ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") dated as of May 25, 2000 by and
among VDC COMMUNICATIONS, INC., a Delaware corporation ("Acquiror"), Voice &
Data Communications (Latin America), Inc., a Delaware corporation ("Sub"), those
individuals and entities whose names appear on the signature page hereof under
the heading "RARE TELEPHONY SHAREHOLDERS" (collectively, the "Rare Telephony
Shareholders") and Xxxxxxxx Xxxxxxxxx Professional Corporation, as escrow agent
(the "Escrow Agent").
BACKGROUND
WHEREAS, Acquiror, Sub, Rare Telephony, Inc., a Nevada corporation
("Rare Telephony"), and the Rare Telephony Shareholders have entered into an
Agreement and Plan of Merger dated May 25, 2000 (the "Merger Agreement")
pursuant to which Rare Telephony shall be merged with and into the Sub (the
"Merger");
WHEREAS, pursuant to the terms of the Merger Agreement, at the Closing,
and effective as of the Effective Time (as defined in Section 19 below),
Acquiror shall deliver the Escrow Shares, which are part of the Merger
Consideration, to the Escrow Agent; and
WHEREAS, the Escrow Agent has agreed to hold the Escrow Shares in
escrow in accordance with the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, the parties hereto
hereby covenant and agree as follows:
1. Definitions, Other Agreements.
(a) All capitalized terms used herein and not otherwise
defined herein shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) It is expressly understood and agreed by the parties
hereto that all references in this Agreement to the Merger Agreement and to any
exhibits to such Merger Agreement are for the convenience of the parties hereto
other than the Escrow Agent, and the Escrow Agent shall have no obligations or
duties with respect thereto other than the obligation to refer to the Merger
Agreement for the purpose of determining the definitions of certain capitalized
terms used herein and not otherwise defined herein or to interpret any
provisions of such other agreements referred to in this Agreement for purposes
of implementation hereof.
2. Appointment of Escrow Agent.
Xxxxxxxx Ingersoll Professional Corporation hereby accepts its
appointment as Escrow Agent to serve in accordance with the terms, conditions
and provisions of this Agreement. The acceptance by the Escrow Agent of its
duties under this Agreement is subject to the terms and conditions set forth at
Section 7 hereafter, which the parties to this Agreement hereby agree shall
govern and control with respect to the rights, duties, liabilities and
immunities of the Escrow Agent.
3. Establishment of Escrow Fund; Power of Attorney.
(a) Pursuant to Section 2.2 of the Merger Agreement, the
Acquiror shall at the Closing deposit with the Escrow Agent the Escrow Shares
constituting the escrow fund (the "Escrow Fund"). The Escrow Shares shall be
registered on the share transfer books of Acquiror in the name of the Rare
Telephony Shareholders, as provided for in the Merger Agreement, and such shares
shall be held by the Escrow Agent on behalf of Rare Telephony Shareholders as
owner of the Escrow Shares comprising the Escrow Fund. If dividends are paid, or
a distribution is made, by Acquiror with respect to the Escrow Shares, in cash
or in property, such dividends or distributions shall also be held as a part of
the Escrow Fund. In the event of any stock splits, recapitalizations or other
adjustments to the capital stock of Acquiror, the resulting number of shares or
other securities which the Escrow Shares convert shall be held as part of the
Escrow Fund.
(b) By virtue of the Rare Telephony Shareholders'
execution of this Escrow Agreement, the Rare Telephony Shareholders have,
without any further act, consented to: (i) the establishment of this escrow
pursuant to the Merger Agreement in the manner set forth herein and (ii) all of
the other terms, conditions and limitations in this Agreement.
(c) By virtue of the Rare Telephony Shareholders'
execution of this Escrow Agreement, the Rare Telephony Shareholders hereby
irrevocably constitute and appoint the Escrow Agent the true and lawful agent
and attorney-in-fact of the Rare Telephony Shareholders with respect to all
matters arising in connection with this Escrow Agreement, including the
administration of the Escrow Fund and the subsequent surrender and cancellation
of the Escrow Shares pursuant to pursuant to Sections 4 and 5 below. To the
extent applicable, the Rare Telephony Shareholders hereby waive the application
of 20 Pa. Stat. Xxx. Section 5601 to the application of this power of attorney.
(d) In the event the Escrow Fund includes any cash (such
as the result of a dividend paid on the Escrow Shares), the Escrow Agent shall
invest such cash in an interest bearing money market account (or similar
account) with a financial institution selected by the Escrow Agent located in
the United States of America and with assets of no less that one billion
dollars. The Escrow Agent may retain such cash in a single account
notwithstanding that the amount of such cash is greater than $100,000. The
Escrow Agent is not required to select the financial institution with the
highest interest rate. Any interest earned shall be part of the Escrow Fund and
shall be treated the same as the Other Property (as defined in Section 4(e)
below) being held by the Escrow Agent. The tax on the interest earned shall be
the responsibility of the owner of the Escrow Shares which resulted in such cash
being held by the Escrow Agent (and such owner shall execute any appropriate
forms with respect to such tax).
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4. Operation and Administration of the Escrow Fund.
(a) Indemnification Claims
(i) To the extent provided herein and in the
Merger Agreement, the Escrow Fund shall be established and thereafter applied to
the payment of indemnification claims asserted by Acquiror or Sub on or before
the one year anniversary of the Effective Time ("Claims") for the benefit of
Acquiror or Sub as provided in Section 7.1(a) of the Merger Agreement. The use
of the Escrow Shares in connection with 7.1(a) of the Merger Agreement shall
serve as non-exclusive sources for payment of any liability of the Rare
Telephony Shareholders to Acquiror and Sub under the Merger Agreement.
