COMMON STOCK EXCHANGE AGREEMENT
by and among the shareholders of
SPACE INNOVATIONS LIMITED
a company incorporated in
England and Wales
and
SPACEDEV, INC.,
A United States Corporation
Incorporated in the State of Colorado
October 1, 1998
1
COMMON STOCK EXCHANGE AGREEMENT
AGREEMENT made and entered into this 1st day of October 1998 by
1) The persons whose names and addresses are shown in Schedule A (each a "SIL
SHAREHOLDER");
2) SpaceDev Inc, a company incorporated in Colorado, U.S.A. whose principal
place of business is at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇.▇.▇. ("SPACEDEV");
3) ▇▇▇▇▇ ▇▇▇▇▇▇ of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇.▇.▇ ▇▇▇▇▇ (the
"GUARANTOR"); and
4) Space Innovations Limited, a company incorporated in England and Wales
whose registered office is at ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇, England ("SIL").
R E C I T A L S
WHEREAS, the SIL Shareholders collectively own all of the issued and outstanding
shares (the "SIL Shares") of Space Innovations Limited, a company incorporated
in England & Wales, whose registered office is at ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, England ("SIL"); and
WHEREAS, the SIL Shareholders desire to exchange and SpaceDev wants to acquire,
directly the SIL Shares in exchange for shares of SpaceDev on the terms and
conditions set out in this agreement; and
NOW, THEREFORE, the parties hereto each in consideration of the representations,
warranties, covenants and agreements provided for or contained herein do hereby
agree as follows:
ARTICLE 1
DEFINITIONS/ACQUISITION/CLOSING
1.1 Definitions.
------------
For all purposes of this Agreement, except as otherwise expressly provided
unless the context otherwise requires,
2
(a) the terms defined in this Article 1 have the meaning assigned to them in
this Article 1 and include the plural as well as the singular,
(b) all accounting terms not otherwise defined herein have the meanings
assigned under generally accepted accounting principles in the particular
country or jurisdiction to which they relate,
(c) all references in this Agreement to designated "Articles," "Sections" and
other subdivisions are to the designated Articles, Sections and other
subdivisions of the body of this Agreement,
(d) pronouns of either gender or neuter shall include, as appropriate, the
other pronoun forms, and the words, "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and not
to any particular Article, Section or other subdivision.
(e) As used in this Agreement and the Exhibits and Schedules delivered
pursuant to this Agreement, the following definitions shall apply.
"ACTION" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or
before any arbitrator or Governmental Entity;
"AGREED TERMS" means a document in a form agreed between the parties
immediately before the Signing of this Agreement;
"AGREEMENT" means this Agreement by and among the parties to this
Agreement together with all Exhibits, Schedules, documents and agreements
attached or incorporated by reference;
"APPROVAL" means any approval, authorization, consent, qualification or
registration, or any waiver of any of the foregoing, required to be
obtained from, or any notice, statement or other communication required to
be filed with or delivered to, any Governmental Entity or any other
Person;
"ASSOCIATE" of a Person means
a corporation or organization of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or
more or any class of equity securities;
any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or
in a similar capacity; and
any relative or spouse of such person or any relative of such spouse.
3
"AUDITORS" means independent public accountants;
"BUSINESS" means the business of SIL as currently conducted, and shall be
deemed to include, but not be limited to, any of the following incidents
of such business: income, cash flow, operations, condition (financial or
other), assets, properties, liabilities and personnel;
"CLOSING" means completion of this Agreement in accordance with clause 1.4
below;
"CLOSING DATE" means the date of Closing;
"CODE" means the United States Internal Revenue Code of 1986, as amended;
"CONTRACT" means any agreement, arrangement, bond, commitment, franchise,
indemnity, indenture, instrument, lease, license or understanding, whether
or not in writing;
"DISCLOSURE LETTER" means the letter from the SIL Warrantors to SpaceDev
dated the same date as this Agreement;
"DOLLARS" OR "$" means the United States of America currency unit;
"EMPLOYEE PLAN" means any employee benefit plan, collective bargaining,
employment or severance agreement or other similar arrangement or
governmental regulation or requirement to which either SIL is a party or
by which it is bound, legally or otherwise;
"ENCUMBRANCE" means any claim charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise,
except for any restrictions on transfer generally arising under any
applicable governmental securities law;
"EQUITY SECURITIES" means any capital stock or other equity interest or
any securities convertible into or exchangeable for capital stock or any
other rights, warrants or options to acquire any of the foregoing
securities;
"FINANCIAL STATEMENTS" means the second quarter 1998 unaudited interim
financial statements and the year ending 1997 unaudited financial
statements of SIL delivered to SpaceDev in accordance with Section 2.7(a)
of this Agreement;
"GAAP" means generally accepted accounting principles in the United States
of America, as in effect from time to time;
4
"GOVERNMENTAL ENTITY" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or
local, domestic or foreign.;
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT" means the Untied States Legislation known as the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the
related regulations and published interpretations;
"HAZARDOUS SUBSTANCE" means (but shall not be limited to) substances that
are defined or listed in, or otherwise classified pursuant to, any
applicable Laws as "hazardous substances," "hazardous materials,"
"hazardous wastes" or "toxic substances," or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, radioactivity,
carcinogenicity, reproduction toxicity or "EP toxicity," and petroleum and
drilling fluids, produced waters and other wastes associated with the
exploration, development, or production of crude oil, natural gas or
geothermal energy;
"INTANGIBLE PROPERTY" means any trade secret, secret process or other
confidential information or know-how and any and all Marks;
"IRS" means generally the United States of America Internal Revenue
Service or any other taxing authority of any other country or government;
"LAW" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity and any Order;
"LOSS" means any action, cost, damage, disbursement, expense, liability,
loss, deficiency, diminution in value, obligation, penalty or settlement
of any kind or nature, whether foreseeable or unforeseeable, including but
not limited to, interest or other carrying costs, penalties, legal,
accounting and other professional fees and expenses incurred in the
investigation, collection, prosecution and defense of claims and amounts
paid in settlement, that may be imposed on or otherwise incurred or
suffered by the specified person;
"▇▇▇▇" means any brand name, copyright, patent, service ▇▇▇▇, trademark,
trade name, and all registrations or applications for registration of any
of the foregoing;
"MATERIAL ADVERSE EFFECT" means any change in or effect on SIL or SpaceDev
that is materially adverse to the business of the relevant company or
person;
"MATERIAL CONTRACT" means those Contracts listed in the Disclosure Letter
as Material Contracts;
"ORDER" means any decree, injunction, judgment, order, ruling, assessment
or writ;
5
"PERMIT" means any license, permit, franchise, certificate of authority,
or order, or any waiver of the foregoing, required to be issued by any
Governmental Entity;
"PERSON" means an association, a corporation, an individual, a
partnership, a trust or other entity or organization, including a
Governmental Entity;
"POUNDS" OR "(POUND)" means the United Kingdom currency unit;
"SIL WARRANTORS" means J ▇▇▇▇▇▇▇▇, ▇ ▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇ ▇ ▇▇▇▇▇▇▇▇, ▇ ▇
▇▇▇▇▇▇▇, ▇ ▇ ▇▇▇▇▇▇▇▇ and A K ▇▇▇▇;
"SPACEDEV FINANCIAL STATEMENTS" means the unaudited interim financial
statements of SpaceDev for the period ended December 31, 1997 delivered to
the SIL shareholders in accordance with section 3.7(a) of this Agreement;
"SPACEDEV SHARES" means common stock of SpaceDev;
"SPACEDEV WARRANTORS" means SpaceDev and the Guarantor
"SUBSIDIARY" means any Person in which SIL has a direct or indirect equity
or ownership interest in excess of 5%.
"TAX" means any foreign, federal, state, county or local income, sales and
use, excise, franchise, real and personal property, transfer, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance or withholding tax or charge imposed by any
Governmental Entity, any interest and penalties (civil or criminal)
related thereto or to the nonpayment thereof, and any Loss in connection
with the determination, settlement or litigation of any Tax liability.
"TAX RETURN" means a report, return or other information required to be
supplied to a Governmental Entity with respect to Taxes.
1.2 Transfer of SIL Shares by the SIL Shareholders.
-----------------------------------------------
Subject to the terms and conditions of this Agreement, each of the SIL
Shareholders who has executed this Agreement agrees to transfer that number of
SIL Shares set forth next to their name in Schedule A below and to deliver the
certificates evidencing such SIL Shares to SpaceDev at Closing. This Agreement
is based upon the material assumption that the SIL Shareholders, as parties to
this Agreement, own collectively one hundred percent (100%) of the issued and
outstanding shares of SIL and that one hundred percent (100%) of the SIL shares
shall be tendered at Closing. In the event that less than one hundred percent
(100%) of the SIL Shares are tendered pursuant to this Agreement, SpaceDev shall
have sole and exclusive power to void this Agreement.
6
1.3 Acquisition of the SIL Shares by SpaceDev.
------------------------------------------
SIL Shareholders agree to tender all the outstanding and issued SIL Shares to
SpaceDev and SpaceDev agrees to purchase the SIL Shares, in consideration of:
(a) the issue by SpaceDev to the SIL Shareholders of one million (1,000,000)
shares of common stock in SpaceDev in the proportions stated next to the
names of the respective SIL Shareholders set out in Schedule A;
(b) SpaceDev agreeing to issue an additional $250,000.00 in value only of
SpaceDev common stock, calculated pursuant to subsection 1.3(f) below to
the SIL Shareholders on January 15, 1999 in the proportions stated next to
the names of the respective SIL Shareholders set out in Schedule A;
(c) SpaceDev agreeing to issue an additional $250,000.00 in value only of
SpaceDev common stock, calculated pursuant to subsection 1.3(f) below to
the SIL Shareholders on July 15, 1999 in the proportions stated next to
the names of the respective SIL Shareholders set out in Schedule A;
(d) SpaceDev agreeing to issue an additional $250,000.00 in value only of
SpaceDev common stock, calculated pursuant to subsection 1.3(f) below to
the SIL Shareholders on January 15, 2000 in the proportions stated next to
the names of the respective SIL Shareholders set out in Schedule A;
(e) SpaceDev agreeing to issue an additional $250,000.00 in value only of
SpaceDev common stock, calculated pursuant to subsection 1.3(f) below to
the SIL Shareholders on July 15, 2000 in the proportions stated next to
the names of the respective SIL Shareholders set out in Schedule A;
(f) The value of all SpaceDev common stock issued under this Agreement shall
be calculated by taking the average of SpaceDev quoted stock closing price
for the five trading days prior to the date the stock is issued. SpaceDev
will retain the right to issue any stock to be issued under this agreement
by issuing that stock at any time prior to the due date of issue without
being in default of this Agreement.
(g) The SIL Board of Directors shall be entitled to nominate one person to sit
on the Board of Directors of SpaceDev, entitling the person to identical
rights in respect to attendance, voting, participation and notice. The
Guarantor, on behalf of SD Holdings, LLC shall provide at closing, a
letter of agreement to use best efforts to elect a SIL representative
(nominated by the SIL Board of Directors) on the SpaceDev Board. The
letter of agreement shall be in effect until December 31, 2000 after which
time, the Guarantor shall be released from all obligations under the
letter of agreement.
7
1.4 The Closing.
------------
The Closing will simultaneously take place at the SpaceDev and SIL offices
immediately following execution of this Agreement by all the parties, at which
time:
(a) the SIL Shareholders and the SIL Board of Directors shall deliver to
SpaceDev:
(1) transfers of the SIL Shares duly completed in favor of SpaceDev
together with share certificates representing the SIL Shares;
(2) the Statutory Books of SIL;
(b) SpaceDev shall issue to the SIL Shareholders one million shares
(1,000,000) of common stock, with appropriate legend restriction pursuant
to Section 2.24 and each in accordance with Clause 1.3(a) above;
(c) SpaceDev shall provide a board resolution authorizing the SIL Board of
Directors to adopt the (i) Revenue and Profit Incentive Stock Option Plan
and (ii) Profit Sharing Stock Issuance Plan. The SIL Board of Directors
shall be vested with the authority and power to issue the stock options
pursuant to the Plans and upon satisfying all conditions and restrictions
contained therefrom including, but not limited to, the condition requiring
SIL to meet or exceed certain sales and profit projections;
(d) The Guarantor, on behalf of SD Holdings LLC, shall provide a letter of
agreement to use best efforts in electing a SIL representative on the
Board of Directors of SpaceDev.
