees of Acquiror or any of its Subsidiaries including the Sub) and
preserve its relationships with customers, suppliers and others having business
dealings with it. The Sub shall conduct no business activity other than in
connection with the transactions contemplated by this Agreement in connection
with the Merger.
(ii) Dividends; Changes in Stock. Neither
Acquiror nor the Sub shall (and shall not propose to) (a) declare or pay any
dividend, on, or make other distributions in respect of, any of its capital
stock, (b) split, combine or reclassify any of its capital stock or issue,
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, (c) repurchase
or otherwise acquire any shares of its capital stock or (d) otherwise change its
capitalization.
(iii) Issuance of Securities. Except as provided
for in Article V, neither Acquiror nor the Sub shall sell, issue, pledge,
authorize or propose the sale or issuance of, pledge or purchase or propose the
purchase of, any shares of its capital stock of any class or securities
convertible into, or rights, warrants or options to acquire, any such shares
or other convertible securities.
(iv) No Dispositions. Acquiror shall not sell,
lease, pledge, encumber or otherwise dispose of, or agree to sell, lease,
pledge, encumber or otherwise dispose of, any of its assets that are material to
its business, or any other assets except in the ordinary course of business
consistent with prior practice.
(v) Indebtedness. Neither Acquiror nor the Sub
shall incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others other than in the ordinary course of business consistent
with prior practice.
(vi) Benefit Plans, Etc. Neither Acquiror nor
the Sub shall adopt or amend in any material respect any collective bargaining
agreement or Employee Benefit Plan (as defined herein).
(vii) Executive Compensation. Neither Acquiror
nor the Sub shall grant to any executive officer any increase in compensation,
or enter into any employment agreement with any executive officer, other than
any of the same the material terms of which have been disclosed to Sky King on
or before the date hereof. Other Actions. Neither Acquiror nor the Sub shall
enter into any agreement or arrangement to do any of the foregoing. Neither
Acquiror nor the Sub shall take any action, or fail to take any action, that is
reasonably likely to result in any of their representations and warranties set
forth in this Agreement becoming untrue in any material respect.
27
5.6 Consents.
Acquiror, Sub, Sky King and the Sky King Shareholders shall
cooperate and use their best efforts to obtain, prior to the Closing, all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts as are necessary for
the consummation of the transactions contemplated by this Agreement; provided,
however, that no loan agreement or contract for borrowed monies shall be repaid
and no contract shall be amended materially to increase the amount payable
thereunder or otherwise to be materially more burdensome in order to obtain any
such consent, approval or authorization without first obtaining the written
approval of the other parties hereto.
5.7 Filings.
Acquiror, the Sub, Sky King and the Sky King Shareholders
shall, as promptly as practicable, make any required filing, and any other
required submissions, under any law, statute, order rule or regulation with
respect to the Merger and the related transactions and shall cooperate with each
other with respect to the foregoing and any shareholder of the Acquiror who has
an obligation to file a Schedule 13D shall do so prior to the Closing.
5.8 All Reasonable Efforts.
Subject to the terms and conditions of this Agreement and to
the fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective shareholders, as advised by their counsel, each of
the parties to this Agreement shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonable practicable, to consummate the Merger and the other transactions
contemplated by this Agreement.
5.9 Public Announcements.
Acquiror, the Sub, Sky King and the Sky King Shareholders
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the Merger, this Agreement or the
other transactions contemplated by this Agreement and shall not issue any other
press release or make any other public statement without prior consultation with
the other parties, except as may be required by law or, with respect to
Acquiror, by obligations pursuant to any listing agreement with an national
securities exchange.
28
5.10 Notification of Certain Matters.
Sky King and the Sky King Shareholders shall give prompt
notice to Acquiror, and Acquiror and the Sub shall give prompt notice to Sky
King and the Sky King Shareholders, of (a) the occurrence or non-occurrence of
any event, the occurrence or non-occurrence of which would cause any of their
representations or warranties in this Agreement to be untrue or inaccurate in
any material respect, as to Sky King and the Sky King Shareholders, at or prior
to the Closing, and, as to Acquiror and Sub, as of the Closing and (b) any
material failure of Sky King and the Sky King Shareholders, on the one hand, or
Acquiror or the Sub, on the other hand, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
them under this Agreement; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available to the party receiving such notice under this Agreement as expressly
provided in this Agreement.
5.11 Expenses.
Except as otherwise expressly provided herein, all costs and
expenses incurred in connection with the Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated.