(ii) For purposes of calculating the "value" of
the Escrow Shares to be applied against any Claim, such value shall be
determined based on the average closing price of Acquiror's common stock for the
ten (10) trading days immediately preceding the date of the Application (as
defined below).
(iii) Either Acquiror or Sub may make application
to the Escrow Agent, with a copy to the Rare Telephony Shareholders (the
"Application"), if it has incurred or suffered damages or losses pursuant to
Section 7.1 of the Merger Agreement. The Application shall identify the amount
of the damages or losses (the "Claim Amount") and shall instruct the Escrow
Agent to apply, subject to subparagraph (iv) below, the Claim Amount against the
"value" of the Escrow Shares in the manner set forth in Section 4(a)(ii) above
by surrendering to Acquiror for cancellation that number of Escrow Shares equal
in "value" to the Claim Amount. Notwithstanding the foregoing, neither the
Acquiror nor the Sub shall make an Application under this Section 4(a) until the
aggregate amount of the damages or losses incurred or suffered by either or both
combined exceeds $20,000.00 (the "Minimum Aggregate Liability Amount"). Subject
to the terms of this Section 4(a), the Acquiror or Sub shall be entitled to
apply the Claim Amount against the "value" of the Escrow Shares in the manner
set forth in Section 4(a)(ii) above only to the extent that the Claim Amount
exceeds the Minimum Aggregate Liability Amount. For clarification purposes, the
Minimum Aggregate Liability Amount is not a "per incident" amount, but rather an
aggregate threshold. Once the Minimum Aggregate Liability Amount has been
reached and is the subject of an Application, any subsequent Claim Amount,
regardless of how small, may be the subject of an Application and shall not be
subject to any kind of deduction or threshold. The maximum number of Escrow
Shares that may be surrendered to Acquiror or Sub for cancellation pursuant to
this Section 4(a)(iii) is 244,898 Escrow Shares. In connection with Escrow
Shares surrendered pursuant to this Section 4(a), said Escrow Shares shall be
surrendered to Acquiror for cancellation on a pro rata basis among all of the
Rare Telephony Shareholders (i.e. taking the same percentage of Escrow Shares
from each such shareholder); provided, however, to the extent a Rare Telephony
Shareholder has had all of his Escrow Shares surrendered to Acquiror for
cancellation pursuant to Sections 4(b) or 4(c) below, then the Escrow Shares to
be surrendered shall be surrendered to Acquiror for cancellation on a pro rata
basis among all of the Rare Telephony Shareholders who have shares held in
escrow, provided further, however, to the extent a Rare Telephony Shareholder
has had some, but not all, of his Escrow Shares surrendered to Acquiror for
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cancellation pursuant to Sections 4(b) or 4(c) below, then the number of Escrow
Shares to be surrendered by such shareholder to Acquiror for cancellation shall
be calculated as though such shareholder had not previously had any of his
Escrow Shares cancelled, unless the remaining Escrow Shares of such shareholder
are less than his pro rata share to be cancelled using this method of
calculation, in which event all of his Escrow Shares shall be cancelled and the
remaining balance to be cancelled shall be on a pro rata basis among the
remaining Rare Telephony Shareholders (in no event under either of these
provisos is there to be a reduction in the total number of shares to be
surrendered for cancellation pursuant to this Section 4 (a)).
(iv) Unless the Escrow Agent is otherwise
informed in writing by the representative of the Rare Telephony Shareholders
referred to in Section 10(a) below within 20 calendar days from the date of the
Escrow Agent's receipt of the Application, that all of the Rare Telephony
Shareholders, in a sworn affidavit, are disputing the basis for the Claim (and
said sworn affidavit is provided to the Escrow Agent), the Claim Amount or the
application thereof against the Escrow Fund, then the Escrow Agent shall apply
the Escrow Fund in the manner set forth in the Application and this Agreement.
(v) If the Escrow Agent is notified by the
representative of the Rare Telephony Shareholders referred to in Section 10(a)
below that all of the Rare Telephony Shareholders contest the basis for the
Claim, the Claim Amount or the application of the Claim Amount against the
Escrow Fund (in the manner set forth in Section 4(a)(iv) above), then, and in
that event, the parties thereto shall submit the issues in dispute to
arbitration in accordance with the provisions of Section 15. The Rare Telephony
Shareholders hereby waive any objection (on the basis of an actual or perceived
conflict or interest) to Xxxxxxxx Ingersoll Professional Corporation providing
legal representation to Acquiror or Sub in any such arbitration.
(vi) If the arbitration results in a finding (or
settlement between the parties) in support of the Application (which for this
purpose shall include any finding, conclusion or settlement which awards
Acquiror at least 70% of the Claim Amount (hereafter, the "Adjusted Claim
Amount")); then, and in that event, there shall be added to the Adjusted Claim
Amount all expenses and costs of Acquiror in connection with the arbitration,
including reasonable counsel fees.
(vii) For purposes of Section 4(a) of this
Agreement only, the term "all of the Rare Telephony Shareholders" means all Rare
Telephony Shareholders who have Escrow Shares being held in escrow subject to
the terms of this Section 4(a). For example, if a Rare Telephony Shareholder
dies prior to the one year anniversary of the deposit of the Escrow Shares and
the deceased Rare Telephony Shareholder's shares are released pursuant to
Section 5(b) or if a Rare Telephony Shareholder has had all of his Escrow Shares
surrendered to the Acquiror for cancellation pursuant to Section 4(b) or 4(c),
then for purposes of Section 4(a) of the Agreement only, the term "all of the
Rare Telephony Shareholders" would exclude such Rare Telephony Shareholder.