(e) SpaceDev shall provide a letter of intent to enter into a Growth Assisted
Cash Infusion Agreement between SpaceDev and SIL.
1.5 Right of First Refusal
----------------------
(a) If SpaceDev, prior to December 31, 2000 elects to sell all or any portion
of the stock in SIL, the individuals named in Schedule A (the "Schedule A
individual(s)") shall have the right of first refusal to meet any bona
fide offer of sale from a third party on the same terms and conditions of
that offer, including but not limited to the price and date for closing.
On receipt of a bona fide third party offer for purchase of the stock,
SpaceDev shall notify the SIL Board of Directors who shall be responsible
for notifying the Schedule A individuals in writing of the offer and its
terms and conditions within 10 days. Within 15 days after the date of
SpaceDev's notice to the SIL Board, the Schedule A individuals shall
notify SpaceDev in writing whether or not they agree to purchase the
shares on the same terms and conditions as contained in the third party
offer. If the Schedule A individuals elect not to purchase the stock,
SpaceDev shall be free to sell the stock to that third party in accordance
with the terms and conditions of the third party offer.
8
(b) In the event that one or more Schedule A individuals agree to participate
in the purchase of the offered shares, then the participating
individual(s) must purchase collectively, all of the offered shares at the
offered price. If the participating Schedule A individuals should fail to
purchase the total offered shares and or pay the specified purchase price,
the right of first refusal shall be deemed waived and SpaceDev shall be
free to sell the shares to the third party in accordance with the terms
and conditions of the third party offer.
(c) The Schedule A individual's right of first refusal shall terminate upon
the earlier occurrence of (i) the Schedule A individual ceasing to be a
SpaceDev shareholder or (ii) the Schedule A individual sells, transfers or
conveys any portion of his or her original issued SpaceDev stock or (ii)
at December 31, 2000.
1.6 Tax Free Exchange
-----------------
It is the intent of the parties that this transaction will constitute a tax free
exchange under the United States Internal Revenue Code Section 368(a)(1)(B) and
under United Kingdom tax legislation.
1.7 Best Efforts
------------
It is the intent of the parties to maximize the revenue and net income of SIL
and to advance the business of SIL utilizing the existing assets, personnel and
the nature of the business, therefore the parties shall use their best efforts
forward to achieve this intent.
1.8 Waiver of Pre-Emption Rights by SIL Shareholders
------------------------------------------------
Each of the SIL Shareholders hereby waives all pre-emption rights under the
Articles of Association in respect to the exchange of SIL shares for SpaceDev
shares hereunder.
9
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SIL WARRANTORS
2.1 The SIL Warrantors, hereby severally warrant to SpaceDev that so far as
they are aware and except as fairly disclosed in the Disclosure Letter,
each of the statements set out in this Article 2 below is true and
accurate in all material respects.
2.2 Each of the Warranties set out in the several paragraphs of this Article 2
below is separate and independent and except as expressly provided to the
contrary in this Agreement is not limited by reference to any other
paragraphs of Article 2.
2.3 Any claim by SpaceDev in connection with the Warranties (a "WARRANTY
CLAIM") will be subject to the following provisions of this Article.
2.4 SpaceDev acknowledges and agrees that:
(a) the warranties set out in Article 2 (the "WARRANTIES") are the only
representations, warranties or other assurances of any kind given by or on
behalf of the SIL Warrantors and on which SpaceDev may rely in entering
into this Agreement;
(b) no other statement, promise or forecast made by or on behalf of the SIL
Warrantors may form the basis of, or be pleaded in connection with, any
claim by SpaceDev under or in connection with this Agreement; and
(c) at the time of entering into this Agreement SpaceDev is not aware of any
matter or thing which is inconsistent with the Warranties or constitutes a
breach of any of them.
2.5 Organization and Related Matters.
---------------------------------
SIL is a company duly organized, validly existing and in good standing under the
laws of England and Wales. SIL has no subsidiaries. SIL has all necessary
corporate power and authority to own its properties and assets and to carry on
the Business as now conducted. True, correct and complete copies of the Articles
of Association of SIL as in effect on the date hereof have been delivered to
SpaceDev.
10
2.6 SIL Shares.
-----------
The SIL Shareholders own the issued and outstanding shares of SIL beneficially
free and clear of any and all liens, covenants, conditions, rights or other
encumbrances. At Closing, SpaceDev will acquire good and marketable title to and
complete ownership of the SIL Shares, free of any and all covenants, conditions,
or other encumbrances. The authorized share capital of SIL consists of 100,000
shares of Common Stock of (pound)1 each, of which 82,000 shares are issued and
outstanding. There are no outstanding warrants, options or other contracts or
other rights to subscribe for or purchase, or Contracts or other obligations to
issue or grant any rights to acquire, any Equity Securities of SIL, or to
restructure or recapitalize SIL. There are no outstanding Contracts of SIL to
repurchase, redeem or otherwise acquire any Equity Securities of SIL. All issued
shares of SIL are duly authorized, validly issued and outstanding and are fully
paid and were issued in conformity with applicable laws. There are no preemptive
rights in respect of any Equity Securities of SIL, except as contained in the
Articles of Association of SIL and except for such rights held by the SIL
Shareholders which rights shall terminate upon the consummation of the
acquisition by SpaceDev of the SIL Shares under this Agreement. Any Equity
Securities of SIL which were issued and reacquired by SIL were so reacquired
(and, if reissued, so reissued) in compliance with all applicable Laws, and SIL
has no outstanding obligation or liability with respect thereto.
2.7 Financial Statements; Changes; Contingencies.
---------------------------------------------
(a) FINANCIAL STATEMENTS. The SIL Shareholders delivered to SpaceDev unaudited
financial statements for the second quarter ending June 30, 1998 and the
unaudited financial statements for the twelve (12) months ending 1997. All
financial statements have been prepared in accordance with the
requirements of the Companies ▇▇▇ ▇▇▇▇ consistently applied during the
periods covered (except as disclosed therein), the statements of income
present fairly the results of operations of SIL for the respective periods
covered, and the balance sheets present fairly the financial condition of
SIL as of their respective dates, except that such financial statements
may omit footnote disclosures required by the requirements of the
Companies ▇▇▇ ▇▇▇▇ to the extent the content thereof would not materially
differ in nature or amount from those disclosures reported in the most
recent audited period, and year-end adjustments to the extent not
material. Notwithstanding the foregoing, all such financial statements
reflect all material adjustments (which consist only of normal recurring
adjustments not material in amount) necessary for a fair presentation.
(b) NO MATERIAL ADVERSE CHANGES. Since the Statement Date, whether in the
ordinary course of business, there has not been, occurred or arisen:
(1) any change in or event affecting SIL, the Business or the SIL Shares
that has had or may reasonably be expected to have a Material Adverse
Effect.
(2) any agreement (other than a Material Contract listed on the
Disclosure Schedule), condition, action or omission which would be
proscribed by (or require consent under) Section 4.3 had it existed,
occurred or arisen after the date of this Agreement,
(3) any strike or other labor dispute, or
(4) any casualty, loss, damage or destruction whether or not covered by
insurance) or any material property of SIL.
11
(c) NO OTHER LIABILITIES OR CONTINGENCIES. SIL does not have any material
liabilities of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, probable of assertion or not,
that, in accordance with the requirements of the Companies ▇▇▇ ▇▇▇▇
applied on a consistent basis, should have been but were not reflected or
disclosed in the financial statements (including the notes thereto)
referred to in subsections 2.7(a) and (b) above, except liabilities which
were incurred after Statement Date, in the ordinary course of business
which do not exceed $10,000 exclusive of current payroll and payroll taxes
for the payroll period ending immediately prior to Closing.
2.8 Tax and Other Returns and Reports.
----------------------------------
SIL has filed, or will, on or before the Closing Date, file all Tax Returns
required to be filed by it on or before the Closing Date. Adequate provision has
been made in the books and records of SIL and in the financial statements
referred to in Section 2.7 above or delivered to SpaceDev, for all Taxes
relating to operations through, or property owned on or before, the date of the
most recent of such financial statements. No liability for Taxes has arisen
since such date other than in the ordinary course of SIL's business. All
required Tax Returns including amendments to date, have been prepared in good
faith without negligence or willful misrepresentation and are complete and
accurate in all material respects. No Governmental Entity has, during the past
three years, examined or is in the process of examining any Tax Returns of SIL.
No Governmental Entity has proposed (tentatively or definitively), asserted or
assessed or, to the best knowledge of SIL, threatened to propose or assert, any
deficiency, assessment or claim for Taxes and there would be no basis for any
such delinquency, assessment or claim.
2.9 Material Contracts.
-------------------
SIL has duly performed all its material obligations under each Material Contract
to the extent that such obligations to perform have accrued; and no material
breach or default, alleged material breach or default, or event which would
(with the passage of time, notice or both) constitute a material breach or
default thereunder by SIL or, to the best knowledge of SIL, by any other party
or obligor with respect thereto, has occurred or as a result of this Agreement
or performance will occur. Consummation of the transactions contemplated by this
Agreement will not (and will not give any Person a right to) terminate or modify
any rights of, or accelerate or augment any obligation of, SIL under any
Material Contract.
2.10 Tangible Property.
------------------
(a) SIL owns no real property. There is no pending or threatened action that
would materially interfere with the quiet enjoyment of any leasehold by
SIL.
(b) SIL owns or leases all tangible personal property that is material to the
Business free of Encumbrances except for Encumbrances consisting of liens
for Taxes not yet due.
12
(c) All material leasehold properties held by SIL, as lessee, are held under
valid, binding and enforceable leases, subject only to such exceptions as
are not, individually or in the aggregate, material to the Business. All
material tangible properties of SIL are in a reasonable state of
maintenance and repair (except for ordinary wear and tear) and are
reasonably adequate for the Business.
2.11 Intangible Property.
--------------------
SIL owns or licenses Intangible Property, required for use in connection with
the Business.
2.12 Authorization; No Conflicts.
----------------------------
The execution, delivery and performance of this Agreement and or related
agreements by SIL has been duly and validly authorized by the Board of Directors
of SIL and by all other necessary corporate action on the part of SIL and by the
SIL Shareholders. SIL and the SIL Shareholders have the full capacity, right,
power and authority to enter into this Agreement and any related agreements to
which they are parties. The execution, delivery and performance of this
Agreement by the SIL Shareholders and the execution, delivery and performance of
any related agreements or contemplated transactions by the SIL Shareholders or
SIL will not violate, or constitute a breach or default (whether upon lapse of
time and/or the occurrence of any act or event or otherwise) under, the
Memorandum or Articles of Association of SIL or any Material Contract, result in
the imposition of any Encumbrance against any asset or properties of SIL, or
violate any Law. No Permits and Approvals are required to be obtained by the SIL
Shareholders to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by the SIL Shareholders and the
performance of this Agreement and any related or contemplated transactions by
the SIL Shareholders or SIL will not, to the knowledge of SIL, require filing or
registration with, or the issuance of any Permit by, any other third party or
Governmental Entity. The consummation of the transactions contemplated by this
Agreement does not, to the knowledge of the SIL Warrantors require any filings
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
2.13 [Reserved]
2.14 Corporate Records.
------------------
The official records and minute books of SIL accurately reflect all material
actions and proceedings taken to date by its shareholders, board of directors
and committees, and the statutory books contain true and complete copies of the
Articles of Association of SIL and all related amendments. The Register of
Members of SIL reflects accurately all transactions in its Shares.
13
2.15 Accounting Records; Internal Controls.
--------------------------------------
SIL has records that accurately reflect its transactions, and accounting
controls sufficient to ensure that such transactions are (i) executed in
accordance with management's general or specific authorization and (ii) recorded
in conformity with the requirements of the Companies ▇▇▇ ▇▇▇▇ so as to maintain
accountability for assets.