5.12 Registration Rights.
(a) Registrable Securities
(i) Promptly after the domestication of
Acquiror into a Delaware corporation by virtue of merging with and into Sub
and the corresponding conversion of Sub Preferred Stock into shares of Sub
Common Stock, Sub shall use its best efforts to prepare and file with the SEC,
and use its best efforts to have declared effective, a registration statement
(the "Registration Statement") registering under the Act and the securities
statutes and regulations of certain states as provided herein, for resale at
market, the shares of Sub Common Stock then to be held by the Sky King
Shareholders (the "Registrable Securities") and thereafter, subject to the terms
and conditions of this Agreement, Sub shall use its best efforts to keep such
Registration Statement effective for a period of three (3) years. The
Registration Statement may also include other securities of Sub, whether on
behalf of Sub or certain other selling stockholders. Restrictions on the resale
of the Registrable Securities are identified at Section 5.12(j). From time to
time, Sub shall amend or supplement such Registration Statement and the
prospectus contained therein as and to the extent necessary to comply with the
Act and any applicable state securities statute or regulation.
(ii) In the event that the Acquiror is not
domesticated by merger into the Sub within one year from the Effective Date,
and if thereafter the holders of Sub Preferred Stock elect to exchange such
shares of Sub Preferred Stock for shares of Acquiror Common Stock, in the manner
and to the extent provided for in the Series A and Series B Certificates of
Designation, then the Acquiror shall register the resale of the shares of
Acquiror Common Stock received by the holders of the Sub Preferred Stock in
the manner discussed in this Section 5.12 as if the obligations of Sub were
29
those of Acquiror. In that event, the terms "Registrable Securities" and
"Sub Common Stock" as used in this Section 5.12 shall refer to those shares of
Acquiror Common Stock received by the holders of Sub Preferred Stock.
(b) Sub shall pay all expenses of the Sub relating to
such registration, other than brokerage or underwriting discounts or
commissions, if any.
(c) It shall be a condition precedent to the obligations
of Sub to take any action pursuant to this Section 5.12 that each of the holders
of Registrable Securities whose shares are so to be registered shall furnish to
Sub in a timely fashion such information regarding such holder, such holder's
Registrable Securities and such other factual information as shall be reasonably
required to effect the registration of such shares.
(d) To the maximum extent permitted by law, Sub shall
indemnify and hold harmless each such holder of Registrable Securities from and
against any and all claims, damages or liabilities, joint or several, to which
such holder becomes subject under the Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse
each such holder for any legal or other expenses reasonably incurred by such
holder in connection with investigating or defending any actions, whether or not
resulting in any liability, insofar as such losses, claims, damages, expenses,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement, in any preliminary or amended preliminary prospectus or in the
prospectus (or the registration statement or prospectus as from time to time
amended or supplement by Sub) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statement therein not misleading in the
circumstances in which they were made, unless such untrue preliminary or amended
preliminary prospectus or prospectus in reliance upon and in conformity with
information furnished in writing to Sub in connection therewith by such holder
expressly for use therein. Promptly after receipt by any such holder of notice
of the commencement of any action in respect of which indemnity may be sought
against Sub, such holder shall notify Sub in writing of the commencement
thereof, and, subject to the provisions of this Section 5.12, Sub shall assume
the defense of such action (including the employment of counsel, who shall be
counsel reasonably satisfactory to such holder), and the payment of expenses
insofar as such action shall relate to any alleged liability in respect of which
indemnity may be sought against Sub. Sub shall not be liable to indemnify any
such holder for any settlement of any such action effected with Sub's prior
written consent. Sub shall not, except with the approval of each party being
indemnified under this Section 5.12, consent to entry of any judgment or enter
into any settlement of any claim or litigation in connection with which
provisions of this Section 5.12 have been applied which does not include an
unconditional term thereof the giving by such claimant or plaintiff to the
parties being so indemnified of a release from all liability in respect to such
claim or litigation.
(e) Each holder whose shares of Registrable Securities
are registered pursuant to the provisions of this Section 5.12 shall indemnify
and hold harmless Sub, each of its directors and each of its officers from and
against any and all claims, damages or liabilities, joint or several, to which
30
they or any of them may become subject under the Act or under any other statute
or at common law or otherwise, and, except as hereinafter provided, will
reimburse Sub and each director and officer for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions, whether or not resulting in any liability, insofar as
such losses, claims, damages, expenses, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, in any preliminary or amended
preliminary prospectus or in the prospectus (or the registration statement or
prospectus as from time to time amended or supplemented) or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in the circumstances in which they were made, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to Sub in connection therewith
by such holder expressly for use therein. Promptly after receipt of notice of
the commencement of any action in respect of which indemnity may be sought
against such holder, Sub shall notify such holder in writing of the commencement
thereof, and such holder shall, subject to the provisions of this Section 5.12,
assume the defense of such action (including the employment of counsel, who
shall be counsel reasonably satisfactory to Sub) and the payment of expenses
insofar as such action shall relate to any alleged liability in respect of which
indemnity may be sought against such holder. Such holder shall not be liable to
indemnify Sub, any director, officer or other person for any settlement of any
such action effected without such holder's consent. Such holder shall not,
except with the approval of the parties being indemnified under this Section
5.12, consent to entry of any judgment or enter into any settlement of any claim
or litigation in connection with which provision of this Section 5.12 have been
applied which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to the parties being so indemnified of a release from
all liability in respect to such claim or litigation. The liability of any such
holder under this Section 5.12 shall be limited to the aggregate price at which
such holder's shares of Sub Common Stock is sold.