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(b) Termination of Employment or Services; Breach of
Contract
(i) The Rare Telephony Shareholders listed on
Schedule 4(b)(i) hereto and incorporated herein by reference ("Hirees") have
entered into, or will be entering into, employment or consulting agreements with
Sub. If a Hiree is terminated for cause (as defined in his employment or
consulting agreement), resigns from such employment or service, or breaches a
material term of his employment or consulting contract (any such event
constituting a "Default Event"), then said Hiree shall forfeit (and said shares
shall be surrendered to Acquiror for cancellation) a percentage of the shares of
Acquiror Common Stock comprising the Merger Consideration issued in the name of
Hiree as follows: (A) 50% if the Default Event occurs within the first one year
period following the Effective Time; (B) 33% if the Default Event occurs within
the second one year period following the Effective Time; and (C) 20% if the
Default Event occurs within the third one year period following the Effective
Time. Attached hereto as Schedule 4(b)(i)II and incorporated herein by reference
is a list of the Rare Telephony Shareholders and the number of shares of
Acquiror Common Stock comprising the Merger Consideration issued in the name of
each Rare Telephony Shareholder. The Escrow Agent shall be entitled to rely upon
this schedule for purposes of the administration of this Agreement. If a Default
Event occurs and the defaulting Hiree (the "Defaulting Hiree") does not have
enough Escrow Shares to cover the number of shares the Defaulting Hiree
forfeited, then the Escrow Agent shall surrender to Acquiror for cancellation
all of the Escrow Shares held in escrow in the name of the Defaulting Hiree and
the Defaulting Hiree shall deliver to the Acquiror an amount of shares of
Acquiror Common Stock equal to such shortfall. For purposes of the percentage
calculations above, all fractions shall be rounded up. The forfeiture and
surrendering of shares Acquiror Common Stock as provided for in this paragraph
shall serve as a non-exclusive remedy for Sub and Acquiror.
(ii) Either Acquiror or Sub may file a notice (a
"Default Notice") with the Escrow Agent, with a copy to the Defaulting Hiree, if
officers of Acquiror or Sub believe that a Default Event has occurred. The
Default Notice shall identify the Default Event(s) and shall instruct the Escrow
Agent to surrender to Acquiror for cancellation that number of Escrow Shares to
be forfeited based upon the formula set forth in Section 4(b)(i).
(iii) Unless the Escrow Agent receives a sworn
affidavit from the Defaulting Hiree within 20 calendar days from the date of the
Escrow Agent's receipt of the Default Notice, disputing the existence of the
Default Event(s), the Escrow Agent shall surrender to Acquiror for cancellation
that number of Escrow Shares to be forfeited based upon the formula set forth in
Section 4(b)(i).
(iv) If the Escrow Agent is notified that the
Defaulting Hiree contests the existence of the Default Event(s) (in the manner
set forth in Section 4(b)(iii) above), then, and in that event, the parties
thereto shall submit the issues in dispute to arbitration in accordance with the
provisions of Section 15. The Defaulting Hiree hereby waives any objection (on
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the basis of an actual or perceived conflict or interest) to Xxxxxxxx Xxxxxxxxx
Professional Corporation providing legal representation to Acquiror or Sub in
any such arbitration.
(v) If the arbitration results in a finding (or
settlement between the parties) in support of the Default Notice (which for this
purpose shall include any finding, conclusion or settlement which provides that
at least one Default Event has occurred); then, and in that event, within ten
(10) calendar days after being provided with an invoice from counsel for
Acquiror or Sub, as the case may be, or Acquiror or Sub, the Defaulting Hiree
shall pay all expenses and costs of Acquiror or Sub, as the case may be, in
connection with the arbitration, including reasonable counsel fees.
(c) Network Consulting Group, Inc. Defaults
(i) Pursuant to an Agreement by and between
Network Consulting Group, Inc. ("Network") and Rare Telephony, dated May 25,
2000 (the "Network Agreement"), Network has agreed to make all payments due from
Network under the terms of, and otherwise perform all of its obligations under,
the leases summarized on Exhibit "A" to the Network Agreement (the "Leases"). If
Network breaches any material term of the Network Agreement or of any one of the
Leases (and any such breach remains uncured fifteen (15) calendar days after
notice of such breach is given by Acquiror or the lessor, or its agent, for any
Lease) (each such breach and failure to cure constituting a "Network Default
Event"), then Network shall forfeit (and said shares shall be surrendered to
Acquiror for cancellation) a percentage of the shares of Acquiror Common Stock
comprising the Merger Consideration issued in the name of Network as follows:
(A) 30% if the Network Default Event occurs within the first one year period
following the Effective Time; (B) 18% if the Network Default Event occurs within
the second one year period following the Effective Time; and (C) 10% if the
Network Default Event occurs within the third one year period following the
Effective Time. Set forth on Schedule 4.2(b)(i)II is the number of shares of the
Acquiror Common Stock comprising the Merger Consideration issued in the name of
Network. The Escrow Agent shall be entitled to rely upon Schedule 4.2(b)(i)II
for purposes of the administration of this Section 4(c). If a Network Default
Event occurs and Network does not have enough Escrow Shares to cover the number
of shares Network forfeited, then the Escrow Agent shall surrender to Acquiror
for cancellation all of the Escrow Shares held in escrow in the name of Network
and Network shall surrender to Acquiror for cancellation an amount of shares of
Acquiror Common Stock equal to such shortfall. For purposes of the percentage
calculations above, all fractions shall be rounded up. The forfeiture and
surrendering of shares of Acquiror Common Stock as provided for in this
paragraph shall serve as a non-exclusive remedy for Sub and Acquiror.
