SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): June 22, 1998
VDC CORPORATION LTD.
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(Exact name of registrant as specified in its charter)
Bermuda 0-14045 061510832
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(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification No.)
incorporation)
75 Holly Hill Lane
Greenwich, CT 06831
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(Address of principal executive office)
(203) 869-5100
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(Registrant's telephone number, including area code)
27 Doubling Road
Greenwich, CT 06830
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
Description of Asset Purchase Transaction
On June 22, 1998 (the "Transaction Date"), VDC Corporation Ltd. (the
"Company") acquired from PortaCom Wireless, Inc. ("PortaCom") in an arm's length
transaction 2,000,000 shares of common stock of Metromedia China Corporation
(f/k/a Metromedia Asia Corporation) ("MCC"), par value $.01 per share (the "MCC
Shares") and warrants to purchase 4,000,000 shares of common stock of MCC at an
exercise price of $4.00 per share (the "Warrants") pursuant to an asset purchase
transaction (the "Purchase Transaction") between the Company and PortaCom.
MCC is a privately-held company headquartered in East Rutherford, New
Jersey engaged in the operation of wireless cellular telecommunications systems
and the build-out of telecommunications projects in the People's Republic of
China. The management of the Company believes that the MCC Shares and Warrants
represent approximately 8.7 percent of MCC's fully diluted shares. Management
acquired the MCC Shares and Warrants to acquire a strategic stake in the
telephony business in China and for long-term investment purposes.
The Company and PortaCom had originally entered into an Asset Purchase
Agreement, dated as of November 25, 1997, as amended as of February 16, 1998,
for the sale of the MCC Shares and Warrants by PortaCom to the Company (the
"Original Agreement"). On March 23, 1998, PortaCom filed a voluntary petition
for relief under Chapter 11 of Title 11 of the United States Code (the
"Bankruptcy Code") before the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). In connection with PortaCom's bankruptcy
filing, the Company and PortaCom entered into an Asset Purchase Agreement, dated
as of March 23, 1998 (as amended, the "Purchase Agreement"), which superseded
the Original Agreement in its entirety.
The Purchase Agreement was subsequently amended by two Stipulations and
Orders in Lieu of Objection, dated as of April 3, 1998 and April 23, 1998,
respectively (collectively, the "Stipulations") and by an Escrow Agreement,
dated April __, 1998, among the Company, PortaCom, the Committee of Unsecured
Creditors of PortaCom Wireless, Inc. (the "Committee") and Klehr, Harrison,
Harvey, Branzburg & Ellers LLP as escrow agent (the "Escrow Agent") (the "Escrow
Agreement"). On April 23, 1998, the Bankruptcy Court entered an order approving
the Purchase Agreement, as amended, authorizing PortaCom to execute and deliver
the Purchase Agreement, as amended, to the Company, and authorizing and
directing the consummation of the sale of the MCC Shares and Warrants by
PortaCom to the Company under Section 363(b) of the Bankruptcy Code as
contemplated by the Purchase Agreement.
In order to consolidate the Purchase Agreement, Stipulations and Escrow
Agreement into one document and to set forth the parties' mutual interpretation
of the Purchase Agreement as amended by the Stipulations and the Escrow
Agreement, the Company, PortaCom and the Escrow Agent entered into a Memorandum
of Understanding, dated as of June 8, 1998 (the "MOU"). The Committee also
executed the MOU for the limited purpose of approving Sections
<PAGE>
3.4(b) and 3.4(d) thereof, which clarified the treatment of certain claims
against PortaCom's bankruptcy estate. The Purchase Agreement, Stipulations,
Escrow Agreement and MOU and other documents and instruments delivered in
connection therewith are collectively referred to herein as the "Purchase
Documents".
Purchase Price
The purchase price ("Purchase Price") for the MCC Shares and Warrants
consists of (i) $82,000 in cash to be disbursed by the Escrow Agent to PortaCom
from time to time to PortaCom for the payment of administrative claims against
PortaCom's bankruptcy estate (the "Administrative Advance"); (ii) $2,600,000 in
cash, to be held in escrow pursuant to the terms of the Escrow Agreement and
subject to adjustment as described in the Purchase Documents (the "Cash Funds");
(iii) 5,300,000 newly issued shares of common stock, par value $2.00 per share,
of the Company, subject to adjustment as described in the Purchase Documents
(the "Company Shares"); (iv) the Deferred Purchase Price (as such term is
defined in the Purchase Documents), if any; and (v) forgiveness of indebtedness
owed by PortaCom to the Company in the original principal amount of $384,725
pursuant to (a) the Loan Agreement, dated November 10, 1997, between the Company
and PortaCom, and (b) the Debtor-in-Possession Loan, Pledge and Security
Agreement, dated March 23, 1998, between the Company and PortaCom, approved by
the Bankruptcy Court on an interim basis on March 25, 1998 and on a final basis
on April 23, 1998, as amended by the Stipulations (the "DIP Financing
Agreement"). The Cash Funds and the Company Shares shall be held in escrow under
the Escrow Agreement until the Bankruptcy Court confirms a plan of
reorganization of PortaCom (the "Plan"). The Company is entitled to any interest
earned on the Cash Funds during the escrow period. Under the Purchase Documents,
the Cash Funds will be available to satisfy outstanding indebtedness owed to
PortaCom's creditors and claimants in its bankruptcy case. To the extent that
more than $384,725 of the Cash Funds is used by PortaCom to satisfy certain of
its indebtedness, the excess thereof will reduce the number of Company Shares
to which PortaCom is ultimately entitled as part of the Purchase Price.
The Deferred Purchase Price is payable only in the event that, on June
8, 1999, MCC is a publicly held company and if the market value of the common
stock of MCC exceeds a certain value as compared with the value of the Company's
common stock as determined by a formula set forth in the Purchase Documents. VDC
may elect to pay the Deferred Purchase Price in the form of either Company
Shares (the "Deferred Purchase Price Shares") or cash.
For a further description of the Company Shares issued to PortaCom and
the Deferred Purchase Price Shares which the Company may issue to PortaCom, see
"Description of the Securities Issued in the Purchase Transaction."
The Company funded the Cash Funds component of the Purchase Price with
its existing cash assets.
On June 8, 1998, the parties commenced closing the Purchase Transaction
in escrow (the "Escrow Closing") pursuant to the terms of a Closing Escrow
Agreement, dated as of June 8, 1998, among the Company, PortaCom, Metromedia
China Corporation ("MCC"), the Committee and Klehr, Harrison, Harvey, Branzburg
& Ellers LLP as closing escrow agent (the "Closing Escrow Agent") (the "Closing
Escrow Agreement"). At the Escrow Closing, which concluded on June 10, 1998, the
Company delivered to the Closing Escrow Agent the Company Shares,
<PAGE>
subject to adjustment under the terms of the Purchase Documents. PortaCom
delivered to the Closing Escrow Agent its assignment of warrant and stock power
in blank relating to the transfer of the MCC Shares and Warrants to the Company.
In addition, PortaCom and MCC delivered to the Closing Escrow Agent the original
stock certificate representing the MCC Shares and the Company delivered to the
Closing Escrow Agent the original warrant certificate representing the Warrants,
which had been pledged to the Company by PortaCom as collateral for prior loan
advances made under a Loan Agreement, Security Agreement and Pledge Agreement,
each dated as of November 10, 1997, between the Company and PortaCom, and the
DIP Financing Agreement.
The Closing Escrow Agent subsequently delivered the original
certificates representing the MCC Shares and Warrants, along with the assignment
of warrant and stock power in blank, to MCC in order for MCC to reissue
certificates for such shares and warrants in the name of the Company (the
"Reissued Shares and Warrants").
The Closing Escrow Agreement automatically terminated by its terms upon
the distribution by the Closing Escrow Agent of all of the Closing Escrowed
Funds (as defined below), MCC Shares, MCC Warrants, the Reissued Shares and
Warrants and the Company Shares, which occurred on June 22, 1998. The "Closing
Escrowed Funds" consisted of a portion of the Cash Funds in the sum of
$41,412.00, which represented the Closing Date Claims and the Bar Date Claims.
The Company agreed to pay investment banking fees of 125,000 Company
Shares (the "Investment Banking Shares"), for arranging the Purchase Transaction
and for advisory services rendered in connection with the Purchase Transaction.
To date, 75,000 Investment Banking Shares have been issued. The issuance of the
remaining 50,000 Investment Banking Shares, however, is subject to the prior
approval of the Bermuda Monetary Authority, which has yet to be obtained.
Description of the Securities Issued in the Purchase Transaction
In connection with the Purchase Transaction, the Company issued
5,300,000 Company Shares, subject to certain adjustments, and may have an
obligation to issue Deferred Purchase Price Shares in the event the Company
elects to pay the Deferred Purchase Price, if any, in the form of Company
Shares.
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Registration Rights
The Company anticipates that the transfer of the Company Shares from
the Company to PortaCom and any subsequent resale or transfer thereof by or on
behalf of PortaCom will be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Act"), by virtue of Section 1145 of the
Bankruptcy Code. However, the Company has agreed that, to the extent such
transfers or resales of the Company Shares are not exempt from registration by
virtue of Section 1145 of the Bankruptcy Code and are accordingly subject to the
registration requirements of the Act, then the Company shall, within forty-five
(45) days after the entry of an order of the Bankruptcy Code confirming a plan
of reorganization of PortaCom, file with the Securities and Exchange Commission,
and use its best efforts to have declared effective, a Registration Statement
(the "Registration Statement") pursuant to which the Company shall register the
potential resale of the Company Shares, and thereafter, shall use its best
efforts to keep such Registration Statement effective until the earlier of (a)
one year after the date such Registration Statement becomes effective or (b) the
date on which PortaCom has transferred and distributed the Company Shares in
accordance with such confirmed plan of reorganization. Other than brokerage or
underwriting discounts or commissions, if any, the expenses of such registration
will be borne by the Company.
The Deferred Purchase Price Shares are entitled to certain registration
rights. The Company has no obligation to assist or cooperate in the offering or
disposition of the Deferred Purchase Price Shares, obtain a commitment from an
underwriter relative to the sale of the Deferred Purchase Price Shares or
include the Deferred Purchase Price Shares within an underwritten offering of
the Company. Furthermore, the Company has the right to reduce the number of
Deferred Purchase Price Shares to be included in a registration statement which
is, in whole or in part, an underwritten public offering of the Company's common
stock (and the registration of such Deferred Purchase Price Shares may be
postponed by the Company for up to 180 days following the completion of any such
underwritten public offering), if in the opinion of the managing underwriter,
the inclusion of the Deferred Purchase Price Shares in such registration
statement would adversely affect the marketing of the securities to be sold by
the Company therein. Other than Seller's attorney's fees and any registration
fees, transfer taxes or underwriting discounts or commissions applicable to the
Deferred Purchase Price Shares, if any, the Company shall bear the expenses of
including the Deferred Purchase Price Shares in a registration statement
covering securities of the Company to be offered and sold by the Company to the
public generally.
Restrictions upon Resale
The Company Shares issued to PortaCom are subject to restrictions upon
resale such that 25% of the shares are eligible for resale upon the earlier of
(a) confirmation of a Plan providing an exemption from the registration
requirements of the Act pursuant to Section 1145 of the Bankruptcy Code or (b)
the effectiveness of a Registration Statement (such earlier date shall be
referred to herein as the "First Resale Date"), an additional 25% are eligible
for resale six months after the First Resale Date, and the remaining 50% of the
shares are eligible for resale one year after the First Resale Date.
<PAGE>
Principal Stockholders
The following table sets forth certain information regarding the
beneficial ownership of the Company Common Shares as of the Transaction Date
with respect to: (i) each person known by the Company to beneficially own 5% or
more of the outstanding Company Common Shares; (ii) each of the Company's
directors; (iii) each of the Company's executive officers; and (iv) all
directors and executive officers of the Company as a group. Except as otherwise
indicated, each person set forth below has sole voting and investment power on
the shares reported.
Number of Shares
Name Owned(1) Percentage of Shares
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Frederick A. Moran 2,849,184(2) 13.7%
Roberts Family Trust 2,750,000(3) 13.2%
James C. Roberts, Trustee
Thomas W. Wilson 21,000(4) .1%
William Zimmerling 9,000(5) .04%
Frederick W. Moran 1,522,957(6) 7.3%
Clayton F. Moran 1,422,957(7) 6.8%
PortaCom Wireless, Inc. 5,300,000(8) 25.5%
All officers and directors of
the Company as a group (4 persons)
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(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations promulgated under the Securities Exchange Act of 1934,
and, accordingly, may include securities owned by or for, among others,
the spouse and/or minor children of an individual and any other
relative who has the same home as such individual, as well as other
securities as to which the individual has or shares voting or
investment power or which each person has the right to acquire within
60 days after the date of this Current Report through the exercise of
options, or otherwise. Beneficial ownership may be disclaimed as to
certain of the securities. This table has been prepared based on
20,778,131 shares of common stock outstanding (assuming approximately
10,612,349 outstanding shares, plus 8,487,500 shares issuable upon
conversion of the Series A Convertible Preferred Stock (the "Series A
Shares") and the Series B Convertible Preferred Stock (the "Series B
Shares") of Sky King Communications, Inc., the Company's subsidiary,
plus 1,678,282 shares to be
<PAGE>
issued pursuant to either various private placement transactions which
occurred on or before May 27, 1998, or as payment of consulting fees
to investment banking firms).
(2) Includes 157,090 shares of common stock to be issued, pursuant to a
private placement which occurred on May 27, 1998, to the following
entities of which Frederick A. Moran, his spouse or minor children are
the sole owners or primary beneficiaries, or to the spouse or minor
children of Mr. Moran: 27,000 shares to Moran Equity Fund, Inc.; 10,000
shares to Luke Moran; 10,000 shares to Kent Moran; 85,667 shares to
Frederick A. Moran, IRA; 90 shares to Frederick A. Moran, Trust; 125
shares of common stock to Anne Moran, Trust; 333 shares to Kent Moran,
IRA; 333 shares to Luke Moran, IRA; 23,667 shares to Frederick A. and
Joan B. Moran. Also includes 1,304,650 shares of common stock owned by
Kent F. Moran and 1,304,650 shares of common stock owned by Luke F.
Moran, both of whom are minor children of Frederick A. Moran. Includes
82,670 shares of common stock owned in the name of Frederick A. Moran
and Joan B. Moran, husband and wife. Does not include 1,422,850 shares
of common stock to be issued to Frederick W. Moran and 1,522,850 shares
of common stock to be issued to Clayton F. Moran, both of whom are
adult children of Frederick A. Moran. Does not include 90 shares to be
issued in the name of Frederick A. Moran, Trust, of which Clayton F.
Moran is the beneficiary of 45 shares and Frederick W. Moran is the
beneficiary of 45 shares, pursuant to a private placement transaction
which occurred on May 27, 1988. Does not include 51,000 shares of
common stock to be issued to Anne Moran, the mother of Frederick A.
Moran, or her retirement accounts, pursuant to a private placement
which occurred on May 27, 1998.
(3) Includes 1,512,500 shares of common stock issued to The Roberts Family
Trust and 1,237,500 shares of common stock which may be issued to The
Roberts Family Trust upon conversion of the Series A and Series B
shares.
(4) Includes options to purchase 21,000 shares of common stock, which
vested on April 1, 1998, but all of which are subject to forfeiture in
the event that Mr. Wilson voluntarily resigns as the Executive Vice
President of the Company or the President of Blue Sky
Telecommunications, Inc. ("Blue Sky"), a wholly-owned subsidiary of the
Company, on or before October 1, 1998, and half of which (or options to
purchase 10,500 shares of common stock) are subject to the forfeiture
in the event that Mr. Wilson resigns as the Company's Executive Vice
President or Blue Sky's President on or before April 1, 1999. Does not
include options to purchase 129,000 shares of common stock which may
vest on or after March 31, 1999.
(5) Includes options to purchase 9,000 shares of common stock, which vested
on April 1, 1998, but all of which are subject to forfeiture in the
event that Mr. Zimmerling voluntarily resigns as either VDC's or Blue
Sky's Vice President on or before October 1, 1998, and half of which
(or options to purchase 4,500 shares) are subject to forfeiture in the
event that Mr. Zimmerling voluntarily resigns as either VDC's or Blue
Sky's Vice President on or before April 1, 1999. Does not include
options to purchase 17,500 shares of common stock which may vest on or
after March 31, 1999.
<PAGE>
(6) Includes 100,000 shares of common stock to be issued to Frederick W.
Moran pursuant to a private placement transaction which occurred on May
27, 1998. Includes 45 shares of common stock to be issued in the name
of Frederick A. Moran, Trust and 62 shares of common stock to be issued
in the name of Anne Moran, Trust, of which Frederick W. Moran is the
beneficiary, pursuant to a private placement transaction which occurred
on May 27, 1998.
(7) Includes 63 shares of common stock to be issued in the name of Anne
Moran, Trust, of which Clayton F. Moran is the beneficiary, pursuant to
a private placement transaction which occurred on May 27, 1998.
(8) All 5,300,000 shares are subject to downward adjustment and are being
held in escrow pending the confirmation of a plan of reorganization of
PortaCom in its pending Chapter 11 bankruptcy case.
ITEM 5. OTHER EVENTS
In order to raise working capital, the Company sold an
aggregate number of 583,430 newly-issued Company Shares at a purchase price of
$6.00 per share to various individuals and entities in a private placement
transaction dated as of May 27, 1998. The Company raised a total of $3,500,580
in this private placement transaction for working capital purposes. The issuance
of these shares, however, is subject to the prior approval of the Bermuda
Monetary Authority, which has not yet been obtained.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits (referenced to Item 601 of Regulation S-K).
<TABLE>
<CAPTION>
Exhibit
Number Title
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<S> <C>
2.11 Asset Purchase Agreement, dated March 23, 1998 between VDC Corporation Ltd. and PortaCom
Wireless, Inc. (1)
2.12 Stipulation and Order in Lieu of Objection, dated April 3, 1998. (2)
2.13 Stipulation and Order in Lieu of Objection, dated April 23, 1998. (2)
2.14 Escrow Agreement, dated April __, 1998, among VDC Corporation Ltd., PortaCom Wireless, Inc.,
the Committee of Unsecured Creditors of PortaCom Wireless, Inc. and Klehr, Harrison, Harvey,
Branzburg & Ellers LLP (2)
<PAGE>
2.15 Memorandum of Understanding, dated June 8, 1998, by and among VDC Corporation Ltd., PortaCom
Wireless, Inc. and Official Committee of Unsecured Creditors of PortaCom Wireless, Inc. (1)
2.16 Closing Escrow Agreement, dated June 8, 1998, by and among VDC Corporation Ltd., PortaCom
Wireless, Inc., Metromedia China Corporation, the Official Committee of Unsecured Creditors
of PortaCom Wireless, Inc. and Klehr, Harrison, Harvey, Branzburg & Ellers LLP (1)
2.17 Promissory Note, dated June 9, 1998, made by VDC Corporation Ltd. in favor of PortaCom
Wireless, Inc. (1)
2.18 Assignment, dated June 8, 1998, by PortaCom Wireless, Inc. (1)
10.3 Loan Agreement, dated November 10, 1997, between VDC Corporation Ltd. and PortaCom Wireless,
Inc. (1)
10.4 Pledge Agreement, dated November 10, 1997, between VDC Corporation Ltd. and PortaCom
Wireless, Inc. (1)
10.5 Security Agreement, dated November 10, 1997, between VDC Corporation Ltd. and PortaCom
Wireless, Inc. (1)
10.6 Debtor-in-Possession Loan, Pledge and Security Agreement, dated March 23, 1998 between VDC
Corporation Ltd and PortaCom Wireless, Inc. (1)
10.7 Waiver, dated June 8, 1998, by VDC Corporation Ltd. (1)
</TABLE>
(1) Filed herewith.
(2) Previously filed as an Exhibit to the Company's Form 10-Q for the quarter
ended March 31, 1998, as filed with the SEC on June 1, 1998, and incorporated by
reference herein.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 7, 1998 VDC CORPORATION LTD.
By: /s/ Frederick A. Moran
---------------------------
Frederick A. Moran
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page Number in
Number Rule 0-3(b)
(Referenced to Sequential
Item 601 of Reg. Numbering System
S-K) Where Exhibit Can
Be Found
<S> <C> <C>
2.11 Asset Purchase Agreement, dated March 23, 1998 between VDC
Corporation Ltd. and PortaCom Wireless, Inc.
