Exhibit 10.7
ESCROW AGREEMENT
This ESCROW AGREEMENT ("Agreement") is made as of the ___ day of April,
1998, by and among VDC Corporation Ltd. ("Buyer"), PortaCom Wireless, Inc.
("Debtor"), the Official Committee of Unsecured Creditors of PortaCom Wireless,
Inc. ("Committee"), and Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx LLP ("Escrow
Agent").
BACKGROUND
A. On March 23, 1998, Debtor filed a Voluntary Petition for relief under
Chapter 11 of Title 11 of the United States Code ("Code"), commencing a case in
the United States Bankruptcy Court for the District of Delaware (the "Court"),
which is pending at number 00-000 (xxx "Xxxx").
B. The Office of the United States Trustee thereafter appointed the
Committee.
C. Prior to the commencement of the Case, Debtor and Buyer were parties to
an asset purchase agreement and amendments thereto, pertaining to Debtor's
agreement to sell to Buyer its interest in and to 2,000,000 shares of common
stock ("MAC Shares") of Metromedia Asia Corporation ("MAC") and warrants to
purchase an additional 4,000,000 shares of MAC common stock with a strike price
of $4.00 per share ("MAC Warrants").
D. Debtor and Buyer negotiated the terms of an asset purchase agreement to
be entered into in the Case and approved by the Court ("Purchase Agreement") and
agreed upon the procedures pursuant to which the Purchase Agreement would be
submitted to the Court for approval.
E. Together with the petition commencing the Case, the Debtor filed the
Motion Of Debtor (A) To Establish Bidding Procedures And To Approve A Break-Up
Fee In Connection With The Sale Of The Debtor's Interest In Certain Property Of
The Estate And (B) To Approve The Form And Manner Of Notice ("Procedures
Motion") with respect to the Purchase Agreement, and the Debtor's Motion for
Approval of the Sale of the Debtor's Interest in Property of the Estate Free and
Clear of Liens, Claims and Encumbrances Pursuant to 11 U.S.C. ss.363(b) and (f)
and Federal Rule of Bankruptcy Procedure 6004 ("Sale Motion")
F. The Committee expressed its intention to object to various provisions of
the Procedures Motion and Notice and the Sale Motion, which objections were
resolved through the modification of the terms of the Purchase Agreement as set
forth in the Stipulation and Order in Lieu of Objection, entered by the Court on
or about April 6, 1998 ("Stipulation").
G. The Stipulation provides for the creation and funding of an escrow
account in connection with the Purchase Agreement. This Agreement is delivered
in furtherance of the Stipulation.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, intending to be legally bound, the parties hereto do
hereby agree as follows:
1. The foregoing recitals are hereby incorporated in this Agreement as
though set forth at length herein.
2. Appointment of Escrow Agent. Debtor, Buyer and the Committee hereby
appoint Escrow Agent, and Escrow Agent hereby accepts such appointment, as the
escrow agent hereunder. Escrow Agent agrees to comply with the terms and
conditions hereof. The Escrow Agent's appointment hereunder shall terminate as
provided in paragraph 3.
3. Term of Agreement; Termination and Appointment of Successor Agent. This
Agreement shall automatically terminate upon the latest to occur of:
a. The latest to occur of any of the following conditions ("Failure
Conditions"): (i) Buyer is not the Successful Bidder (as defined in the
Procedures Motion and the Sale Motion) at the auction to be held on or
about April 23, 1998, or any time thereafter as the Court may direct; (ii)
the sale of the MAC Shares and MAC Warrants to Buyer is not confirmed by
the Court after the auction takes place; (iii) the sale of the MAC Shares
and MAC Warrants to Buyer does not close within the time contemplated and
required by the Purchase Agreement; or (iv) after approval of the Purchase
Agreement by a final, non-appealable Order of the Court, the occurrence of
any terminating event specified in Article 11 of the Purchase Agreement.
Upon termination of this Agreement as a result of the occurrence of one of
the Failure Conditions, the Escrow Agent shall immediately (x) distribute
all of the Escrowed Funds and any and all accrued interest and earnings
thereon to Buyer and (y) surrender the Letter of Credit (as defined below)
to Buyer and neither Buyer nor the issuer of the Letter of Credit shall
have any further liability under the Letter of Credit, at which time the
Escrow Agent's appointment shall automatically terminate.
b. In the event none of the Failure Conditions shall occur, the Escrow
Agent's appointment shall automatically terminate upon the distribution of
all of the Escrowed Funds and VDC Shares in accordance herewith. Prior to
the automatic termination as provided for in this paragraph 3(b), the
appointment of the Escrow Agent may be terminated upon the written consent
of (i) Buyer and (ii) either (x) Debtor or (y) the Committee, and a
successor escrow agent shall be appointed satisfactory to Buyer, Debtor and
the Committee.