(ii) Either Acquiror or Sub may file a notice
(the "Network Notice") with the Escrow Agent, with a copy to Network, if
officers of Acquiror or Sub believe that a Network Default Event has occurred.
The Network Notice shall identify the Network Default Event(s) and shall
instruct the Escrow Agent to surrender to Acquiror for cancellation that number
of Escrow Shares to be forfeited based upon the formula set forth in Section
4(c)(i).
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(iii) Unless the Escrow Agent receives a sworn
affidavit from Network within 20 calendar days from the date of the Escrow
Agent's receipt of the Network Notice, disputing the existence of the Network
Default Event(s), the Escrow Agent shall surrender to Acquiror for cancellation
that number of Escrow Shares to be forfeited based upon the formula set forth in
Section 4(c)(i).
(iv) If the Escrow Agent is notified that Network
contests the existence of the Network Default Event(s) (in the manner set forth
in Section 4(c)(iii) above), then, and in that event, the parties thereto shall
submit the issues in dispute to arbitration in accordance with the provisions of
Section 15. Network hereby waives any objection (on the basis of an actual or
perceived conflict or interest) to Xxxxxxxx Ingersoll Professional Corporation
providing legal representation to Acquiror or Sub in any such arbitration.
(v) If the arbitration results in a finding (or
settlement between the parties) in support of the Network Notice (which for this
purpose shall include any finding, conclusion or settlement which provides that
at least one Network Default Event has occurred); then, and in that event,
within ten (10) calendar days after being provided with an invoice from counsel
for Acquiror or Sub, as the case may be, or Acquiror or Sub, Network shall pay
all expenses and costs of Acquiror or Sub, as the case may be, in connection
with the arbitration, including reasonable counsel fees.
(d) The shares of Acquiror Common Stock constituting
the Merger Consideration is subject to the following restrictions upon resale
(the "Restrictions"): 34% of the holder's Acquiror Common Stock no earlier than
one (1) year following the Effective Time; an additional 33% of the holder's
Acquiror Common Stock no earlier than two (2) years following the Effective
Time; and the remaining 33% of the holder's Acquiror Common Stock no earlier
than three (3) years following the Effective Time. When shares are forfeited
and/or surrendered to Acquiror for cancellation pursuant to Section 4, the
Escrow Agent shall surrender first shares which have the Restriction expire
three (3) years following the Effective Time and second shares which have the
Restriction expire two (2) years following the Effective Time. For purposes of
the percentage calculations above for years one and two, all fractions shall be
rounded up.
(e) Notwithstanding the other provisions of this Section
4 in the event that the Escrow Fund includes cash or property received with
respect to the Escrow Shares (collectively, the "Other Property"), such Other
Property shall be applied by the Escrow Agent as follows:
(i) In the event the Escrow Agent is making a
distribution from the Escrow Fund as a result of a Claim pursuant to Section
4(a) above, the Escrow Agent shall first deliver to the Acquiror the Other
Property in an amount up to the Claim Amount and then the balance of the Claim
Amount, if any, would be paid by the delivery of the Escrow Shares.
(ii) In the event any of the Other Property to
be delivered to the Acquiror hereunder is not cash, the value of such Other
Property shall be determined as follows:
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(A) if it is shares of publicly traded
stock, the value shall be based on the
average closing price of such stock for the
ten (10) trading days immediately preceding
the date of Application or (B) if the Other
Property is anything else, by the mutual
decision of the Acquiror and the Rare
Telephony Shareholders (if they are unable
to reach such determination, then any
dispute shall be determined by arbitration
pursuant to Section 15 below).
(iii) If a percentage of the Escrow Shares are
being forfeited pursuant to Section 4(b) or 4(c) above, the Escrow Agent shall
deliver to the Acquiror the same percentage of the Other Property being held in
escrow with respect to such Rare Telephony Shareholder or Network.
(f) In the event that pursuant to the provisions of
Sections 4(a)(vi), 4(b)(v) or 4(c)(v) the Acquiror or Sub is owed amounts
hereunder, and such amounts are not paid within ten (10) calendar days of its
notifying the responsible party (the "Responsible Party") of the amount owed, it
may request the Escrow Agent pay such amounts by delivery to the Acquiror or the
Sub the appropriate amount of the Escrow Fund being held with respect to the
Responsible Party by written notice (a "Payment Notice") to the Escrow Agent
with a copy to the Responsible Party. In the event the Responsible Party fails
to provide the Escrow Agent with written notification of its objection, in a
sworn affidavit, within twenty (20) calendar days from the date of the Escrow
Agent's receipt of a Payment Notice, the Escrow Agent shall apply the Escrow
Fund in the manner set forth in the Payment Notice and this Agreement. In the
event the Escrow Agent receives written notice of a dispute, then the parties
thereto shall submit the dispute to arbitration in accordance with the
provisions of Section 15. The Responsible Party hereby waives any objection (on
the basis of an actual or perceived conflict or interest) to Xxxxxxxx Xxxxxxxxx
Professional Corporation providing legal representation to Acquiror or Sub in
any such arbitration.