2.15 Memorandum of Understanding, dated June 8, 1998, by and among VDC
Corporation Ltd., PortaCom Wireless, Inc. and Official Committee
of Unsecured Creditors of PortaCom Wireless, Inc.
2.16 Closing Escrow Agreement, dated June 8, 1998, by and among VDC
Corporation Ltd., PortaCom Wireless, Inc., Metromedia China
Corporation, the Official Committee of Unsecured Creditors of
PortaCom Wireless, Inc. and Klehr, Harrison, Harvey, Branzburg &
Ellers LLP
2.17 Promissory Note, dated June 9, 1998, made by VDC Corporation Ltd.
in favor of PortaCom Wireless, Inc.
2.18 Assignment, dated June 8, 1998, by PortaCom Wireless, Inc.
10.3 Loan Agreement, dated November 10, 1997, between VDC Corporation
Ltd. and PortaCom Wireless, Inc.
10.4 Pledge Agreement, dated November 10, 1997, between VDC
Corporation Ltd. and PortaCom Wireless, Inc.
10.5 Security Agreement, dated November 10, 1997, between VDC
Corporation Ltd. and PortaCom Wireless, Inc.
10.6 Debtor-in-Possession Loan, Pledge and Security Agreement, dated
March 23, 1998 between VDC Corporation Ltd and PortaCom Wireless,
Inc.
10.7 Waiver, dated June 8, 1998, by VDC Corporation Ltd.
</TABLE>
ASSET PURCHASE AGREEMENT
by and between
VDC CORPORATION LTD.,
as Buyer,
and
PORTACOM WIRELESS, INC.
as Seller
March 23, 1998
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the 23rd day
of March, 1998, by and between VDC CORPORATION LTD., a Bermuda corporation
("Buyer"), and PORTACOM WIRELESS, INC., a Delaware corporation ("Seller").
WITNESSETH:
WHEREAS, Seller desires to sell, and Buyer desires to purchase, on the
terms and conditions hereafter set forth, certain of the assets of Seller as
described herein; and
WHEREAS, Seller and Buyer are parties to that certain Asset Purchase
Agreement, dated as of November 25, 1997, as amended as of February 16, 1998,
concerning the subject matter hereof (the "Original Agreement"); and
WHEREAS, Seller and Buyer intend that this Agreement supersede in its
entirety the Original Agreement; and
WHEREAS, on March 23, 1998, Seller filed a voluntary petition for relief
under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code")
before the United States Bankruptcy Court for the District of Delaware (or any
other tribunal exercising jurisdiction over the Debtor and property of its
estate, the "Court"); and
WHEREAS, Seller remains in possession of its property and in control of its
business pursuant to ss.ss.1107 and 1108 of the Bankruptcy Code; and
WHEREAS, Seller and Buyer are parties to a Loan Agreement, Security
Agreement and Pledge Agreement, entered into on November 10, 1997, whereby Buyer
extended to Seller prior to the commencement of the case the principal sum of
approximately $360,000 (together with all accrued interests, costs and fees, the
"Pre-Petition Indebtedness"); and
WHEREAS, Seller and Buyer are parties to a Debtor In Possession Loan,
Security and Pledge Agreement, entered into after the commencement of the case,
and subject to Court approval, whereby Buyer agreed to advance to Seller the
principal amount up to an additional $333,000, subject to the terms and
conditions set forth therein (together with all accrued interests, costs and
fees, the "Post-Petition Indebtedness" and together with the Pre-Petition
Indebtedness, the "Indebtedness"); and
WHEREAS, Seller and Buyer agree that the transactions contemplated hereby
are other than in the ordinary course of Seller's business, and accordingly
Court approval is required; and
WHEREAS, Seller and Buyer desire to consummate the transactions
contemplated hereby as quickly as possible in order to maximize the benefit to
the estate and intend to seek expedited consideration by the Court of the
approval of this Agreement; and
1
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
agreements and representations and warranties herein contained, and for other
good and legal consideration, the receipt and sufficiency of which is hereby
acknowledged, Seller and Buyer, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
DEFINITIONS
1.1. When used in this Agreement, the following terms, in their singular
and plural forms, shall have the meanings assigned to them below:
"Act" means the Securities Act of 1933, as amended.
"Agreement" is defined in the initial paragraph hereof.
"Assets" means all of Seller's right, title and interest in and to all
of the following described holdings:
(i) Two million shares of common stock, par value $.01 per share
("MAC Common Stock"), of Metromedia Asia Corporation ("MAC"), as evidenced by
Stock Certificate Number 59, dated February 28, 1997; and
(ii) Warrants ("MAC Warrants") to purchase four million shares of
common stock, par value $.01 per share, at $4.00 per share, of MAC, as
evidenced by Warrant Number 19.
"Buyer" is defined in the initial paragraph hereof.
"Cash Funds" is defined in Section 3.2(a).
"Claim" means a claim or demand for any and all I Liabilities,
damages, losses, obligations, deficiencies, encumbrances, penalties, costs and
expenses, including reasonable attorneys' fees, resulting from, related to or
arising out of (i) any misrepresentation, breach of warranty or non-fulfillment
of any covenant of Seller set forth in this Agreement or in any Related
Document; (ii) Seller's ownership of the Assets; (iii) any and all actions,
suits, investigations, proceedings, demands, assessments, audits, judgments and
claims arising out of any of the foregoing.
"Closing" and "Closing Date" are defined in Section 6.1.
"Disclosure Schedule" is defined in Section 4.1.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"Governmental Authority" means any foreign, federal, state, regional
or local authority, agency, body, court or instrumentality, regulatory or
otherwise, which, in whole or in
2
<PAGE>
part, was formed by or operates under the auspices of any foreign, federal,
state, regional or local government.
"Indemnified Party" is defined in Section 10.4.
"Indemnifying Party" is defined in Section 10.4.
"Law" means any common law and any federal, state, regional, local or
foreign law, rule, statute, ordinance, rule, order or regulation.
"Liabilities" means liabilities, obligations, claims or debts of
Seller of any type or nature, whether matured, unmatured, contingent or unknown,
including, without limitation, tort, contract or other claims asserted against
Seller which are based on acts or omissions occurring on, before or after the
Closing Date.
"Lien" means any lien, charge, covenant, condition, easement, adverse
claim, demand, encumbrance, security interest, option, pledge, or any other
title defect, easement or restriction of any kind.
"Purchase Price" is defined in Section 3.1.
"Registration Statement" is defined in Section 7.6.
"Related Documents" means this Agreement and each document or
instrument executed in connection with the consummation of the transactions
contemplated herein.
"Seller" is defined in the initial paragraph of this Agreement.
"Termination Agreement" means that certain Termination Agreement,
dated September 11, 1996, by and among Seller, MAC, as successor-in-interest to
Asian American Telecommunications Corporation and Max E. Bobbitt, as Agent.
"VDC Shares" is defined in Section 3.2(b).
ARTICLE 2
SALE AND PURCHASE OF ASSETS
2.1. Agreement to Sell and Purchase Assets. Subject to the terms and
conditions hereof and on the basis of and in reliance upon the covenants,
agreements and representations and warranties set forth herein, on the Closing
Date Seller shall sell the Assets to Buyer, and Buyer shall purchase the Assets
from Seller. The Assets shall be sold, transferred and conveyed by Seller to
Buyer free and clear of any and all claims, liens, encumbrances and the rights
of others.
2.2. Responsibility for Liabilities. Buyer shall not assume any Liabilities
of Seller by virtue of this Agreement or otherwise. Notwithstanding anything
herein, in the Original
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Agreement or in any Related Document to the contrary, except as otherwise
expressly provided herein, Buyer is neither assuming nor agreeing to pay or
discharge any of the claims against, or liabilities or obligations of, the
Seller, Seller's bankruptcy estate or of any other party and nothing in this
Agreement shall be construed to the contrary. All claims against, and
liabilities and obligations of Seller, and Seller's bankruptcy estate, whether
known or unknown, suspected or unsuspected, direct or contingent, in litigation,
threatened or not yet asserted or existing with respect to any aspect of the
Assets, Seller's bankruptcy case or estate, or this Agreement, arising or
existing prior to or on the Closing Date are and shall remain the responsibility
of Seller and Seller's bankruptcy estate, and such liabilities or obligations
arising after Closing shall be the responsibility of the Buyer. The Order
entered by the Court approving this Agreement shall specifically provide that
the Buyer is not liable for pre-Closing claims, liabilities or obligations and
is not liable as a successor-in-interest to creditors of Seller or Seller's
bankruptcy estate.
ARTICLE 3
PAYMENT OF THE PURCHASE PRICE
3.1. Purchase Price. The purchase price ("Purchase Price") for the Assets
shall consist of (i) the Closing Purchase Price (as such term is defined in
Section 3.2 below) and (ii) the Deferred Purchase Price (as such term is defined
in Section 3.5 below), if any.
3.2. Closing Purchase Price. The Closing Purchase Price (the "Closing
Purchase Price") shall be paid or delivered by Buyer at Closing in the following
manner:
(a) Subject to adjustment pursuant to Section 3.4 hereof, Buyer shall
deliver an amount not to exceed the difference between Seven Hundred Thousand
Dollars ($700,000) and the outstanding Indebtedness (the "Cash Funds") in
immediately available funds in the form of cash, cashier's check or wire
transfer; and
(b) Buyer shall deliver 5,300,000 shares of newly issued shares of
common stock, par value $2.00 per share, of Buyer (the "VDC Shares") in
accordance with the provisions of Section 3.3; and
(c) Buyer shall satisfy of the Indebtedness.
3.3. Allocation of Closing Purchase Price. The Closing Purchase Price shall
be allocated in the following manner:
(a) At the Closing, Seller will deliver a schedule (the "Debt
Schedule") identifying its indebtedness as of the Closing Date. Buyer shall
deliver to and deposit with Seller that portion of the Cash Funds and the VDC
Shares necessary to satisfy Seller's indebtedness to its creditors in the
amounts and manner as set forth in the Debt Schedule. The Cash Funds and/or any
and all VDC Shares delivered to Seller pursuant to this Section 3.3(a) shall be
credited against and considered a part of the Closing Purchase Price and shall
be held and distributed by Seller to the creditors (or provision shall be made
for the ultimate distribution of such amounts and/or Shares to creditors upon
the final resolution of any disputed amounts
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payable or claims against Seller) in accordance with the provisions of a further
order of the Court.
(b) Seller shall retain the VDC Shares until such time as a
disposition of such shares occurs to Seller's stockholders pursuant to a
confirmed plan of reorganization providing for the issuance of the VDC Shares
pursuant to the exemption set forth in Bankruptcy Code ss.1145, or an effective
registration statement in accordance with the provisions of Section 7.6 hereof.
3.4. Adjustment to Closing Purchase Price. Forgiveness of the Indebtedness
shall constitute initial payments and deposits against the Closing Purchase
Price, and, as such, shall be applied towards the Closing Purchase Price under
this Agreement upon the Closing Date.
3.5. Deferred Purchase Price.
(a) For the purposes of this Section 3.5, the terms listed below shall
have the following meanings:
(i) "MAC Base Price" means $12.00 per share for each share of MAC
common stock;
(ii) "MAC Market Price" means
(A) If MAC's common stock is traded in the over-the-counter
market and not on any national securities exchange or in the NASDAQ Reporting
System, the market price shall be the average of the mean between the last bid
and ask prices per share, as reported by the National Quotation Bureau, Inc. or
an equivalent generally accepted reporting service, for the consecutive 20
trading days following the one year anniversary of the Closing Date, or if not
so reported, the average of the closing bid and asked prices for a share of MAC
common stock for the consecutive 20 trading days following the one year
anniversary of the Closing Date as furnished to MAC by any member of the
National Association of Securities Dealers, Inc., selected by MAC for that
purpose.
(B) If MAC's common stock is traded on a national securities
exchange or in the NASDAQ Reporting System, the market price shall be the simple
average of the closing prices of a share of MAC's common stock, as quoted on the
NASDAQ Reporting System or its other principal exchange for the consecutive 20
trading days following the one year anniversary of the Closing Date.
(C) If the market price cannot be determined for MAC's
common stock on such date on either of the foregoing bases, the market price
shall be the fair market value as reasonably determined by an investment banking
firm selected by Seller and Buyer, with the cost therefor to be borne equally by
Seller and Buyer.
(iii) "VDC Base Price" means $5.00 per share for each share of
VDC common stock; and
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(iv) "VDC Market Price" means
(A) If VDC's common stock is traded in the over-the-counter
market and not on any national securities exchange nor in the NASDAQ Reporting
System, the market price shall be the average of the mean between the last bid
and ask prices per share, as reported by the National Quotation Bureau, Inc. or
an equivalent generally accepted reporting service, for the consecutive 20
trading days following the one year anniversary of the Closing Date, or if not
so reported, the average of the closing bid and asked prices for a share of VDC
common stock for the consecutive 20 trading days following the one year
anniversary of the Closing Date as furnished to VDC by any member of the
National Association of Securities Dealers, Inc., selected by VDC for that
purpose.
(B) If VDC's common stock is traded on a national securities
exchange or in the NASDAQ Reporting System, the market price shall be the simple
average of the closing prices at which a share of VDC's common stock traded, as
quoted on the NASDAQ Reporting System or its other principal exchange for the
consecutive 20 trading days following the one year anniversary of the Closing
Date.
(C) If the market price cannot be determined by VDC's common
stock on such date on either of the foregoing bases, the market price shall be
the fair market value as reasonably determined by an investment banking firm
selected by Seller and Buyer, with the cost therefor to be borne equally be
Seller and Buyer.
(b) In the event that on the one year anniversary of the Closing Date, MAC
is a publicly held company whose shares are registered with the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934, Buyer
shall pay and deliver to Seller the Deferred Purchase Price (the "Deferred
Purchase Price") calculated in accordance with Section 3.5(c) below, if any,
within ninety (90) days following the one year anniversary of the Closing Date.
The Deferred Purchase Price shall be paid, at VDC's sole option, in either (i)
immediately available funds in the form of cash, cashier's check or wire
transfer, or (ii) shares of VDC common stock. In the event that VDC elects to
pay the Deferred Purchase Price in the form of shares of VDC common stock, such
stock shall be priced at the higher of $5.00 per share or the VDC Market Price
per share.
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(c) The Deferred Purchase Price shall be calculated in accordance with the
following formula:
MAC Market Price - VDC Market Price x $5,000,000
----------------- ----------------
MAC Base Price VDC Base Price
For example, assuming that the MAC Market Price is $13.20, and the VDC
Market Price is $5.00, the Deferred Purchase Price would equal (10% - 0%) x
($5,000,000) = $500,000.
If the number calculated from the above formula is negative, there is no
Deferred Purchase Price.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1. Disclosure Schedule. Seller has delivered or caused to be delivered to
Buyer, prior to the execution of this Agreement, disclosure schedules, and
documents relating thereto, which include the numbered schedules specifically
referred to in this Agreement and which are attached hereto (collectively, the
"Disclosure Schedule"). To the best of Seller's knowledge, the information
contained in the Disclosure Schedule is complete and accurate in all material
respects and all documents that are attached to the Disclosure Schedule are
complete and accurate copies of the genuine original documents they purport to
represent as in effect on the date hereof. Capitalized terms used in the
Disclosure Schedule and not otherwise defined therein have the meanings ascribed
to such terms in this Agreement.
4.2. Organization and Standing of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Subject only to approval by the Court, Seller has all requisite
corporate power and authority to sell the Assets, free and clear of any and all
Liens. A certified copy of Seller's Articles of Incorporation and Bylaws are
attached to Schedule 4.2 of the Disclosure Schedule.
4.3. Encumbrances Created by this Agreement. The execution and delivery of
this Agreement and each of the Related Documents does not, and the consummation
of the transactions contemplated hereby or thereby will not, create any Liens on
any assets (including the Assets) of Seller in favor of third parties.
4.4. Title to Assets. Seller and Seller's bankruptcy estate own and hold of
record the entire right, title and interest in and to all of the Assets, free
and clear of any and all Liens, except the liens held by Buyer and interests
held by MAC.
4.5. VDC Shares to Be Issued Pursuant to Plan or Constitute Restricted
Securities. Seller represents and warrants: (I) (a) that it will prepare and
file a plan of reorganization and disclosure statement pertaining thereto, as
soon as is practicable and in no event later than the original period fixed by
ss. 1121(b) of the Bankruptcy Code, (b) that this Agreement, the
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transactions contemplated hereby and the issuance and distribution of the VDC
Shares are and will be under and in accordance with such plan as contemplated by
ss.1145 of the Bankruptcy Code, or (II) upon Seller's failure to obtain a
declaration from the Court that the issuance of the VDC Shares is exempt from
registration pursuant to Bankruptcy Code ss.1145, (a) that it has reviewed the
annual and periodic reports of Buyer, as filed by Buyer with the SEC pursuant to
the Securities Exchange Act of 1934, and that it has such knowledge and
experience in financial and business matters that it is capable of utilizing the
information set forth therein concerning Buyer to evaluate the risks of
investing in the VDC Shares; (b) that it has been advised that the VDC Shares to
be issued by Buyer constitute "restricted securities" as defined in Rule 144
promulgated under the Securities Act, and accordingly, have not been and will
not be registered under the Securities Act except as otherwise set forth in this
Agreement, and, therefore, it may not be able to sell or otherwise dispose of
such VDC Shares except if the VDC Shares are subject to an effective
registration statement filed with the SEC, in compliance with Rule 144 or
otherwise pursuant to an exemption from registration under the Act; (c) that the
VDC Shares so issued are being acquired by them for their own benefit and on
their own behalf for investment purposes and not with a view to, or for sale or
for resale in connection with, a public offering or re-distribution thereof; (d)
that the VDC Shares so issued will not be resold (i) without registration
thereof under the Securities Act (unless an opinion of counsel acceptable to
VDC, or to Buyer, an exemption from such registration is available), (ii) in
violation of any law; and (e) that the certificate or certificates representing
the VDC Shares to be issued will be imprinted with a legend in form and
substance as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF REGISTRATION, OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON
AN OPINION LETTER OF COUNSEL FOR THE COMPANY OR A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION.
and Buyer is hereby authorized to notify the transfer agent of the status of the
VDC Shares, and to take such other action including, but not limited to, the
placing of a "stop transfer" order on the books and records of Buyer's transfer
agent to ensure compliance with the foregoing.
4.6. Brokers' Fees. No broker, finder or other person or entity acting in a
similar capacity has participated on behalf of Seller in connection with the
transactions contemplated by this Agreement. Seller has not incurred any
Liability for brokers' fees, finders' fees, agents' commissions or other similar
forms of compensation in connection with this Agreement or the transactions
contemplated hereby.
4.7. Avoidance. The transactions contemplated hereby are not subject to
avoidance as fraudulent transfers or fraudulent conveyances under applicable
non-bankruptcy law or the Bankruptcy Code.
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4.8. Fair Value. Seller acknowledges and agrees that the Purchase Price
constitutes fair, adequate and reasonably equivalent consideration in exchange
for the Assets.
4.9. Full Disclosure. No representation or warranty by Seller in this
Agreement and no statement contained in any Disclosure Schedule to this
Agreement contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1. Organization and Standing of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Bermuda.
5.2. Authorization and Enforceability. Buyer has all requisite corporate
power and authority to enter into this Agreement and the Related Documents to
which it is a party and to carry out the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. All necessary
and appropriate action has been taken by Buyer with respect to the execution and
delivery of this Agreement and each of the Related Documents and the performance
of its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Related Documents and the consummation of the contemplated
transactions by Buyer will not (a) result in the breach of any of the terms or
conditions of, or constitute a default under, the Certificate of Incorporation
or the By-Laws of Buyer or (b) violate any Law or any order, writ, injunction or
decree of any Governmental Authority. This Agreement and any Related Documents
to which Buyer is a party constitute valid and binding obligations of Buyer
enforceable against Buyer in accordance with their respective terms.
5.3. VDC Shares. The VDC Shares delivered by Buyer at Closing will be
validly and legally issued, free and clear of any and all Liens, and will be
fully paid and non-assessable, except that in the event the Court does not
declare that the issuance of the VDC Shares are under a plan in Seller's
bankruptcy case pursuant to Bankruptcy Code ss.1145, the VDC Shares shall be
"restricted securities" pursuant to Rule 144 promulgated under the Act and
except for the restrictions on resale set forth in Section 7.6 hereof.