(f) In connection with its obligations to register the
Registrable Securities as provided in this Section 5.12, Sub shall have no
obligation: (i) to assist or cooperate in the offering or disposition of such
shares; (ii) except as expressly provided in this Section 5.12, to indemnify or
hold harmless the holders of such securities being registered or any underwriter
designated by such holders; (iii) to obtain a commitment from an underwriter
relative to the sale of such shares; or (iv) to include such Registrable
Securities within an underwritten offering of Sub conducted on a firm basis.
(g) If in the opinion of a lead or managing underwriter
retained by Sub to conduct an underwriting on a firm basis, the resale of such
Registrable Securities covered by the registration statement would have an
adverse effect upon the completion of an underwritten sale of securities, on
behalf of Sub, then, in that event, the holders of the Registrable Securities to
be included in such registration statement do hereby agree to the restrictions
upon resale requested by a managing underwriter.
(h) In connection with its obligations to register the
Registrable Securities as provided in this Section 5.12, Sub shall also:
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(i) furnish to each holder of shares of
Registrable Securities that are registered or to be registered pursuant to the
provisions of this Section 5.12, such copies of each preliminary and final
prospectus and any and all supplements and such other documents as such holder
may reasonably request to facilitate the public offering of the shares of
Registrable Securities;
(ii) use its best efforts to register or qualify
such Registrable Securities covered by such registration statement under the
applicable securities or "Blue Sky" laws of such jurisdiction in the United
States as such holder may reasonably request (not to exceed an aggregate
of 10 such jurisdictions); provided, however, that Acquiror shall not be
obligated to qualify to do business in any jurisdiction where it is not then
so qualified or to take any action that would subject it to the service of
process in suits other than those arising out of the offer or sale of the
securities covered by the registration statement in any jurisdiction where it
is not then so subject; and
(iii) furnish to each such holder upon request a
copy of all documents filed and all correspondence from and to the SEC in
connection with any such offering.
(i) The registration and other rights granted to the
holders of Registrable Securities in this Section 5.12 may not be assigned or
transferred by such holder without the prior written consent of Sub thereto.
(j) The Registrable Securities shall be subject to the
following restrictions upon resale:
(i) With respect to Sky King Shareholders other
than principal shareholders of Sky King (over 10% shareholders) or individuals
who become directors or officers of Acquiror or Sub, resale shall be limited to:
25% of the holder's Sub Common Stock no earlier than six (6) months following
the Closing; an additional 25% of the holder's Sub Common Stock no earlier than
twelve (12) months following the Closing; and the remaining 50% of the holder's
Sub Common Stock no earlier than eighteen (18) months following the Closing.
(ii) With respect to all principal (over 10%)
shareholders of Sky King and individuals who become directors or officers of
Acquiror or Sub, no resales shall commence until eighteen (18) months after the
Closing.
5.13 Documents at Closing.
Each party to this Agreement agrees to execute and deliver at
the Closing those documents identified in Section 2.2 which are required to be
executed and delivered by such party.
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5.14 Prohibition on Trading in Acquiror and Sub Stock.
Sky King and the Sky King Shareholders acknowledge that the
United States securities laws prohibit any person who has received material
non-public information concerning the matters which are the subject matter of
this Agreement from purchasing or selling the securities of the Acquiror or Sub,
or from communicating such information to any person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell securities of the Acquiror or Sub. Accordingly, the Sky King Shareholders
agree that they will not purchase or sell any securities of the Acquiror or Sub,
or communicate such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell
securities of the Acquiror or Sub, until no earlier than 72 hours following the
dissemination of a Current Report on Form 8-K to the SEC announcing the Closing
pursuant to this Agreement.
5.15 Anticipated Acquisition of the Principal Assets of PortaCom
Wireless, Inc.