4. Escrowed Funds. The "Escrowed Funds" shall comprise a fund to be created
by Buyer equal to $2.6 million. The Escrowed Funds shall be established with a
minimum amount of cash in the amount of $1.25 million ("Cash Portion"), and the
balance may be funded in cash or through an unconditional and irrevocable
standby letter of credit for the benefit of Debtor ("Letter of Credit"), or such
other structure reasonably acceptable to the Committee. The Escrow Agent
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shall hold the Escrowed Funds for the payment of Closing Date Claims, Bar
Date Claims, Pre-Petition Settlements and Other Allowed Claims (each as defined
below).
5. Delivery of Escrowed Funds and VDC Shares to Escrow Agent. The Escrowed
Funds shall be delivered to the Escrow Agent within two (2) business days after
the date upon which this Agreement is fully executed. At Closing (as defined in
the Purchase Agreement), the Buyer shall deliver to the Escrow Agent in
furtherance of Section 4(b) of the Stipulation and subject to adjustment
provided for in paragraph 8 below, 5.3 million newly issued shares of common
stock, par value $2.00 per share, of Buyer (the "VDC Shares").
6. Investment of Escrowed Funds. Escrow Agent shall deposit the Cash
Portion in a money market account(s) in Escrow Agent's name for the benefit of
Seller and Buyer (such account(s) shall be referred to hereinafter as "Escrow
Account"). Escrow Agent shall invest the Cash Portion in a money market or
federally-backed investment in Buyer's discretion. Escrow Agent agrees at all
times to maintain and keep the Cash Portion and any and all interest and
earnings thereon in the Escrow Account and to otherwise invest and disburse the
Escrowed Funds and any and all interest and earnings thereon in accordance
herewith. Escrow Agent shall keep the Escrowed Funds received by it hereunder
and any and all interest and earnings thereon separate and distinct from funds
owned by itself or others. Interest and all other earnings on the Cash Portion
shall accrue and inure solely for the benefit of Buyer and shall not be added to
or become part of the Escrowed Funds.
7. Order of Escrowed Funds Distributed. The Escrow Agent shall first
utilize the entire Cash Portion of the Escrowed Funds to make distributions as
set forth herein prior to drawing upon the Letter of Credit to make such
distributions. The Escrow Agent shall not be responsible for the validity of the
Letter of Credit or the failure of the issuer to honor a draw request.
8. Distribution of the Escrowed Funds and VDC Shares.
a. At or before Closing, the Debtor shall deliver to the Escrow Agent
a schedule containing the amounts and names of the holders of all priority
unsecured and general unsecured claims which, as of the Closing Date (as
defined in the Purchase Agreement), are scheduled by the Debtor as fixed
and liquidated, unsecured claims against the Debtor's estate and for which
no proof(s) of claim has been filed or for which proof(s) of claim have
been filed in the scheduled or a lesser amount ("Closing Date Claims"). At
Closing, the Escrow Agent shall deliver to Debtor from the Escrowed Funds
cash in an amount equal to the Closing Date Claims for distribution to the
holders of Closing Date Claims.
b. Upon the later of (i) Closing or (ii) the entry of a final,
non-appealable Order by the Court approving or ratifying the settlement
agreements entered into by the Debtor prior to the commencement of the Case
("Pre-Petition Settlements"), or otherwise authorizing a settlement and
compromise upon the terms of, the Pre-Petition Settlements, including an
Order confirming a plan of reorganization providing for such approval,
ratification, or authorization, the Escrow Agent shall deliver to Debtor or
the disbursing
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agent under such plan, as the case may be, cash and a portion of the VDC
Shares in an amount equal to that to be distributed pursuant to the
Pre-Petition Settlements. In the event Debtor fails to obtain a final,
non-appealable Order approving or ratifying any of the Pre-Petition
Settlements, or otherwise authorizing a settlement and compromise upon the
terms of such Pre-Petition Settlement, then any resulting claim asserted
against the Debtor's estate shall constitute a Disputed Claim and treated
in accordance with paragraph 8(d) below.
c. Within seven (7) days after May 15, 1998 (the "Bar Date"), Debtor
shall deliver to the Escrow Agent, Buyer and the Committee a schedule
containing the amounts and names of holders of all claims, other than the
Closing Date Claims, as to which, as of the Bar Date, proof(s) of claim
have been filed in the scheduled or a lesser amount than that which was
scheduled by the Debtor (collectively, the "Bar Date Claims"). Within five
(5) days after delivery by the Debtor of such schedule, the Escrow Agent
shall deliver to Debtor from the Escrowed Funds cash in an amount equal to
the Bar Date Claims for distribution to the holders of Bar Date Claims.