5.4. Approval. The Board of Directors of the Buyer has approved the
execution of this Agreement and the transactions contemplated thereby.
5.5. Brokers' Fees. Buyer has not incurred any liability for brokers' fees,
finders' fees, agents' commissions or other similar forms of compensation in
connection with this Agreement or the transactions contemplated hereby for which
Seller shall have any responsibility.
5.6. Full Disclosure. No representation or warranty by Buyer in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary to
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make the statements contained therein, in light of the circumstances in which
they are made, not misleading.
ARTICLE 6
CLOSING
6.1. Closing. Subject to satisfaction or waiver of all conditions precedent
set forth in Sections 8 and 9 of this Agreement, the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Buchanan Ingersoll Professional Corporation, at 10:00 a.m., local time the
day on which the last of the conditions precedent set forth in either Section 8
or 9 of this Agreement is fulfilled (the "Closing Date") or at such other time,
date and place as the parties may agree, but in no event shall such date be
later than April 30, 1998.
6.2. Obligations of Seller. At or prior to the Closing, Seller shall
deliver to Buyer, in each case, in form and substance satisfactory to Buyer:
(a) a written release by all of the parties to the Termination
Agreement agreeing to the release of the MAC Common Stock to the Buyer;
(b) written evidence from MAC confirming that, as of the Closing Date,
no part of the Assets pledged as collateral under the Termination Agreement has
been sold, assigned, transferred or otherwise disposed of or subject to any
action for any of the foregoing (other than the transaction contemplated in this
Agreement), and that, as of the Closing Date, neither MAC nor its parent
corporation, Metromedia International Group, Inc., contemplates taking any of
the foregoing actions;
(c) such other instruments of transfer as shall be necessary or
appropriate to vest in the Buyer good and marketable title to the Assets;
(d) such other documents as may be described in Article 8 of this
Agreement; and
(e) a certified copy of the Order approving this Agreement and
authorizing Seller to consummate the transactions contemplated hereby.
6.3. Obligations of Buyer. At the Closing, Buyer shall deliver:
(a) the Purchase Price in accordance with Article 3 of this Agreement;
(b) a Deferred Purchase Price Note, in form and substance mutually
satisfactory to the parties hereto;
(c) evidence of the satisfaction of the Indebtedness; and
(d) such other documents as may be described in Article 9 of this
Agreement.
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6.4. Further Documents or Necessary Action. Buyer and Seller each agree to
take all such further actions on or after the Closing Date as may be necessary,
desirable or appropriate in order to confirm or effectuate the transactions
contemplated by this Agreement.
ARTICLE 7
COVENANTS AND AGREEMENTS
Seller covenants to and agrees with Buyer, and Buyer covenants to and
agrees with Seller, as follows:
7.1. Conduct of Business Pending the Closing. During the period from the
date of this Agreement to the Closing Date, Seller shall conduct its business
operations in the ordinary and usual course and to maintain its records and
books of account in a manner consistent with prior periods. Seller shall,
without purporting to make any commitment on behalf of Buyer, exercise
reasonable efforts to preserve intact the present business organization and
personnel of Seller and the present goodwill of Seller with persons having
business dealings with them. Except as otherwise required or contemplated
hereby, Seller further covenants and agrees that, from the date of this
Agreement to the Closing Date, it shall not, without the written consent of
Buyer:
(a) enter into any negotiations, discussions or agreements
contemplating, affecting or respecting the Assets or Seller's ability to
transfer the Assets;
(b) enter into any negotiations, discussions or agreements
contemplating or respecting the acquisition of Seller or any material asset
thereof (other than in the ordinary course of business), whether through a sale
of stock, a merger or consolidation, the sale of all or substantially all of the
assets of Seller, any type of recapitalization or otherwise, with the exception
of the Seller's interest in and to its Cambodian venture, the disposition of
which has been discussed with the Buyer;
(c) incur any Liabilities or take any action that would diminish the
value of the Assets;
(d) take any action which would interfere with or prevent performance
of this Agreement; or
(e) engage in any activity or enter into any transaction which would
be inconsistent in any respect with any of the representations, warranties or
covenants set forth in this Agreement, as if such representations, warranties
and covenants were made at a time subsequent to such activity or transaction and
all references to the date of this Agreement were deemed to be such later date.
7.2. Access By Buyer; Confidentiality. During the period from the date of
this Agreement to the Closing Date, Seller shall cause Buyer, its agents and
representatives to be given full access during normal business hours to the
premises, buildings, offices, books, records, assets (including the Assets),
Liabilities, operations, contracts, files, personnel, financial
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and tax information and other data and information of Seller, and shall
cooperate with Buyer in conducting its due diligence investigation of Seller;
provided that such access shall not unreasonably interfere with the normal
operations and employee relationships of Seller. All information provided to or
learned by Buyer as a result of such access or otherwise in connection with the
transactions contemplated by this Agreement shall be held in confidence.
7.3. Access By Seller; Confidentiality. During the period from the date of
this Agreement to the Closing Date, Buyer shall cause Seller, its agents and
representatives to be given full access during normal business hours to the
premises, buildings, offices, books, records, assets, liabilities, operations,
contracts, files, personnel, financial and tax information and other data and
information of Buyer, and shall cooperate with Seller in conducting its due
diligence investigation of Buyer; provided that such access shall not
unreasonably interfere with the normal operations and employee relationships of
Buyer. Buyer shall provide Seller with copies of all reports and/or findings
made with the Securities and Exchange Commission from the date hereof through
the Closing. All information provided to or learned by Seller as a result of
such access or otherwise in connection with the transactions contemplated by
this Agreement shall be held in confidence.
7.4. Notice of Breach or Failure of Condition. Seller and Buyer agree to
give prompt notice to the others of the occurrence of any event or the failure
of any event to occur that might preclude or interfere with the timely
satisfaction of any condition precedent to the obligations of Seller or Buyer
under this Agreement.
7.5. Best Efforts. Seller and Buyer shall use their respective best efforts
to obtain all consents or approvals necessary to bring about the satisfaction of
the conditions required to be performed, fulfilled or complied with by them
pursuant to this Agreement and to take or cause to be taken all action, and to
do or cause to be done all things, necessary, proper or advisable under
applicable Laws to consummate and make effective the transactions contemplated
by this Agreement as expeditiously as practicable.
7.6. Registration Rights Agreement.
(a) Buyer agrees that, to the extent that the VDC shares may not be
transferred by Seller pursuant to the provisions of Section 1145 of the
Bankruptcy Code, within forty-five (45) days after the Closing Date, it shall,
at its sole expense, use its best efforts to file with the SEC a registration
statement (the "Registration Statement") which shall register (i) the
distribution of the VDC Shares to the stockholders of Seller and (ii) the
distribution of the VDC Shares delivered to third parties by the Seller in
satisfaction of claims against Seller and its bankruptcy estate. Resale of the
VDC Shares shall be subject to the following limitations:
(i) 25% of the VDC Shares may be sold upon the date of
declaration of the effectiveness of the Registration Statement;
(ii) 25% of the VDC Shares may be sold upon the six month
anniversary of the date of declaration of effectiveness of the
Registration Statement; and
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(iii) the remaining 50% of the VDC Shares may be sold upon the
one year anniversary of the date of declaration of effectiveness of
the Registration Statement.
(b) Notwithstanding the rights granted hereunder, Buyer shall have no
obligation whatsoever to:
(i) assist or cooperate in the offering or disposition of the VDC
Shares;
(ii) indemnify or hold harmless the holders of the VDC Shares or
any underwriter designated by such security holders;
(iii) obtain a commitment from an underwriter relative to the
sale of the VDC Shares; or
(iv) include the VDC Shares within an underwritten offering of
Buyer.
7.7. Loans. Buyer agrees to make advances, in its sole discretion, to the
Seller under and in accordance Loan, Security and Pledge Agreement, with such
advances being applied against the Purchase Price pursuant to Section 3.4
hereof.
7.8. Exclusive Dealing. In consideration of Buyer expending considerable
time and expenses in connection with the transactions contemplated in this
Agreement, including those incurred for due diligence inquiries and legal fees,
Seller hereby covenants and agrees that until the later of (i) sixty (60) days
after the date on which this Agreement automatically expires pursuant to Section
11.5 and (ii) the date on which this Agreement is terminated pursuant to
Sections 11.1, 11.2 or 11.3, Seller will not, directly or indirectly, through
any representative or otherwise, solicit or entertain offers from, negotiate
with or in any manner encourage, discuss, accept or consider any proposal of any
other person relating to the acquisition of the Assets, in whole or in part,
whether directly or indirectly, through purchase, merger, consolidation or
otherwise, except as otherwise may be required by law or order of the Court.
7.9. Good Faith. Seller and Buyer have each acted and negotiated this
Agreement in good faith. This Agreement represents an arms-length agreement
among the parties, absent collusion, coercion or duress. The Purchase Price to
be paid by the Buyer for the Assets in accordance herewith, represents the fair
and reasonably equivalent value of and for the Assets. Further, the Order
approving this Agreement shall provide that the reversal or modification or
appeal thereof will not affect the validity of the Closing of the sale of the
Assets to Buyer under and in accordance with such Order by virtue of specific
findings that the Buyer purchased the Assets in good faith, unless such Order is
stayed prior to the Closing.
7.10. Bidding Procedures. Seller covenants and agrees that it will seek
expedited consideration by the Court of the approval of this Agreement, together
with approval of bidding procedures acceptable to Buyer and approval of the
Break-Up Fee provided for in section 11.4 below. In the event that the Court
makes the sale of the Assets to Buyer subject to the submission
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of higher and better offers, the following procedure, among others agreed to by
Buyer, will govern the submission of any Competing Bid as follows:
(a) The Competing Bid shall provide for consideration that exceeds the
Purchase Price offered by Buyer by at least $1,100,000 (taking into effect that
portion of the Purchase Price resulting from the forgiveness of the
Indebtedness), and if the successful highest bidder is not Buyer, deliver to
Seller at the hearing scheduled for the approval of this Agreement a
nonrefundable deposit payable in cash or by certified or cashier's check in an
amount equal to 10% of successful highest Competing Bid;
(b) The amount of the Competing Bid for purposes of paragraph (a)
above shall not be on terms which are more burdensome or conditional in any
material respect than the terms hereof;
(c) The form of the Competing Bid must be in the form of a final
written contract signed by the competing bidder which, when and if approved by
the Court, can be immediately countersigned by the Seller and shall form a
binding agreement between the parties thereto;
(d) The Competing Bid shall not be contingent upon receipt of
financing necessary to its consummation; and
(e) The Competing Bid shall not be conditioned on the outcome of
unperformed due diligence by the competing bidder with respect to the business
or the Seller's Assets; and the competing bidder shall be obligated to close
prior to July 1, 1998.
(f) If any Competing Bid does not conform to paragraphs (a) through
(e) above, such bid will not be considered by the Court or be admissible at such
hearing.
7.11. Cooperation. Seller and Buyer agree that they will cooperate in good
faith with respect to all proceedings before the Court in the case in connection
with the approval and consummation of this Agreement and the transactions
contemplated hereby.
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ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
All obligations of Buyer under this Agreement are subject to the
satisfaction by Seller at or before the Closing of all of the following
conditions, except to the extent expressly waived in writing by Buyer:
8.1. Representations and Warranties True at Closing. The representations
and warranties of Seller contained in this Agreement shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects on the Closing Date as though such representations and
warranties were made again on the Closing Date.
8.2. Performance. Seller shall have performed and complied in all material
respects with all agreements and conditions required by this Agreement to be
performed or complied with by Seller prior to or at the Closing, including,
without limitation, the delivery to Buyer of the documents listed in Section
6.2.
8.3. No Adverse Changes. Except as contemplated by this Agreement, there
shall have been no material adverse change in the condition, prospects, business
or operations, financial or otherwise, of Seller from the date of this Agreement
to the Closing Date.
8.4. Litigation. On the Closing Date, there shall not be any pending or
threatened litigation in any court or any proceedings by or before any
Governmental Authority with a view to seek, or in which it is sought, to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement or in which it is sought to obtain divestiture, rescission or damages
in connection with the transactions contemplated by this Agreement and no
investigation by any Governmental Authority shall be pending which might result
in any such litigation or other proceeding.
8.5. Necessary Consents. All statutory requirements for the valid
consummation by Buyer of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents, waivers, approvals or
other actions by any Governmental Authority or third party which are required
for the consummation of the transactions contemplated by this Agreement shall
have been received and shall be in full force and effect.
8.6. Stockholder Approval. To the extent required by the laws of Bermuda,
the stockholders of Buyer shall have approved the transactions contemplated by
this Agreement.
8.7. Certificate. Seller shall have delivered to Buyer a certificate, dated
as of the Closing Date, of the Seller to the effect that the conditions set
forth in Sections 8.1, 8.2, 8.3, 8.4 and 8.8 have been satisfied.
8.8. Consents. Seller shall have provided written consents to the
acquisition of the Assets by Buyer from all appropriate Governmental
Authorities (to the extent so required by law) in form and substance reasonably
acceptable to Buyer.
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8.9. Due Diligence. Buyer shall have completed, to its satisfaction, a due
diligence review of the financial condition, results of operations, properties,
assets, liabilities, business and prospects of Seller.
8.10. Evidence of Satisfaction of Indebtedness. Seller shall have provided
validly executed releases, waivers and/or settlement agreements, satisfactory in
form and substance to Buyer, evidencing agreements for the satisfaction of
substantially all indebtedness of, and claims against, Seller.
8.11. Court Approval. The Court shall have entered an Order in form and
substance satisfactory to Buyer, approving this Agreement, authorizing the
transactions contemplated hereby, replacing the Liens on the Assets by granting
to the holders thereof Liens in and on the Purchase Price and authorizing the
sale of the Assets free and clear of all Liens, which Order shall not be subject
to a pending appeal, or motion for reconsideration, modification, vacation or
stay, and as to which the time to file such appeal or motion has expired, or any
such appeal or motion that may have been filed has been dismissed with prejudice
or otherwise disposed of without impacting negatively the Order contemplated
hereby. Further, such Order shall recognize Buyer's rights with respect to the
Indebtedness under Bankruptcy Code ss.363(k), shall declare the parties' good
faith in all respects under and in accordance with Bankruptcy Code ss.363(m),
and shall give full effect to the Break-Up Fee, bidding and exclusive dealing
provisions hereof.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
All obligations of Seller under this Agreement are subject to the
satisfaction by Buyer at or before the Closing of all of the following
conditions, except to the extent expressly waived in writing by Seller:
9.1. Representations and Warranties True at Closing. The representations
and warranties of Buyer contained in this Agreement shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects on the Closing Date as though such representations and
warranties were made again on the Closing Date; provided, however, that if Buyer
changes its jurisdiction of incorporation from the Commonwealth of Bermuda to
the State of Delaware on or before the Closing Date, Buyer shall be deemed to
represent in Section 5.1 that it is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
9.2. Performance. Buyer shall have performed and complied, in all material
respects, with all agreements and conditions required by this Agreement to be
performed or complied with by Buyer prior to or at the Closing.
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9.3. No Adverse Changes. Except as contemplated by this Agreement, there
shall have been no material adverse change in the condition, business or
operations, financial or otherwise, of Buyer from the date of this Agreement to
the Closing Date.
9.4. Necessary Consents. All statutory requirements for the valid
consummation by Seller of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents, waivers, approvals or
other actions by any Governmental Authority or third party which are required
for the consummation of the transactions contemplated by this Agreement shall
have been received and shall be in full force and effect.
9.5. Certificate. Buyer shall have delivered to Seller a certificate, dated
as of the Closing Date, to the effect that the conditions set forth in Sections
9.1, 9.2 and 9.3 have been satisfied.
9.6. Court Approval. The Court shall have entered an Order in form and
substance satisfactory to Seller, approving this Agreement, authorizing the
transactions contemplated hereby, replacing the Liens on the Assets by granting
to the holders thereof Liens in and on the Purchase Price and authorizing the
sale of the Assets free and clear of all Liens.
9.7. Indebtedness. Seller shall be obligated to perform hereunder and Close
the transactions contemplated hereby notwithstanding the occurrence of an Event
of Default under the documents evidencing the Indebtedness or Buyer's exercise
of any rights or remedies thereunder, including, without limitation, Seller
shall continue to seek approval of this Agreement with respect to the MAC Shares
following Buyer's exercise of its right to retain possession of the MAC Warrants
in satisfaction of the Indebtedness and the Purchase Price shall be adjusted by
reducing the Purchase Price by the Indebtedness and Cash Funds, resulting in the
VDC Shares and Deferred Purchase Price being exchanged for the Assets.
ARTICLE 10
INDEMNIFICATION AND RELATED MATTERS
10.1. Survival of Representations and Warranties. The representations and
warranties contained in this Agreement, the schedules and exhibits hereto, and
any agreement, document, instrument or certificate delivered hereunder,
including the Related Documents, shall survive the Closing Date. This Article 10
constitutes the sole and exclusive remedy of Buyer and Seller with respect to
any subject matter addressed herein, and Buyer and Seller hereby waive and
release the other from any and all claims and other causes of action, including
without limitation claims for contribution, relating to any such subject matter.
10.2. Indemnification by Seller.
(a) Seller agrees to indemnify Buyer against and hold it harmless
from:
(i) all liability, loss, damage or deficiency resulting from or
arising out of any inaccuracy in or breach of any representation or
warranty by Seller in
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this Agreement, in any Related Document to which Seller was a
signatory or in any other agreement or document delivered by or on
behalf of Seller in connection with the transactions contemplated by
this Agreement;
(ii) all liability of Seller not expressly assumed by Buyer;
(iii) all liability, loss, damage or deficiency resulting from or
arising out of any breach or nonperformance of any covenant or
obligation made or incurred by Seller in this Agreement, in any
Related Document to which Seller was a signatory or in any other
agreement or document delivered by or on behalf of Seller in
connection with the transactions contemplated by this Agreement; and
(iv) any and all reasonable costs and expenses (including
reasonable legal and accounting fees) related to any of the foregoing.
In the event that Buyer makes a Claim which is determined by a court
of competent jurisdiction to be without reasonable basis in law or
fact, Buyer shall bear all reasonable costs and expenses (including
court costs and reasonable legal and accounting fees), incurred by
Seller in investigating and defending against such Claim,
which indemnification obligation of Seller shall be secured by the Deferred
Purchase Price and the VDC Shares that remain unissued and Buyer shall have the
right of offset with respect thereto.
10.3. Indemnification by Buyer. Buyer shall indemnify Seller against and
hold it harmless from:
(a) all liability, loss, damage or deficiency resulting from or
arising out of any inaccuracy in or breach of any representation or
warranty by Buyer in this Agreement in any Related Document or in any other
agreement or document delivered by or on behalf of Buyer in connection with
the transactions contemplated by this Agreement;
(b) all liability, loss, damage or deficiency resulting from or
arising out of any breach or nonperformance of any covenant or obligation
made or incurred by Buyer in this Agreement, in any Related Document, or in
any other agreement or document delivered by or on behalf of Buyer in
connection with the transactions contemplated by this Agreement; and
(c) any and all reasonable costs and expenses (including reasonable
legal and accounting fees) related to any of the foregoing. In the event
that Seller makes a Claim which is determined by a court of competent
jurisdiction to be without reasonable basis in law or fact, Seller shall
bear all reasonable costs and expenses (including court costs and
reasonable legal and accounting fees), incurred by Buyer in investigating
and defending against such Claim.