(a) Acquiror has entered into an Asset Purchase Agreement
with PortaCom Wireless, Inc. ("PortaCom") to purchase from PortaCom all of its
interest in and to 2,000,000 shares of the common stock and 4,000,000 warrants
of Metromedia Asia Corporation (the "PortaCom Transaction") in consideration for
5,300,000 shares of Acquiror Common Stock and up to $700,000 in immediately
available funds. A copy of the Asset Purchase Agreement shall be attached as an
Exhibit to this Agreement. Acquiror will continue to take whatever reasonable
measures are necessary to complete the PortaCom Transaction. Sky King has been
advised that there can be no assurances that the PortaCom Transaction will be
completed timely, if at all, since a closing thereunder is dependent upon
PortaCom shareholder and regulatory approvals, as well as securing certain
waivers from Metromedia Asia Corporation ("MAC") permitting transfer of the MAC
shares and warrants.
(b) In connection with the PortaCom Transaction, Acquiror
has agreed to advance amounts up to $700,000 to PortaCom (the "PortaCom
Advances") to be applied by PortaCom against certain of its outstanding
indebtedness. Towards that end, as of the date of the Closing hereof,
Acquiror must have funded at least $300,000 of the PortaCom Advances. In
recognition of the possibility that Acquiror may need to fund up to $400,000 of
the PortaCom Advances after the Closing hereof, the parties hereto agree as
follows:
(i) In the event that on the date of the
Closing, Acquiror has not advanced all of the PortaCom Advances to PortaCom,
then:
(A) On or before the Closing, one or
more shareholders of Acquiror shall voluntarily surrender to Acquiror, without
payment therefor, that number of shares of Acquiror Common Stock (the
"Surrendered Shares") valued at the amount of the remainder of the PortaCom
Advances (the "Remaining PortaCom Advances"). For the purposes of this
paragraph, the shares of Acquiror Common Stock shall be valued at $3.00 per
share; and
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(B) From the date of the Closing and
until the date of the closing of the PortaCom Transaction, Acquiror shall use
diligent efforts to sell the Surrendered Shares in one or more private
placement transactions (the "Private Placement Transactions") in order to, and
only to the extent required to, secure cash proceeds sufficient to satisfy the
obligation to advance the Remaining PortaCom Advances to PortaCom.
(1) If and to the extent that
Acquiror fails to receive the entire amount of the Remaining PortaCom Advances
through the Private Placement Transactions by the date of the closing of the
PortaCom Transaction, then Acquiror shall make any such remaining payment out
of its then-existing cash assets. Thereafter, Acquiror shall be entitled to sell
any remaining Surrendered Shares to reimburse itself for funds expended in
connection with the payment of the Remaining PortaCom Advances or retain any
remaining Surrendered Shares in its treasury.
(2) In the event that Acquiror
receives through the Private Placement Transactions more than the amount of
the Remaining PortaCom Advances, then Acquiror shall deliver to the former
holder(s) of the Surrendered Shares (in the proportion of their shares so
surrendered), any such excess amount.
(3) In the event that Acquiror
raises sufficient funds from the Private Placement Transactions to pay or
advance the entire amount of the Remaining PortaCom Advances before all of
the Surrendered Shares are sold through the Private Placement Transactions,
then Acquiror shall, for no consideration therefor, re-issue to the former
holder(s) of the Surrendered Shares (in the proportion of their shares so
surrendered), any such remaining Surrendered Shares.
5.16 Production of Schedules and Exhibits.
Within fifteen (15) days of the execution of this Agreement
each of the parties hereto shall produce to the other parties, to the extent not
previously done, all of the Schedules and Exhibits required to be produced
pursuant to this Agreement. The Schedules and Exhibits produced subsequent to
the execution of this Agreement, shall be given such force and effect as though
such Schedules and Exhibits were produced upon execution of this Agreement.
5.17 Acknowledgment of Approvals.
By virtue of their respective signatures to this Agreement,
Acquiror, Sub, Sky King and the Sky King Shareholders acknowledge their approval
of this Agreement and their consent to the consummation of the transactions
identified herein.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
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6.1 Conditions to Obligations of Sky King and the Sky King
Shareholders.
The obligations of Sky King and the Sky King Shareholders to
consummate the Merger and the other transactions contemplated to be consummated
by it at the Closing are subject to the satisfaction (or waiver by Sky King and
the Sky King Shareholders) at or prior to the Closing (or at such other time
prior thereto as may be expressly provided in this Agreement) of each of the
following conditions:
(a) Acquiror shall have sold, transferred or otherwise
disposed of all of its present assets and shall as of the Closing have assets
consisting of at least: (i) $1 million in cash or other liquid assets; and (ii)
notes receivable of not less than $4 million with maturities on or before 1
August, 1999.