2.16 Permits.
--------
To the best knowledge of the SIL Warrantors SIL holds all material Permits that
are required by any Governmental Entity to permit the corporation to conduct its
business as now conducted, and all such permits are valid and in full force and
effect and will remain so upon consummation of the transactions contemplated by
this Agreement. To the best knowledge of the SIL Warrantors, no suspension,
cancellation or termination of any of such Permits is threatened or imminent.
2.17 Compliance with Law.
--------------------
(a) SIL is organized and has conducted its businesses in accordance with
applicable Laws in all material respects, and the forms, procedures and
practices of SIL are in compliance with all such Laws, to the extent
applicable, in all material respects.
(b) The use and operation of the assets of SIL are in compliance in all
material respects with all applicable Laws and there is no material
violation of any of such Laws.
(c) The share exchange of SpaceDev shares for SIL shares contemplated under
this Agreement does not violate any United Kingdom laws including but not
limited to corporate law, securities law or any tax revenue laws.
2.18 Employee Benefits.
------------------
Except as set forth in the Disclosure Letter, there are no employee benefit
plans or other employee benefits accruing for the benefit of any director,
officer or employee of SIL.
2.19 Certain Interests; Dividends.
-----------------------------
Neither SIL, nor any officer or director of SIL, nor any Associate of SIL has
any material interest in any property used in or pertaining to the Business; no
such Person is indebted or otherwise obligated to SIL; and SIL is not indebted
or otherwise obligated to any such Person, except for amounts due under normal
arrangements applicable to all employees generally as to salary or reimbursement
of ordinary business expenses not unusual in amount or significance. To the best
knowledge of the SIL Warrantors the consummation of the transactions
contemplated by this Agreement will not (either alone, or upon the occurrence of
any act or event, or with the lapse of time, or both) result in any benefit or
payment (severance or other) arising or becoming due from SIL or the successor
or assign thereof to any Person. Except as expressly permitted by this
Agreement, there has been no dividend or other distribution of assets or
securities whether consisting of money, property or any other thing of value,
declared, issued or paid to or for the benefit of the SIL Shareholders
subsequent to the date of the most recent financial statements described in
Section 2.7. SIL has paid no special bonuses to any officer, director or
employee.
14
2.20 No Brokers, Finders or Financial Advisors.
------------------------------------------
No agent, broker, finder or investment or commercial banker, or other Person or
firm engaged by or acting on behalf of SIL or any of its respective Affiliates
in connection with the negotiation, execution or performance of this Agreement
or the transactions contemplated by this Agreement, is or will be entitled to
any brokerage or finder's or similar fee or other commission as a result of this
Agreement or such transactions.
2.21 Environmental Compliance.
-------------------------
SIL has not generated, used, transported, treated, stored, released or disposed
of, or has suffered or permitted anyone else to generate, use, transport, treat,
store, release or dispose of any Hazardous Substance in violation of any Laws.
There has not been any generation, use, transportation, treatment, storage,
release or disposal of any Hazardous substance in connection with the conduct of
the Business of SIL or the use of any property or facility of SIL or to the
knowledge of SIL any nearby or adjacent properties or facilities, which has
created or might reasonably be expected to create any liability under any Laws
or which would require reporting to or notification of any Governmental Entity.
No asbestos or polychlorinated biphenyl or underground storage tank is contained
in or located at any facility of SIL.
2.22 Dividends.
----------
SIL has not declared or paid any dividends of any kind nor declared or made any
other distributions of any kind whatsoever including, without limitation, by way
of redemption or repurchase or reduction of authorized capital.
2.23 Waiver of Rights.
-----------------
SIL has not waived or surrendered any right of substantial value and has not
made any gift of money or of any of its property or assets.
2.24 Investment Representation.
--------------------------
The SpaceDev Shares are restricted securities within the meaning of the United
States federal securities laws, and the SIL Shareholders are acquiring the
SpaceDev Shares for their own account for investment purposes only and not with
a view to or for sale in connection with the distribution thereof. The SIL
Shareholders certify that they are not a United States person and are not
acquiring the SpaceDev Shares for the account or benefit of any United States
person. The SIL Shareholders agree to resell such securities only in accordance
with the provisions of Regulation S of the Securities Act of 1933 (the "Act"),
pursuant to a registration under the Act, or pursuant to an available exemption
from registration. The certificates evidencing the SpaceDev Shares shall bear a
legend substantially as follows:
15
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE OR
SECURITIES LAWS AND NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN
MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR SUCH STATE LAWS, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT."
2.25 Limitations on the Liability of the SIL Warrantors
--------------------------------------------------
The liability of the SIL Warrantors under this Agreement shall be limited as
follows:
(a) there shall be disregarded for all purposes any breach of this Agreement
unless the amount of damages to which SpaceDev would otherwise be entitled
is an amount in excess of $15,000;
(b) SpaceDev shall not be entitled to recover any damages in respect of any
breach or breaches of the Warranties pursuant under Article 2 of this
Agreement unless the aggregate loss or damage amount in respect of all
such breach or breaches for which the SIL Warrantors are liable exceeds
$15,000, in which event a claim in respect of the excess over $15,000 may
be made;
(c) the maximum liability of each SIL Warrantor in respect of the aggregate of
all the claims made by SpaceDev in respect of any breach of this Agreement
shall not exceed five hundred thousand dollars ($500,000).
2.26 SpaceDev may not bring any claim for breach of the provisions of this
Agreement unless written notice of the claim shall have been given to the
SIL Warrantors accompanied by reasonable particulars of the claim,
including the amount of the claim:
(a) in the case of any claim under the Warranties under Article 2, within 12
months of the date of this Agreement; and
(b) in the case of any other claim, within 3 months of the date of this
Agreement, provided that the liability of the SIL Warrantors in respect of
any Warranty Claim shall absolutely terminate if proceedings in respect of
it have not been commenced within 2 months of service of notice of that
claim.
16
2.27 The SIL Warrantors shall not be liable and no claim or claims shall be
made against them in respect of any Warranty Claim:
(a) if the fact, omission, circumstance or occurrence giving rise to or
forming the basis of the claim has been fairly disclosed to SpaceDev in
the Disclosure Letter;
(b) to the extent that provision or allowance for the matter or liability has
been made in the Financial Statements or is otherwise taken account of, or
reflected in, the Financial Statements;
(c) to the extent that the claim would not have arisen but for a change in
legislation made after the date of this Agreement (whether relating to
taxation, rates of taxation or otherwise) or the withdrawal of any
extra-statutory concession previously made by the IRS or other taxing
authority (whether or not the change purports to be effective
retrospectively in whole or in part);
(d) if the matter giving rise to the claim is provided for under the terms of
this Agreement or carried out in the implementation of it;
(e) to the extent the liability of the SIL Warrantors in respect of the claim
is affected by any voluntary act (other than in the ordinary course of
business of SIL) of SpaceDev or of SIL carried out on, or after the date
of this Agreement;
(f) if the claim arises from any act, matter or thing done or omitted to be
done by SpaceDev or SIL at the request or with the approval of SpaceDev;
(g) if the claim arises from SpaceDev or SIL disclaiming any part of the
benefit of capital or other allowances against taxation claimed or
proposed to be claimed on or before the date of this Agreement of which
particulars have been given to SpaceDev; or
(h) if the claim arises from any change in accounting policy or practice of
SpaceDev or SIL introduced or having effect after Closing.
2.28 If SpaceDev becomes aware of a matter which could give rise to a claim
under the other provisions of this Agreement, the SIL Warrantors shall not
be liable in respect of it unless written notice of the relevant facts is
given by SpaceDev to the SIL Warrantors as soon as reasonably practicable
and in any event within 30 days of SpaceDev becoming aware of those facts.
2.29 Without prejudice to SpaceDev's duty to mitigate any loss in respect of
any breach of the Warranties, any damages for such breach shall be
assessed on the basis of the diminution in value of the SIL Shares (which
value shall not be taken to be greater than the Consideration) directly
attributable to the breach in question (after taking into account all
compensating factors) and not on the basis of the loss of or cost to SIL
in respect of the matter giving rise to the claim.
17
2.30 Without prejudice to any duty it may have at common law or otherwise,
SpaceDev shall use all reasonable endeavors to mitigate any loss or damage
which it may suffer in consequence of any breach by the SIL Warrantors of
the Warranties or other provisions of this Agreement.
2.31 If in respect of any matter which could give rise to a breach of the
Warranties SpaceDev or SIL is entitled to claim under any policy of
insurance (or would have been so entitled had it maintained in force the
insurance cover current at Closing) no such matter shall be the subject of
a claim unless and until the SpaceDev or SIL shall have made a claim
against its insurers and the amount of such claim (or of any claim which
could have been made had such policies or their equivalents been
maintained in effect after Closing) shall then reduce or extinguish any
such claim.
2.32 If any claim for breach of any of the Warranties is based upon a liability
of SIL which is contingent only, the SIL Warrantors shall not be liable to
make any payment to SpaceDev or to SIL unless and until such contingent
liability becomes an actual liability and is discharged.
2.33 If any of the SIL Warrantors makes any payment by way of damages in
respect of a Warranty Claim (the "DAMAGES PAYMENT") and within 12 months
of the making of the Damages Payment SIL or SpaceDev receives any benefit
otherwise than from that SIL Warrantor which it would not have received
but for the circumstance giving rise to the claim in respect of which the
Damages Payment was made, SpaceDev shall, once it or SIL has received such
benefit, forthwith repay to that SIL Warrantor the Damages Payment in so
far as it does not exceed the value of the benefit recovered from the
third party.
2.34 Any liability of the SIL Warrantors will take account of any corresponding
savings or benefits accruing to SpaceDev or SIL as a result of the
circumstances giving rise to the Warranty Claim. If any provision in the
Financial Statements for taxation proves to be an over-provision, the
amount of the over-provision will be set off against any liability of the
Warrantors under this Agreement.
2.35 Subject to the other provisions of this Article 2, it is hereby agreed
that each individual SIL Warrantor shall have no liability in respect of
any claim made by SpaceDev for breach of any of the provisions of this
Agreement if such claim or claims shall have arisen by reason of fraud,
dishonesty or deliberate non-disclosure on the part of any other SIL
Warrantor.
2.36 Notwithstanding Article 2.35 none of the SIL Warrantors shall, as between
each other be liable to make a contribution in respect of any payment made
or agreed to be made by any other SIL Warrantors in respect of any claim
under, or in respect of, any breach of this Agreement unless such SIL
Warrantor has been adequately consulted in the course of negotiations
following the notification of any such claim and has been joined as a
party to any proceedings in which that claim has been made.
18
2.37 Any amount paid by the SIL Warrantors in respect of any claim under this
Agreement shall be deemed to be a reduction in the purchase consideration
for the SIL Shares.
2.38 The liability of each individual SIL Warrantor in respect of any claim
made by SpaceDev for breach of the SIL Warranties or any other provisions
of this Agreement shall not exceed the proportion set out below against
the name of that SIL Warrantor of the amount of any such claim or claims.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ 18.87%
Mr. A.K. ▇▇▇▇ 18.87%
Mr. ▇.▇. ▇▇▇▇▇▇▇▇ 18.87%
▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇ 5.65%
▇▇. ▇.▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 18.87%
▇▇. ▇. ▇▇▇▇▇▇▇▇ 18.87%
-------
100.00%
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SPACEDEV
3.1 The SpaceDev and the Guarantor severally warrant (to the extent of
$2,500,000 maximum liability to SpaceDev and to the extent of $500,000
maximum liability to Guarantor) to the SIL Shareholders that except as
fairly disclosed in the letter to the SIL Shareholders dated the same date
as this Agreement and delivered prior to its execution (the "SPACEDEV
DISCLOSURE LETTER"), each of the statements set out in this Article 3
below is true and accurate in all material respects.
3.2 Each of the Warranties set out in the several paragraphs of this Article 3
below (the "SPACEDEV WARRANTIES") is separate and independent and except
as expressly provided to the contrary in this Agreement is not limited by
reference to any other paragraphs of Article 3.
3.3 Any claim by the SIL Shareholders in connection with the SpaceDev
Warranties (a "SPACEDEV WARRANTY Claim") will be subject to the following
provisions of this Article.