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10.4. Third Party Claims. If any action, suit, investigation or proceeding
(including without limitation negotiations with federal, state, local or foreign
tax authorities) shall be threatened or commenced by a third party in respect of
which a party (an "Indemnified Party") may make a Claim hereunder, the
Indemnified Party shall notify the party obligated to indemnify such party
hereunder (the "Indemnifying Party") to that effect with reasonable promptness
(so as to not prejudice such party's rights) after the commencement or
threatened commencement of such action, suit, investigation or proceeding, and
the Indemnifying Party shall have the opportunity to defend against such action,
suit, investigation or proceeding (or, if the action, suit, investigation or
proceeding involves to a significant extent matters beyond the scope of the
indemnity agreement contained herein, those claims that are covered hereby)
subject to the limitations set forth below. If the Indemnifying Party elects to
defend against any action, suit, investigation or proceeding (or, as described
in the preceding parenthetical, one or more claims relating thereto), the
Indemnifying Party shall notify the Indemnified Party to that effect with
reasonable promptness. In such case, the Indemnified Party shall have the right
to employ its own counsel and participate in the defense of such matter, but the
fees and expenses of counsel shall be at the expense of the Indemnified Party
unless the employment of such counsel at the expense of the Indemnifying Party
shall have been authorized in writing by the Indemnifying Party. Any party
granted the right to direct the defense of a threatened or actual suit,
investigation or proceeding hereunder shall: (i) keep the other fully informed
of material developments in the action, suit, investigation or proceeding at all
stages thereof; (ii) promptly submit to the other copies of all pleadings,
responsive pleadings, motions and other similar legal documents and papers
received in connection with the action, suit, investigation or proceeding; (iii)
permit the other and its counsel, to the extent practicable, to confer on the
conduct of the defense of the action, suit, investigation or proceeding; and
(iv) to the extent practicable, permit the other and its counsel an opportunity
to review all legal papers to be submitted prior to their submission. The
parties shall make available to each other and each other's counsel and
accountants all of its or their books and records relating to the action, suit,
investigation or proceeding, and each party shall render to the other such
assistance as may be reasonably required in order to insure the proper and
adequate defense of the action, suit, investigation or proceeding. The parties
shall use their respective good faith efforts to avoid the waiver of any
privilege of either party. The assumption of the defense of any matter by an
Indemnifying Party shall not constitute an admission of responsibility to
indemnify or in any manner impair or restrict such party's rights to later seek
to be reimbursed its costs and expenses if indemnification under this Agreement
with respect to such matter was not required. An Indemnifying Party may elect to
assume the defense of a matter at any time during the pendency of such matter,
even if initially such party did not elect to assume such defense, so long as
such assumption at such later time would not prejudice the rights of the
Indemnified Party. No settlement of a matter by the Indemnified Party shall be
binding on an Indemnifying Party for purposes of such party's indemnification
obligations hereunder.
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ARTICLE 11
TERMINATION
11.1. Termination by Mutual Consent. At any time on or prior to the Closing
Date, this Agreement may be terminated by the mutual written consent of Seller
and Buyer without liability on the part of Seller or Buyer.
11.2. Termination Upon Breach or Default. If Seller or Buyer shall
materially default in the observance or in the due and timely performance of any
of the covenants contained in this Agreement, or if there shall have been a
material breach by either of the parties of any of the representations or
warranties set forth in this Agreement, the other party may, upon written notice
and a reasonably opportunity to cure, terminate this Agreement, without
prejudice to its rights and remedies available at law, including the right to
recover expenses, costs and other damages.
11.3. Termination Based Upon Failure of Conditions. If any of the
conditions of this Agreement to be complied with or performed by a party on or
before the Closing Date, shall not have been complied with or performed in all
material respects by such date and such noncompliance or nonperformance shall
not have been waived in writing by the other party, the party to whom the
benefit of such condition runs may, upon written notice, terminate this
Agreement, without prejudice to its or their rights and remedies available under
law, including the right to recover expenses, costs and other damages.
11.4. Break-Up Fees. Notwithstanding anything to the contrary contained
within this Agreement, in the event Seller is unable to, or elects not to
complete the transactions contemplated by this Agreement for any reason, except:
(i) a breach by Buyer of any of its representations, warranties and covenants
contained herein or (ii) a material adverse development in the business or
operations of Buyer between the date of this Agreement and the Closing Date,
then; and in that event, Seller shall pay Buyer a break-up fee equal to One
Million Dollars ($1,000,000) ("Break-Up Fee") in order to reimburse Buyer for
its time and expenses incurred in connection with the transactions contemplated
in this Agreement, as well as for any lost opportunity costs and direct and
indirect consequential damages. Payment of the Break-Up Fee shall be made by
wire transfer of immediately available funds to an account designated by Buyer
not later than five (5) days after receipt by Seller of a written demand for the
Break-Up Fee by Buyer, but in no case later than Seller's receipt of proceeds
from the sale or other disposition of the Assets, directly or indirectly. Seller
acknowledges that any payment of the Break-Up Fee will be treated as one for
liquidated damages and not a penalty, such being agreed between Buyer and Seller
to be a necessary condition to this Agreement to compensate Buyer for expenses
and expenditures incurred and made in connection herewith and otherwise for
Seller's non-compliance with this Agreement.
11.5. Final Expiration. This Agreement shall automatically expire if the
Closing does not occur on or before April 30, 1998, or, upon such later date as
VDC in its sole discretion may determine; provided, however, that such later
date shall not be later than July 1, 1998.
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ARTICLE 12
GENERAL
12.1. Entire Agreement. This Agreement, and the exhibits and schedules
hereto (including the Disclosure Schedule), and the agreements specifically
referred to herein, including the documents evidencing the Indebtedness, set
forth the entire agreement and understanding of Seller and Buyer in respect of
the transactions contemplated hereby and, except with respect to the provisions
of Section 13 of the Letter of Intent and the no shop provisions set forth in
Section 8 of the Letter of Intent, supersede all prior agreements, arrangements
and understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by Seller or Buyer
that is not embodied in this Agreement or in the documents specifically referred
to herein and neither Seller nor Buyer shall not be bound by or liable for any
alleged representation, promise, inducement or statement of intention not so set
forth.
12.2. Binding Effect; Benefits; Assignment. Upon the entry of an Order by
the Court approving this Agreement, all of the terms of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by and against Seller
and its successors and authorized assigns, and Buyer and its successors and
authorized assigns. Nothing in this Agreement, express or implied, is intended
to confer upon any other person any rights or remedies under or by reason of
this Agreement except as expressly indicated herein. Neither Seller nor Buyer
shall assign any of their respective rights or obligations under this Agreement
to any other person, firm or corporation without the prior written consent of
the other party, except that Buyer may assign its rights and obligations under
this Agreement to a direct or indirect wholly-owned subsidiary of Buyer,
although Buyer shall remain fully responsible for all of its obligations under
this Agreement.
12.3. Construction. The headings of the sections and paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise modify any of the terms or provisions hereof. The
language used in this Agreement shall be deemed to be the language chosen by the
parties to this Agreement to express their mutual intent, and no rule of strict
construction shall be applied against any party.
12.4. Amendment and Waiver. This Agreement may be amended, modified,
superseded or canceled and any of the terms, covenants, representations,
warranties or conditions hereof may be waived only by a written instrument
executed by Seller and Buyer or, in the case of a waiver, by or on behalf of the
party waiving compliance.
12.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware as applicable to contracts
made and to be performed in Delaware, without regard to conflict of laws
principles.
12.6. Public Disclosure. Except as required by Law, or in connection with
the solicitation of new investment advisory agreements with Seller's clients,
neither Buyer nor Seller shall make any public disclosure of the existence or
terms of this Agreement or the transactions
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contemplated hereby without the prior written consent of the other party, which
consent shall not be unreasonably withheld. In the event that Seller or Buyer
determines that the disclosure of the existence or terms of this Agreement is
required by Law, such party shall so notify the other parties and shall provide
to the other party a copy of any such public disclosure prior to releasing the
same.
12.7. Notices. All notices, requests, demands and other communications to
be given pursuant to the terms of this Agreement shall be in writing and shall
be deemed to have been duly given if hand delivered, sent by overnight mail by a
nationally recognized overnight delivery service or mailed first class, postage
prepaid:
(a) If to Seller:
Michael Richard, President
PortaCom Wireless, Inc.
10061 Talbert Avenue, Suite 200
Fountain Valley, CA 92708
Telephone: (714) 593-3234
Telecopier: (714) 593-3264
with a copy to:
Francis A. Monaco, Jr., Esquire
Walsh and Monzack, P.A.
1201 Orange Street, Suite 400
Wilmington, DE 19899
Telephone: (302) 656-8162
Telecopier: (302) 656-2769
and
Jeffrey Kurtzman, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telephone: (215) 568-4493
Telecopier: (215) 568-6603
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(b) If to Buyer:
Frederick A. Moran, Chief Executive Officer
VDC Corporation Ltd.
27 Doubling Road
Greenwich, CT 06830
Telephone: (203) 661-9600
Telecopier: (203) 869-1430
with a copy to:
Stephen M. Cohen, Esq.
Stuart M. Brown, Esq.
Buchanan Ingersoll Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, Pennsylvania 19103
Telephone: (215) 665-3873
Telecopier: (215) 665-8760
Either party may change its address by prior written notice to the other party.
12.8. Counterparts. This Agreement may be executed in counterparts, each of
which when so executed shall be deemed to be an original and such counterparts
shall together constitute one and the same instrument.
12.9. Expenses. Each party shall pay their own respective expenses, costs
and fees incurred in connection with the negotiation, preparation, execution and
delivery of this Agreement and each of the Related Documents and the
consummation of the transactions contemplated hereby, including, without
limitation, the fees and expenses of their respective legal counsel, accountants
and financial advisors.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
VDC CORPORATION LTD.
By: /s/ Frederick A. Moran
-------------------------------------------
Frederick A. Moran, Chief Executive Officer
PORTACOM WIRELESS, INC.
By: /s/ Michael Richard
-------------------------------------------
Michael Richard, President
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EXHIBIT A
Indebtedness of Seller to be satisfied from proceeds of the Purchase Price
Source of Proceeds
---------------------------
Cash Funds VDC Shares
Creditor/Claimant Amount (amount) (Number)
- --------------------- --------------- --------------- ---------------------
- --------------------- --------------- --------------- ---------------------
- --------------------- --------------- --------------- ---------------------
- --------------------- --------------- --------------- ---------------------
- --------------------- --------------- --------------- ---------------------
- --------------------- --------------- --------------- ---------------------
- --------------------- --------------- --------------- ---------------------
- --------------------- --------------- --------------- ---------------------
- --------------------- --------------- --------------- ---------------------
- --------------------- --------------- --------------- ---------------------
24
MEMORANDUM OF UNDERSTANDING
by and among
VDC CORPORATION LTD.,
as Buyer,
and
PORTACOM WIRELESS, INC.,
as Seller
and
OFFICIAL COMMITTEE OF UNSECURED CREDITORS
OF PORTACOM WIRELESS, INC.
June 8, 1998
<PAGE>
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING (the "MOU") is made as of the 8th day of
June, 1998, by and among VDC CORPORATION LTD., a Bermuda corporation ("Buyer"),
PORTACOM WIRELESS, INC., a Delaware corporation ("Seller") and the OFFICIAL
COMMITTEE OF UNSECURED CREDITORS OF PORTACOM WIRELESS, INC. (the "Committee").
WITNESSETH:
WHEREAS, Seller desires to sell, and Buyer desires to purchase, on the
terms and conditions hereafter set forth, certain of the assets of Seller as
described herein; and
WHEREAS, Seller and Buyer are parties to that certain Asset Purchase
Agreement, dated as of March 23, 1998 (the "Prior Agreement"), as amended by two
Stipulations and Orders in Lieu of Objection, dated as of April 3, 1998 and
April 23, 1998, respectively (collectively, the "Stipulations") and by an Escrow
Agreement among Seller, Buyer, the Committee and Klehr, Harrison, Harvey,
Branzburg & Ellers, LLP ("Escrow Agreement"), which Prior Agreement, as amended
(the "Amended Agreement"), superseded in its entirety the Asset Purchase
Agreement between Seller and Buyer dated as of November 25, 1997, as amended as
of February 16, 1998, concerning the subject matter hereof; and
WHEREAS, on March 23, 1998, Seller filed a voluntary petition for relief
under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code")
before the United States Bankruptcy Court for the District of Delaware (or any
other tribunal exercising jurisdiction over the Seller and property of its
estate, the "Court"); and
WHEREAS, Seller remains in possession of its property and in control of its
business pursuant to ss.ss. 1107 and 1108 of the Bankruptcy Code; and
WHEREAS, Seller and Buyer are parties to a Loan Agreement, Security
Agreement and Pledge Agreement, entered into on November 10, 1997, whereby Buyer
extended to Seller prior to the commencement of the case the principal sum of
$366,725 (together with all accrued interests, costs and fees, the "Pre-Petition
Indebtedness"); and
WHEREAS, Seller and Buyer are parties to a Debtor In Possession Loan,
Security and Pledge Agreement (the "DIP Financing Agreement"), entered into
after the commencement of the case, and approved by the Court on an interim
basis on April 3, 1998, and by a final order entered on or about April 23, 1998,
as amended by the Stipulations, whereby Buyer agreed to advance to Seller the
principal amount up to an additional $18,000, subject to the terms and
conditions set forth therein (together with all post-petition accrued interests,
costs and fees, the "Post-Petition Indebtedness" and together with the
Pre-Petition Indebtedness, the "Indebtedness"); and
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WHEREAS, the transactions contemplated hereby are other than in the
ordinary course of Seller's business and, therefore, require Court approval
pursuant to Bankruptcy Code ss. 363; and
WHEREAS, on or about April 23, 1998, the Court entered an order (the
"Order") approving the execution of the Amended Agreement and the consummation
of the transactions contemplated thereby and hereby; and
WHEREAS, the parties intend for this MOU to consolidate the Prior
Agreement, Stipulations and Escrow Agreement into one document and set forth the
parties' mutual interpretation of the Amended Agreement; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
agreements and representations and warranties herein contained, and for other
good and legal consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 When used in this MOU, the following terms, in their singular and
plural forms, shall have the meanings assigned to them below:
"Act" means the Securities Act of 1933, as amended.
"Allowed Claims" means the pre-petition unsecured claims, as defined in
Bankruptcy Code ss. 101(5), or portion thereof, that: (a) are allowed pursuant
to a final, non-appealable Order of the Court, or (b) are deemed allowed
pursuant to Bankruptcy Code ss. 1111(a), or (c) are the subject of pre-petition
settlement agreements, or post-petition settlements approved by the Court, that
provide for the payment of cash, in whole or in part, in settlement and
satisfaction thereof, and in such case, the cash portion thereof.
"Amended Agreement" is defined in the recitals to this MOU.
"Assets" means all of Seller's right, title and interest in and to all
of the following described holdings:
(i) Two million shares of common stock, par value $.01 per share
("MAC Common Stock"), of Metromedia Asia Corporation ("MAC"),
predecessor-in-interest to Metromedia China Corporation, as evidenced by Stock
Certificate Number 59, dated February 28, 1997; and
(ii) Warrants ("MAC Warrants") to purchase four million shares of
common stock, par value $.01 per share, at $4.00 per share, of MAC, as evidenced
by Warrant Number 19.
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The term "Assets" shall also include all rights and privileges
pertaining to the MAC Common Stock and MAC Warrants, including, without
limitation, all securities and additional securities receivable in respect of or
in exchange for such securities, all rights to subscribe for securities incident
to or arising from ownership of such securities, all cash, interest, stock and
other dividends or distributions paid or payable on such securities, and
whatever is received when any of the foregoing is sold, exchanged or otherwise
disposed of, including any proceeds as such term is defined in the Uniform
Commercial Code of each state as enacted and in effect on the date hereof in
each applicable jurisdiction, and as the same may subsequently be amended from
time to time.
"Buyer" is defined in the initial paragraph hereof.
"Cash Funds" is defined in Section 3.2(a) hereof.
"Cash Purchase Escrow" means that segregated, interest bearing escrow
account established and maintained by the Seller, funded by Buyer, in an amount
equal to $2,682,000. The Cash Purchase Escrow may be funded by any combination
of cash and stand-by letter of credit; provided, however, that the cash portion
shall be in the minimum amount of $1,250,000. The holders of administrative
claims to the extent of $82,000, and the holders of priority unsecured claims
and general unsecured claims shall be the beneficiaries of this fund.
"Claim" means a claim or demand for any and all Liabilities, damages,
losses, obligations, deficiencies, encumbrances, penalties, costs and expenses,
including reasonable attorneys' fees, resulting from, related to or arising out
of (i) any misrepresentation, breach of warranty or non-fulfillment of any
covenant of Seller set forth in the Amended Agreement or in any Related
Document; (ii) Seller's ownership of the Assets; (iii) any and all actions,
suits, investigations, proceedings, demands, assessments, audits, judgments and
claims arising out of any of the foregoing.
"Closing" and "Closing Date" are defined in Section 6.1 hereof.
"Committee" is defined in the initial paragraph hereof.
"Disclosure Schedule" is defined in Section 4.1 hereof.
"Disputed Claims" means any pre-petition, unsecured claim that is not
an Allowed Claim, by virtue of its being scheduled by the Seller as disputed,
contingent or unliquidated, and proof of which has not been timely filed, or as
to which an objection has been interposed and which is pending as of Closing.
"Escrow Agent" shall mean Klehr, Harrison, Harvey, Branzburg & Ellers
LLP, as escrow agent under the Escrow Agreement.
"Escrow Agreement" is defined in the recitals to this MOU.
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"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"Governmental Authority" means any foreign, federal, state, regional or
local authority, agency, body, court or instrumentality, regulatory or
otherwise, which, in whole or in part, was formed by or operates under the
auspices of any foreign, federal, state, regional or local government.
"Indemnified Party" is defined in Section 10.4 hereof.
"Indemnifying Party" is defined in Section 10.4 hereof.
"Law" means any common law and any federal, state, regional, local or
foreign law, rule, statute, ordinance, rule, order or regulation.
"Liabilities" means liabilities, obligations, claims or debts of Seller
of any type or nature, whether matured, unmatured, contingent or unknown,
including, without limitation, tort, contract or other claims asserted against
Seller which are based on acts or omissions occurring on, before or after the
Closing Date.
"Lien" means any lien, charge, covenant, condition, easement, adverse
claim, demand, encumbrance, security interest, option, pledge, or any other
title defect, easement or restriction of any kind.
"MOU" is defined in the initial paragraph hereof.
"Purchase Price" is defined in Section 3.1 hereof.
"Registration Statement" is defined in Section 7.6 hereof.
"Related Documents" means the Amended Agreement, Escrow Agreement and
each document or instrument executed in connection with the consummation of the
transactions contemplated herein.
"Seller" is defined in the initial paragraph of this MOU.
"Settlements" means the pre-petition settlement agreements and
post-petition settlements approved by the Court which provide for the payment of
securities of Buyer or cash.
"Termination Agreement" means that certain Termination Agreement, dated
September 11, 1996, by and among Seller, MAC, as successor-in-interest to Asian
American Telecommunications Corporation and predecessor-in-interest to
Metromedia China Corporation, and Max E. Bobbitt, as Agent.
"VDC Shares" is defined in Section 3.2(b) hereof.
5
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ARTICLE 2
SALE AND PURCHASE OF ASSETS
2.1 Agreement to Sell and Purchase Assets. Subject to the terms and
conditions hereof and on the basis of and in reliance upon the covenants,
agreements and representations and warranties set forth herein, on the Closing
Date Seller shall sell the Assets to Buyer, and Buyer shall purchase the Assets
from Seller. The Assets shall be sold, transferred and conveyed by Seller to
Buyer free and clear of any and all claims, Liens, encumbrances and the rights
of others, including, without limitation, any restrictions upon resale under
applicable federal or state securities rules, regulations or laws.
2.2 Responsibility for Liabilities. Buyer shall not assume any Liabilities
of Seller by virtue of the Amended Agreement or otherwise. Notwithstanding
anything herein, in the Amended Agreement or in any Related Document to the
contrary, except as otherwise expressly provided herein, Buyer is neither
assuming nor agreeing to pay or discharge any of the claims against, or
Liabilities or obligations of, the Seller, Seller's bankruptcy estate or of any
other party and nothing in any such document or the Order shall be construed to
the contrary. All claims against, and Liabilities and obligations of Seller, and
Seller's bankruptcy estate, whether known or unknown, suspected or unsuspected,
direct or contingent, in litigation, threatened or not yet asserted or existing
with respect to any aspect of the Assets, Seller's bankruptcy case or estate, or
the Amended Agreement, arising or existing prior to or on the Closing Date are
and shall remain the responsibility of Seller and Seller's bankruptcy estate,
and such Liabilities or obligations arising after Closing with respect to any
aspect of the Assets shall be the responsibility of the Buyer. The Order entered
by the Court approving the Amended Agreement specifically provides that the
Buyer is not liable for pre-Closing claims, Liabilities or obligations and is
not liable as a successor-in-interest to creditors of Seller or Seller's
bankruptcy estate.