d. All claims against the Debtor's estate other than the Closing Date
Claims, the Pre-Petition Settlements and the Bar Date Claims constitute
"Disputed Claims." From time to time, and to the extent that any Disputed
Claim becomes an allowed claim pursuant to a final, non-appealable Order of
the Court ("Other Allowed Claims"), the Escrow Agent shall deliver to
Debtor or the disbursing agent under a plan of reorganization confirmed in
the Debtor's case, as the case may be, for distribution to the holder(s)
thereof, cash and/or a portion of the VDC Shares having an aggregate value
equal to the aggregate amount of the Other Allowed Claim; and shall
disburse to Buyer the 60% Credit (as defined below) for each Other Allowed
Claim.
e. After payment of all Closing Date Claims, Pre-Petition Settlements,
Bar Date Claims, and Other Allowed Claims, the Escrow Agent shall make a
final distribution: (a) To the Buyer: (i) of cash in an amount equal to the
sum of the disallowed amount of Disputed Claims not previously disbursed as
part of the 60% Credit, plus the Cash Portion funded in excess of the cash
required to pay the Closing Date Claims, Bar Date Claims, cash paid under
Pre-Petition Settlements, and cash paid to holders of Other Allowed Claims,
plus all interest and other earnings on the Escrowed Funds, and (ii) of the
"Returned Shares," defined as a portion of the VDC Shares in an amount
equal to the difference between (x) the total amount of the Escrowed Funds
distributed on account of the Closing Date Claims, Bar Date Claims,
Pre-Petition Settlements and Other Allowed Claims and (y) the Indebtedness
(as defined in the Purchase Agreement) plus the fee incurred by Buyer to
obtain the Letter of Credit, divided by the value of the VDC stock valued
consistently with paragraph 14 of the Motion; and (b) To the Debtor: of all
of the VDC Shares remaining after distribution of the Returned Shares to
Buyer (equal to 5,300,000 shares less the Returned Shares).
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9. 60% Credit. The "60% Credit" shall constitute a reduction in Buyer's
liability under the Letter of Credit and/or a payment in cash to Buyer,
whichever Buyer may from time to time elect in writing, in an amount equal to
60% of the disallowed portion of any Disputed Claim. In the event Buyer has
elected to receive a reduction in its liability under the Letter of Credit, the
Escrow Agent shall as is necessary to implement paragraph 8(e) hereof, send
written notice of the 60% Credit(s) to the financial institution issuing the
Letter of Credit.
10. Consent to Distributions. Notwithstanding any other provision of the
Agreement to the contrary, no distribution of the Escrowed Funds or VDC Shares
shall be made under this Agreement or otherwise, unless the Escrow Agent has the
written consent of Buyer, Debtor and the Committee to any such proposed
distribution, which consent shall not be unreasonably withheld.
11. Fees of Escrow Agent. The Escrow Agent shall not be entitled to any
compensation or reimbursement of expenses on account of its services as Escrow
Agent directly from the Escrowed Funds; however, the Escrow Agent shall be
entitled to be compensated for its services from funds otherwise available for
distribution to the holders of administrative expense claims, subject to Court
approval under Code xx.xx. 330, 331, and/or 503.
12. Duties Ministerial. The duties of Escrow Agent are entirely ministerial
and not discretionary. Escrow Agent may rely upon any order of court, not only
as to its due execution, validity and effectiveness, but also as to the truth
and accuracy of any information contained therein, which the Escrow Agent shall
in good faith believe to be genuine, to have been entered of record.
13. Release of, and Covenant not to Xxx, Escrow Agent. In consideration for
the Escrow Agent's agreement to perform its duties under this Agreement, Buyer,
Debtor and Committee, and their respective shareholders, partners, officers,
employees, agents, successors and assigns, jointly and severally, hereby waive
any suit, claim, demand or cause of action of any kind which any of them may
have or may assert against Escrow Agent arising out of or relating to the
execution or performance by Escrow Agent of its duties under this Agreement,
unless such suit, claim or demand or cause of action arises from the gross
negligence or willfulness of Escrow Agent. Buyer, Debtor and Committee, jointly
and severally, hereby irrevocably covenant not to xxx or commence or join in any
proceedings, whether legal, equitable or otherwise, against Escrow Agent on
account of any act or omission to act on the part of Escrow Agent, unless such
action or omission was willful or grossly negligent. Further, to induce Escrow
Agent to act hereunder, the parties hereto agree to indemnify, defend and hold
Escrow Agent harmless from any liability incurred by any action taken or
omission by Escrow Agent, except for gross negligence or willful acts,
including, but not limited to its reasonable attorneys' fees and costs in
connection therewith.
