CLOSING ESCROW AGREEMENT
This CLOSING ESCROW AGREEMENT ("Agreement") is made as of the 8th day of
June, 1998, by and among VDC Corporation Ltd. ("Buyer"), PortaCom Wireless, Inc.
("Debtor"), Metromedia China Corporation ("MCC"), the Official Committee of
Unsecured Creditors of PortaCom Wireless, Inc. ("Committee"), Klehr, Harrison,
Xxxxxx, Xxxxxxxxx & Xxxxxx LLP ("Closing Escrow Agent") and Klehr, Harrison,
Xxxxxx, Branzburg & 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, predecessor in interest to
MCC ("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. The Purchase Agreement was amended by (a)
two Stipulations and Orders in Lieu of Objection, dated as of April 3, 1998 and
April 23, 1998, respectively (collectively, the "Stipulations"), by and among
Debtor, VDC and the Committee; and (b) the Escrow Agreement (the "Escrow
Agreement"), dated April __, 1998, among Debtor, VDC, the Committee and Klehr,
Harrison, Xxxxxx, Branzburg & Xxxxxx LLP as Escrow Agent.
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. On April 23, 1998, the United States Bankruptcy Court for the District
of Delaware (the "Court") entered an order (the "Sale Order") approving the
Purchase Agreement and authorizing the sale of the MAC Shares and Warrants free
and clear of any liens or encumbrances, including MCC's first priority security
interest in the MCC Shares (the "MCC
Lien"). Pursuant to the Sale Order and section 363 of the Bankruptcy Code, the
MCC Lien attached to the sale proceeds (the "Replacement Lien"), including
certain shares of common stock of VDC (the "VDC Shares").
G. Pursuant to that certain pledge agreement dated June 8, 1998 between the
Debtor and MCC (the "Pledge Agreement"), MCC has agreed that the Replacement
Lien is limited to 50% of the Debtor's interest in the VDC Shares deliverable to
the Debtor under the Purchase Agreement dated March 23, 1998, as amended.
Pursuant to the Pledge Agreement, in order for MCC to perfect the Replacement
Lien, the Debtor has agreed that 2.65 million VDC Shares will be pledged to MCC
(the "Pledged Shares"), subject to the terms of the Pledge Agreement.
H. Buyer has demanded that, as a condition for closing under the Purchase
Agreement, the Debtor deliver to Buyer a newly issued stock certificate
representing the MAC Shares and a newly issued warrant certificate representing
the MAC Warrants, each in the name of Buyer (collectively, the "Reissued Shares
and Warrants").
I. This Closing Escrow Agreement is delivered in furtherance of the closing
of the sale of the MAC Shares and Warrants, that commenced on June 8, 1998 at
the offices of Xxxxxxxx Ingersoll Professional Corporation (the "Closing").
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 Closing Escrow Agent. Debtor, Buyer, MCC and the
Committee hereby appoint Closing Escrow Agent, and Closing Escrow Agent hereby
accepts such appointment, as the escrow agent hereunder. Closing Escrow Agent
agrees to comply with the terms and conditions hereof. The Closing 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 distribution by the Closing
Escrow Agent, of all of the Closing Escrowed Funds (as defined below), MAC
Shares, MAC Warrants, the Reissued Shares and Warrant and VDC Shares (as defined
below) in accordance herewith. Prior to the automatic termination as provided
for in this paragraph, the appointment of the Closing 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, MCC and the Committee. Notwithstanding termination of this
Agreement, the Closing Escrow Agent shall continue its obligations as Escrow
Agent under the Escrow Agreement.
4. Delivery of Escrowed Funds. The "Closing Escrowed Funds" comprise a
portion of the Escrowed Funds, as defined in the Escrow Agreement, in the sum of
the Closing Date Claims and Bar Date Claims, as defined in the Purchase
Agreement, totaling $41,412.00.
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The Escrow Agent is in possession of the Escrowed Funds and the Closing Escrow
Agent hereby acknowledges constructive receipt of the Closing Escrowed Funds
5. Delivery of MAC Shares, MAC Warrants, VDC Shares and Other Deliverables
to Closing Escrow Agent. At or before the Closing under the Purchase Agreement,
the Buyer shall deliver to the Closing Escrow Agent, subject to adjustment
provided for in the Escrow Agreement and the Purchase Agreement, three (3) share
certificates representing the aggregate of 5,300,000 newly issued shares of
common stock, par value $2.00 per share, of Buyer (the "VDC Shares"). The share
certificates representing the VDC Shares shall be issued in the name of the
Debtor and shall be delivered by the Buyer to the Closing Escrow Agent in the
following designations, subject to adjustment as provided in the Purchase
Agreement and the Escrow Agreement: (i) 2,650,000 shares ("Certificate 1") which
shall constitute the Pledged Shares, (ii) 1,325,000 shares ("Certificate 2") and
(iii) 1,325,000 shares ("Certificate 3"). Buyer shall cause its counsel to
deliver its opinion to MCC regarding the applicability of exemptions from
registration required under the Securities Act of 1933, as amended, to the
transfer by Debtor to Buyer of the MAC Shares and MAC Warrants. Debtor shall
deliver to the Closing Escrow Agent its assignment of warrant and stock power in
blank relating to the transfer of the MAC Shares and MAC Warrants to Buyer.
Debtor and MCC shall deliver to the Closing Escrow Agent the MAC Shares and
Buyer shall deliver to the Closing Escrow Agent the MAC Warrants. In connection
with Certificate 1, Debtor and MCC shall, at or prior to Closing, execute the
Pledge Agreement in favor of MCC and deliver such Pledge Agreement to the
Closing Escrow Agent.