5. Release of Escrow Shares; Termination.
(a) Rare Telephony Shareholders Who Are Not Hirees (Other
Than Network Consulting Group, Inc.). A list of Rare Telephony Shareholders,
other than Network, who are not Hirees is set forth on Schedule 5(a) hereto and
incorporated herein by reference (the "Non-hiree Shareholders"). The Escrow
Shares issued in the name of the Non-hiree Shareholders (the "Non-hiree Shares")
shall remain in escrow subject to application pursuant to Section 4 hereof until
the one year anniversary of the Effective Time, and on such date any such
Non-hiree Shares remaining in the Escrow Fund shall be delivered and released to
the Non-hiree Shareholders.
(b) Rare Telephony Shareholders Who Are Hirees. All of
the Escrow Shares issued in the name of the Hirees (the "Hiree Shares") shall
remain in escrow subject to application pursuant to Section 4 hereof until the
one year anniversary of the Effective Time. On such date the Escrow Agent may
release Hiree Shares not needed to cover potential forfeitures as provided for
in Section 4(b) in the second and third years following the Effective Time. On
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the two year anniversary of the Effective Time, the Escrow Agent may release
Hiree Shares not needed to cover potential forfeitures as provided for in
Section 4(b) in the third year following the Effective Time. On the three year
anniversary of the Effective Time, the Escrow Agent may release to the Hirees
all Hiree Shares remaining in the Escrow Fund. To the extent the employment or
consultancy of a Hiree is terminated without cause by the Sub (i.e. not under
any for "cause" provision of the applicable agreement) prior to the three year
anniversary of the Effective Time, said Hiree's Shares shall continue to remain
in escrow, in accordance with the terms of this paragraph, subject to forfeiture
in accordance with Section 4(b). In the event that a Hiree dies prior to the
three year anniversary of the Effective Time, then said Hiree's Escrow Shares
(but only said Hiree's Escrow Shares) shall be released to the estate of the
deceased Hiree if, and only if, the Escrow Agent is notified in writing by
Acquiror that the following three conditions precedent were satisfied: (1) the
estate of the Hiree provides the Acquiror's counsel with an original death
certificate for the deceased Hiree; (2) the President or CEO of the Sub (in
Acquiror's sole discretion) provides a sworn affidavit confirming that to the
best of his knowledge the Hiree, prior to his death, had not violated any
material term of his employment or consulting agreement with the Sub; and (3) in
the sixty (60) calendar days following the Hiree's death, counsel for Acquiror
is satisfied that Hiree, prior to his death, had not violated any material term
of his employment or consulting agreement with the Sub.
(c) Network Consulting Group, Inc. All of the Escrow
Shares issued in the name of Network (the "Network Shares") shall remain in
escrow subject to application pursuant to Section 4 hereof until the one year
anniversary of the Effective Time. On such date the Escrow Agent may release
Network Shares not needed to cover potential forfeitures as provided for in
Section 4(c) in the second and third years following the Effective Time. On the
two year anniversary of the Effective Time, the Escrow Agent may release Network
Shares not needed to cover potential forfeitures as provided for in Section 4(c)
in the third year following the Effective Time. On the three year anniversary of
the Effective Time, the Escrow Agent may release to the Network all Network
Shares remaining in the Escrow Fund.
(d) Notwithstanding the above, the Escrow Agent may
continue to retain in escrow, subject to the terms of this Agreement, any Escrow
Shares that upon Acquiror's or Sub's reasonable estimate are subject to dispute
or arbitration in accordance with the terms of this Agreement.
(e) In the event the Escrow Fund contains any Other
Property, such Other Property shall be released pursuant to the provisions of
this Section 5 at the same time that the Escrow Shares to which such Other
Property relates to is released.
(f) Once all of the Escrow Shares and any Other Property
have been either released to Acquiror for cancellation or returned to Rare
Telephony Shareholders, the provisions of this Escrow Agreement shall no longer
be of any force and effect and this Escrow Agreement shall be deemed to have
terminated, other than the provisions of Section 6 and 7(g) below.
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6. Fees and Expenses of Escrow Agent.
The Escrow Agent shall be entitled to reimbursement of all
fees and reasonable out-of-pocket expenses incurred by the Escrow Agent in
connection with the performance of his functions hereunder, including reasonable
fees and disbursements of the attorneys and paralegals of Escrow Agent at their
respective regularly hourly rates then in effect and the fees incurred by
outside counsel pursuant to Section 7(d) below. The responsibility for payment
of reimbursements to the Escrow Agent shall be assumed by Acquiror.
7. Duties and Liabilities of the Escrow Agent.
(a) The Escrow Agent shall act hereunder as depository
only, and it shall not be responsible or liable in any manner whatsoever for any
determinations regarding the cancellation and forfeiture of the Escrow Shares
pursuant to Section 4 hereof. It is agreed that the duties and obligations of
the Escrow Agent are those herein specifically provided and no other. Except as
otherwise specifically provided in this Agreement, the Escrow Agent shall not
have any liability under, nor duty to inquire into, the terms and provisions of
any agreement or instrument, other than this Agreement. The duties of the Escrow
Agent are ministerial in nature, and the Escrow Agent shall not incur any
liability whatsoever other than for its own willful misconduct or gross
negligence. Without limiting the generality of the foregoing, the Escrow Agent
shall not have any duty or responsibility (i) to enforce or cause to be enforced
any of the terms and conditions contained in the Merger Agreement or (ii) to
verify the accuracy or sufficiency of any notice or other document received by
it in connection with this Agreement.
(b) The Escrow Agent shall not incur any liability
for following the instructions herein contained or expressly provided for, or
written instructions given by the parties hereto. The Escrow Agent shall not
have any responsibility for the genuineness or validity of any document or other
material presented to or deposited with it nor shall it have any liability for
any action taken, suffered or omitted in accordance with any written
instructions or certificates given to it hereunder and believed by it in good
faith to be what it purports to be and to be signed by the proper party or
parties.