3.4 the SIL Shareholders acknowledge and agree that:
19
(a) the SpaceDev Warranties are the only representations, warranties or
other assurances of any kind given by or on behalf of the SpaceDev
Warrantors and on which the SIL Shareholders may rely in entering
into this Agreement;
(b) no other statement, promise or forecast made by or on behalf of the
SpaceDev Warrantors may form the basis of, or be pleaded in
connection with, any claim by the SIL Shareholders under or in
connection with this Agreement; and
(c) at the time of entering into this Agreement the SIL Shareholders are
not aware of any matter or thing which is inconsistent with the
SpaceDev Warranties or constitutes a breach of any of them.
3.5 Organization and Related Matters.
---------------------------------
SpaceDev is a corporation duly organized, validly existing and in good standing
under the laws of the state of Colorado in the United States of America.
SpaceDev has all necessary corporate power and authority to own its properties
and assets and to carry on its business as now conducted. True, correct and
complete copies of the charter documents of SpaceDev as in effect on the date
hereof have been delivered to the SIL Shareholders.
3.6 SpaceDev Shares.
----------------
At the Closing, the SIL Shareholders will acquire good and marketable title and
complete ownership of the SpaceDev Shares, free of any and all covenants,
conditions, or other Encumbrances except for any resale restrictions
requirements made pursuant to 2.24. The authorized capital stock of SpaceDev
consists of twenty five million (25,000,000) shares of common stock and ten
million (10,000,000) shares of convertible preferred stock, of which 4,414,373
common shares and 82,450 convertible preferred shares are issued and
outstanding. There are no outstanding Contracts of SpaceDev to repurchase,
redeem or otherwise acquire any Equity Securities of SpaceDev. All shares of
capital stock of SpaceDev are duly authorized, validly issued and outstanding
and are fully paid and nonassessable and were issued in conformity with
applicable laws. Any Equity Securities of SpaceDev which were issued and
reacquired by SpaceDev were so reacquired (and, if reissued, so reissued) in
compliance with all applicable Laws, and SpaceDev has no outstanding obligation
or liability with respect thereto.
3.7 Financial Statements; Changes; Contingencies.
---------------------------------------------
20
(a) FINANCIAL STATEMENTS. SpaceDev has delivered to the SIL Shareholders
the unaudited December 31, 1997 balance sheet for SpaceDev and the
related statements of income for the 12 months then ended. All such
interim financial statements have been prepared in accordance with
GAAP consistently applied during the periods covered (except as
disclosed therein), the statements of income present fairly the
results of operations of SpaceDev for the respective periods covered,
and the balance sheets present fairly the financial condition of
SpaceDev as of their respective dates, except that such financial
statements may omit footnote disclosures required by GAAP to the
extent the content thereof would not materially differ in nature or
amount from those disclosures reported in the most recent audited
period, and year-end adjustments to the extent not material.
Notwithstanding the foregoing, all such financial statements reflect
all material adjustments (which consist only of normal recurring
adjustments not material in amount) necessary for a fair
presentation.
(b) NO MATERIAL ADVERSE CHANGES. Since the Statement Date, whether in the
ordinary course of business, there has not been, occurred or arisen:
1. any change in or event affecting SpaceDev, its business or the
Common Stock of SpaceDev that has had or may reasonably be
expected to have a Material Adverse Effect.
2. any agreement (other than a Material Contract listed in the
Disclosure Letter), condition, action or omission which would be
proscribed by (or require consent under) section 4.3 had it
existed, occurred or arisen after the date of this Agreement,
3. any strike or other labor dispute, or
4. any casualty, loss, damage or destruction whether or not covered
by insurance or any material property of SpaceDev.
(c) NO OTHER LIABILITIES OR CONTINGENCIES. SpaceDev does not have any
material liabilities of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, probable
of assertion or not, that, in accordance with GAAP applied on a
consistent basis, should have been but were not reflected or
disclosed in the financial statements (including the notes thereto)
referred to in subsection 3.7(a) and (b) above, except liabilities
which were incurred after Statement Date, in the ordinary course of
business which do not exceed $10,000 exclusive of current payroll and
payroll taxes for the payroll period ending immediately prior to
Closing.
3.8 Authorization; No Conflicts.
----------------------------
The execution, delivery and performance of this Agreement and or related
agreements by SpaceDev and the Guarantor have been duly and validly authorized
by the Board of Directors of SpaceDev and by all other necessary corporate
action on the part of SpaceDev and by the Guarantor. SpaceDev and the Guarantor
have the full capacity, right, power and authority to enter into this Agreement
and any related agreements to which they are parties. The execution, delivery
and performance of this Agreement by SpaceDev and the Guarantor and the
execution, delivery and performance of any related agreements or contemplated
transactions by SpaceDev and the Guarantor will not violate, or constitute a
breach or default (whether upon lapse of time and/or the occurrence of any act
or event or otherwise) under, the Articles of Incorporation or by-laws of
SpaceDev or any Material Contract, result in the imposition of any Encumbrance
against any asset or properties of SpaceDev, or violate any Law. The
consummation of the transactions contemplated by this Agreement does not, to the
knowledge of SpaceDev and the Guarantor require any filings under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
21
3.9 [Reserved]
3.10 Corporate Records.
------------------
The official records and minute books of SpaceDev accurately reflect all
material actions and proceedings taken to date by its shareholders, board of
directors and committees, and such minute books contain true and complete copies
of the charter documents of SpaceDev and all related amendments. The stock
record books of SpaceDev reflect accurately all transactions in its capital
stock of all classes.
3.11 Compliance with Law.
--------------------
(a) SpaceDev is organized and has conducted its businesses in accordance
with applicable Laws in all material respects, and the forms,
procedures and practices of SpaceDev are in compliance with all such
Laws, to the extent applicable, in all material respects.
(b) The use and operation of the assets of SpaceDev are in compliance in
all material respects with all applicable Laws and there is no
material violation of any of such Laws.
3.12 No Brokers, Finders or Financial Advisors.
------------------------------------------
No agent, broker, finder or investment or commercial banker, or other Person or
firm engaged by or acting on behalf of SpaceDev or any of its respective
Affiliates in connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is or will be
entitled to any brokerage or finder's or similar fee or other commission as a
result of this Agreement or such transactions.
3.13 Dividends.
----------
SpaceDev has not declared or paid any dividends of any kind nor declared or made
any other distributions of any kind whatsoever including, without limitation, by
way of redemption or repurchase or reduction of authorized capital.
22
3.14 Tax and Other Reports and Regulatory Matters
--------------------------------------------
The United States Securities and Exchange Commission (SEC) has issued an Order
Instituting Proceedings for a Cease and Desist order to be issued against
SpaceDev alleging the Company has made statement contained in press releases and
on the Company's web site including information published by the Company
relating to its projected revenues and earnings, the nature and status of the
Company's relationship with the National Aeronautics and Space Administration,
and the nature of the Company's relationship with an underwriter which violate
the securities laws. The SEC has requested an order issued against the Company
to cease and desist making these and similar statements. The Company disagrees
with the SEC's position and believes their position is without merit. A hearing
will be held before an Administrative Law Judge to determine the merits of the
allegations made by the SEC. The Company has issued a news release relating to
these matters which, along with the Order Instituting Proceedings issued by the
SEC are contained in the Disclosure Letter. The SIL Shareholders agree that they
have not relied on any information published by SpaceDev or any information
which is contained in the SEC Order Instituting Proceedings. The SIL
Shareholders have completed their own independent investigation of SpaceDev
prior to entering into this Agreement and have received and reviewed all
information they feel necessary regarding the SEC matter during their
investigation.
3.15 The liability of the SpaceDev Warrantors under this Agreement shall be
limited as follows:
-------------------
(a) there shall be disregarded for all purposes any breach of this
Agreement unless the amount of damages to which the SIL Shareholders
would otherwise be entitled is an amount in excess of $15,000;
(b) the SIL Shareholders shall not be entitled to recover any damages in
respect of any breach or breaches of the SpaceDev Warranties unless
the aggregate loss or damage amount in respect of all such breach or
breaches for which the SpaceDev Warrantors are liable exceeds
$15,000, in which event a claim in respect of the excess over $15,000
may be made;
(c) the maximum liability of SpaceDev in respect of the aggregate of all
the claims made by the SIL Shareholders in respect of any breach of
this Agreement shall not exceed two million five hundred thousand
dollars ($2,500,000). The maximum liability of the Guarantor in
respect of the aggregate of all the claims made by the SIL
Shareholders in respect of any breach of this Agreement shall not
exceed five hundred thousand dollars ($500,000).
3.16 SpaceDev may not bring any claim for breach of the provisions of this
Agreement unless written notice of the claim shall have been given to the
SpaceDev Warrantors accompanied by reasonable particulars of the claim,
including the amount of the claim:
(a) in the case of any claim under the SpaceDev Warranties, within 12
months of the date of this Agreement; and
(b) in the case of any other claim, within 3 months of the date of this
Agreement, provided that the liability of the SpaceDev Warrantors in
respect of any SpaceDev Warranty Claim shall absolutely terminate if
proceeding in respect of it have not been commenced with 2 months of
service of notice of that claim.
23
3.17 The SpaceDev Warrantors shall not be liable and no claim or claims shall
be made against them in respect of any SpaceDev Warranty Claim:
(a) if the fact, omission, circumstance or occurrence giving rise to or
forming the basis of the claim has been fairly disclosed to the SIL
Shareholders in the SpaceDev Disclosure Letter;
(b) to the extent that provision or allowance for the matter or liability
has been made in the SpaceDev Financial Statements or is otherwise
taken account of, or reflected in, the SpaceDev Financial Statements;
(c) to the extent that the claim would not have arisen but for a change
in legislation made after the date of this Agreement (whether
relating to taxation, rates of taxation or otherwise) or the
withdrawal of any extra-statutory concession previously made by the
IRS or other taxing authority (whether or not the change purports to
be effective retrospectively in whole or in part);
(d) if the matter giving rise to the claim is provided for under the
terms of this Agreement or carried out in the implementation of it;
(e) to the extent the liability of the SpaceDev Warrantors in respect of
the claim is affected by any voluntary act (other than in the
ordinary course of business of SpaceDev) of SpaceDev or of SIL
carried out on, or after the date of this Agreement;
(f) if the claim arises from any act, matter or thing done or omitted to
be done by SpaceDev or SIL at the request or with the approval of
SIL;
(g) if the claim arises from SpaceDev or SIL disclaiming any part of the
benefit of capital or other allowances against taxation claimed or
proposed to be claimed on or before the date of this Agreement of
which particulars have been given to SIL; or
(h) if the claim arises from any change in accounting policy or practice
of SpaceDev or SIL introduced or having effect after Closing.
3.18 If the SIL Shareholders become aware of a matter which could give rise to
a claim under the other provisions of this Agreement, the SpaceDev
Warrantors shall not be liable in respect of it unless written notice of
the relevant facts is given by the SIL Shareholders to the SpaceDev
Warrantors as soon as reasonably practicable and in any event within 30
days of the SIL Shareholders becoming aware of those facts.
24
3.19 Without prejudice to the SIL Shareholders' duty to mitigate any loss in
respect of any breach of the SpaceDev Warranties, any damages for such
breach shall be assessed on the basis of the diminution in value of the
SpaceDev Shares (which value shall not be taken to be greater than the
Consideration) directly attributable to the breach in question (after
taking into account all compensating factors) and not on the basis of the
loss of or cost to SpaceDev in respect of the matter giving rise to the
claim.
3.20 Without prejudice to any duty they may have at common law or otherwise,
the SIL Shareholders shall use all reasonable endeavors to mitigate any
loss or damage which they may suffer in consequence of any breach by the
SpaceDev Warrantors of the SpaceDev Warranties or other provisions of this
Agreement.
3.21 If in respect of any matter which could give rise to a breach of the
SpaceDev Warranties the SIL Shareholders, SpaceDev or SIL is entitled to
claim under any policy of insurance (or would have been so entitled had it
maintained in force the insurance cover current at Closing) no such matter
shall be the subject of a claim unless and until the SpaceDev or SIL shall
have made a claim against its insurers and the amount of such claim (or of
any claim which could have been made had such policies or their
equivalents been maintained in effect after Closing) shall then reduce or
extinguish any such claim.