(b) Acquiror shall have settled and/or satisfied all
outstanding obligations or liabilities so that as of the Closing Acquiror shall
have no obligations or liabilities except trade payables incurred in connection
with this transaction, those in connection with the PortaCom Transaction and
those in the ordinary course, which in the aggregate shall not exceed $250,000.
Notwithstanding anything to the contrary contained in the foregoing sentence, if
Acquiror has not advanced the entire amount of the PortaCom Advances to PortaCom
on or before the date of the Closing, then on or before the date of the Closing,
Acquiror shall have (i) advanced a minimum of $300,000 of the PortaCom Advances
to PortaCom and (ii) satisfied the provisions of Section 5.15(b)(i)(A).
(c) On or before the Closing, Acquiror shall have secured
general releases from each of its directors and officers agreeing to release
Acquiror from any and all claims, liabilities, obligations and demands in
connection with the transactions contemplated by this Agreement.
(d) The representations and warranties of Acquiror and
the Sub set out in this Agreement shall be true and correct in all material
respects at and as of the time of the Closing as though such representations
and warranties were made at and as of such time.
(e) Each of Acquiror and the Sub shall have complied in a
timely manner and in all material respects with the respective covenants and
agreements set out in this Agreement.
(f) The Merger shall have been approved by Sky King and
the Sky King Shareholders in accordance with the provisions of the CBCA.
(g) On or before the Closing, the officers and directors
of Acquiror shall have tendered their immediate resignations from office and
shall have in conjunction therewith reconstituted the Board of Directors to
consist of a maximum of five (5) members and shall have nominated to Acquiror's
Board of Directors two (2) individuals designated by the holders of the Sub
Preferred Stock and the VDC Designee shall have been designated by the
Acquiror's Board of Directors (as such Board was constituted immediately prior
to the Closing).
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(h) Sky King and the Sky King Shareholders shall be
reasonably satisfied that the Merger results in a tax-free reorganization under
Section 368 of the Code.
(i) Acquiror shall enter into Employment Agreements with
each of 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 competent jurisdiction or governmental
authority that prohibits or restricts the consummation of the Merger or
the related transactions.
6.2 Conditions to Acquiror's and the Sub's Obligations.
The obligations of Acquiror and the Sub to consummate the
Merger and the other transactions contemplated to be consummated by it at the
Closing are subject to the satisfaction (or waiver by Acquiror) at or prior to
the Closing (or at such other time prior thereto as may be expressly provided in
this Agreement) of each of the following conditions:
(a) On or before the Closing, Sky King shall have secured
general releases from each of its directors, officers, consultants, employees
and shareholders agreeing to: (i) release Sky King, Acquiror and Sub from any
and all claims, liabilities, obligations and demands; (ii) terminate any
employment agreements; and (iii) terminate any shareholder agreements.
36
(b) On or before the Closing, Sky King shall have secured
the resignation of each of its directors and officers except 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 Shareholders to the effect that the
representations and warranties of the Sky King Shareholders set forth herein are
true and correct in all material respects and that the Sky King Shareholders
have complied in all material respects with their covenants and agreements set
forth herein required to be complied with by Closing.
(h) Sky King and the Sky King Shareholders shall have
executed and delivered the Escrow Agreement to Acquiror and the Escrow Agent.
(i) Acquiror and Sub shall have completed prior to the
Closing, to their satisfaction, a due diligence review of the financial
condition, results of operations, properties, assets, liabilities, businesses
and prospects of Sky King.
(j) All director, shareholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required under this Agreement, applicable law or any
applicable contract or agreement (other than as contemplated by this Agreement)
to complete the Merger shall have been secured.
37
(k) No statute, rule, regulation, executive order,
decree, injunction or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
authority that prohibits or restricts the consummation of the Merger or the
related transactions.
(l) Acquiror's and Sub's Board of Directors, and
shareholders to the extent necessary, shall have approved the Merger in
accordance with the DGCL.
(m) The Board of Directors and Sky King Shareholders
shall have approved the Merger in accordance with the CBCA.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
(a) Sky King Shareholders. The Sky King Shareholders
shall indemnify, defend and hold harmless Acquiror and Sub from and against any
and all demands, claims, actions or causes of action, judgments, assessments,
losses, liabilities, damages or penalties and reasonable attorneys' fees and
related disbursements (collectively, "Claims") incurred by Acquiror or Sub which
arise out of or result from a misrepresentation, breach of warranty, or breach
of any covenant of Sky King or the Sky King Shareholders contained herein or in
the Schedules annexed hereto or in any deed, exhibit, closing certificate,
schedule or any ancillary certificates or other documents or instruments
furnished by Sky King or the Sky King Shareholders pursuant hereto or in
connection with the transactions contemplated hereby or thereby.