14. Conflict Waiver. After consultation with their respective counsel, the
parties hereto waive any actual and/or potential conflict of interest between
the parties hereto and the Escrow Agent, or any future conflicts which may arise
during the course of performance of this Agreement or the administration of the
Case resulting from the Escrow Agent's execution and performance of this
Agreement.
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15. Disputes. In the event of any disputes regarding the Escrowed Funds,
including without limitation their distribution, use, or ownership, the Escrow
Agent shall implead the Escrowed Funds to the Court.
16. Notices. All notices, demands, requests and other communications
required or permitted hereunder shall be in writing and shall be deemed to be
delivered (a) when actually transmitted via facsimile, or (b) one day following
deposit with a nationally recognized overnight carrier, addressed to the
addressee as follows:
(a) If to Buyer: Xxxxxxxxx X. Xxxxx, Chief Executive Officer
VDC Corporation, Ltd.
00 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
(000) 000-0000 (Fax)
with copies to: Xxxxxx X. Xxxxx, Esquire
Xxxxxxxx Xxxxxxxxx Professional Corporation
00 Xxxx Xxxxxx, 00xx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(000) 000-0000 (Fax)
(b) If to Debtor: Xxxxxxx Xxxxxxx, President
PortaCom Wireless, Inc.
00000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxxxx, XX 00000
(000) 000-0000 (Fax)
with copies to: Xxxxxxx X. Xxxxxx, Xx., Esquire
Xxxxx and Monzack, P.A.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
(000) 000-0000 (Fax)
and
Xxxxxxx X. Xxxxxx, Esquire
Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(000) 000-0000 (Fax)
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(c) If to Committee: Xxxxxxx X. Xxxxxx, Esquire
Xxxxxx Xxxxxxxx LLP
3000 Two Xxxxx Square
Eighteenth and Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
215) 000-0000 (Fax)
(d) If to Escrow Agent: Xxxxxxx Xxxxxxxx, Esquire
Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(000) 000-0000 (Fax)
17. Substitution of Letter of Credit. In the event Buyer initially funds
the entire Escrowed Funds in cash, Buyer may thereafter elect to substitute up
to $1.35 million of the Escrowed Funds with an unconditional and irrevocable
standby letter of credit for the benefit of Debtor, which shall be presented
upon terms reasonably acceptable to Debtor and the Committee, and shall deliver
such letter of credit to the Escrow Agent, who shall treat such letter of credit
as if it was the Letter of Credit and had been delivered to the Escrow Agent
initially under the terms of this Agreement. Upon receipt of such letter of
credit, the Escrow Agent shall release to Buyer cash from the Escrowed Funds in
an amount equal to the face value of such letter of credit.
18. Savings Clause. In the event that any provision of this Agreement or
its application to any person or circumstance shall be finally determined by the
court to be invalid or unenforceable to any extent, the remainder of this
Agreement, and the application of such provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
19. Interpretation. This Agreement shall be interpreted in accordance with
the laws of the Commonwealth of Pennsylvania for contracts made and performed
within the Commonwealth.
20. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns,
including any trustee appointed or elected pursuant to Code ss.ss.701 and 702.
The terms and conditions of this Agreement, the rights and the obligations of
the parties and their respective successors and assigns shall survive any and
all breaches and/or defaults under this Agreement and any such other events as
may occur as herein provided.
21. Jurisdiction. The United States Bankruptcy Court for the District of
Delaware, or any other court exercising jurisdiction over the Debtor's estate,
shall have exclusive jurisdiction to enforce the terms and conditions of this
Agreement and enter any and all appropriate injunctions, contempt orders, orders
for specific performance and other relief as may be just and equitable.
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22. Captions. The titles and captions used herein are for reference only
and shall not constitute a part of this Agreement or construed as having any
legal effect.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which when
taken together shall constitute one and the same document.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above-written.
VDC CORPORATION, LTD.
By: /s/ Xxxxxxxxx X. Xxxxx
----------------------------------
Xxxxxxxxx X. Xxxxx,
Chairman and Chief Executive
Officer
PORTACOM WIRELESS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Xxxxxxx X. Xxxxxxx, President
OFFICIAL COMMITTEE OF UNSECURED
CREDITORS
By: /s/ J. Xxxxxxx Xxxxxxxxxxxx
----------------------------------
J. Xxxxxxx Xxxxxxxxxxxx,
Chairman
ESCROW AGENT -
KLEHR, HARRISON, XXXXXX, BRANZBURG
& XXXXXX LLP
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------
Xxxxxxx Xxxxxxxx, A Member of
the Firm
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