3.22 If any claim for breach of any of the SpaceDev Warranties is based upon a
liability of SpaceDev which is contingent only, the SpaceDev Warrantors
shall not be liable to make any payment to the SIL Shareholders unless and
until such contingent liability becomes an actual liability and is
discharged.
3.23 If any of the SpaceDev Warrantors makes any payment by way of damages in
respect of a SpaceDev Warranty Claim (the "DAMAGES PAYMENT") and within 12
months of the making of the Damages Payment SIL or SpaceDev receives any
benefit otherwise than from that SpaceDev Warrantor which it would not
have received but for the circumstance giving rise to the claim in respect
of which the Damages Payment was made, the SIL Shareholders shall, once
they or SIL have received such benefit, forthwith repay to that SpaceDev
Warrantor the Damages Payment in so far as it does not exceed the value of
the benefit recovered from the third party.
3.24 Any liability of the SpaceDev Warrantors will take account of any
corresponding savings or benefits accruing to SpaceDev or SIL as a result
of the circumstances giving rise to the SpaceDev Warranty Claim. If any
provision in the SpaceDev Financial Statements for taxation proves to be
an over-provision, the amount of the over-provision will be set off
against any liability of the SpaceDev Warrantors under this Agreement.
3.25 Subject to the other provisions of this Article 3, it is hereby agreed
that each SpaceDev Warrantor shall have no liability in respect of any
claim made by the SIL Shareholders for breach of any of the provisions of
this Agreement if such claim or claims shall have arisen by reason of
fraud, dishonesty or deliberate non-disclosure on the part of any other
SpaceDev Warrantor.
25
ARTICLE 4
GENERAL
4.1 Amendments; Waivers.
--------------------
This Agreement and any schedule or exhibit attached hereto may be amended only
by agreement in writing of all parties. No waiver of any provision nor consent
to any exception to the terms of this Agreement shall be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.
4.2 Schedules; Exhibits; Integration.
---------------------------------
Each schedule and exhibit delivered pursuant to the terms of this Agreement
shall be in writing and shall constitute a part of this Agreement, although
schedules need not be attached to each copy of this Agreement. This Agreement,
together with such schedules and exhibits, constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements and understandings of the parties in connection therewith.
4.3 Best Efforts; Further Assurances.
---------------------------------
Except as otherwise expressly provided herein, each party will use its best
efforts to cause all conditions to its obligations hereunder to be timely
satisfied and to perform and fulfill all obligations on its part to be performed
and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be effected substantially in accordance
with its terms as soon as reasonably practicable. The parties shall cooperate
with each other in such actions and in securing requisite Approvals. Each party
shall execute and deliver both before and after the Closing such further
certificates, agreements and other documents and take such other actions as the
other party may reasonably request to consummate or implement the transactions
contemplated hereby or to evidence such events or matters.
4.4 Governing Law and Jurisdiction
------------------------------
(a) Any dispute, controversy or claim arising under, out of or relating to
this Agreement and any subsequent amendments of this Agreement, including
without limitation, its formation, validity, binding effect,
interpretation, performance, breach or termination, as well as
non-contractual claims, shall be submitted to a three member arbitration
tribunal which shall apply UNCITRAL rules.
26
(b) Both the claimant and respondent shall have the right to appoint one
arbitrator ("appointed arbitrators"). The appointed arbitrators shall have
the exclusive right and responsibility to jointly select one arbitrator to
serve with the appointed arbitrators on the tribunal and to act as the
chairperson of the proceedings.
(c) The choice of forum and the choice of law shall be the jurisdiction of the
respondent to the claim of action. All decisions rendered by the Tribunal
shall be binding upon the parties. The prevailing party shall be entitled
to reasonable attorney fees, costs and expenses, including the costs of
arbitration, incurred in connection with such action.
4.5 No Assignment.
--------------
Neither this Agreement nor any rights or obligations under it may be assigned
except that SpaceDev may assign its rights, and delegate its obligations,
hereunder (including but not limited to its rights under Article 1 to any
wholly-owned subsidiary of SpaceDev) and SpaceDev may assign this Agreement to
an affiliate to whom it has transferred the SIL shares.
4.6 Headings.
---------
The descriptive headings of the Articles, Sections and subsections of this
Agreement are for convenience only and do not constitute a part of this
Agreement.
4.7 Counterparts.
-------------
This Agreement any amendment hereto or any other agreement (or document)
delivered pursuant hereto may be executed in one or more counterparts and by
different parties in separate counterparts. All of such counterparts shall
constitute one and the same agreement (or other document) and shall become
effective (unless otherwise provided therein) when one or more counterparts have
been signed by each party and delivered to the other party.
4.8 Confidentiality.
----------------
All information disclosed in writing by any party (or its representatives) in
connection with the transactions contemplated by this Agreement to any other
party (or its representatives) shall be kept confidential by such other party
and its representatives and shall not be used by any such Persons other than as
contemplated by this Agreement, except to the extent that such information or
disclosure (i) was known by the recipient when received, (ii) is or hereafter
becomes lawfully obtainable from other sources, (iii) is necessary or
appropriate to disclose to a Governmental Entity or stock exchange having
jurisdiction over the parties, or (iv) may otherwise be required by law. If this
Agreement is terminated in accordance with its terms, each party shall use all
reasonable efforts to return upon written request from the other party all
documents (and reproductions thereof) received by it or its representatives from
such other party (and, in the case of reproductions, all such reproductions made
by the receiving party) that include information not within the exceptions
contained in the first sentence of this Section 4.8, unless the recipients
provide assurances reasonably satisfactory to the requesting party that such
documents have been destroyed.
27
4.9 Parties in Interest.
--------------------
This Agreement shall be binding upon and inure to the benefit of each party, and
nothing in this Agreement, express or implied, is intended to confer upon any
other Person any rights or remedies of any nature whatsoever under or by reason
of this Agreement. Nothing in this Agreement is intended to relieve or discharge
the obligation of any third person to any party to this Agreement.
4.10 Notices.
--------
Any notice or other communication hereunder must be given in writing and (a)
delivered in person, (b) transmitted by telex, telefax or other
telecommunications mechanism or (c) mailed by certified or registered mail,
postage prepaid, receipt request, as follows:
If to SpaceDev:
SpaceDev, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
(▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇▇▇▇▇
Popov, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
Facsimile ▇▇▇-▇▇▇-▇▇▇▇
If to SIL and the SIL Shareholders:
c/o Space Innovations Limited
The Paddock
Hambridge Road
Newbury
Berkshire
With a copy to:
▇▇▇▇▇ ▇▇▇▇-▇▇▇▇
Bird and Bird
Facsimile: ▇▇-▇▇▇-▇▇▇-▇▇▇▇
28
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 4.10 and an appropriate answer back is received; or (ii) if given by any
other means, when actually received at such address.
4.11 Expenses.
---------
The SIL Shareholders and SpaceDev shall each pay their or its own expenses
incident to the negotiation, preparation and performance of this Agreement and
the transactions contemplated hereby, including but not limited to the fees,
expenses and disbursements of their respective advisors, accountants and
counsel.
4.12 Remedies; Waiver.
-----------------
All rights and remedies existing under this Agreement and any related agreements
or documents are cumulative to and not exclusive of, any rights or remedies
otherwise available. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof, nor shall any
single or partial exercise preclude any further or other exercise of such or any
other right.
4.13 Knowledge Convention.
---------------------
Whenever any statement herein or in any schedule, exhibit, certificate or other
documents delivered to any party pursuant to this Agreement is made "to its
knowledge" or "to its best knowledge" or words of similar intent or effect of
any party or its representative, such person shall make such statement only
after conducting a diligent investigation of the subject matter thereof, and
each statement shall be deemed to include a representation that such
investigation has been conducted.
4.14 Representation by Counsel; Interpretation.
------------------------------------------
The SIL Shareholders, SpaceDev and the Guarantor respectively acknowledge that
each party to this Agreement has been represented by counsel in connection with
this Agreement and the transactions contemplated by this Agreement. Accordingly,
any rule of Law or any legal decision that would require interpretation of any
claimed ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived.
29
4.15 Severability.
-------------
If any provision of this Agreement is determined to be invalid, illegal or
unenforceable by any Governmental Entity, the remaining provisions of this
Agreement to the extent permitted by Law shall remain in full force and effect
provided that the economic and legal substance of the transactions contemplated
is not affected in any manner materially adverse to any party.
30
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed by its duly authorized officers as of the day and year first above
written.
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
------------------------------------
SIGNED by ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇ ▇▇▇▇▇ Heelas
/s/ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
31
/s/ ▇▇▇▇▇▇ Kit ▇▇▇▇▇ ▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇▇▇ Kit ▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
SIGNED by ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
SPACEDEV, INC.,
a Colorado corporation
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
By ▇▇▇▇▇ ▇▇▇▇▇▇, President
GUARANTOR
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
SIGNED in his capacity as Guarantor
by ▇▇▇▇▇ ▇▇▇▇▇▇
SPACE INNOVATIONS LIMITED
a United Kingdom Corporation
------------------------------------
Director
32
SCHEDULE A
SPACE INNOVATIONS LIMITED SHAREHOLDERS
--------------------------------------
NUMBER OF PERCENTAGE NUMBER OF
ORDINARY OF TOTAL SPACEDEV
SHARES OF 1(POUND) OUTSTANDING SHARES TO BE
NAME ADDRESS EACH SHARES ISSUED AT
IN THE OWNED CLOSING
COMPANY (rounded to the
nearest
hundredth)
---------------------------- ----------------------- ----------------- ---------------- -------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ 1,000 1.22% 12,195
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, 10,000 12.20% 121,951
▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇ ▇▇▇
Antony ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Peel Cottage, Butt Street, 10,000 12.20% 121,951
▇▇▇▇▇ Ludgershall, Andover,
Hants SP11 9QQ
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Greenfields, Water Lane, 10,000 12.20% 121,951
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, 4,000 4.88% 48,780
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, 10,000 12.20% 121,951
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ 4 ▇▇▇▇▇ Close, 6,000 7.32% 73,172
Wallingford, ▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ "Talisker", Graces Lane, 1,000 1.22% 12,195
Chieveley, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇ ▇▇▇
33
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, 5,000 6.10% 60,976
▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Wildhern 3,000 3.66% 36,586
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ Kit ▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ 10,000 12.20% 121,951
Kong
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 8 Amport Close, 1,000 1.22% 12,195
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ Lane, 10,000 12.20% 121,951
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, 1,000 1.22% 12,195
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇ ▇▇▇
TOTAL 82,000 100% 1,000,000
34
DISCLOSURES DISCLOSURE SCHEDULES
35
DISCLOSURE LETTER
-----------------
From: The SIL Warrantors
To: SpaceDev
1st October 1998
Dear Sirs
SPACE INNOVATIONS LIMITED (THE "COMPANY")
This letter is the Disclosure Letter referred to in clause 2.1 of the Common
Stock Exchange Agreement to be entered into today between the SIL Shareholders,
SpaceDev Inc ("PURCHASER"), ▇▇▇▇▇ ▇▇▇▇▇▇ and the Company, under which the
Purchaser is to purchase, and the SL Shareholders are to sell, all of the issued
share capital in the Company (the "AGREEMENT").
Unless the contrary intention appears. expressions defined in the Agreement have
the same meaning in this letter.
The warranties in Article 2 of the Agreement (the "WARRANTIES") are made and
given subject to the disclosures in this letter. The SIL Warrantors shall not be
or be deemed to be in breach of any of the Warranties (and no claim shall lie
for any breach of the Warranties) in respect of the matters disclosed in this
letter.
References in this letter to clause numbers are to clauses in the Agreement and
references to paragraph numbers are to paragraphs in the specified schedules to
the Agreement. For convenience, certain disclosures are set out against
particular clauses or paragraphs of particular schedules but any matter which is
disclosed, whether generally or by reference to a particular clause or
paragraph, is disclosed for the purpose of all the Warranties which will be
qualified accordingly.
Any disclosure of any matter or of any document shall not imply the existence of
any representation, warranty or undertaking not expressly given in the
Agreement.
Where any matter is disclosed in respect of a Warranty which is expressed to be
qualified by, or subject to a test of "materiality", the disclosure of that
matter does not imply that it is considered to be material for the purpose of
that Warranty and materiality shall not be construed by reference to any of the
matters disclosed in this letter.