(b) Acquiror and Sub. Acquiror and Sub shall indemnify,
defend and hold harmless Sky King and the Sky King Shareholders from and
against any and all Claims, as defined at Subsection 7.1(a) above, incurred
by Sky King and/or the Sky King Shareholders which arise out of or result from a
misrepresentation, breach of warranty or breach of any covenant of Acquiror and
Sub contained herein or in the Schedules annexed hereto or in any deed, exhibit,
closing certificate, schedule or any ancillary certificates or other documents
or instruments furnished by Acquiror or the Sub pursuant hereto or in connection
with the transactions contemplated hereby or thereby.
(c) Methods of Asserting Claims for Indemnification. All
claims for indemnification under this Agreement shall be asserted as follows:
(i) Third Party Claims. In the event that any
Claim for which a party (the "Indemnitee") would be entitled to indemnification
under this Agreement is asserted against or sought to be collected from the
Indemnitee by a third party the Indemnitee shall promptly notify the other party
(the "Indemnitor") of such Claim, specifying the nature thereof, the applicable
38
provision in this Agreement or other instrument under which the Claim arises,
and the amount or the estimated amount thereof (the "Claim Notice"). The
Indemnitor shall have thirty (30) days (or, if shorter, a period to a date not
less than ten (10) days prior to when a responsive pleading or other document
is required to be filed but in no event less than ten (10) days from delivery or
mailing of the Claim Notice) (the "Notice Period") to notify the Indemnitee (a)
whether or not it disputes the Claim and (b) if liability hereunder is not
disputed, whether or not it desires to defend the Indemnitee. If the
Indemnitor elects to defend by appropriate proceedings, such proceedings
shall be promptly settled or prosecuted to a final conclusion in such a manner
as to avoid any risk of damage to the Indemnitee; and all costs and expenses of
such proceedings and the amount of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but
not control, any such defense or settlement, it may do so at its sole cost and
expense. If the Indemnitor has disputed the Claim, as provided above, and
shall not defend such Claim, the Indemnitee shall have the right to control the
defense or settlement of such Claim, in its sole discretion, and shall be
reimbursed by the Indemnitor for its reasonable costs and expenses of such
defense.
(ii) Non-Third Party Claims. In the event that
the Indemnitee should have a Claim for indemnification hereunder which does
not involve a Claim being asserted against it or sought to be collected by a
third party, the Indemnitee shall promptly send a Claim Notice with respect
to such Claim to the Indemnitor. If the Indemnitor does not notify the
Indemnitee within the Notice Period that it disputes such Claim, the
Indemnitor shall pay the amount thereof to the Indemnitee. If the Indemnitor
disputes the amount of such Claim, the controversy in question shall be
submitted to arbitration pursuant to Section 9.8 hereafter.
ARTICLE VIII
TERMINATION
8.1 Termination.
This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Closing:
(a) by mutual written consent of the board of directors
of Acquiror, the Sub, Sky King and the Sky King Shareholders:
(b) by any of Acquiror, the Sub, Sky King or the Sky
King Shareholders:
(i) if the Closing shall not have occurred on or
before March 31, 1998; provided, however, that the right to terminate this
Agreement under this Section 8.1(b)(i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Closing to occur on or before that date; or
39
(ii) if any court of competent jurisdiction, or
any governmental body, regulatory or administrative agency or commission having
appropriate jurisdiction shall have issued an order, decree or filing or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable.
(c) by Sky King and the Sky King Shareholders if any of
the conditions specified in Section 6.1 have not been met and the sole remedy of
Sky King and the Sky King Shareholders in that event, shall be either to waive
such failure and proceed to close hereunder, or to terminate this Agreement in
which event neither Sky King and the Sky King Shareholders nor Acquiror shall
have any claim or action against the other; or
(d) by Acquiror and Sub if any of the conditions
specified in Section 6.2 have not been met and the sole remedy of Acquiror and
Sub in that event, shall be either to waive such failure and proceed to close
hereunder, or to terminate this Agreement in which event neither Acquiror and
the Sub nor Sky King and the Sky King Shareholders shall have any claim or
action against the other.
8.2 Notice and Effect of Termination.
In the event of the termination and abandonment of this
Agreement pursuant to Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision pursuant to which
such termination is made, and this Agreement shall forthwith become void and
have no effect without any liability on the part of any party or its directors,
officers or shareholders, except for the provisions of this Section 8.2 and
Sections 5.4, 5.9 and 5.11, which shall survive any termination of this
Agreement. Nothing contained in this Section 8.2 shall relieve any party from
any liability for any breach of this Agreement provided that the sole remedy
available to Sky King and the Sky King Shareholders for any breach of this
Agreement by Acquiror or Sub shall be as set forth in Section 7.1 hereof.