ARTICLE 3
PAYMENT OF THE PURCHASE PRICE
3.1 Purchase Price. The purchase price ("Purchase Price") for the Assets
shall consist of (i) the Administrative Advance (as such term is defined in
Section 3.4(i) below), (ii) the Closing Purchase Price (as such term is defined
in Section 3.2 below) and (iii) the Deferred Purchase Price (as such term is
defined in Section 3.5 below), if any.
3.2 Closing Purchase Price. The Closing Purchase Price (the "Closing
Purchase Price") shall be paid or delivered by Buyer at or before Closing in the
following manner:
(a) Subject to adjustment pursuant to Section 3.4 hereof, Buyer has
delivered the Cash Purchase Escrow (the "Cash Funds") to the Escrow Agent for
the benefit of Seller and Buyer; and
(b) At Closing, subject to adjustment provided for in Section 3.4
hereof, Buyer shall deliver to the Escrow Agent 5,300,000 newly issued shares of
common stock, par
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value $2.00 per share, of Buyer in accordance with the provisions of Sections
3.3 and 7.7 hereof (the "VDC Shares"). After Closing, the number of VDC Shares
to be issued to Seller, and subsequently transferred to Seller's creditors and
equity security holders, in consideration hereof shall equal the difference
between (i) 5,300,000 and (ii) the difference between the principal amount of
the Cash Purchase Escrow delivered to Seller (subject to and in accordance with
the terms of Section 3.4 hereof) and the Indebtedness, divided by the value of
the Buyer's stock valued consistently with paragraph 14 of the Motion to (A) to
Establish Bidding Procedures and 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, dated March 23, 1998, which is attached
hereto as Exhibit "B" (the "Procedures Motion"). For example, if the funds of
the Cash Purchase Escrow delivered to Seller are in the amount of $1,400,000,
the Indebtedness is $400,000 and the value of the VDC Shares is $6.00, the
number of VDC Shares to be issued to Seller is equal to 5,133,334 shares
(5,300,000 - ((1,400,000 - 400,000)/6)); and
(c) Post Closing and after Buyer has received from the Escrow Agent
that portion of the Cash Purchase Escrow, together with all accrued interest and
other earnings thereon, as well as the Returned Shares (as such term is defined
in Section 3.4(h)(i) hereof), pursuant to Sections 3.4(e), (f) and (h) hereof
and Section 8(b) of the Escrow Agreement, Buyer shall, within fifteen (15)
business days thereafter, mark the notes evidencing the Indebtedness satisfied
and deliver the same to Seller.
3.3 Distribution of VDC Shares. In addition to Section 7.6 and subject to
Section 7.7, Seller shall retain the VDC Shares delivered from the Escrow Agent
until such time as a transfer or other disposition of such shares occurs to
Seller's creditors and stockholders pursuant to (a) a confirmed plan of
reorganization providing for the transfer of the VDC Shares pursuant to the
exemption set forth in Bankruptcy Code ss. 1145, or (b) an effective
Registration Statement in accordance with the provisions of Section 7.6 hereof.
3.4 Closing and Post-Closing Adjustments of Cash Purchase Escrow and VDC
Shares.
(a) Forgiveness of the Indebtedness shall constitute a portion of the
Closing Purchase Price, and, as such, shall be applied towards the Closing
Purchase Price under the Amended Agreement upon or after the Closing Date, as
the case may be.
(b) At or before Closing, the Seller shall deliver to the Escrow Agent
a schedule containing the amounts and names of the holders of all priority
unsecured and general unsecured claims for which, as of the Closing Date,
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 Seller from the
Cash Funds an amount equal to the Closing Date Claims for distribution to the
holders of Closing Date Claims pursuant to further order of the Court.
(c) Upon the later of (i) Closing or (ii) the entry of a final,
non-appealable Order by the Court approving or ratifying the Settlements, or
otherwise authorizing a settlement and compromise upon the terms of, the
Settlements, including an Order confirming a plan of
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reorganization providing for such approval, ratification, or authorization, the
Escrow Agent shall deliver to Seller or the disbursing 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 Settlements. The consideration payable to
third parties to any Settlement shall be deemed to constitute an Allowed Claim
having a value in the amount of such consideration. In the event Seller fails to
obtain a final, non-appealable Order approving or ratifying any of the
Settlements, or otherwise authorizing a settlement and compromise upon the terms
of such Settlement, then any resulting claim asserted against the Seller's
bankruptcy estate shall constitute a Disputed Claim and be treated in accordance
with paragraph 3.4(e) below.
(d) Upon the later of (i) Closing or (ii) within seven (7) days after
May 15, 1998 (the "Bar Date"), Seller 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, are
scheduled by the Seller as fixed and liquidated, unsecured claims against the
Seller's bankruptcy 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
than that which was scheduled by the Seller (collectively, the "Bar Date
Claims"). The Bar Date Claims shall be deemed to constitute Allowed Claims.
Within five (5) days after delivery by the Seller of such schedule, but not
before Closing, the Escrow Agent shall deliver to Seller from the Cash Funds an
amount equal to the Bar Date Claims for distribution to the holders of Bar Date
Claims pursuant to further order of the Court.
(e) All claims against the Seller's bankruptcy estate other than the
Closing Date Claims, claims resolved through the Settlements and the Bar Date
Claims constitute "Disputed Claims." From time to time after Closing, and to the
extent that any Disputed Claim becomes an Allowed Claim pursuant to a final,
non-appealable Order of the Court ("Other Allowed Claim(s)"), the Escrow Agent
shall deliver to Seller or the disbursing agent under a plan of reorganization
confirmed in the Seller'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 such Other Allowed Claim pursuant to
further order of the Court; and shall disburse to Buyer the 60% Credit without
further order of the Court (as defined in Section 3.4(f) below) on account of
each such Other Allowed Claim.
(f) 60% Credit. The "60% Credit" shall equal 60% of the disallowed
portion of any Disputed Claim and constitute a reduction, from time to time and
prior to the final disbursement provided for in section 3.4(g) below, in Buyer's
liability under the standby letter of credit used to fund the Cash Purchase
Escrow (the "Letter of Credit") and/or a payment in cash to Buyer, whichever
Buyer may from time to time elect in writing (Buyer, having funded the Cash
Purchase Escrow in full in cash is deemed to elect a payment in cash to Buyer of
the 60% Credit). 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 Section 3.4(g) hereof, send written notice of the 60% Credit(s) to the
financial institution issuing the Letter of Credit.
(g) Upon the later of (i) Closing or (ii) following the entry of an
order confirming a plan of reorganization in the Case that provides for the
consummation of the Amended
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Agreement and sale of the Assets to Buyer, then the Escrow Agent may disburse to
Seller not more than one million VDC Shares of the First Series of VDC Shares,
as defined in Section 7.7(a)(i) below, that may be alienated by Seller pursuant
to Sections 7.6 and 7.7 hereof, which VDC Shares may be liquidated by Seller,
and the proceeds thereof available to pay administrative expenses or otherwise
distributed to creditors (such VDC Shares shall be referred to as the
"Administrative Shares").
(h) After payment of all Closing Date Claims, Settlements, Bar Date
Claims, and Other Allowed Claims, the Escrow Agent shall make a final
distribution of the Cash Purchase Escrow and VDC Shares:
(i) To the Buyer: (A) 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 the Escrow Account in excess of the cash
required to pay the Closing Date Claims, Bar Date Claims, cash paid under
Settlements, and cash paid to holders of Other Allowed Claims, plus all interest
and other earnings on the Cash Funds, and (B) 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 Cash Funds distributed on account of the Closing Date
Claims, Bar Date Claims, Settlements, Other Allowed Claims and Administrative
Advance, as defined below, and (y) the Indebtedness, plus the fee incurred by
Buyer to obtain the Letter of Credit, divided by the value of the shares of
stock of Buyer valued consistently with paragraph 14 of the Procedures Motion;
and
(ii) To the Seller: of all of the VDC Shares remaining after
distribution of the Returned Shares to Buyer and the Administrative Shares, or
portion thereof, to Seller.
(i) The Cash Funds shall comprise in part the amount of $82,000.00,
which amount may be disbursed by the Escrow Agent to the Seller from time to
time for the payment of administrative claims ("Administrative Advance"). The
Administrative Advance may be disbursed as a result of the entry of the Order,
and may be disbursed prior to Closing under the Amended Agreement, as a
non-refundable deposit on account of the Closing Purchase Price. Thereafter, the
Seller shall submit advance requests to the Escrow Agent and legal counsel for
the Committee and funds from the Administrative Advance will be disbursed by the
Escrow Agent to the Seller in amounts approved by the Committee, which approval
shall not be unreasonably withheld, subject to all terms of the Escrow
Agreement. The Committee shall be deemed to approve any advance requests as to
which it has not notified the Seller's counsel and Escrow Agent of an objection
thereto within three (3) business days of its receipt of any such request.
3.5 Deferred Purchase Price.
(a) For the purposes of this Section 3.5, the terms listed below shall
have the following meanings:
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(i) "MAC Base Price" means $12.00 per share for each share of MAC
common stock;
(ii) "MAC Market Price" means
(A) If MAC's common stock is traded in the over-the-counter
market and not on any national securities exchange or in the NASDAQ Reporting
System, the market price shall be the average of the mean between the last bid
and ask prices per share, as reported by the National Quotation Bureau, Inc. or
an equivalent generally accepted reporting service, for the consecutive 20
trading days following the one year anniversary of the Closing Date, or if not
so reported, the average of the closing bid and asked prices for a share of MAC
common stock for the consecutive 20 trading days following the one year
anniversary of the Closing Date as furnished to MAC by any member of the
National Association of Securities Dealers, Inc., selected by MAC for that
purpose.
(B) If MAC's common stock is traded on a national securities
exchange or in the NASDAQ Reporting System, the market price shall be the simple
average of the closing prices of a share of MAC's common stock, as quoted on the
NASDAQ Reporting System or its other principal exchange for the consecutive 20
trading days following the one year anniversary of the Closing Date.
(C) If the market price cannot be determined by MAC's common
stock on such date on either of the foregoing bases, the market price shall be
the fair market value as reasonably determined by an investment banking firm
selected by Seller and Buyer, with the cost therefor to be borne equally by
Seller and Buyer.
(iii) "VDC Base Price" means $5.00 per share for each share of VDC
common stock; and
(iv) "VDC Market Price" means
(A) If VDC's common stock is traded in the over-the-counter
market and not on any national securities exchange nor in the NASDAQ Reporting
System, the market price shall be the average of the mean between the last bid
and ask prices per share, as reported by the National Quotation Bureau, Inc. or
an equivalent generally accepted reporting service, for the consecutive 20
trading days following the one year anniversary of the Closing Date, or if not
so reported, the average of the closing bid and asked prices for a share of VDC
common stock for the consecutive 20 trading days following the one year
anniversary of the Closing Date as furnished to VDC by any member of the
National Association of Securities Dealers, Inc., selected by VDC for that
purpose.
(B) If VDC's common stock is traded on a national securities
exchange or in the NASDAQ Reporting System, the market price shall be the simple
average of the closing prices at which a share of VDC's common stock traded, as
quoted on the NASDAQ
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Reporting System or its other principal exchange for the consecutive 20 trading
days following the one year anniversary of the Closing Date.
(C) If the market price cannot be determined by VDC's common
stock on such date on either of the foregoing bases, the market price shall be
the fair market value as reasonably determined by an investment banking firm
selected by Seller and Buyer, with the cost therefor to be borne equally be
Seller and Buyer.
(b) In the event that on the one year anniversary of the Closing Date,
MAC is a publicly held company whose shares are registered with the Securities
and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), Buyer shall pay and deliver to Seller the Deferred
Purchase Price (the "Deferred Purchase Price") calculated in accordance with
Section 3.5(c) below, if any, within ninety (90) days following the one year
anniversary of the Closing Date. The Deferred Purchase Price shall be paid, at
VDC's sole option, in either (i) immediately available funds in the form of
cash, cashier's check or wire transfer, or (ii) shares of VDC common stock. In
the event that VDC elects to pay the Deferred Purchase Price in the form of
shares of VDC common stock (the "Deferred Purchase Price Shares"), the value of
such stock for the purposes of such determination, shall be computed at the
higher of $5.00 per share or the VDC Market Price per share. The following
registration rights shall apply with respect to the resale of the Deferred
Purchase Price Shares by Seller:
(i) The Buyer shall advise the Seller by written notice prior to the
filing of a registration statement under the Act (excluding registration on
Forms S-8, S-4, or any successor forms thereto), covering securities of the
Buyer to be offered and sold by the Buyer to the public generally and shall,
upon the request of the Seller given at least seven (7) business days prior to
the filing of such registration statement, include in any such registration
statement such information as may be required to permit a public offering of the
Deferred Purchase Price Shares. The Buyer shall supply prospectuses, qualify the
Deferred Purchase Price Shares for sale in such states as the Buyer qualified
its securities and furnish indemnification in the manner as set forth in
subsection (ii)(B) of this Section 3.5(b); provided, however, that the Buyer
will not be required to maintain the registration of the Deferred Purchase Price
Shares for any longer period than it shall require for its own purposes. The
Seller shall furnish such information as may be reasonably requested by the
Buyer in order to include such Deferred Purchase Price Shares in the
registration statement. The Buyer need not include the resale of the Deferred
Purchase Price Shares in any underwritten offering; the sole obligation of the
Buyer being to include the resale of such shares in a registration statement,
not to ensure their method of distribution. Towards that end, the Buyer shall
have no obligation whatsoever to (a) assist or cooperate in the offering or
disposition of the Deferred Purchase Price Shares; (b) obtain a commitment from
an underwriter relative to the sale of the Deferred Purchase Price Shares; or
(c) include the Deferred Purchase Price Shares within an underwritten offering
of the Buyer. In the event that any registration pursuant to this Section 3.5(b)
shall be, in whole or in part, an underwritten public offering of common stock
of Buyer, the number of Deferred Purchase Price Shares to be included in such
underwriting may be reduced (and the registration of such Deferred Purchase
Price Shares may be postponed by the Buyer for up to 180 days following the
completion of any such underwritten offering) if and to the extent the managing
underwriter shall be of the opinion
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that such inclusion would adversely affect the marketing of the securities to be
sold by the Buyer therein. Notwithstanding the foregoing, the Buyer may withdraw
any registration statement referred to in this Section 3.5(b) without thereby
incurring liability to the Seller.
(ii) The following provisions of this Section 3.5(b) shall also be
applicable:
(A) The Buyer shall bear the entire cost and expense of any
registration of securities initiated by it under subsection (i) of this Section
3.5(b) notwithstanding that Deferred Purchase Price Shares may be included in
any such registration. The Seller shall, however, bear the fees of its own
counsel and any registration fees, transfer taxes or underwriting discounts or
commissions applicable to the Deferred Purchase Price Shares sold by it pursuant
to any registration statement pursuant to this Section 3.5(b) and bear any other
costs imposed by applicable federal or state securities laws, rules or
regulations.
(B) The Buyer shall indemnify and hold harmless the Seller and
each underwriter, within the meaning of the Act, who may purchase from or sell
for the Seller any Deferred Purchase Price Shares from and against any and all
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement under the Act filed by or at the direction of the Buyer or any
prospectus included therein required to be filed or furnished by reason of this
Section 3.5(b) or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims damages or
liabilities are caused by any such untrue statement or omission or alleged
omission based upon information furnished or required to be furnished in writing
to the Buyer by the Seller or underwriter expressly for use therein, which
indemnification shall include each person, if any, who controls any such
underwriter within the meaning of such Act; provided, however, that the Buyer
shall not be obliged so to indemnify the Seller or underwriter or controlling
person unless the Seller or underwriter shall at the same time indemnify the
Buyer, its directors, each officer signing the related registration statement
and each person, if any, who controls the Buyer within the meaning of such Act,
from and against any and all losses, claims, damages and liabilities caused by
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement or any prospectus required to be filed or furnished
by reason of this Section 3.5(b) or caused by any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, insofar as such losses, claims, damages or liabilities
are caused by any untrue statement or alleged untrue statement or omission based
upon information furnished in writing to the Buyer by the Seller or underwriter
expressly for use therein.
(c) The Deferred Purchase Price shall be calculated in accordance with
the following formula:
MAC Market Price - VDC Market Price x $5,000,000
---------------- ----------------
MAC Base Price VDC Base Price
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For example, assuming that the MAC Market Price is $13.20, and the VDC
Market Price is $5.00, the Deferred Purchase Price would equal (10% - 0%) x
($5,000,000) = $500,000.
If the number calculated from the above formula is negative, there is no
Deferred Purchase Price.
(d) Notwithstanding anything to the contrary contained herein, in the
event that on the one year anniversary of the Closing Date, MAC is not a
publicly held company whose shares are registered with the SEC under the 1934
Act, Buyer shall have no obligation to pay the Deferred Purchase Price.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
4.1 Disclosure Schedule. Seller has delivered or caused to be delivered to
Buyer, prior to the execution of this MOU, disclosure schedules, and documents
relating thereto, which include the numbered schedules specifically referred to
in this MOU and which are attached hereto (collectively, the "Disclosure
Schedule"). To the best of Seller's knowledge, the information contained in the
Disclosure Schedule is complete and accurate in all material respects and all
documents that are attached to the Disclosure Schedule are complete and accurate
copies of the genuine original documents they purport to represent as in effect
on the date hereof. Capitalized terms used in the Disclosure Schedule and not
otherwise defined therein have the meanings ascribed to such terms in this MOU.
4.2 Organization and Standing of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Subject only to approval by the Court, Seller has all requisite
corporate power and authority to sell the Assets, free and clear of any and all
Liens, including, without limitation, any restrictions upon resale under
applicable federal or state securities rules, regulations or laws. A certified
copy of Seller's Articles of Incorporation and Bylaws are attached to Schedule
4.2 of the Disclosure Schedule.
4.3 Encumbrances Created by the Amended Agreement. The execution and
delivery of the Amended Agreement and each of the Related Documents does not,
and the consummation of the transactions contemplated hereby or thereby will not
create (i) any Liens on any assets (including the Assets) of Seller in favor of
third parties, or (ii) any restrictions upon resale of the Assets under
applicable federal or state securities rules, regulations or laws.
4.4 Title to Assets. Seller and Seller's bankruptcy estate own and hold of
record the entire right, title and interest in and to all of the Assets, free
and clear of any and all Liens, including, without limitation, any restrictions
upon resale under applicable federal or state securities rules, regulations or
laws, except the Liens held by Buyer and interests held by MAC which are to be
released upon the Closing.
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4.5 VDC Shares to Be Transferred Pursuant to Plan or Constitute Restricted
Securities. Seller represents and warrants: (I) (a) that it has prepared and
filed a plan of reorganization and disclosure statement pertaining thereto
within the original period fixed by ss. 1121(b) of the Bankruptcy Code, (b) that
the Amended Agreement, the transactions contemplated thereby and the
distribution of the VDC Shares are and will be under and in accordance with such
plan as contemplated by ss. 1145 of the Bankruptcy Code, or (II) upon Seller's
failure to obtain a declaration from the Court that the offer, sale or transfer
of the VDC Shares is exempt from registration pursuant to Bankruptcy Code ss.
1145 in accordance with a plan of reorganization, (a) that it has reviewed the
annual and periodic reports of Buyer, as filed by Buyer with the SEC pursuant to
the Securities Exchange Act of 1934, and that it has such knowledge and
experience in financial and business matters that it is capable of utilizing the
information set forth therein concerning Buyer to evaluate the risks of
investing in the VDC Shares; (b) that it has been advised that the VDC Shares to
be issued by Buyer constitute "restricted securities" as defined in Rule 144
promulgated under the Securities Act, and accordingly, have not been and will
not be registered under the Securities Act except as otherwise set forth in the
Amended Agreement, and, therefore, it may not be able to sell or otherwise
dispose of such VDC Shares except if the VDC Shares are subject to an effective
Registration Statement filed with the SEC, in compliance with Rule 144 or
otherwise pursuant to an exemption from registration under the Act; (c) that the
VDC Shares so issued are being acquired by them for their own benefit and on
their own behalf for investment purposes and not with a view to, or for sale or
for resale in connection with, a public offering or re-distribution thereof,
except in accordance with and pursuant to a confirmed plan of reorganization and
confirmation order entered by the Court; (d) that the VDC Shares so issued will
not be resold (i) without registration thereof under the Securities Act (unless
an opinion of counsel acceptable to VDC, or to Buyer, an exemption from such
registration is available), (ii) in violation of any law; and (e) that the
certificate or certificates representing the VDC Shares to be issued will be
imprinted with a legend in form and substance as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
REGISTRATION, OR THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION,
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, BASED ON AN OPINION
LETTER OF COUNSEL FOR THE COMPANY OR A NO-ACTION LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION.
and Buyer is hereby authorized to notify the transfer agent of the status of the
VDC Shares, and to take such other action including, but not limited to, the
placing of a "stop transfer" order on the books and records of Buyer's transfer
agent to ensure compliance with the foregoing and Sections 7.6 and 7.7 hereof.