GENERAL MATTERS
The following facts, matters or documents are deemed to have been disclosed in
this letter and the Purchaser is deemed to purchase the Company with full
knowledge and notice of such facts, matters or documents and of the effect of
all the contents and provisions of such documents:
(a) All information contained in the Agreement (including the recitals and
Schedules to it) and in the documents referred to in the Agreement as
being in the Agreed Terms.
(b) Any matter which is disclosed or expressed to be provided for or noted
in the audited accounts of the Company for the accounting period
ending December 1996, and the unaudited accounts for the accounting
period ending December 1997, and the unaudited management accounts for
the accounting period ending second quarter 1998.
(c) All information contained in:
(i) the documents contained in the files of documents supplied in
relation to the Purchasers' due diligence exercise (the "DUE
DILIGENCE DOCUMENTS") which documents are listed in Schedule 1
to this letter; and
(ii) the disclosure documents ("DISCLOSURE DOCUMENTS") which
documents are listed in Schedule 2 to this letter;
The Due Diligence Documents and the Disclosure Documents form part of
this letter as if they were expressly set out in it. In the event of
any inconsistency between the contents of any Due Diligence Document
or Disclosure Document and any reference to it or summary of it in
this letter, the provisions of the Due Diligence Document or
Disclosure Document are to be taken as correct unless the contrary is
stated. The Due Diligence Documents and the Disclosure Documents
constitute all written information which has been supplied to the
Purchaser or to any of its advisers in the course of negotiation of
the Agreement and any Warranty referring to written information is
therefore given on the basis that it refers only to the documents set
out in Schedules 1 and 2. In the event of any inconsistency between
any of the statements contained in any Disclosure: Document or Due
Diligence Document, the most recently made statement shall be taken as
being correct unless expressly stated in this letter.
(d) All matters in the Memorandum and Articles of Association of the
Company.
(e) All matters which would have been revealed by inspection of the
Statutory Books or the Minute Books of the Company.
(f) All information contained on the files maintained by the Registrar of
Companies in respect of the Company.
(g) All information relating to the Company which is on public record or
which is otherwise in the public domain.
(h) All information and matters:
(i) which are apparent or which should have been apparent from the
title deeds of the Properties; or
(ii) which are disclosed in Replies to Enquiries; or
(iii) which appear on the Register of Title of H.M. Land Registry,
the Registers maintained under the Land Charges ▇▇▇ ▇▇▇▇, any
Local Land Charges Register maintained by any local authority
in whose district any of the Properties is situated, or by any
other searches and. enquiries which would be undertaken by a
prudent purchaser of the Properties; or
(iv) which would be disclosed by a physical inspection of the
Properties,
whether or not such investigations, searches, enquiries and
inspections have been made.
(i) All matters which would be disclosed by a physical inspection of the
plant, equipment and machinery of the Company and its stocks of raw
materials, work in progress and finished goods.
(j) All information in written correspondence or documents up to and
including the date of this letter passing from the SIL Shareholders or
the Company (including via its agents or advisors) to the Purchaser or
its agents or its advisers and all enclosures to such correspondence.
(k) All matters on public record at any Patent Registry, Trade ▇▇▇▇
Registry or Registered Design Registry anywhere in the world.
SPECIFIC MATTERS
The following specific matters are disclosed. References in the margin are to
the Warranties contained in the corresponding clause numbers in Article 2 of the
Agreement. A document number in square parentheses is the number of the Due
Diligence Document or Disclosure Document listed in Schedule 1 or 2 to this
letter respectively:
2.7(a) FINANCIAL STATEMENTS.
---------------------
DISPUTE WITH BEGBIES TRAYOR
---------------------------
The 1997 financial accounts are only at 'draft' status because of an
unresolved dispute between SIL and Begbies ▇▇▇▇▇▇▇, who are the joint
administrative receivers of Satellites International Limited, the
company whose assets and business were purchased by SIL in June 1996.
Schedule 2 Disclosure Documents [1] and [2] refer. As part of the
original agreement. SIL purchased the goodwill of the company under a
complex formula, where the goodwill was defined as the amount of
excess profit accruing from the total of all pre-existing contracts
over and above a predefined threshold. SIL made payments to the
receiver over a period of time in respect of this expected goodwill,
amounting to (pound)21,197. However, as time went on, it became
apparent that there was no excess profit and hence no goodwill.
Accordingly, SIL has demanded that the (pound)21,197 paid to the
receiver should be repaid. At the time of disclosure, the current
position is that the receiver has refused to pay back this amount. It
is possible that in order to reduce legal charges, a compromise may be
reached in due course, whereby the receiver pays back only a portion
of the amount in dispute. The resolution of this matter has a direct
bearing on the financial accounts for 1997.
CASH FLOW SITUATION
-------------------
As explained in the Business, Plans, Schedule 1 documents [1] and [2],
SIL has long been in need of a cash flow buffer, with an amount of
(pound)300k being suggested as appropriate to the type of business
undertaken by the company. One of the principal factors taken into
account by the SIL shareholders in pursuing the Agreement with
SpaceDev was the undertaking by SpaceDev to provide such a buffer.
Prior to completion of the Agreement, SpaceDev has provided $80k as an
unsecured loan. On completion of the Agreement, SIL has an immediate
need of a further $150k in order to help smooth out the uneven cash
flow which is inherent in this type of business. Both these amounts
are seen as part of the $2M which will be provided by SpaceDev over
the acquisition period.
BANK OVERDRAFT FACILITY
-----------------------
SIL has recently changed bankers to Lloyds Bank in Newbury. The bank
has agreed an unsecured overdraft facility of (pound)50,000 in
accordance with the overdraft facility letter included in Schedule 2,
Document [3]. At present the Bank has agreed verbally to increase the
overdraft to (pound)100k until the end of September 1998. There is
currently no agreement for this increase to be retained beyond this
date. This is one of the reasons for the cash injection requirement
described above.
FINANCIAL FORECASTS
-------------------
The financial forecasts included in the Business Plans, Schedule 1
Documents [1] and [2], are based on an assessment of the potential
market for SIL's products and do not necessarily reflect what is
likely to be achieved due to the constraints resulting from limited
resources in terms of manpower, equipment and facilities. The cash
infusion from SpaceDev should minimise these constraints.
2.7(b) NO MATERIAL ADVERSE CHANGES
---------------------------
CONTRACT CHANGES
----------------
There have been a number of changes to current contracts, mostly
involving extension to delivery times. None of these has been, or is
expected to be, contentious, but for completeness the contracts
involved are:
Ref Customer Work Change
--- -------- ---- ------
506 Alcatel ▇▇▇▇ K-band modem chipset Time extension
539 ESTEC CST S-Band transponder Time extension
▇▇▇ ▇▇▇▇▇ ▇▇ ▇-▇▇▇▇ transmitter Time extension
557 CONAE 3W X-band transmitter Time extension
620 DASA DST modem Time extension
689 Alcatel ▇▇▇▇ K-band modem board Time extension
690 Verhaert Spacecraft sub-systems Time extension
725 CAL S-band transponder fot ▇▇▇▇▇▇▇ Time extension
551 CRTS Antenna Auto-tracking Reqmt waived
2.7(c) NO OTHER LIABILITIES OR CONTINGENCIES.
--------------------------------------
CURRENT LIABILITIES
-------------------
Current liabilities in excess of $10,000.00 to which commitments exist
over and above normal supplier terms of credit, and orders which have
been placed in excess of this figure are:
Supplier Work Amount
-------- ---- ------
Garfield ASIC design and manufacture (pound)105,950
Dornier Replacement of test equipment (pound)9,354
ITC Commission payments (pound)27,872
Hewlett Packard Supply of test equipment (pound)20,660
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Subcontract services (pound)20,606
Pensions Arrears (pound)11,345
Back Pay Withheld from Directors (pound)25,515
Taxes:PAYE/NI Arrears (pound)54,819
Government Loan Loan under UK Government-backed (pound)36,111
Small Firms Loan Guarantee Scheme.
Debenture currently held by Barc1ays
Bank, in process of transferring it to
Lloyds Bank.
2.8 TAX AND OTHER RETURNS AND REPORT
--------------------------------
DISTRAINT ORDER
---------------
In June 1998 the Inland Revenue issued a Distraint Order against
certain material assets of the Company against overdue 1997/8 PAYE and
National Insurance payments. This order was satisfied and fully
discharged in August 1998. The Tax Office has agreed to provide
written confirmation that this has been done. This confirmation will
be sent to SpaceDev as soon as it is available.
TAX AUDIT
---------
HM Customs and Excise and Inland Revenue Tax Inspectors have carried
out their standard statutory tax audits following the Management
Buy-Out of the original company, Satellites International Limited, in
June 1996. No anomalies were found or recorded.
2.9 MATERIAL CONTRACTS
------------------
All material obligations under all Material Contracts have been or are
being performed with the exception of some delays in delivery dates as
specified in 2.7(b) above.
2.18 EMPLOYEE BENEFITS
-----------------
SIL provides the following benefits to its employees:
PRIVATE HEALTH INSURANCE provided by BUPA
PENSIONS under a group personal pension scheme
COMPANY VEHICLES provided to two Directors
DEATH IN SERVICE provided to beneficiary at 4x annual salary
2.19 CERTAIN INTERESTS; DIVIDENDS
----------------------------
The following persons have personal loans invested in SIL, to which,
the Company has a liability for repayment as follows:
Name Principal Sum Loaned
---- --------------------
▇. ▇▇▇▇▇▇▇▇ (pound)12,000
▇.▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ` (pound)10,000
▇. ▇. ▇▇▇▇▇▇▇▇ (pound)10,000
▇.▇. ▇▇▇▇▇▇▇ (pound)11,000
▇.▇. ▇▇▇▇▇▇▇▇ (pound)5,000
A.K. ▇▇▇▇ (pound)10,000
Kindly acknowledge receipt of this letter and all the documents set out in
Schedules 1 and 2 of this letter by signing and returning to us the enclosed
acknowledgement:
Yours faithfully
/s/ A.K. ▇▇▇▇
A.K. ▇▇▇▇
for and on behalf of the SIL Warrantors
SCHEDULE 1
----------
DUE DILIGENCE DOCUMENTS
-----------------------
1. Business Plan for Investment in SIL, Ref SIL-BP2, Issue 1, 24 Nov 1997.
2. Addendum to Business Plan for Investment in SIL, Ref SIL-BP2/ADD1, Issue
1, 31 March 1998.
3. All email enquiries and responses between SpaceDev and SIL during the
negotiation period.
SCHEDULE 2
----------
DISCLOSURE DOCUMENTS
--------------------
1. Draft 'Letter Before Action', Ref. LVM\43 SPACI, dated 4 Sept 1998,
concerning the dispute between SIL and the Solicitors acting for Begbies
▇▇▇▇▇▇▇ who are acting as the joint administrative receivers of
Satellites International Limited, the company whose assets and business
were purchased by SIL in June 1996.
2. Letter from SIL to their solicitors instructing them formally to issue
the letter before action.
3. Overdraft Facility letter from Lloyds Bank, Ref PCR/SS dated 18 August
1998.
From: SpaceDev
To: The SIL Warrantors
We acknowledge receipt of your Disclosure Letter dated 30th September 1998 and
of the copy documents listed in the attached schedules.
.......................................
Dated September 1998
DRAFT LETTER
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
[DX: ]
4 September 1998
BY FAX AND BY DX
Dear Sirs
SATELLITES INTERNATIONAL LIMITED (IN ADMINISTRATIVE RECEIVERSHIP)
We act for Space Innovations Limited ("SIL"). who purchased the assets and
business of Satellites International Limited ("the Company") on 30 May 1996 from
your clients, D.R.F Sapte and ▇.▇ ▇▇▇▇▇▇ of Begbies ▇▇▇▇▇▇▇, acting as joint
administrative receivers of the Company.
A dispute has arisen between our respective clients as to the consideration to
be paid for the goodwill of the Company. It is our client's position that the
goodwill of the Company has nil value and therefore the full amount of
(pound)21,196.94 which it has paid on account of the purchase of the goodwill
should be reimbursed by your client.