(c) The Escrow Agent shall not be liable for any error
of judgment, or for any act done or step taken or omitted by it in good faith,
or for any mistake of fact or law, or for anything which it may do or refrain
from doing in connection with this Agreement, except its own gross negligence or
willful misconduct.
(d) The Escrow Agent may consult with, and obtain the
advice of, legal counsel selected by it in the event of any question as to any
of the provisions hereof or its duties hereunder, and the Escrow Agent shall
incur no liability and shall be fully protected for any action taken, suffered
or omitted by it in good faith in accordance with the advice of such counsel and
shall be reimbursed for such fees and expenses pursuant to Section 6 above.
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(e) In the event that the Escrow Agent shall be uncertain
as to its duties or rights hereunder or shall have received instructions, claims
or demands from any party hereto which, in its reasonable opinion, conflict with
any of the provisions of this Agreement or with instructions, claims or demands
of any other party hereto, the Escrow Agent shall refrain from taking any action
and its sole obligation shall be to keep safely all property held in escrow
hereunder until it shall be directed otherwise in writing by all of the
surviving parties hereto or, with respect to a dispute under Section 4 hereof by
all of the parties to such dispute, or by a final order by a court of competent
jurisdiction or by a judgment or order of an arbitrator pursuant to Section 15,
or exercises its rights under Section 7 hereof.
(f) The Escrow Agent shall not be required to institute
legal proceedings of any kind and shall not be required to initiate or defend
any legal proceedings which may be instituted against it in respect of the
subject matter of this Agreement, provided that the Escrow Agent shall at all
times take such action as is reasonably necessary to keep safely all property
held in escrow hereunder. If the Escrow Agent does elect to so act or is
required to so act in order to keep safely all property held in escrow
hereunder, the Escrow Agent will do so only to the extent that it is indemnified
to its reasonable satisfaction against the cost and expense of such defense or
initiation.
(g) The parties hereto (other than the Escrow Agent)
shall jointly and severally indemnify and hold the Escrow Agent harmless from
and against any and all losses, claims. damages. liabilities and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
arising out of or in connection with any act or failure to act (other than by
reason of any willful misconduct or gross negligence) on the part of the Escrow
Agent in connection with any of the duties required to be performed by the
Escrow Agent hereunder. The terms of this Section 7(g) shall survive the
termination of this Agreement and, with respect to claims arising in connection
with the Escrow Agent's duties while acting as such, the resignation or removal
of the Escrow Agent.
(h) At any time that the Escrow Agent so chooses, the
Escrow Agent may resign from its duties hereunder by giving not less than thirty
(30) calendar days' prior written notice to Acquiror, Sub, and the Rare
Telephony Shareholders. Prior to the expiration of such thirty (30) day period,
Acquiror, Sub, and the Rare Telephony Shareholders shall designate, by mutual
consent, a successor escrow agent; provided, that notwithstanding any
resignation date set forth in the Escrow Agent' notice, such resignation shall
not take effect until receipt by the Escrow Agent of an instrument duly executed
by a successor escrow agent evidencing its appointment as Escrow Agent hereunder
and acceptance of this Agreement. If no successor escrow agent is appointed
within such thirty (30) day period, the Escrow Agent may deposit the Escrow Fund
with a court of competent jurisdiction as provided in Section 7(j) hereof,
whereupon the Escrow Agent shall be discharged of all duties and obligations
hereunder.
(i) The Escrow Agent may be removed at any time by
agreement of Acquiror, Sub, and the Rare Telephony Shareholders by giving not
less than thirty (30) calendar days' prior written notice to the Escrow Agent.
Prior to the expiration of such thirty (30) day period, Acquiror, Sub, and the
11
Rare Telephony Shareholders shall designate, by mutual consent, a successor
escrow agent. If no successor escrow agent is appointed within such thirty (30)
day period and accepts the Escrow Fund and agrees to be bound by this Agreement,
the Escrow Agent may deposit the Escrow Fund with a court of competent
jurisdiction as provided in Section 7(j) hereof, whereupon the Escrow Agent
shall be discharged of all duties and obligations hereunder.
(j) Notwithstanding anything herein to the contrary, in
the event of any disagreement between any of the parties to this Agreement, or
between them and any other person, resulting in adverse claims or demands being
made against the Escrow Fund, or in the event the Escrow Agent in good faith is
in doubt as to what action it should take hereunder, the Escrow Agent may be
discharged of its duties and obligations hereunder upon its deposit, at any time
after ten (10) calendar days' written notice to Acquiror, Sub, and the Rare
Telephony Shareholders, of the Escrow Fund with a court of competent
jurisdiction located in the Commonwealth of Pennsylvania. The parties hereto
hereby submit to the personal jurisdiction of any such court, waive any and all
right to contest the jurisdiction of such court, and consent to service of
process by the method and addresses set forth in Section 10 hereof.
(k) The parties hereto acknowledge that Escrow Agent
has served, and may serve in the future, as counsel to the Acquiror, the Sub and
their affiliates. In any matter or dispute arising among the parties hereto,
including out of the Merger Agreement, this Agreement, or any document in
connection therewith, any party hereto may confer with, and be represented by,
such counsel and such counsel shall not be disqualified from any such
representation as a result of being the Escrow Agent hereunder. Without limiting
the generality of the foregoing, Xxxxxxxx Xxxxxxxxx Professional Corporation
acting as Escrow Agent hereunder shall not present a conflict of interest in
connection with any representation by it of any or all of the Acquiror, the Sub
or any affiliate thereof including, without limitation, in any matter adverse to
any party hereto, any such conflict of interest being hereby expressly waived.