4.6 Brokers' Fees. No broker, finder or other person or entity acting in a
similar capacity has participated on behalf of Seller in connection with the
transactions contemplated by
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the Amended Agreement. Seller has not incurred any Liability for brokers' fees,
finders' fees, agents' commissions or other similar forms of compensation in
connection with the Amended Agreement or the transactions contemplated thereby.
4.7 Avoidance. The transactions contemplated hereby are not subject to
avoidance as fraudulent transfers or fraudulent conveyances under applicable
non-bankruptcy law or the Bankruptcy Code.
4.8 Fair Value. Seller acknowledges and agrees that the Purchase Price
constitutes fair, adequate and reasonably equivalent consideration in exchange
for the Assets.
4.9 Settlements. To the best of Seller's knowledge, the Settlements are
enforceable in Seller's bankruptcy case, and Seller will vigorously attempt to
enforce them in Seller's Chapter 11 bankruptcy case, to the extent necessary.
4.10 Full Disclosure. No representation or warranty by Seller in the
Amended Agreement or this MOU and no statement contained in any Disclosure
Schedule to the Amended Agreement or this MOU contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which they are
made, not misleading.
.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 Organization and Standing of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Bermuda.
5.2 Authorization and Enforceability. Buyer has all requisite corporate
power and authority to enter into the Amended Agreement and the Related
Documents to which it is a party and to carry out the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder. All
necessary and appropriate action has been taken by Buyer with respect to the
execution and delivery of the Amended Agreement and each of the Related
Documents and the performance of its obligations hereunder and thereunder. The
execution and delivery of the Amended Agreement and the Related Documents and
the consummation of the contemplated transactions by Buyer will not (a) result
in the breach of any of the terms or conditions of, or constitute a default
under, the Memorandum of Association or the Bye-Laws of Buyer or (b) violate any
Law or any order, writ, injunction or decree of any Governmental Authority. The
Amended Agreement and any Related Documents to which Buyer is a party constitute
valid and binding obligations of Buyer enforceable against Buyer in accordance
with their respective terms.
5.3 VDC Shares. The VDC Shares delivered by Buyer at Closing will be
validly and legally issued, free and clear of any and all Liens, and will be
fully paid and non-assessable. The
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VDC Shares constitute "restricted securities" as such term is defined in Rule
144 under the Act and may not be subsequently offered, sold or transferred
without registration under the Act except pursuant to Bankruptcy Code ss. 1145
or pursuant to an exemption from registration under the Act. The VDC Shares are
also subject to the restrictions on resale set forth in Section 7.7 hereof.
5.4 Approval. The Board of Directors of the Buyer has approved the
execution of the Amended Agreement and the transactions contemplated thereby.
5.5 Brokers' Fees. Buyer has not incurred any liability for brokers' fees,
finders' fees, agents' commissions or other similar form of compensation in
connection with the Amended Agreement and the transactions contemplated hereby
for which Seller shall have any responsibility.
5.6 Full Disclosure. No representation or warranty by Buyer in this MOU or
the Amended Agreement contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained therein, in
light of the circumstances in which they are made, not misleading.
ARTICLE 6
CLOSING
6.1 Closing. Subject to satisfaction or waiver of all conditions precedent
set forth in Articles 8 and 9 of the Amended Agreement, the closing of the
transactions contemplated by the Amended Agreement (the "Closing") shall take
place at the offices of Buchanan Ingersoll Professional Corporation, at 10:00
a.m., local time the day on which the last of the conditions precedent set forth
in either Article 8 or 9 of the Amended Agreement is fulfilled (the "Closing
Date") or at such other time, date and place as the parties may agree, but in no
event shall such date be later than July 1, 1998.
6.2 Obligations of Seller. At or prior to the Closing, Seller shall deliver
to Buyer, in each case, in form and substance satisfactory to Buyer:
(a) a newly issued share certificate issued in the name of Buyer, free
of any restriction on transfer thereof, representing 2,000,000 shares of common
stock, par value $.01 per share, of Metromedia China Corporation;
(b) a newly issued warrant certificate issued in the name of Buyer,
free of any restriction on transfer thereof, representing the right to purchase
4,000,000 shares of common stock, par value $.01 per share, of Metromedia China
Corporation, at $4.00 per share;
(c) a written release by all of the parties to the Termination
Agreement agreeing to the release of the MAC Common Stock to the Buyer;
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(d) written evidence from MAC confirming that, as of the Closing Date,
no part of the Assets pledged as collateral under the Termination Agreement has
been sold, assigned, transferred or otherwise disposed of or subject to any
action for any of the foregoing (other than the transaction contemplated in the
Amended Agreement), and that, as of the Closing Date, neither MAC nor its parent
corporation, Metromedia International Group, Inc., contemplates taking any of
the foregoing actions;
(e) such other instruments of transfer as shall be necessary or
appropriate to vest in the Buyer good and marketable title to the Assets;
(f) such other documents as may be described in Article 8 of this MOU;
and
(g) a certified copy of the Order approving the Amended Agreement and
authorizing Seller to consummate the transactions contemplated hereby and all
certifications of service and publication filed in connection therewith.
6.3 Obligations of Buyer. At the Closing, Buyer shall deliver:
(a) the Purchase Price in accordance with Article 3 of this MOU;
(b) such other documents as may be described in Article 9 of this MOU;
and
(c) the Deferred Purchase Price Note.
6.4 Further Documents or Necessary Action. Buyer and Seller each agree to
take all such further actions on or after the Closing Date as may be necessary,
desirable or appropriate in order to confirm or effectuate the transactions
contemplated by this MOU and the Amended Agreement.
ARTICLE 7
COVENANTS AND AGREEMENTS
Seller covenants to and agrees with Buyer, and Buyer covenants to and
agrees with Seller, as follows:
7.1 Conduct of Business Pending the Closing. During the period from the
date of the Amended Agreement to the Closing Date, Seller shall conduct its
business operations in the ordinary and usual course and to maintain its records
and books of account in a manner consistent with prior periods. Seller shall,
without purporting to make any commitment on behalf of Buyer, exercise
reasonable efforts to preserve intact the present business organization and
personnel of Seller and the present goodwill of Seller with persons having
business dealings with them. Except as otherwise required or contemplated
hereby, Seller further covenants and agrees that, from the date of the Amended
Agreement to the Closing Date, it shall not, without the written consent of
Buyer:
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(a) enter into any negotiations, discussions or agreements
contemplating, affecting or respecting the Assets or Seller's ability to
transfer the Assets;
(b) enter into any negotiations, discussions or agreements
contemplating or respecting the acquisition of Seller or any material asset
thereof (other than in the ordinary course of business), whether through a sale
of stock, a merger or consolidation, the sale of all or substantially all of the
assets of Seller, any type of recapitalization or otherwise, with the exception
of the Seller's interest in and to its Cambodian venture, the disposition of
which has been discussed with the Buyer;
(c) incur any Liabilities or take any action that would diminish the
value of the Assets;
(d) take any action which would interfere with or prevent performance
of this MOU or the Amended Agreement; or
(e) engage in any activity or enter into any transaction which would be
inconsistent in any respect with any of the representations, warranties or
covenants set forth in this MOU or the Amended Agreement as if such
representations, warranties and covenants were made at a time subsequent to such
activity or transaction and all references to the date of this MOU or the
Amended Agreement, as the case may be, were deemed to be such later date.
7.2 Access By Buyer; Confidentiality. During the period from the date of
the Amended Agreement to the Closing Date, Seller shall cause Buyer, its agents
and representatives to be given full access during normal business hours to the
premises, buildings, offices, books, records, assets (including the Assets),
Liabilities, operations, contracts, files, personnel, financial and tax
information and other data and information of Seller, and shall cooperate with
Buyer in conducting its due diligence investigation of Seller; provided that
such access shall not unreasonably interfere with the normal operations and
employee relationships of Seller. All information provided to or learned by
Buyer as a result of such access or otherwise in connection with the
transactions contemplated by this MOU and the Amended Agreement shall be held in
confidence, except as otherwise disclosed by Seller in its bankruptcy case.
7.3 Access By Seller; Confidentiality. During the period from the date of
the Amended Agreement to the Closing Date, Buyer shall cause Seller, its agents
and representatives to be given full access during normal business hours to the
premises, buildings, offices, books, records, assets, liabilities, operations,
contracts, files, personnel, financial and tax information and other data and
information of Buyer, and shall cooperate with Seller in conducting its due
diligence investigation of Buyer; provided that such access shall not
unreasonably interfere with the normal operations and employee relationships of
Buyer. Buyer shall provide Seller with copies of all reports and/or findings
made with the SEC from the date hereof through the Closing. All information
provided to or learned by Seller as a result of such access or otherwise in
connection with the transactions contemplated by this MOU and the Amended
Agreement shall be held in confidence.
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7.4 Notice of Breach or Failure of Condition. Seller and Buyer agree to
give prompt notice to the other of the occurrence of any event or the failure of
any event to occur that might preclude or interfere with the timely satisfaction
of any condition precedent to the obligations of Seller or Buyer under the
Amended Agreement.
7.5 Best Efforts. Seller and Buyer shall use their respective best efforts
to obtain all consents or approvals necessary to bring about the satisfaction of
the conditions required to be performed, fulfilled or complied with by them
pursuant to the Amended Agreement and to take or cause to be taken all action,
and to do or cause to be done all things, necessary, proper or advisable under
applicable Laws to consummate and make effective the transactions contemplated
by the Amended Agreement as expeditiously as practicable.
7.6 Resales and Transfers of VDC Shares. Buyer and Seller contemplate that
an offer and sale of the VDC Shares to Seller and any resale or transfer thereof
by or on behalf of Seller will be exempt from registration by virtue of Section
1145 of the Bankruptcy Code. Buyer agrees that, to the extent, and only to the
extent, that an offer, sale, resale or transfer of the VDC Shares is subject to
the registration requirements of the Act, then within forty-five (45) days after
the entry of an order of the Court confirming a plan of reorganization of the
Seller, Buyer shall, at its sole expense, file with the SEC a registration
statement (the "Registration Statement") which shall register the offer, sale,
resale, transfer or distribution of the VDC Shares from VDC to PortaCom, and by
or on behalf of PortaCom to its stockholders and creditors pursuant to such a
plan, thereafter shall use its best efforts to cause such Registration Statement
to become effective in accordance with the requirements of the Act and to remain
effective until the earlier of (i) one year after the date such Registration
Statement becomes effective or (ii) PortaCom has transferred and distributed the
VDC Shares in accordance with such plan of reorganization.
7.7 Restrictions on Resale of VDC Shares.
(a) Resale of the VDC Shares, regardless of whether such shares may be
sold, offered or transferred by Seller pursuant to Section 1145 of the
Bankruptcy Code or pursuant to an effective registration statement filed
pursuant to Section 7.6 above, shall be subject to the following additional
limitations:
(i) 25% of the VDC Shares, inclusive of the Administrative Shares
disbursed pursuant to Section 3.4(g) above (the "First Series"), may
only be sold, offered or transferred upon the earlier of (A)
confirmation of a plan of reorganization of Seller providing an
exemption from the registration requirements of the Act Section 1145 of
the Bankruptcy Code or (B) the effectiveness of the Registration
Statement provided in Section 7.6 above (the "First Resale Date");
(ii) 25% of the VDC Shares (the "Second Series") may only be
sold, offered or transferred upon the six month anniversary of the
First Resale Date; and
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(iii) the remaining 50% of the VDC Shares (the "Third Series")
may only be sold, offered or transferred upon the one year anniversary
of First Resale Date.
(b) Notwithstanding the rights granted hereunder, Buyer shall have no
obligation whatsoever to:
(i) assist or cooperate in the offering or disposition of the VDC
Shares;
(ii) indemnify or hold harmless the holders of the VDC Shares or
any underwriter designated by such security holders;
(iii) obtain a commitment from an underwriter relative to the
sale of the VDC Shares; or
(iv) include the VDC Shares within an underwritten offering of
Buyer.
(c) The VDC Shares representing the First Series (which shall include
the Administrative Shares) distributed to Seller and its stockholders shall bear
the following restrictive legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON RESALE AS SET FORTH IN SECTION 7.6(a)(i) OF A CERTAIN
ASSET PURCHASE AGREEMENT DATED MARCH 23, 1998 BETWEEN THE COMPANY AND
PORTACOM WIRELESS, INC. ("PORTACOM"), AS AMENDED, AND SECTION 7.7(a)(i)
OF A CERTAIN MEMORANDUM OF UNDERSTANDING ("MOU") DATED JUNE 8, 1998
BETWEEN THE COMPANY, PORTACOM AND THE COMMITTEE OF UNSECURED CREDITORS
OF PORTACOM (COLLECTIVELY, THE "AGREEMENT"). A COPY OF THE AGREEMENT
MAY BE OBTAINED AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
OTHER THAN IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT, WHICH
PROHIBITS THE SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE UNTIL THE "FIRST RESALE DATE" (AS SUCH
TERM IS DEFINED IN SECTION 7.7(a)(i) OF THE MOU).
(d) The VDC Shares representing the Second Series distributed to Seller
and its stockholders shall bear the following restrictive legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON RESALE AS SET FORTH IN
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SECTION 7.6(a)(ii) OF A CERTAIN ASSET PURCHASE AGREEMENT DATED MARCH
23, 1998 BETWEEN THE COMPANY AND PORTACOM WIRELESS, INC. ("PORTACOM")
AND SECTION 7.7(a)(ii) OF A CERTAIN MEMORANDUM OF UNDERSTANDING ("MOU")
DATED JUNE 8, 1998 BETWEEN THE COMPANY, PORTACOM AND THE COMMITTEE OF
UNSECURED CREDITORS OF PORTACOM (COLLECTIVELY, THE "AGREEMENT"). A COPY
OF THE AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL EXECUTIVE OFFICES OF
THE COMPANY. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF OTHER THAN IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT,
WHICH PROHIBITS THE SALE, TRANSFER OR OTHER DISPOSITION OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE UNTIL THE "FIRST RESALE
DATE" (AS SUCH TERM IS DEFINED IN SECTION 7.7(a)(i) OF THE MOU).
(e) The VDC Shares representing the Third Series distributed to Seller
and its stockholders shall bear the following restrictive legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON RESALE AS SET FORTH IN SECTION 7.6(a)(iii) OF A CERTAIN
ASSET PURCHASE AGREEMENT DATED MARCH 23, 1998 BETWEEN THE COMPANY AND
PORTACOM WIRELESS, INC. ("PORTACOM") AND SECTION 7.7(a)(iii) OF A
CERTAIN MEMORANDUM OF UNDERSTANDING ("MOU") DATED JUNE 8, 1998 BETWEEN
THE COMPANY, PORTACOM AND THE COMMITTEE OF UNSECURED CREDITORS OF
PORTACOM (COLLECTIVELY, THE "AGREEMENT"). A COPY OF THE AGREEMENT MAY
BE OBTAINED AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF OTHER
THAN IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT, WHICH PROHIBITS THE
SALE, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE UNTIL THE "FIRST RESALE DATE" (AS SUCH TERM IS DEFINED
IN SECTION 7.7(a)(i) OF THE MOU).
7.8 Loans. Buyer has made advances to the Seller under and in accordance
with the Loan, Security and Pledge Agreement in the aggregate principal amount
of $384,725 as of the date hereof and is under no obligation to, and may not
pursuant to order of the Court, make additional advances to Seller. The
Indebtedness shall be applied on account of the Purchase Price pursuant to
Section 3.4 hereof.
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7.9 Exclusive Dealing. In consideration of Buyer expending considerable
time and expenses in connection with the transactions contemplated in the
Amended Agreement, including those incurred for due diligence inquiries and
legal fees, Seller hereby covenants and agrees that until the date on which the
Amended Agreement is terminated pursuant to Sections 11.1, 11.2 or 11.3, Seller
will not, directly or indirectly, through any representative or otherwise,
solicit or entertain offers from, negotiate with or in any manner encourage,
discuss, accept or consider any proposal of any other person relating to the
acquisition of the Assets, in whole or in part, whether directly or indirectly,
through purchase, merger, consolidation or otherwise, except as otherwise may be
required by law or order of the Court.
7.10 Good Faith. Seller and Buyer have each acted and negotiated this MOU
in good faith. This MOU represents an arms-length agreement among the parties,
absent collusion, coercion or duress. The Purchase Price to be paid by the Buyer
for the Assets in accordance herewith, represents the fair and reasonably
equivalent value of and for the Assets. Further, the Order approving the Amended
Agreement shall provide that the reversal or modification or appeal thereof will
not affect the validity of the Closing of the sale of the Assets to Buyer under
and in accordance with such Order by virtue of specific findings that the Buyer
purchased the Assets in good faith, unless such Order is stayed prior to the
Closing.
7.11 Bidding Procedures. [Intentionally omitted].
7.12 Cooperation. Seller and Buyer agree that they will cooperate in good
faith with respect to all proceedings before the Court in the case in connection
with the approval and consummation of the Amended Agreement and this MOU and the
transactions contemplated hereby.
7.13 Cash Purchase Escrow. Interest and all other earnings on the Cash
Purchase Escrow shall inure to the benefit of Buyer. The excess Cash Purchase
Escrow, or any portion thereof, shall be returned to Buyer from time to time at
such time as any Disputed Claim becomes an Allowed Claim, as provided for in
Section 3.4 hereof. All other terms and conditions of the escrow are set forth
in the Escrow Agreement. The Escrow Agreement, except Section 8(a) thereof as
expressly modified by Section 3.4(b) hereof, shall remain in full force and
effect; provided, however, that the terms of Section 10 of the Escrow Agreement
shall remain in full force and effect notwithstanding anything to the contrary
contained herein.
7.14 Post-Closing Agreement. Seller and Buyer covenant and agree to enter
into a Post-Closing Agreement on the Closing Date that shall include an
obligation on the part of Seller to file an amended plan of reorganization with
the Court identifying the sale, offer, transfer or distribution of the VDC
Shares from Buyer to Seller and from Seller to Seller's creditors and
stockholders as exempt from registration under Section 1145 of the Bankruptcy
Code consistent with the terms hereof.
7.15 Non-Refundable Deposit. The Administrative Advance and, by virtue of
the entry of the Order, $260,000 of the Cash Purchase Escrow shall be
non-refundable as to Buyer, except in the event of a default by Seller under the
Amended Agreement.
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ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
All obligations of Buyer under the Amended Agreement are subject to the
satisfaction by Seller at or before the Closing of all of the following
conditions, except to the extent expressly waived in writing by Buyer:
8.1 Representations and Warranties True at Closing. The representations and
warranties of Seller contained in this MOU shall have been true and correct in
all material respects when made and shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made again on the Closing Date.
8.2 Performance. Seller shall have performed and complied in all material
respects with all agreements and conditions required by this MOU and the Amended
Agreement to be performed or complied with by Seller prior to or at the Closing,
including, without limitation, the delivery to Buyer of the documents listed in
Section 6.2.
8.3 No Adverse Changes. Except as contemplated by this MOU, there shall
have been no material adverse change in the condition, prospects, business or
operations, financial or otherwise, of Seller from the date of the Amended
Agreement to the Closing Date.
8.4 Litigation. On the Closing Date, there shall not be any pending or
threatened litigation in any court or any proceedings by or before any
Governmental Authority with a view to seek, or in which it is sought, to
restrain or prohibit the consummation of the transactions contemplated by this
MOU or in which it is sought to obtain divestiture, rescission or damages in
connection with the transactions contemplated by this MOU and no investigation
by any Governmental Authority shall be pending which might result in any such
litigation or other proceeding.
8.5 Necessary Consents. All statutory requirements for the valid
consummation by Buyer of the transactions contemplated by this MOU shall have
been fulfilled and all authorizations, consents, waivers, approvals or other
actions by any Governmental Authority or third party which are required for the
consummation of the transactions contemplated by this MOU shall have been
received and shall be in full force and effect.
8.6 Stockholder Approval. To the extent required by the laws of Bermuda,
the stockholders of Buyer shall have approved the transactions contemplated by
this MOU.