THE RELEVANT CONTRACTUAL CAUSES
THE SALE AGREEMENT
By an Agreement dated 30 May 1996 between the Company and a shelf company which
is now SIL ("the Sale Agreement"), the Company agreed to transfer to our client
such right, title and interest as it might have in the Company and certain of
the Company's assets. The Vendor is defined as the Company acting by its Joint
Administrative Receivers and the Purchaser is the shelf company which is now
SIL. The following clauses of the Sale Agreement are relied on by our client:
(i) Clause 1.1:-
""Assets" Collectively the Contracts, the Goodwill,..."
(ii) Clause 2.1:-
Continued..../
"Subject to the provisions of this Agreement, the Vendor shall sell,
and the Purchaser shall purchase, with effect from the Transfer Date,
such right title and interest as the Vendor may have in the Business
and the Assets..."
(iii) Clause 3.1:-
"The consideration for the sale, and purchase, and for the licences
and other facilities mentioned below; shall be agreed between the
Vendor and the Purchaser or, failing that, under clause 24 and; when
so agreed or determined, shall be payable by the Purchaser on demand
by the Vendor."
THE SUPPLEMENTAL AGREEMENT
By a Supplemental Agreement dated 6 June 1996 between the Company and the same
shelf company which is now SIL ("the Supplemental Agreement"), the method by
which the goodwill of the Company would be calculated and purchased was agreed.
The following clauses of the Supplemental Agreement are relied on by our client:
(i) Clause 2:-
""New contracts Vendor's Amounts" The lesser of(pound)20,000 and an
amount equal to the aggregate of
the amount set out in column 8
(WIP) of the final schedule
prepared by the Purchaser to
Clause 3.1.2 of Schedule 1
hereto in the form of the pro
forma calculation set out in
Schedule 3 hereto: ["NCVA"]"
""Vendor's Amounts" The lesser of (pound)43,590 and an
amount equal to the aggregate of
the amounts to be set out in
column 8 (WIP) of the final
schedule prepared by the
Purchaser pursuant to Clause
3.1.1 of Schedule 1 hereto in the
form of the pro forma
calculation set out in Schedule 2
hereto, ["VA"]"
The NCVA and the VA are therefore to be calculated pursuant to the pro forma
calculations respectively set out in Schedules 2 and 3 to the Supplemental
Agreement on the basis of the aggregate amounts set out in column 8 (WIP) of the
final schedules.
-2- Continued..../
(ii) Schedule 1 Clause 3 provides that SIL shall provide to your client:
"on or before the day 14 days after the end of each three month
period after the Transfer Date (the first such date being 12
September 1996):
3.1.1 a Schedule in the form of Schedule 2 hereto showing the
position as at the previous month end including the position on
the WIP contract's performance costs;
3.1.2 a Schedule in the form of Schedule 3 showing the position
as at the previous month end including the position on the New
Contract's Performance Costs".
This is consistent with the definitions of NCVA and VA set out above.
(iii) The consideration for the Sale and Purchase of the Goodwill of the
Company is calculated under Clause 2.2 as follows:
"In respect of the Goodwill the sum of (pound)1 plus the Vendor's
Amounts as at 30 November 1997 and plus the New Contracts
Vendor's Amounts as at 30 November 1997 subject to and as
calculated and payable in accordance with Schedule 1 hereto".
In addition, Schedule 1 Clause 2 provides that:-
"The Purchaser shall pay to the Vendor as consideration for the
Goodwill (pound)1 plus a sum equal to the aggregate at the
Vendor's Amounts as at 30 November 1997 and the New Contracts
Vendor's Amounts as at 30 November 1997 calculated and payable in
accordance with Clause 4 of this Schedule 1"
OUR CLIENT'S CLAIM
1. CLAUSE 2.2
It is our view that, Clause 2.2 is subject to Schedule 1 Clause 2. Therefore,
even though Clause 2.2 does not explicitly state that the goodwill of the
Company is comprised of the sum of (pound)1 plus a sum equal to the aggregate
value of the NCVA and VA as at 30 November 1997, this is implicit because
Schedule 1 Clause 2.2 provides for an aggregation of the NCVA and the VA as at
that date.
It is also our view that either or both the NCVA or the VA may have a negative
value on the basis that the pro forma calculations set out in Schedules 2 and 3
of the Supplemental Agreement in relation to the NCVA and the VA respectively
contain negative values for a number of the amounts shown in column 8 (WIP) of
those Schedules.
The final schedule for the NCVA prepared pursuant to Clause 2 of the
Supplemental Agreement shows the aggregate of the figures in column 8 (WIP) as
(pound)42,021.
-3- Continued..../
However, the amount for the NCVA has been capped at (pound)20,000 by that
Clause.
The final schedule for the VA prepared pursuant to Clause 2 of the Supplemental
Agreement shows the aggregate of the figures in column 8 (WIP) as minus
(pound)22,843. As set out above, it is possible for this amount to be a negative
value.
The sum equal to the aggregate of these two amounts ((pound)20,000 + minus
(pound)22,343) is minus (pound)2,843.
The consideration for the purchase of the goodwill of the Company pursuant to
Clause 2,2 is therefore calculated as follows:
consideration provided for (pound)
in clauses 2,2 and
Schedule 1 Clause 2 1
sum equal to the aggregate
of the NCVA and VA as at
30 November 1997 (2,843)
TOTAL (2,842)
It is therefore our client's position that the Company has no goodwill and that
the consideration for the purchase of the goodwill of the Company pursuant to
Clause 2.2 is nil.
2. SCHEDULE 1 CLAUSE 4
As set out above Schedule 1 Clause 2 provides that the sum equal to the
aggregate of the NCVA and VA is:-
"Calculated and payable in accordance with Clause 4 of Schedule 1."
Schedule 1 Clause 4.1.1 provides that:-
"The Purchaser shall make payments on account to the Vendor in six
equal three monthly installments, the first such instalment being paid
on 12 September 1996, and the subsequent instalments being paid at
three monthly intervals thereafter."
Schedule 1 Clause 4.1.2 provides that:
"The amount of each instalment shall be (pound)3,632.50 in respect of
the Vendor's Amount and (pound)1,666.66 in respect of the New Contracts
Vendor's Amounts".
Schedule 1 Clause 4.1.3 provides that:
"The balance of the Vendor's Amounts and the New Contracts Vendor's
Amounts shall be paid by the Purchaser to the Vendor or reimbursed by
the Vendor to the Purchaser (as appropriate) on the date 28 days after
the last of
-4-
the six three month periods referred to above".
Schedule 1 Cause 4.2 then sets out a number of factors which may affect the
payment of the instalments under Schedule 1 Clause 4.1. The only provision of
Schedule 1 Clause 4.2 which our client relies upon is 4.2.1:
"if either of the schedules produced by the Purchaser pursuant to
clauses 3.1.1 and 3.1.2 of this Schedule 1show a position where the
aggregate total of column 8 is less than (pound)21,795 in the case of
that produced pursuant to clause 3.1.1 or is less than (pound)10,000
in the case of that produced pursuant to clause 3.1.2, the Purchaser
shall be entitled to suspend payment of the relevant instalments."
Pursuant to this clause our client withheld two instalments to be paid under
Schedule 1 Clause 4.1.2.
It is our view that the provisions for payment of the NCVA and the VA in
Schedule 1 Clauses 4.1 and 4.2 are consistent with the method of calculating the
consideration for the purchase of the goodwill of the Company under Clause 2.2
and Schedule 1 Clause 2.
Schedule 1 Clause 4.1.2 differentiates between the amount of each instalment to
be paid for the NCVA and the VA respectively. This does not prevent the
aggregation of the two amounts once the final schedules have been produced
pursuant to Clause 2. Further, Schedule 1 Clause 4.1.3 provides that the balance
of the VA and the NCVA shall be paid by the Purchaser to the Vendor or
reimbursed by the Vendor to the Purchaser "as appropriate". The use of the word
"balance" in the singular implies that one amount will either be paid by the
Purchaser or reimbursed by the Vendor when the final schedules have been
produced. The words "as appropriate" suggest that a further payment will be made
by the Purchaser if the balance of the NCVA and the VA is more than the amount
paid on account or that the Vendor will reimburse the Purchaser where the amount
paid on account is more than the balance of the NCVA and the VA. This Supports
our view that the NCVA and the VA are to be aggregated to calculate the
consideration to be paid under clause 2.2.;
THE GROUNDS FOR OUR CLIENT'S CLAIM
It is our view that our client is entitled to reimbursement of the full amount
of (pound)21,196.64 which they have paid on account for the purchase of the
goodwill of the Company.
There are two grounds on which our client's claim for the reimbursement of the
full amount paid on account is based:-
(i) As the goodwill of the Company is nil, as calculated above,
your client is under a contractual obligation pursuant to
Schedule 1 Clause 4.1.3 to reimburse to our client the full
amount it has paid on account of the purchase of the goodwill.
Your client is in breach of that obligation.
(ii) Pursuant to Clause 2,1 of the. Sale Agreement your client is
under a
-5-
contractual obligation to sell its right, title and interest
in the assets of the Company, which includes its goodwill. Our
client has paid (pound)21,196.64 on account of the purchase of
the goodwill. The Company has no goodwill therefore our client
has received nothing in return for this payment. Your client
is therefore in breach of its obligations under, inter alia,
Clause 2.1 of the Sale Agreement.
Please confirm that within 14 days of the date of this letter that your client
will reimburse the full amount of (pound)21,196.64 to our client plus interest
under Clause 7 of the Supplemental Agreement. In the event that we do not
receive your confirmation by the above time limit we will advise our client to
commence proceedings against your client. -
Yours faithfully
-6-
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇
▇▇ ▇▇ ▇▇▇
▇▇▇▇▇▇▇
[SIL logo] Tel: ▇(▇▇) ▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇(▇▇) ▇▇▇▇▇ ▇▇▇▇▇▇
+(44) (▇) ▇▇▇▇ ▇▇▇▇▇
SPACE INNOVATIONS LIMITED Fax: +(44) (▇) ▇▇▇▇ ▇▇▇▇▇
E-mail: ▇▇▇▇@▇▇▇.▇▇▇
Web Site: ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇/
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 22 September 1998
BIRD & BIRD
Solicitors Our ref: AKW/GS
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Dear ▇▇ ▇▇▇▇▇▇,
SATELLITES INTERNATIONAL LIMITED (IN ADMINISTRATIVE RECEIVERSHIP)
Thank you for your letter of 4 September with the draft letter before action.
The Board has now reviewed these letters and decided that we should instruct you
formally to issue the letter before action - we have no comments on the draft.
I look forward to your confirmation that the letter has been sent and to
receiving a copy.
Many thanks.
Yours sincerely,
/s/ A.K. ▇▇▇▇
A.K. ▇▇▇▇
Managing Director.
Registered in England No 3193413 - Registered Office as above
Lloyds Bank Plc
Lloyds Bank Third floor
Commercial ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Telephone: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax: ▇▇▇▇▇ ▇▇▇▇▇▇
The Directors
Space Innovations Limited
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Your Ref: OurRef: PGR/SS 18 August, 1998
Dear Sirs
OVERDRAFT AND OTHER FACILITY
We Lloyds Bank Plc (the "Bank") are pleased to offer to Space Innovations
Limited an overdraft facility on account number ▇▇▇▇▇▇▇ on the following terms
and conditions.
AMOUNT
The maximum aggregate amount outstanding under the facility at any one time
(calculated on the basis of cleared funds) shall not exceed (pound)50,000.
AVAILABILITY
Any amounts from time to time owing under to facility are repayable on demand
but it is the Bank's present intention to make the facility available until 28
February, 1999. All moneys from time to time owing to the Bank under this
facility shall be repaid no later than this date or such later date as may from
time to time be advised in writing by the Bank. The amounts owing at any time
may include interest, costs or charges debited to the account in accordance with
the terms of this letter.
INTEREST
Interest is calculated on the cleared daily balance of the account and will- be
payable on amounts owing up to the aforesaid limit at 3 1/2% per annum over the
Bank's Base Rate from time to time (currently 11% per annum in total).
Interest will be payable on amounts owing in excess of the agreed limit at
Lloyds Bank Unauthorised Overdraft Rate (presently 13%).