8. Amendment.
This Agreement may be amended, modified or rescinded by and
upon written notice to the Escrow Agent given by Acquiror, Sub, and the Rare
Telephony Shareholders; provided that the rights, duties, liabilities,
indemnities and immunities of the Escrow Agent hereunder may not be adversely
affected at any time without the written consent of the Escrow Agent.
12
9. Voting of Escrow Shares; Rights During Escrow Period;
Restriction on Transfer.
All rights to vote the Escrow Shares while they are part of
the Escrow Fund shall be retained by the Escrow Agent, who shall vote the Escrow
Shares in accordance with the written instructions of the applicable Rare
Telephony Shareholder. While retained in escrow pursuant to the terms of this
Agreement, except as otherwise provided, the Rare Telephony Shareholders shall
have no right, title or interest in and to the Escrow Fund until otherwise
released from escrow pursuant to the terms hereof. The Rare Telephony
Shareholders shall not have any right to transfer or assign their interests in
the Escrow Shares in the Escrow Fund during such period of time as such Shares
remain a part of the Escrow Fund unless Acquiror shall first have consented
thereto in writing and provided that any such transferee shall deliver to the
Escrow Agent a duly signed stock power covering such Escrow Shares and written
confirmation, satisfactory to the Escrow Agent and the Acquiror, that such
transferee agrees to become a party to and be bound by the provisions of this
Agreement, and the Escrow Agent shall hold such transferee's shares and stock
powers in escrow subject to this Agreement.
10. Notices.
All notices, requests, instructions, consents and other
communications to be given pursuant to this Agreement shall be in writing and
shall be deemed received (i) on the same day if delivered in person, by same-day
courier or by telegraph, telex or facsimile transmission (receipt confirmed)
(provided that telegraph, telex or facsimile notice shall be deemed received on
the next business day if received after 5:00 p.m. Eastern Standard Time), (ii)
on the next day if delivered by overnight mail or courier, or (iii) on the date
indicated on the return receipt, or if there is no such receipt, on the third
calendar day (excluding Sundays) if delivered by certified or registered mail,
postage prepaid, to the party for whom intended to the following addresses (or
to such other addresses and facsimile numbers as a party may designate by notice
to the other parties):
(a) if to the Rare Telephony Shareholders, or any one of
them, at:
Xxxxxx X. Xxxxxx
Rare Telephony, Inc.
000 Xxxx Xxxxxx, Xxxxx 000
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Facsimile No: (000) 000-0000
If a Default Notice, a copy to the defaulting Hiree at the
address set forth on the signature page hereto (or such
subsequent address provided by such Hiree to the Acquiror or
Sub).
(b) if to Acquiror or the Sub at:
13
Xxxxxxxxx X. Xxxxx
VDC Communications, Inc.
00 Xxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxx, Esq.
VDC Communications, Inc.
00 Xxxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
(c) If to the Escrow Agent to:
Xxxxxx X. Xxxxx, Esq.
Xxxxxxxx Xxxxxxxxx Professional Corporation
Eleven Penn Center
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile No. (000) 000-0000
11. Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of
the successors, heirs, personal representatives and permitted assigns of each of
the parties hereto.
12. Counterparts.
This Agreement may be executed in multiple counterparts each of which
shall be an original but all of which together shall constitute one and the same
instrument. This Agreement may also be executed and delivered by exchange of
facsimile copies showing the signatures of the parties, and those signatures
need not be affixed to the same copy. The facsimile copies showing the
signatures of the parties will constitute originally signed copies of the
Agreement requiring no further execution.
13. Governing Law.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of New Jersey applicable to contracts
executed and to be performed entirely within said State; provided, however, that
the provisions of Section 7(j) shall be governed by the laws of the Commonwealth
of Pennsylvania.
14
14. Severability.
In case any provision in this Agreement shall be held invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions hereof will not in any way be affected or impaired thereby, unless
the provisions held invalid shall substantially impair the benefits of the
remaining portions of this Agreement.
15. Arbitration.
All controversies or claims arising out of or relating to this
Agreement shall be determined by binding arbitration applying the laws of the
State of New Jersey and the rules of the American Arbitration Association
applicable to the Commercial Panel, except that there shall only be one (1)
arbitrator. The arbitration shall be conducted at Acquiror's offices in
Greenwich, Connecticut, or at such other location designated by Acquiror. The
decision of the arbitrator shall be final and binding upon the parties, shall
include written findings of law and fact, and judgment may be obtained thereon
in any court of competent jurisdiction. Each party shall bear the cost of
preparing and presenting its own case (except as provided for in Section 4
above). The cost of the arbitration, including the fees and expenses of the
arbitrator, shall be shared equally by the parties thereto unless the award
otherwise provides (except as provided in Section 4 above). Nothing herein shall
preclude a party from seeking injunctive relief to restrain any breach or
threatened breach of the covenants and agreements set forth in this Agreement or
otherwise to obtain specific performance of any such covenant or agreement,
without the necessity of posting bond or security in connection therewith.
16. Pronouns.
Whenever the context of this Agreement may require, any
pronoun will include the corresponding masculine, feminine and neuter form, and
the singular form of nouns and pronouns will include the plural.
17. Construction.
This Agreement will not be construed more strictly against one
party then against the other by virtue of the fact that drafts may have been
prepared by counsel for one of the parties, it being recognized that this
Agreement is the product of negotiations among the parties and that the parties
have contributed to the final preparation of this Agreement.