8.7 Certificate. Seller shall have delivered to Buyer a certificate, dated
as of the Closing Date, of the Seller to the effect that the conditions set
forth in Sections 8.1, 8.2, 8.3, 8.4 and 8.8 have been satisfied.
8.8 Consents. Seller shall have provided written consents to the
acquisition of the Assets by Buyer from all appropriate Governmental Authorities
(to the extent so required by law) in form and substance reasonably acceptable
to Buyer.
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8.9 Due Diligence. Buyer shall have completed, to its satisfaction, a due
diligence review of the financial condition, results of operations, properties,
assets, liabilities, business and prospects of Seller.
8.10 Satisfaction of Claims. The Settlements shall be determined to be
enforceable against the non-Seller parties thereto in accordance with their
terms in the Seller's bankruptcy case. Seller shall use its best efforts to
resolve claims against its bankruptcy estate as soon as is practicable.
8.11 Court Approval. The Court has entered the Order. The Order shall not
be subject to a pending appeal, or motion for reconsideration, modification,
vacation or stay, and as to which any appeal or motion, the time to file such
appeal or motion has expired, or any such appeal or motion that may have been
filed has been dismissed with prejudice or otherwise disposed of without
impacting negatively the validity and enforceability of the Order contemplated
hereby.
8.12 Escrow Agreement. The Committee and Escrow Agent shall have executed
this MOU, agreeing to the amendment and modification of Section 8(a) of the
Escrow Agreement by Section 3.4(b) hereof. There shall not have occurred and be
continuing an uncured event of default under the Escrow Agreement.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
All obligations of Seller under the Amended Agreement are subject to
the satisfaction by Buyer at or before the Closing of all of the following
conditions, except to the extent expressly waived in writing by Seller:
9.1 Representations and Warranties True at Closing. The representations and
warranties of Buyer contained in this MOU shall have been true and correct in
all material respects when made and shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made again on the Closing Date; provided, however, that if Buyer changes its
jurisdiction of incorporation from the Commonwealth of Bermuda to the State of
Delaware on or before the Closing Date, Buyer shall be deemed to represent in
Section 5.1 that it is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware.
9.2 Performance. Buyer shall have performed and complied, in all material
respects, with all agreements and conditions required by this MOU and the
Amended Agreement to be performed or complied with by Buyer prior to or at the
Closing.
9.3 No Adverse Changes. Except as contemplated by this MOU, there shall
have been no material adverse change in the condition, business or operations,
financial or otherwise, of Buyer from the date of the Amended Agreement to the
Closing Date.
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9.4 Necessary Consents. All statutory requirements for the valid
consummation by Seller of the transactions contemplated by this MOU shall have
been fulfilled and all authorizations, consents, waivers, approvals or other
actions by any Governmental Authority or third party which are required for the
consummation of the transactions contemplated by this MOU shall have been
received and shall be in full force and effect.
9.5 Certificate. Buyer shall have delivered to Seller a certificate, dated
as of the Closing Date, to the effect that the conditions set forth in Sections
9.1, 9.2 and 9.3 have been satisfied.
9.6 Indebtedness. Seller shall be obligated to perform hereunder and Close
the transactions contemplated hereby notwithstanding the occurrence of an Event
of Default under the documents evidencing the Indebtedness or Buyer's exercise
of any rights or remedies thereunder.
9.7 Escrow Agreement. The Committee and Escrow Agent shall have executed
this MOU, agreeing to the amendment and modification of Section 8(a) of the
Escrow Agreement by Section 3.4(b) hereof. There shall not have occurred and be
continuing an uncured event of default under the Escrow Agreement.
ARTICLE 10
INDEMNIFICATION AND RELATED MATTERS
10.1 Survival of Representations and Warranties. The representations and
warranties contained in the Amended Agreement and this MOU, the schedules and
exhibits hereto, and any agreement, document, instrument or certificate
delivered hereunder, including the Related Documents, shall survive the Closing
Date. Except as otherwise provided in Section 7.15 hereof, this Article 10
constitutes the sole and exclusive remedy of Buyer and Seller with respect to
any subject matter addressed herein, and Buyer and Seller hereby waive and
release the other from any and all claims and other causes of action, including
without limitation claims for contribution, relating to any such subject matter.
10.2 Indemnification by Seller.
(a) Seller agrees to indemnify Buyer against and hold it
harmless from:
(i) all liability, loss, damage or deficiency resulting from or
arising out of any inaccuracy in or breach of any representation or
warranty by Seller in the Amended Agreement or this MOU, in any
Related Document to which Seller was a signatory or in any other
agreement or document delivered by or on behalf of Seller in
connection with the transactions contemplated by this MOU and the
Amended Agreement;
(ii) all liability of Seller not expressly assumed by Buyer;
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(iii) all liability, loss, damage or deficiency resulting from or
arising out of any breach or nonperformance of any covenant or
obligation made or incurred by Seller in the Amended Agreement or this
MOU, in any Related Document to which Seller was a signatory or in any
other agreement or document delivered by or on behalf of Seller in
connection with the transactions contemplated by this MOU and the
Amended Agreement; and
(iv) any and all reasonable costs and expenses (including
reasonable legal and accounting fees) related to any of the foregoing.
In the event that Buyer makes a Claim which is determined by a court
of competent jurisdiction to be without reasonable basis in law or
fact, Buyer shall bear all reasonable costs and expenses (including
court costs and reasonable legal and accounting fees), incurred by
Seller in investigating and defending against such Claim,
which indemnification obligation of Seller shall be secured by the Deferred
Purchase Price and the VDC Shares that remain unissued in the possession of the
Escrow Agent or not further distributed to creditors or stockholders of Seller
and Buyer shall have the right of offset with respect thereto.
10.3 Indemnification by Buyer.
(a) Buyer shall indemnify Seller against and hold it harmless from:
(i) all liability, loss, damage or deficiency resulting from or
arising out of any inaccuracy in or breach of any representation or
warranty by Buyer in the Amended Agreement or this MOU in any Related
Document or in any other agreement or document delivered by or on
behalf of Buyer in connection with the transactions contemplated by
this MOU and the Amended Agreement;
(ii) all liability, loss, damage or deficiency resulting from or
arising out of any breach or nonperformance of any covenant or
obligation made or incurred by Buyer in the Amended Agreement and this
MOU, in any Related Document, or in any other agreement or document
delivered by or on behalf of Buyer in connection with the transactions
contemplated by this MOU and the Amended Agreement; and
(iii) any and all reasonable costs and expenses (including
reasonable legal and accounting fees) related to any of the foregoing.
In the event that Seller makes a Claim which is determined by a court
of competent jurisdiction to be without reasonable basis in law or
fact, Seller shall bear all reasonable costs and expenses (including
court costs and reasonable legal and accounting fees), incurred by
Buyer in investigating and defending against such Claim.
10.4 Third Party Claims. If any action, suit, investigation or proceeding
(including without limitation negotiations with federal, state, local or foreign
tax authorities) shall be threatened or commenced by a third party in respect of
which a party (an "Indemnified Party")
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may make a Claim hereunder, the Indemnified Party shall notify the party
obligated to indemnify such party hereunder (the "Indemnifying Party") to that
effect with reasonable promptness (so as to not prejudice such party's rights)
after the commencement or threatened commencement of such action, suit,
investigation or proceeding, and the Indemnifying Party shall have the
opportunity to defend against such action, suit, investigation or proceeding
(or, if the action, suit, investigation or proceeding involves to a significant
extent matters beyond the scope of the indemnity agreement contained herein,
those claims that are covered hereby) subject to the limitations set forth
below. If the Indemnifying Party elects to defend against any action, suit,
investigation or proceeding (or, as described in the preceding parenthetical,
one or more claims relating thereto), the Indemnifying Party shall notify the
Indemnified Party to that effect with reasonable promptness. In such case, the
Indemnified Party shall have the right to employ its own counsel and participate
in the defense of such matter, but the fees and expenses of counsel shall be at
the expense of the Indemnified Party unless the employment of such counsel at
the expense of the Indemnifying Party shall have been authorized in writing by
the Indemnifying Party. Any party granted the right to direct the defense of a
threatened or actual suit, investigation or proceeding hereunder shall: (i) keep
the other fully informed of material developments in the action, suit,
investigation or proceeding at all stages thereof; (ii) promptly submit to the
other copies of all pleadings, responsive pleadings, motions and other similar
legal documents and papers received in connection with the action, suit,
investigation or proceeding; (iii) permit the other and its counsel, to the
extent practicable, to confer on the conduct of the defense of the action, suit,
investigation or proceeding; and (iv) to the extent practicable, permit the
other and its counsel an opportunity to review all legal papers to be submitted
prior to their submission. The parties shall make available to each other and
each other's counsel and accountants all of its or their books and records
relating to the action, suit, investigation or proceeding, and each party shall
render to the other such assistance as may be reasonably required in order to
insure the proper and adequate defense of the action, suit, investigation or
proceeding. The parties shall use their respective good faith efforts to avoid
the waiver of any privilege of either party. The assumption of the defense of
any matter by an Indemnifying Party shall not constitute an admission of
responsibility to indemnify or in any manner impair or restrict such party's
rights to later seek to be reimbursed its costs and expenses if indemnification
under the Amended Agreement or this MOU with respect to such matter was not
required. An Indemnifying Party may elect to assume the defense of a matter at
any time during the pendency of such matter, even if initially such party did
not elect to assume such defense, so long as such assumption at such later time
would not prejudice the rights of the Indemnified Party. No settlement of a
matter by the Indemnified Party shall be binding on an Indemnifying Party for
purposes of such party's indemnification obligations hereunder.
ARTICLE 11
TERMINATION
11.1 Termination by Mutual Consent. At any time on or prior to the Closing
Date, the Amended Agreement and this MOU may be terminated by the mutual written
consent of Seller and Buyer without liability, including deposits not paid, on
the part of Seller or Buyer.
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11.2 Termination Upon Breach or Default. If Seller or Buyer shall
materially default in the observance or in the due and timely performance of any
of the covenants contained in the Amended Agreement, or if there shall have been
a material breach by either of the parties of any of the representations or
warranties set forth in this MOU, the other party may, upon written notice and a
reasonably opportunity to cure, terminate the Amended Agreement, without
prejudice to its rights and remedies available at law, including the right to
recover expenses, costs and other damages.
11.3 Termination Based Upon Failure of Conditions. If any of the conditions
of the Amended Agreement to be complied with or performed by a party on or
before the Closing Date, shall not have been complied with or performed in all
material respects by such date and such noncompliance or nonperformance shall
not have been waived in writing by the other party, the party to whom the
benefit of such condition runs may, upon written notice, terminate the Amended
Agreement, without prejudice to its or their rights and remedies available under
law, including the right to recover expenses, costs and other damages, and, upon
a breach of this Section 11.3 by Seller, Buyer shall be entitled to retain all
unpaid deposits.
11.4 Break-Up Fees. Notwithstanding anything to the contrary contained
within this MOU or the Amended Agreement, in the event Seller is unable to, or
elects not to complete the transactions contemplated by this MOU for any reason,
except: (i) a breach by Buyer of any of its representations, warranties and
covenants contained herein or (ii) a material adverse development in the
business or operations of Buyer between the date of the Amended Agreement and
the Closing Date, then, and in that event, Seller shall pay Buyer a break-up fee
equal to One Million Dollars ($1,000,000) ("Break-Up Fee") in order to reimburse
Buyer for its time and expenses incurred in connection with the transactions
contemplated in this MOU and the Amended Agreement, as well as for any lost
opportunity costs and direct and indirect consequential damages. Payment of the
Break-Up Fee shall be made by wire transfer of immediately available funds to an
account designated by Buyer not later than five (5) days after receipt by Seller
of a written demand for the Break-Up Fee by Buyer, but in no case later than
Seller's receipt of proceeds from the sale or other disposition of the Assets,
directly or indirectly. Seller acknowledges that any payment of the Break-Up Fee
will be treated as one for liquidated damages and not a penalty, such being
agreed between Buyer and Seller to be a necessary condition to this MOU and the
Amended Agreement to compensate Buyer for expenses and expenditures incurred and
made in connection herewith and otherwise for Seller's non-compliance with this
MOU and the Amended Agreement.
11.5 Final Expiration. The Amended Agreement shall automatically expire if
the Closing does not occur on or before July 1, 1998, or, upon such later date
as VDC in its sole discretion may determine; provided, however, that such later
date shall not be later than December 31, 1998.
28
<PAGE>
ARTICLE 12
GENERAL
12.1 Entire Agreement. Subject to Section 12.10, this MOU, and the exhibits
and schedules hereto (including the Disclosure Schedule), and the agreements
specifically referred to herein, including the Escrow Agreement, as amended by
Section 3.4(b) hereof, and the documents evidencing the Indebtedness, set forth
the entire agreement and understanding of Seller and Buyer in respect of the
transactions contemplated hereby and, except with respect to the provisions of
Section 13 of the Letter of Intent and the no shop provisions set forth in
Section 8 of the Letter of Intent, supersede all prior agreements, arrangements
and understandings relating to the subject matter hereof. No representation,
promise, inducement or statement of intention has been made by Seller or Buyer
that is not embodied in this MOU or in the documents specifically referred to
herein and neither Seller nor Buyer shall not be bound by or liable for any
alleged representation, promise, inducement or statement of intention not so set
forth.
12.2 Binding Effect; Benefits; Assignment. By virtue of the entry of the
Order by the Court approving the Amended Agreement, all of the terms of the
Amended Agreement are binding upon, inure to the benefit of and are enforceable
by and against Seller and its successors and authorized assigns, and Buyer and
its successors and authorized assigns. Nothing in this MOU or the Amended
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies under or by reason of this MOU or the Amended Agreement
except as expressly indicated herein. Neither Seller nor Buyer shall assign any
of their respective rights or obligations under this MOU or the Amended
Agreement to any other person, firm or corporation without the prior written
consent of the other party, except that Buyer may assign its rights and
obligations under this MOU or the Amended Agreement to a direct or indirect
wholly-owned subsidiary of Buyer, although Buyer shall remain fully responsible
for all of its obligations under this MOU or the Amended Agreement.
12.3 Construction. The headings of the sections and paragraphs of this MOU
have been inserted for convenience of reference only and shall in no way
restrict or otherwise modify any of the terms or provisions hereof. The language
used in this MOU shall be deemed to be the language chosen by the parties to
this MOU and the Amended Agreement to express their mutual intent, and no rule
of strict construction shall be applied against any party.
12.4 Amendment and Waiver. This MOU may be amended, modified, superseded or
canceled and any of the terms, covenants, representations, warranties or
conditions hereof may be waived only by a written instrument executed by Seller
and Buyer or, in the case of a waiver, by or on behalf of the party waiving
compliance.
12.5 Governing Law. This MOU shall be governed by and construed in
accordance with the laws of the State of Delaware as applicable to contracts
made and to be performed in Delaware, without regard to conflict of laws
principles.
12.6 [Intentionally omitted].
29
<PAGE>
12.7 Notices. All notices, requests, demands and other communications to be
given pursuant to the terms of this MOU shall be in writing and shall be deemed
to have been duly given if hand delivered, sent by overnight mail by a
nationally recognized overnight delivery service or mailed first class, postage
prepaid:
(a) If to Seller:
Michael Richard, President
PortaCom Wireless, Inc.
10061 Talbert Avenue, Suite 200
Fountain Valley, CA 92708
Telephone: (714) 593-3234
Telecopier: (714) 593-3264
with a copy to:
Francis A. Monaco, Jr., Esquire
Walsh and Monzack, P.A.
1201 Orange Street, Suite 400
Wilmington, DE 19899
Telephone: (302) 656-8162
Telecopier: (302) 656-2769
and
Jeffrey Kurtzman, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
Telephone: (215) 568-4493
Telecopier: (215) 568-6603
b) If to Buyer:
Frederick A. Moran, Chief Executive Officer
VDC Corporation Ltd.
27 Doubling Road
Greenwich, CT 06830
Telephone: (203) 661-9600
Telecopier: (203) 869-1430
30
<PAGE>
with a copy to:
Stephen M. Cohen, Esq.
Stuart M. Brown, Esq.
Buchanan Ingersoll Professional Corporation
Eleven Penn Center, 14th Floor
1835 Market Street
Philadelphia, Pennsylvania 19103
Telephone: (215) 665-3873
Telecopier: (215) 665-8760
c) if to the Committee:
Francis J. Lawall, Esquire
Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
Telephone: (215) 981-4481
Telecopier: (215) 981-4750
Either party may change its address by prior written notice to the other party.
12.8 Counterparts. This MOU may be executed in counterparts, each of which
when so executed shall be deemed to be an original and such counterparts shall
together constitute one and the same instrument.
12.9 Expenses. Each party shall pay their own respective expenses, costs
and fees incurred in connection with the negotiation, preparation, execution and
delivery of this MOU and the Amended Agreement and each of the Related Documents
and the consummation of the transactions contemplated hereby, including, without
limitation, the fees and expenses of their respective legal counsel, accountants
and financial advisors.
12.10 Survival of Prior Agreement. Seller and Buyer intend for this MOU to
set forth their mutual interpretation of the Amended Agreement and the Escrow
Agreement; provided, however, if a separate order of the Court is not entered
approving this MOU and to the extent that any of the parties hereto seek to
enforce any of the provisions of this MOU which are inconsistent with the
Amended Agreement or the Escrow Agreement, then the Amended Agreement and the
Escrow Agreement, shall survive and remain in full force and effect for that
purpose.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this MOU to be duly
executed as of the day and year first above written.
VDC CORPORATION LTD.
By: /s/ Frederick A. Moran
-------------------------------------------
Frederick A. Moran, Chief Executive Officer
PORTACOM WIRELESS, INC.
By: /s/ Michael A. Richard
-------------------------------------------
Michael A. Richard, President
OFFICIAL COMMITTEE OF UNSECURED
CREDITORS OF PORTACOM WIRELESS, INC.
(the "Committee")
By: /s/ Francis J. Lawall
-------------------------------------------
Name: Francis J. Lawall, Esquire
Title: Pepper Hamilton LLP
This document is being executed on behalf of the Committee for the limited
purpose of approving paragraphs 3.4(b) and 3.4(d) hereof. The Committee's
execution hereof does not constitute a consent to or ratification of any other
provision of this document.
Intending to be legally bound hereby, the Escrow Agent hereby agrees that
Section 8(a) of the Escrow Agreement is and shall be amended and modified
consistent with the terms of Section 3.4(b) of the foregoing MOU, and that the
Escrow Agreement, as amended and modified, shall remain in full force and
effect.
ESCROW AGENT -
KLEHR , HARRISON, HARVEY, BRANZBURG
& ELLERS LLP
By: /s/ Jeffrey Kurtzman
-------------------------------------------
Name: Jeffrey Kurtzman
Title: A Member of the Firm
32
<PAGE>
EXHIBIT A
Indebtedness of Seller to be satisfied from proceeds of the Purchase Price
- -------------------------------------------------------------------------------
Source of Proceeds
- -------------------------------------------------------------------------------
Cash Funds VDC Shares
Creditor/Claimant Amount (amount) (Number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
33
<PAGE>
EXHIBIT B
Procedures Motion
34
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,
Harvey, Branzburg & Ellers LLP ("Closing Escrow Agent") and Klehr, Harrison,
Harvey, Branzburg & Ellers 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 98-661 (the "Case").
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, Harvey, Branzburg & Ellers 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
<PAGE>
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 Buchanan 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.
2
<PAGE>
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.
3
<PAGE>
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 Sue, 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
sue 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.
4
<PAGE>
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: Frederick A. Moran, Chief Executive Officer
VDC Corporation, Ltd.
27 Doubling Road
Greenwich, CT 06830
(203) 869-1430 (Fax)
with copies to: Stuart M. Brown, Esquire
Buchanan Ingersoll Professional Corporation
11 Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103
(215) 665-8760 (Fax)
(b) If to Debtor: Michael Richard, President
PortaCom Wireless, Inc.
10061 Talbert Avenue, Suite 200
Fountain Valley, CA 92708
(714) 593-3264 (Fax)
with copies to: Francis A. Monaco, Jr., Esquire
Walsh and Monzack, P.A.