8.3 Extension; Waiver.
Any time prior to the Closing, the parties may (a) extend the
time for the performance of any of the obligations or other acts of any other
party under or relating to this Agreement; (b) waive any inaccuracies in the
representations or warranties by any other party or (c) waive compliance with
any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any other party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
8.4 Amendment and Modification.
This Agreement may be amended, whether before or after the
vote of the Sky King Shareholders or shareholders of Acquiror, by written
agreement of Acquiror, the Sub, Sky King and the Sky King Shareholders;
40
provided, however, that after the approval, if any, of this Agreement by the Sky
King Shareholders, no such amendment shall reduce or change the consideration to
be received by any Sky King Shareholder in connection with the Merger as set out
in Section 1.3 hereof or shall otherwise adversely affect the rights under this
Agreement of the Sky King Shareholders without the approval of such adversely
affected shareholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of Acquiror, the Sub, Sky King and the Sky King
Shareholders.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Representations and Warranties.
The respective representations and warranties of Acquiror, the
Sub, Sky King and the Sky King Shareholders shall not be deemed waived or
otherwise affected by any investigation made by any party. Each representation
and warranty shall survive the Closing through all applicable statutes of
limitations.
9.2 Notices.
All notices requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given on the date if delivered
personally, or upon the second business day after it shall have been deposited
by certified or registered mail with postage prepaid, or sent by telex, telegram
or telecopier, as follows (or at such other address or facsimile number for a
party as shall be specified by like notice):
(a) if to Sky King at:
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
41
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
9.3 Entire Agreement; Assignment.
This Agreement, including all Exhibits and Schedules hereto,
constitutes the entire Agreement among the parties with respect to its subject
matter and supersedes all prior agreements and understandings, both written and
oral, among the parties or any of them with respect to such subject matter and
shall not be assigned by operation of law or otherwise.
9.4 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding
upon the parties and their respective successors and assigns. Nothing in this
Agreement is intended to confer on any person other than the parties to this
Agreement or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.5 Headings.
The descriptive headings of the sections of this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
9.6 Counterparts.
This Agreement may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.
42
9.7 Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the laws
that might otherwise govern under principles of conflicts of laws applicable
thereto.
9.8 Arbitration.
If a dispute arises as to the interpretation of this
Agreement, it shall be decided finally in an arbitration proceeding conforming
to the Rules of the American Arbitration Association applicable to commercial
arbitration then in effect at the time of the dispute. The arbitration shall
take place in Philadelphia, Pennsylvania. The decision of the Arbitrators shall
be conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. The parties
shall share equally the costs of the arbitration.
9.9 Severability.
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
9.10 Release and Discharge.
By virtue of their execution of this Agreement, as of the
Closing and thereafter, any and all Sky King directors, officers and
shareholders hereby agree to release, remise and forever discharge Sky King from
and against any and all debts, obligations, liabilities and amounts owing from
Sky King prior to the Closing, and Sky King is not obligated to take any action
or make any payments to third parties on behalf of the Sky King Shareholders.
9.11 Certain Definitions.
As used herein:
(a) "Act" means the Securities Act of 1933, as amended;
(b) "Affiliate" shall have the meanings ascribed to such
term in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended to date (the "Exchange Act");
43
(c) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which federally chartered financial institutions
are not open for business in the City of Philadelphia;
(d) "Dissenting Shares" shall mean the shares of Sky
King Common Stock held by the Dissenting Shareholders, as such term is defined
in Section 1.5;
(e) "Employee Benefit Plan" means any employee benefit
plan (as defined in ss. 3(3) of the Employee Retirement Income Security Act of
1974, as amended, or any employment contract, employee loan, incentive
compensation, profit sharing, retirement, pension, deferred compensation,
severance, termination pay, stock option or purchase plan, guaranteed annual
income plan, fund or arrangement, payroll incentive, policy, fund, agreement or
arrangement, non-competition or consulting agreement, hospitalization,
disability, life or other insurance plan, or other employee fringe benefit
program or plan, or any other plan, payroll practice, policy fund agreement or
arrangement similar to or in the nature of the foregoing, oral or written;
(f) "Escrow Agent" means that person or entity mutually
agreed upon by the parties hereto to act as escrow agent to hold, safeguard
and disburse the Escrow Shares (as such term is defined in Section 1.3) pursuant
to the terms and conditions of this Agreement;
(g) "Knowledge" shall mean the actual current knowledge
of the executive management of the party to this Agreement to whom knowledge is
ascribed together with the knowledge such executive management should reasonably
be expected to have in the performance of its duties and responsibilities;
(h) "Material Adverse Effect" shall mean any adverse
effect on the business, condition (financial or otherwise) or results of
operation of the relevant party and its subsidiaries, if any, which is material
to such party and its subsidiaries, if any, taken as a whole;
(i) "Person" means any individual, corporation,
partnership, association, trust or other entity or organization, including a
governmental or political subdivision or any agency or institution thereof; and
(j) "Subsidiary" shall mean, when used with reference to
an entity, any corporation, a majority of the outstanding voting securities
of which is owned directly or indirectly, or a majority of the board of
directors of which may be elected, by such entity.