Interest will be debited to the account monthly in arrears (normally on the 19th
of each month or on the next working day) and additionally on the date upon
which the facility ceases to be available.
-2-
The Bank's Base Rate may be varied (either up or down) by the Bank at any time.
Notice of changes will be displayed in the branch of the Bank where your account
is held.
COSTS AND CHARGES
Charges will be payable on the account monthly as follows:
70p per entry.
These charges will be debited to the account and may be varied by the Bank at
any time and notice of changes will be advised to you.
The following fees are payable.
Arrangement fee (pound) 500 (to be taken on return of the Facility Letter)
Security fee (pound) 190 (to be taken on perfection of the security)
All costs and expenses incurred by the Bank in creating the security referred to
below in excess of the security fee shall be debited to the account under advice
to you.
All costs and expenses incurred by the Bank in preserving or enforcing the
security referred to below shall be debited to the account under advice to you.
SECURITY
It is a condition of the facility and of the Other Facility referred to below
that amounts owing shall be secured by the following. Any security which is not
already in place is to be provided to the Bank in a form acceptable to the Bank.
An unlimited debenture from the Company.
A deed of postponement of Directors Loan of (pound)10,000 from Antony ▇▇▇ ▇▇▇▇.
A deed of postponement of Directors Loan of (pound)10,000 from ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
A deed of postponement or Directors Loan of (pound)11,000 from ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇.
A deed of postponement of Directors Loan of (pound)10,000 from ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇.
A deed of postponement of Directors Loan of (pound)5,000 from ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇.
FINANCIAL INFORMATION
Whilst the facility or the Other Facility remain available you should provide to
the Bank copies of any financial information that the Bank may from time to time
reasonable request, including:
(a) your audited annual accounts, and
-3-
(b) your monthly management accounts, to include aged debtor analysis,
as soon as possible after the end of the period to which they relate which shall
not be later than 150 days in respect of your annual accounts or 30 days in
respect of your management accounts from the end of each relevant period.
(c) The figures so provided should demonstrate that the Company's. good book
debts under 90 days equal or exceed 400% of the Company's liability to the Bank.
OTHER FACILITY
In addition to the overdraft facility we are pleased to offer to you a Telepay
facility of (pound)100,000 to cover sterling payment instructions telephoned by
you to agents of the Bank in order for the payments to be made by automated
means. The limit detailed above is the maximum total value of such instructions
for payment during any one month.
This additional facility will be available upon such terms and conditions as
shall from time to time be specified by the Bank and may be cancelled by the
Bank at any time, but it is the Bank's present intention to keep this facility
in place for the period of availability of the overdraft facility. Your
liability in respect of any utilisation of this facility may, however, extend
beyond such period of availability.
PERIOD OF OFFER
Please confirm your acceptance of the facilities offered by returning the
attached duplicate of this letter with the acknowledgement signed in accordance
with the bank mandate currently held by Bank. If such confirmation is not
received by Lloyds Bank Commercial Service, Newbury office by 8 September, 1998,
the offer will lapse.
Your faithfully
For and on behalf of Lloyds Bank Plc
/s/ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
Manager
Enc
EXHIBIT "A"
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
August 6, 1998
ADMINISTRATIVE PROCEEDING
File No. 3-9668
In the Matter of ORDER INSTITUTING PUBLIC
Spacedev, Inc. CEASE-AND-DESIST
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, PROCEEDINGS PURSUANT TO
SECTION 8A OF THE
Respondents. SECURITIES ACT OF 1933
AND SECTION 21C
OF THE SECURITIES
EXCHANGE ACT OF 1934
I.
The Securities and Exchange Commission ("Commission") deems it
appropriate and in the public interest that public cease-and-desist proceedings
be, and they hereby are, instituted pursuant to Section 8A of the Securities Act
of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of
1934 ("Exchange Act") against Spacedev, Inc. ("Spacedev") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
("▇▇▇▇▇▇").
II.
As the result of an investigation, the Division of Enforcement ("the
Division") alleges that:
A. Spacedev, Inc. is a publicly-held Colorado corporation headquartered in San
Diego, California. Spacedev is the surviving corporation of the October 1997
merger between a privately-held, Colorado-based holding company named Spacedev,
LLC, and a Colorado shell company named Pegasus Development Group, Inc. In
approximately April 1998, Spacedev made a public offering of its stock pursuant
to Rule 504 of Regulation D under the Securities Act. At all relevant times
Spacedev's common stock was quoted on the OTC Bulletin Board.
B. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, age 53, who maintains residences in both Virginia and
Colorado, has been chairman of Spacedev's board of directors since the company's
inception.
C. Spacedev proposes to engage in the business of commercial space exploration
and development. The company intends to construct and launch an unmanned
spacecraft (the Near Earth Asteroid Prospector or "NEAP") to a targeted near
earth asteroid for the purpose of collecting scientific data. Spacedev intends
to obtain revenue from this project by selling space on the NEAP module to
scientists seeking to transport their own instruments to the asteroid, and by
selling data obtained by instruments attached to the NEAP module by Spacedev.
Spacedev plans to launch the NEAP module no earlier than 2000.
D. From about January 1998 through June 1998, ▇▇▇▇▇▇ and Spacedev violated
Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and
Rule l0b-5 thereunder in that, directly or indirectly, in or in connection with
the offer, purchase or sale of securities by use of the means or
instrumentalities of transportation or communication in interstate commerce or
by use of the mails, they employed devices, schemes or artifices to defraud;
obtained money or property by means of untrue statements of material facts or
omissions to state material facts necessary in order to make the statements
made, in the light of the circumstances under which they were made, not
misleading or engaged in transactions, practices, or courses of business which
would or did operate as a fraud or deceit upon the sellers and purchasers of
securities, namely common stock of Spacedev.
E. As a part of and in furtherance of the conduct described above in
subparagraph II.D., from approximately January 1998 through June 1998, in press
releases, a newsletter, and over the internet, Spacedev and ▇▇▇▇▇▇ made untrue
statements of material facts and omitted to state material facts to the public,
to investors and to prospective investors, including those in the Rule 504
offering. In this regard, Spacedev and ▇▇▇▇▇▇:
1. Projected for 1998 revenues of $l0 million and earnings of $2
million. These projections had no reasonable basis and were false and misleading
because ▇▇▇▇▇▇ and Spacedev did not disclose numerous contingencies to its
revenue projections, such as the need for approval of its potential customers'
projects by the National Aeronautics and Space Administration ("NASA");
2. Falsely stated that Spacedev had an agreement with NASA for the use
of its Deep Space Network, a satellite communication system necessary to
accomplish Spacedev's NEAP mission; and
3. Misrepresented the nature of Spacedev's financing agreement with a
broker-dealer, and continued to publicly assert the existence of the agreement
after it was terminated.
III.
In view of the allegations made by the Division, the Commission deems
it necessary and appropriate in the public interest that public cease and desist
proceedings be instituted to determine:
A. Whether the allegations set forth in Section II hereof are true and, in
connection therewith, to afford the Respondents an opportunity to establish any
defenses to such allegations; and
2
B. Whether, pursuant to Section 8A of the Securities Act and Section 21C of the
Exchange Act, the Respondents should be ordered to cease and desist from
committing or causing violations of and any future violations of Section 17(a)
of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5
thereunder.
IV.
IT IS HEREBY ORDERED that a public hearing for the purpose of taking
evidence on the questions set forth in Section III hereof be convened not
earlier than thirty (30) days and not later than sixty (60) days from service of
this Order, at a time and place to be fixed, and before an Administrative Law
Judge to be designated, by further Order as provided by Rule 200 of the
Commission's Rules of Practice, 17 C.F.R. ss. 201.200.
IT IS FURTHER ORDERED that Respondents file an Answer to the
allegations contained in this Order within twenty (20) days after service upon
them of said Order as provided by Rule 220 of the Commission's Rules of
Practice, 17 C.F.R. ss. 201.220.
If a Respondent fails to file the directed Answer or fails to appear
at a hearing after being duly notified, he may be deemed in default and the
proceedings may be determined against him upon consideration of the Order, the
allegations of which may be deemed to be true as provided by Rules 155(a), 310
and 220 of the Commission's Rules of Practice, 17 C.F.R. ss.201.155(a), 201.310,
and 201.220.
This Order shall be served upon the Respondents personally or by
certified mail forthwith.
In the absence of an appropriate waiver, no officer or employee of the
Commission engaged in the performance of investigative or prosecuting functions
in this or any factually related proceeding will be permitted to participate or
advise in the decision upon this matter except as witness or counsel in
proceedings held pursuant to notice. Since this proceeding is not "rule making"
with the meaning of Section 4(c) of the Administrative Procedure Act, it is not
deemed subject to the provisions of that Section delaying the effective date of
any Commission action.
By the Commission.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Secretary
3
SERVICE LIST
------------
Rule 141 of the Commission's Rules of Practice provides that the
Secretary, or another duly authorized officer of the Commission, shall serve a
copy of the Order Instituting Public Cease-and-Desist Proceedings Pursuant to
Section 8A of the Securities Act of 1933 and Section 21C of the Securities
Exchange Act of 1934 on each person named as a party in the order and their
legal agent.
The attached Order Instituting Public Cease-and-Desist Proceedings
Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the
Securities Exchange Act of 1934, has been sent to the following parties and
other persons entitled to notice:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Administrative Law Judge
Securities and Exchange Commission
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇ ▇▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Division of Enforcement
Securities and Exchange Commission
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Branch of Regional Office Assistance
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇ ▇-▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Securities and Exchange Commission
Central Regional Office
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Spacedev, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Spacedev, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, Esq.
Popov, McCulldgh & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attorney for Respondents
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and Spacedev, Inc.
SpaceDev logo
Headquarters
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇.▇▇▇.▇▇▇▇ fax: ▇▇▇.▇▇▇.▇▇▇▇
International Business Development ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇.▇▇▇.▇▇▇▇ fax: ▇▇▇.▇▇▇.▇▇▇▇
▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇ ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇
FOR IMMEDIATE RELEASE: August 10,1998
CONTACT: ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President
CEO ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Account Executive
SpaceDev, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇▇ Associates, Inc.
(▇▇▇) ▇▇▇-▇▇▇▇ (▇▇▇) ▇▇▇-▇▇▇▇
SPACEDEV CEO ISSUES STATEMENT ON SEC INQUIRY
San Diego, CA - ▇▇▇ ▇▇▇▇▇▇, SpaceDev (OTC BB: SPDV) founder and president,
responded today to a Securities and Exchange Commission (SEC) administrative
proceeding filed on Thursday, August 6, 1998.
"SpaceDev was disappointed to learn that the SEC has decided to institute an
administrative proceeding," said ▇▇. ▇▇▇▇▇▇. "While the Company disagrees with
the views expressed by the SEC in its Order Instituting Proceedings, the Company
had attempted to resolve the issues raised by the SEC through a settlement. The
Company now intends to vigorously contest the SEC's allegations."
▇▇. ▇▇▇▇▇▇ compared today's action by the SEC to "shooting at ants with an
elephant gun," and expressed confidence that ultimately the SEC's case would be
dismissed and that the Company would be vindicated.
SpaceDev, the world's first commercial space exploration and development
company, intends to launch the first privately financed spacecraft to land on
another planetary body. SpaceDev is selling rides for scientific instruments to
governments and companies to transport their instruments and experiments,
through deep space to a near earth asteroid. SpaceDev intends to sell the data
acquired by its instruments as commercial products. Colorado-based SpaceDev has
offices in San Diego, CA and Washington, D.C.
EXCEPT FOR HISTORICAL FINANCIAL INFORMATION CONTAINED HEREIN, THE MATTERS SET
FORTH IN THIS RELEASE ARE FORWARD-LOOKING STATEMENTS THAT ARE DEPENDENT ON
CERTAIN RISKS AND UNCERTAINTIES INCLUDING BUT NOT LIMITED TO SUCH FACTORS AS
MARKET DEMAND PRICING, AND CHANGES IN WORLDWIDE ECONOMIC CONDITIONS.
Note: News releases and other information on SpaceDev can be accessed at
▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ or ▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇▇▇.▇▇▇/▇▇▇▇ on the Internet
###