6. Delivery to MCC. MCC shall cause the MAC Warrants and the certificates
representing the MAC Shares, both of which are currently in the name of Debtor,
to be re-issued in the name of the Buyer, and MCC shall deliver such new
certificate and such new warrant to the Closing Escrow Agent in no event later
than seven (7) business days after the Closing in exchange for the previously
issued certificate and warrant. In order to effectuate the reissuance of the MAC
Shares as set forth in paragraph 5 above, at Closing, the Closing Escrow Agent,
with the assistance of MCC, shall deliver to MCC's transfer agent the following
documents: (a) the original certificate for the MAC Shares, issued in the name
of the Debtor; (b) the irrevocable stock power executed by the Debtor; (c) the
opinion of counsel to VDC to the effect that the offer and sale of the MAC
Shares is exempt from registration; (d) the written direction from MCC to
reissue the MAC Shares in the name of VDC and to deliver the Reissued Shares to
the Closing Escrow Agent. The parties hereto acknowledge and agree that, if for
any reason, MCC's transfer agent cannot or will not reissue the MAC Shares in
the name of VDC, MCC will immediately direct its transfer agent to return to the
Closing Escrow Agent the original certificate for the MAC Shares issued in the
name of the Debtor. At Closing, MCC shall deliver the Reissued Warrants to the
Closing Escrow Agent.
7. Distribution of Reissued Shares and Warrants, VDC Shares and Closing
Escrowed Funds. Upon full performance under paragraphs 5 and 6 above, the
Closing Escrow Agent shall (i) deliver the Reissued Shares and Warrants to
Buyer; (ii) deliver Certificate 1 and the Pledge Agreement to MCC, (iii) deliver
custody of Certificate 2 and Certificate 3 to the Escrow Agent; and (iv) deliver
the Closing Escrowed Funds to Debtor.
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8. Failure to Close. The parties hereto agree to use their best efforts to
complete timely their respective performances under paragraphs 5, 6 and 7 above.
In the event, however, that the Closing Escrow Agent does not receive the
Reissued Shares and Warrants within seven (7) business days of the date hereof,
or any other deliverables within such time period, except as previously
impleaded pursuant to paragraph 13 below, then the Closing Escrow Agent shall
return all deliverables in its possession to the respective party from whom the
Closing Escrow Agent received such deliverables, and the Closing Escrow Agent's
term and appointment shall be terminated thereafter, unless the parties hereto
consent in writing to extend such time of performance.
9. Fees of Escrow Agent. The Closing Escrow Agent shall not be entitled to
any compensation or reimbursement of expenses on account of its services as
Closing Escrow Agent directly from the Escrowed Funds; however, the Closing
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 ss.ss.330, 331, and/or 503.
10. Duties Ministerial. The duties of Closing Escrow Agent are entirely
ministerial and not discretionary. Closing 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
Closing Escrow Agent shall in good faith believe to be genuine, to have been
entered of record.
11. Release of, and Covenant not to Xxx, Escrow Agent. In consideration for
the Closing Escrow Agent's agreement to perform its duties under this Agreement,
Buyer, Debtor, MCC 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 Closing Escrow Agent arising out of or
relating to the execution or performance by Closing 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 Closing 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 Closing Escrow Agent on account of any act or omission to act
on the part of Closing Escrow Agent, unless such action or omission was willful
or grossly negligent. Further, to induce Closing Escrow Agent to act hereunder,
the parties hereto agree to indemnify, defend and hold Closing Escrow Agent
harmless from any liability incurred by any action taken or omission by Closing
Escrow Agent, except for gross negligence or willful acts, including, but not
limited to its reasonable attorneys' fees and costs in connection therewith.
12. 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 Closing 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 Closing Escrow Agent's execution
and performance of this Agreement.
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13. Disputes. In the event of any disputes regarding the Closing Escrowed
Funds, the MAC Shares, the MAC Warrants, the Reissued Shares and Warrants and/or
the VDC Shares, including without limitation their distribution, use, or
ownership, the Closing Escrow Agent shall implead the Closing Escrowed Funds,
the MAC Shares, the MAC Warrants, the Reissued Shares and Warrants and/or the
VDC Shares, as applicable, to the Court.
14. 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
(000) 000-0000 (Fax)
(d) If to Closing
Escrow Agent: Xxxxxxx Xxxxxxxx, Esquire
Klehr, Harrison, Xxxxxx, Branzburg & Xxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(000) 000-0000 (Fax)
(e) If to Escrow Agent: Xxxxxxx Xxxxxxxx, Esquire
Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(000) 000-0000 (Fax)
(f) If to MCC: Xxxxxx X. Xxxxxx, Esquire
General Counsel, Metromedia China Corporation
Xxx Xxxxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
(000) 000-0000 (Fax)
15. 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.
16. Interpretation. This Agreement shall be interpreted in accordance with
the laws of the Commonwealth of Pennsylvania for contracts made and performed
within the Commonwealth.
17. 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.
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18. 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.
19. 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.
20. 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,
Chief Executive Officer
PORTACOM WIRELESS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxxx,
Chief Executive Officer
METROMEDIA CHINA CORP.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxxx X. Xxxxxxx,
Senior Vice President
OFFICIAL COMMITTEE OF UNSECURED
CREDITORS
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------------------
Xxxxxxx Xxxxxx, Counsel to the Committee
[signatures continue onto next page]
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CLOSING ESCROW AGENT -
KLEHR, HARRISON, XXXXXX, XXXXXXXXX
& XXXXXX LLP
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------------------
Xxxxxxx Xxxxxxxx, A Member of the Firm
ESCROW AGENT -
KLEHR, HARRISON, XXXXXX, XXXXXXXXX
& XXXXXX LLP
By: /s/ Xxxxxxx Xxxxxxxx
----------------------------------------------
Xxxxxxx Xxxxxxxx, A Member of the Firm
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