IN WITNESS WHEREOF, Acquiror, Sub, Sky King and the Sky King
Shareholders have caused this Agreement to be signed by their respective
officers hereunto duly authorized, effective as of the date first written above.
Attest: VDC CORPORATION LTD.
44
By:____________________________ By: /s/ Xxxxxx Xxxxxxxx Xxxxx
--------------------------------
Xxxxxx Xxxxxxxx Lacey, President
Attest: VDC (DELAWARE), INC.
By:____________________________ By: /s/ Xxxxxx Xxxxx
--------------------------------
Xxxxxx Xxxxx, President
[signatures continue onto next page]
Attest: SKY KING COMMUNICATIONS, INC.
By:____________________________ By: /s/ Xxxxxxxxx X. Xxxxx
--------------------------------
Xxxxxxxxx X. Xxxxx, Chairman
Attest:
By: /s/ Xxxxx Xxxxxxx
--------------------------------
By:____________________________ Xxxxx Xxxxxxx, Chief Operating Officer
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:_____________________________
-------------------------------------
45
Ownership Percentage: 13.0%
[signatures continue onto next page]
46
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
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Xxxxxx Xxxx
Address:______________________________ Address:_____________________________
------------------------------------- -------------------------------------
Ownership Percentage: .55%
Witness
/s/ Xxxxx X. Xxxxxxx, Trustee
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Xxxxxxx Family Trust
Address:______________________________ Address:_____________________________
------------------------------------- -------------------------------------
Ownership Percentage: 27.5%
[signatures continue onto next page]
47
Witness
/s/ Xxxxx Xxxxxx
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Xxxxx Xxxxxx
Address:______________________________ 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
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Xxxxx Xxxxx
Address:______________________________ Address:_____________________________
------------------------------------- -------------------------------------
Ownership Percentage: .66%
Witness
/s/ Xxxxx Xxxxxxx
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Xxxxx Xxxxxxx
Address:______________________________ Address:_____________________________
------------------------------------- -------------------------------------
Ownership Percentage: .07%
[signatures continue onto next page]
48
Witness
/s/ Xxxxxxx Xxxxxx
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Xxxxxxx Xxxxxx
Address:______________________________ Address:_____________________________
------------------------------------- -------------------------------------
Ownership Percentage: .27%
Witness
/s/ Xxxxxx xx Xxxx
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Xxxxxx xx Xxxx XXX
Address:______________________________ Address:_____________________________
------------------------------------- -------------------------------------
Ownership Percentage: .27%
Witness
/s/ Xxxx Xxxxxxx
--------------------------------
_____________________________________ Signature
Name:________________________________ Name: Xxxxxxx Tech, LLC
Address:______________________________ By: Xxxx Xxxxxxx, Managing Partner
_____________________________________ Address:_____________________________
Ownership Percentage: .11%
[signatures continue onto next page]
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]
49
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:______________________________ Name: Xxxxxx Xxxxxx
_____________________________________ Title: Financial Controller
Address: Xxxxxxxxx Xxxxx
Xxxxx Xxxx Xxxxxxxxxx Xxxxxx
Xxxxx Road
Xxxxx Xxxxx
Stockport, Cheshire England SK7 5DA
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
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Ownership Percentage: 3.0%
50
Schedule 4.1(m)
---------------
Lease between Sky King Communications, Inc. as lessee and D. Loschiava, trustee,
as lessor for a residence located at 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.
51
Schedule 4.1(p)
---------------
1. Lease between Sky King Communications, Inc. as lessee and D. Loschiava,
trustee, as lessor for a residence located at 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.
52
Schedule 4.2(d)(i)
------------------
VDC Corporation Ltd. Warrants
-----------------------------
Number of Warrants Expiration Date Exercise Price
------------------ --------------- --------------
455,000 June 30, 1998 $4 per share
250,000 September 30, 1998 $4 per share
45,000 June 30, 1998 $5 per share
53
Schedule 4.2(g)
---------------
None
54
Schedule 5.5(a)(ix)
-------------------
Sky King Communications, Inc. plans to acquire Blue Sky International LLC and
the Sakalin Telecom Group of companies.
55