18. Read and Understood.
Each party acknowledges that (i) it has carefully read this
Agreement, (ii) it has had the assistance of legal counsel of its choosing (and
such other professionals and advisors as it has deemed necessary) in the review
and execution hereof, (iii) the meaning and effect of the various terms and
provision hereof have been fully explained to it by such counsel, (iv) it has
conducted such investigation, review and analysis as it has deemed necessary to
15
understand the provisions of this Agreement and the transactions contemplated
hereby, and (v) it has executed this Agreement of its own free will.
19. Effective Time.
This Agreement shall become effective as of the "Effective
Time" of the Merger (as defined in the Merger Agreement). The "Effective Time"
of the Merger for purposes of this Agreement shall be the "Effective Time"
indicated on an "Effective Time Certificate" executed by VDC Communications,
Inc. at the closing of the Merger.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
16
IN WITNESS WHEREOF, the parties hereto have duly caused this Escrow
Agreement to be executed as of the date first written above.
Attest: VDC COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxxxxxx X. Xxxxx
------------------------------------- --------------------------------------
Xxxxxxxxx X. Xxxxx
Chief Executive Officer
Attest: VOICE & DATA COMMUNICATIONS
(LATIN AMERICA), INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxxxxxx X. Xxxxx
------------------------------------- --------------------------------------
Xxxxxxxxx X. Xxxxx
Chief Executive Officer
Witness RARE TELEPHONY SHAREHOLDERS:
/s/ Xxxxx Santa Lucia /s/ Xxxxxx X. Xxxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia Signature
Address:____________________________ Name: Xxxxxx X. Xxxxxx
____________________________________ Address:
Fax No:
Witness
/s/ Xxxxx Santa Lucia /s/ Xxxxx Xxxxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxxx X. Xxxxxxx
____________________________________ Address:
Fax No:
Witness
/s/ Xxxxx Santa Lucia /s/ Xxxxxxx Xxxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxxxxx Xxxxxx
____________________________________ Address:
Fax No:
17
Witness
/s/ Xxxxx Santa Lucia /s/ Xxxxxxxxxxx XxXxxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxxxxxxxxx XxXxxxxx
____________________________________ Address:
Fax No: _____________________
Witness
/s/ Xxxxx Santa Lucia /s/ Xxxxxx Xxxxxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxxxx Xxxxxxxx
____________________________________ Address:
Fax No: _____________________
Witness
/s/ Xxxxxxxxx X. Xxxxxxxx /s/ Xxxxx Santa Xxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxx Signature
Address: Name: Xxxxx Santa Xxxxx
Address:
Fax No: _____________________
Witness
/s/ Xxxxx Santa Lucia /s/ Xxxxx X. Xxxxxxx ,President
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Network Consulting Group, Inc.
____________________________________ Address:
Fax No:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxx Xxxxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxxxx Xxxxxxx
____________________________________ Address:
Fax No: _____________________
18
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxx Xxxxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxx Xxxxxxx
____________________________________ Address:
Fax No:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxxx Xxxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxxxxx Xxxxxx
____________________________________ Address:
Fax No:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxxx Xxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxxxxx Xxxxx
____________________________________ Address:
Fax No:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxx Xxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxxxx Xxxx
____________________________________ Address:
Fax No:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxxx Xxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxxxxx Xxxxx
____________________________________ Address:
Fax No: _____________________
19
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxx Xxxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxx Xxxxxx
____________________________________ Address:
Fax No:
Witness
/s/ Xxxxx Santa Xxxxx /s/ Xxxxxxxx Xxxx Xxxxxxx
---------------------------------------- -----------------------------------------
Name: Xxxxx Santa Lucia_____________ Signature
Address:____________________________ Name: Xxxxxxxx Xxxx Xxxxxxx
____________________________________ Address:
Fax No:
ESCROW AGENT:
Xxxxxxxx Ingersoll Professional Corporation
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------------
Xxxxxx X. Xxxxx, Shareholder
20
Schedule 4(b)(i)
Xxxxxx Xxxxxxxx
Xxxxxxx Xxxxxx
Xxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
Xxxxxx Xxxxxxx
Xxxxxxx Xxxxx
Xxxxxx Xxxx
Xxxxxxxxxxx XxXxxxxx
Xxxxxxx Xxxxx
Xxxxx Santa Xxxxx
Xxxx Xxxxxx
Xxxxxxxx Xxxx Xxxxxxx
21
Schedule 4(b)(i) II
-------------------
Rare Telephony Shareholder Number of Shares
-------------------------- ----------------
Xxxxxx Xxxxxxxx 62,661
Xxxxxxx Xxxxxx 62,661
Xxxxxx Xxxxxx 503,306
Xxxxx Xxxxxxx 125,167
Xxxxxx Xxxxxxx 239,943
Xxxxxxx Xxxxx 6,204
Xxxxxx Xxxx 6,204
Xxxxxxxxxxx XxXxxxxx 31,331
Xxxxxxx Xxxxx 6,204
Xxxxx Santa Xxxxx 12,563
Xxxx Xxxxxx 3,102
Xxxxxxxx Xxxx Xxxxxxx 3,102
Network Consulting Group, Inc. 438,628
Xxxx Xxxxxxx 24,972
Xxxxxxx Xxxxxx 24,972
22
Schedule 5(a)
-------------
Xxxx Xxxxxxx 24,972 shares
Xxxxxxx Xxxxxx 24,972 shares
23