1201 Orange Street, Suite 400
Wilmington, DE 19899
(302) 656-2769 (Fax)
and
Michael C. Forman, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
(215) 568-6603 (Fax)
5
<PAGE>
(c) If to Committee: Francis J. Lawall, Esquire
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
(215) 981-4750 (Fax)
(d) If to Closing
Escrow Agent: Jeffrey Kurtzman, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
(215) 568-6603 (Fax)
(e) If to Escrow Agent: Jeffrey Kurtzman, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
(215) 568-6603 (Fax)
(f) If to MCC: Arnold L. Wadler, Esquire
General Counsel, Metromedia China Corporation
One Meadowlands Plaza
East Rutherford, NJ 07073
(201) 531-2803 (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.
6
<PAGE>
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/ Frederick A. Moran
-----------------------------------------------
Frederick A. Moran,
Chief Executive Officer
PORTACOM WIRELESS, INC.
By: /s/ Michael A. Richard
-----------------------------------------------
Michael A. Richard,
Chief Executive Officer
METROMEDIA CHINA CORP.
By: /s/ Robert A. Maresca
-----------------------------------------------
Robert A. Maresca,
Senior Vice President
OFFICIAL COMMITTEE OF UNSECURED
CREDITORS
By: /s/ Francis Lawall
-----------------------------------------------
Francis Lawall, Counsel to the Committee
[signatures continue onto next page]
7
<PAGE>
CLOSING ESCROW AGENT -
KLEHR, HARRISON, HARVEY, BRANZBURG
& ELLERS LLP
By: /s/ Jeffrey Kurtzman
----------------------------------------------
Jeffrey Kurtzman, A Member of the Firm
ESCROW AGENT -
KLEHR, HARRISON, HARVEY, BRANZBURG
& ELLERS LLP
By: /s/ Jeffrey Kurtzman
----------------------------------------------
Jeffrey Kurtzman, A Member of the Firm
8
PROMISSORY NOTE
June 9, 1998
FOR VALUE RECEIVED, VDC CORPORATION LTD., a Bermuda corporation (the
"Maker"), promises to pay to the order of PORTACOM WIRELESS, a Delaware
corporation (the "Payee") the amount set forth below in accordance with the
terms hereof.
This Note is the Deferred Purchase Price Note referred to in the Asset
Purchase Agreement, dated March 23, 1998, between Maker and Payee, as amended
(the "Purchase Agreement") and the Memorandum of Understanding, dated as of June
9, 1998, among Maker, Payee and the Official Committee of Unsecured Creditors of
PortaCom Wireless, Inc. (the "MOU"). Capitalized terms not defined herein shall
have the meaning ascribed thereto in the Purchase Agreement. The original
principal amount due hereunder shall be that amount calculated in accordance
with the following formula (the "Formula"), as set forth in Section 3.5 of the
Purchase Agreement:
MAC Market Price - VDC Market Price x $5,000,000
---------------- ----------------
MAC Base Price VDC Base Price
The entire principal amount outstanding under this Note shall be payable in
either lawful money of the United States or, at Maker's sole option, shares of
common stock of Maker as set forth in Section 3.5(b) of the Purchase Agreement,
at Payee's principal offices at 10061 Talbert Avenue, Suite 200, Fountain
Valley, California 92708 or at such other place or places as Payee shall
designate, on September 4, 1999, provided, however, that Maker shall not be
obligated to pay any amount due hereunder and this Note shall be deemed null and
void in the event that either (1) on June 8, 1999, Metromedia China Corporation
is not a publicly traded company whose shares are registered with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 or (2) the
amount calculated in accordance with the Formula is a negative number.
Maker is obligated to make the payments on the above specified due date in
accordance with the terms of this Note and the Purchase Agreement without
defalcation or setoff and without notice or demand, and the failure to receive
any notice or demand from Payee shall not be a defense to, or excuse for, the
failure to make such payment on the due date.
Maker shall be in default hereunder upon the occurrence of any of the
following events (an "Event of Default"): (i) the failure to make payment when
due; or (ii) the failure of Maker to observe or perform or cause to be observed
or performed any agreement, condition or obligation on Maker's part to be
performed hereunder.
Upon the occurrence of any Event of Default, the entire amount outstanding
under this Note shall, at the option of Payee, become immediately due and
payable without presentment,
<PAGE>
demand or further action of any kind, and one or more executions may forthwith
issue on any judgment or judgments obtained by virtue of any provision of this
Note or otherwise obtained.
The rights and remedies provided herein shall be cumulative and concurrent
and shall not be exclusive of any right or remedy provided by law, in equity or
otherwise. Said rights and remedies may, at the sole discretion of Payee, be
pursued singly, successively or together as often as occasion therefor shall
arise, against Maker. No failure on the part of Payee to exercise any of such
rights or remedies shall be deemed a waiver of any such rights or remedies or of
any Event of Default hereunder.
The granting, with or without notice, of any extension or extensions of
time for payment of any sum or sums due hereunder, or for the performance of any
covenant, provision, condition or agreement contained herein or therein, or the
granting of any other indulgence, or the taking or releasing or subordinating of
any security for the indebtedness evidenced hereby, or any other modification or
amendment of this Note will in no way release or discharge the liability of
Maker whether or not granted or done with the knowledge or consent of Maker.
Payee shall not be deemed, by any act of omission or commission, to have
waived any of its rights or remedies hereunder, at law or in equity, unless such
waiver is in writing and signed by Payee, and then only to the extent
specifically set forth in the writing. A waiver as to one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy as to a
subsequent event.
In the event any portion of this Note shall be declared by any court of
competent jurisdiction to be invalid or unenforceable, such portion shall be
deemed severable from this Note, and the remaining parts hereof shall remain in
full force and effect, as fully as though such invalid or unenforceable portion
was never part of this Note.
The obligations of Maker hereunder shall be binding on the heirs,
representatives, successors and assigns of Maker and the benefits of this Note
shall inure to Payee, and its heirs, representatives, successors and assigns and
to any holder of this Note.
The outstanding balance due under this Note may be prepaid, in the
aggregate during the term of this Note, in whole or in part, without penalty or
premium. No partial prepayment shall postpone or interrupt payment of the
remaining balance, which shall continue to be due and payable at the time and in
the manner set forth above.
All notices and other communications required or given under this Note
shall be in writing and shall be sent by U.S. certified mail, return receipt
requested, or by a nationally recognized overnight courier service, addressed to
Payee or to Maker at their respective addresses as set forth in the Purchase
Agreement.
2
<PAGE>
This Note, and all issues arising hereunder, shall be governed by and
construed according to the laws of the State of Delaware.
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused
this Promissory Note to be duly executed as of the 9th day of June, 1998.
VDC CORPORATION LTD.
By: /s/ Frederick A. Moran
-------------------------------
Frederick A. Moran,
Chief Executive Officer
3
ASSIGNMENT
The undersigned hereby assigns and transfers Warrant No. 19 (the "Warrant")
to Purchase Shares of Common Stock, Par Value $.01 Per Share, of Metromedia Asia
Corporation (n/k/a Metromedia China Corporation) ("MCC") to VDC Corporation Ltd.
whose federal tax identification number is 061510832 and whose principal
executive offices are located at 27 Doubling Road, Greenwich, Connecticut 06830,
and irrevocably appoints Hadley E. Feldman as agent to transfer this Warrant on
the books of MCC. Such agent may substitute another to act for such agent.
PORTACOM WIRELESS, INC.
Date: June 8, 1998 By: /s/ Michael A. Richard
---------------------------------------
Michael A. Richard, Chief Executive Officer
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made this 10th day of November,
1997, by and between VDC Corporation Ltd., a Bermuda corporation (the "Lender"),
and PortaCom Wireless, Inc., a Delaware corporation (the "Debtor").
W I T N E S S E T H:
WHEREAS, the Lender and the Debtor have entered into a Letter of Intent
dated September 29, 1997 (the "Letter of Intent"), attached hereto as Exhibit B,
which sets forth the proposed terms of a possible acquisition transaction
between the parties (the "Transaction"); and
WHEREAS, pursuant to the Letter of Intent, Lender has agreed to advance
certain amounts to the Debtor as a loan (the "Loan") to be used by the Debtor
for the purposes identified at Section 4(e) hereafter. The Debtor and the Lender
desire to set forth herein the terms and conditions pursuant to which the Lender
has agreed to advance the Loan to the Debtor.
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants contained herein, and intending to be legally bound hereby, the Lender
and the Debtor hereby agree as follows:
1. The Loan. The Lender has granted to the Debtor the Loan upon the terms
and subject to the conditions hereinafter set forth. Lender shall have no
obligation to provide advances, except in its sole discretion. Any amounts
advanced by Lender under this Agreement shall be evidenced by a properly
completed and executed Note, the form of which is attached hereto as Exhibit A,
dated as of the date of advancement (the "Note"), made by the Debtor in favor of
the Lender in such amounts as may be requested by Debtor and approved by Lender.
The determination of the principal amount of the Loan issued under this
Agreement on any date shall be made on the basis of the face aggregate amount of
the Note(s) which have been issued and are outstanding on such date. The
obligation of the Debtor to repay to the Lender the aggregate outstanding
principal amount of the Loan, together with accrued interest thereon, shall be
evidenced by any and all Notes to be executed and delivered by the Debtor to the
Lender either concurrently with the execution and delivery of this Agreement or
in the future.
2. Payment of Interest and Principal.
(a) Payment of Loan. The unpaid principal balance under the Loan (as
evidenced by any Notes which may be issued), together with all accrued and
unpaid interest on the unpaid principal balance, which shall accrue at the rate
of ten percent (10%) per annum (the "Interest Rate"), shall be paid in full upon
the earlier to occur of: (i) the date the Transaction has been terminated by
either of the parties (as such termination may be provided for in the Letter of
Intent, or thereafter, in any "Definitive Agreement," as such term is defined in
the Letter of Intent); (ii) the date of the closing of the Transaction; or (iii)
180 days from the date hereof.
(b) Prepayment. The Debtor shall have the right to prepay at any time
and from time to time, without penalty or premium, all or any portion of the
outstanding balance
<PAGE>
of the Loan. All prepayments of the Loan shall be applied first to accrued
interest, and second to the unpaid principal balance due thereunder.
(c) Place of Payment. The Debtor shall make all payments to the Lender
at the place set forth in Section 7(d) hereunder, or at such other place or
places as the Lender, from time to time, shall designate in writing to the
Debtor in accordance with Section 7(d) hereunder.
3. Security Interest. To secure all of the Debtor's obligations under the
Notes and this Agreement, the Debtor has concurrently herewith granted to Lender
a lien on and security interest in and to the Collateral, as such term is
defined in the Security Agreement, dated of even date herewith, which is hereby
confirmed and ratified as being in full force and effect and incorporated into
this Agreement by reference. Except as expressly stated otherwise in the
Security Agreement, the Lender's security interest in the Collateral shall be a
first priority lien.
4. Representations and Warranties of the Debtor. As a further inducement to
the Lender to execute and deliver this Agreement and to make the Loan available
to the Debtor, the Debtor, except as otherwise set forth in the Disclosure
Statement attached hereto as Exhibit B, hereby represents and warrants to, and
makes the following agreements with the Lender as follows:
(a) Authority.
(i) The Debtor is a corporation, duly organized, validly existing
and subsisting under the laws of Delaware.
(ii) The Debtor has full power and authority to borrow the Loan, to
execute and deliver this Agreement and any and all Notes and any other
instruments and documents required to be executed in connection herewith and
therewith (such other instruments and documents being collectively called the
"Other Documents").
(b) Validity and Enforceability. This Agreement, each Note and each of
the Other Documents have been, and will be, validly executed and delivered by
the Debtor and are the legal, valid and binding obligations of the Debtor,
enforceable against the Debtor in accordance with their respective terms.
(c) No Conflicts. The execution and delivery by the Debtor of this
Agreement, any Note and each of the Other Documents and the performance by the
Debtor of all of its obligations hereunder and thereunder (a) will not violate
or be in conflict with any law, order, rule or regulation of any court of other
governmental authority applicable to the Debtor; (b) will not constitute a
default (with or without the giving of notice or the passage of time or both)
under any indenture, agreement or other instrument to which it is a party or by
which it or any of its properties or assets is or may be bound or subject; and
(c) will not result in the creation or imposition of any lien, security
interest, charge or encumbrance of any nature upon any of its properties or
assets, except the Permitted Lien, as such term is defined in the Security
Agreement.
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<PAGE>
(d) No Consents. No consent, approval or authorization of, or
registration, declaration or filing with, any governmental authority or other
third party is required as a condition to, or in connection with, the due and
valid execution and delivery by the Debtor of this Agreement, any Note or any of
the Other Documents.
(e) Use of Loan Proceeds. The proceeds from the Loan issued hereunder
shall be used by the Debtor only for working capital purposes in the ordinary
course of business.
(f) Business Qualification. The Debtor is duly qualified to transact
business in the United States and in each state of the United States where it
conducts business and is in good standing in each jurisdiction in which its
failure to be so qualified and in good standing would have a materially adverse
effect on its financial condition of business, and it has the corporate power
and ability to own and operate its properties and to carry on its business as
now conducted.
(g) SEC Filings. The Debtor has filed all necessary reports and filings
(collectively, the "Filings") required to be filed with the Securities and
Exchange Commission as of the date hereof and all Filings are true and correct
and contain no material misrepresentations or omissions of material fact.
(h) Litigation. Except as disclosed in the Filings, there is no action,
suit or proceeding pending with any court, administrative agency or other
governmental body or arbitrator, or threatened against the Debtor. The Debtor is
not a party or subject to or bound by any injunction, judgment, order or decree,
whether or not still subject to appeal, of any court, administrative agency or
other governmental body or arbitrator.
(i) Taxes. The Debtor has paid all federal and state income and other
applicable taxes levied by the United States and all deficiencies or other
additions to any tax interest and penalties owed by the Debtor in connection
with any tax requiring to be paid relating to the Debtor or any of its assets or
business as of the date hereof. The Debtor shall timely pay all taxes relating
to it or its business or assets, including additions, interests, penalties and
estimated payments required to be paid by it under the applicable law after the
date hereof.
(j) Liens. The Debtor has all right, title and interest in, and good and
marketable title to, the Collateral, free and clear of any claim, pledge,
security interest, restriction, lien or encumbrance of any kind or nature
whatsoever, except for the Permitted Lien, as such term is defined in the
Security Agreement.
5. Events of Default: Remedies.
(a) Events of Default. The following shall constitute events of default
under this Agreement ("Events of Default"):
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<PAGE>
(i) The Debtor fails to pay when due any principal, interest or
other sums due hereunder or under any of the Notes and shall not have remedied
such failure within five (5) days after the date when due.
(ii) The Debtor defaults in the observance or performance of any
condition or covenant contained in this Agreement or any Note and the Debtor
shall not have remedied the default within fifteen (15) days after receipt of
written notice of such default has been given by Lender to the Debtor.
(iii) A breach by the Debtor of any warranty or any representation
contained in this Agreement or any Note, and such breach shall not have been
remedied within fifteen (15) days after receipt of written notice of such breach
has been given by Lender to the Debtor.
(iv) A dissolution or liquidation of the Debtor shall have been
declared.
(v) If Debtor shall make an assignment for the benefit of creditors,
or file a voluntary petition under the Bankruptcy Code, as amended, or any other
insolvency law, or apply for or consent to the appointment of a receiver,
trustee or custodian of all or part of its property.
(vi) If the Debtor files an answer admitting the jurisdiction of the
court and the material allegations of an involuntary petition filed against the
Debtor under the Bankruptcy Code, as amended, or any other insolvency law or
there is a failure to have such petition dismissed within ninety (90) days after
its filing.
(vii) If an Order for relief shall be entered following the filing
of an involuntary petition against the Debtor under the Bankruptcy Code, as
amended, or any other insolvency law, or if an Order shall be entered appointing
a receiver, trustee or custodian of all or parts of its property.
(viii) If there shall have occurred an Event of Default under any
other agreements between the Debtor and the Lender.
(b) Remedies. In the event an Event of Default shall occur and be
continuing, then, in the sole discretion of the Lender and without further
notice to the Debtor, the unpaid principal amount of the Loan, together with all
accrued interest thereon at the applicable rate specified in the Note, and all
other sums due by the Debtor under any Note or this Agreement shall become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Debtor, until Debtor has made full payment to the Lender of all amounts due
under any and all Notes or under this Agreement. Upon the occurrence of an Event
of Default, the Lender shall have the right to charge and accrue interest at a
rate per annum equal to the Interest Rate plus three percent (3%) (the "Default
Rate"). In addition, in each case, the Lender may recover all costs of suit and
other expenses incurred by the Lender (including attorneys' fees) in connection
with the collection of
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<PAGE>
any sums due under any and all Notes or under this Agreement. In addition to all
other remedies available to it, the Lender may exercise its rights under any and
all Notes delivered to the Lender or under any of the Other Documents. The
remedies set forth herein shall be in addition to, and not in lieu of, any other
additional rights or remedies the Lender may have at law or in equity.
6. Survival of Representations and Covenants. This Agreement and all
covenants, agreements, representations and warranties made herein, in the
Disclosure Statement attached hereto as Exhibit B, and in any Other Documents
delivered pursuant hereto shall survive the making of the Loan and the execution
and delivery of any Note and this Agreement, and shall continue in full force
and effect until all of the obligations have been fully paid, performed,
satisfied and discharged.
7. Miscellaneous.
(a) Entire Agreement: Amendments. This Agreement, all Notes and all of
the Other Documents executed and delivered pursuant hereto constitute the entire
agreement between the Lender and the Debtor with respect to the subject matter
hereof. The provisions of this Agreement, any Note or any of the Other Documents
shall not be modified, rescinded or waived except in writing executed by the
party against whom such modification, rescission or waiver is sought to be
enforced.
(b) Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the Lender and the Debtor and their respective heirs,
personal representatives, successors and assigns, except that the Debtor shall
not make any assignment of its rights hereunder without the prior written
consent of the Lender.
(c) Rights Cumulative. The remedies of the Lender as provided in any and
all Notes, or in this Agreement and all of the Other Documents shall be
cumulative and concurrent; may be pursued singly, successively, or together at
the sole discretion of the Lender; may be exercised as often as occasion for
their exercise shall occur; and in no event shall the failure to exercise any
such right or remedy be construed as a waiver or release of it.
(d) Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given and made when received by the party to whom the
notice, request, etc. is directed, and which shall be delivered personally, by
courier service such as Federal Express, or by messenger, or by United States
mail, registered or certified mail, postage pre-paid, return receipt requested,
addressed as set forth below.
If to the Debtor:
PortaCom Wireless, Inc.
10061 Talbert Avenue
Suite 200
Fountain Valley, CA 92708
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<PAGE>
If to the Lender:
VDC Corporation Ltd.
P.O. Box HM 1255
44 Church Street
Hamilton, Bermuda
with a copy to: Stephen M. Cohen, Esquire
Buchanan Ingersoll Profession Corporation
11 Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103
(e) Controlling Law and Jurisdiction. This Agreement and all questions
relating to its validity, interpretation and performance shall be governed by
and construed in accordance with the laws of the State of Delaware of the United
States. The Debtor hereby consents to the exclusive jurisdiction of the United
States District Court for the Eastern District of Pennsylvania for the
resolution of all claims, disputes and controversies arising hereunder.
(f) Notice of Default. The Debtor hereby agrees to promptly notify the
Lender of any event or circumstance which gives rise to or which is reasonably
likely to give rise to an Event of Default hereunder.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
(i) Severability. If any provisions of this Agreement shall be held
invalid under any applicable laws, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provisions and, to this end, the provisions hereof are severable.
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be executed and delivered as of the date first written above.
VDC CORPORATION LTD.
BY: /s/ Graham Ferguson Lacey
-------------------------------------
Graham Ferguson Lacey, President
PORTACOM WIRELESS, INC.
BY: /s/ Douglas C. MacLellan
-------------------------------------
Douglas C. MacLellan,
President and Chief Executive Officer
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PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Agreement"), dated November 10, 1997, is made
and entered into by and between PORTACOM WIRELESS, INC., a Delaware corporation
(the "Debtor") and VDC CORPORATION LTD., (the "Secured Party") under that
certain Loan Agreement dated of even date herewith (as it may hereafter from
time to time be restated, amended, modified or supplemented, the "Loan
Agreement") by and between the Debtor and the Secured Party.
WHEREAS, pursuant to the Loan Agreement, the Secured Party agreed to
provide certain loans to Debtor; and
WHEREAS, as security for such loans, and as required by the Loan Agreement,
all of the warrants (whether now existing or hereafter acquired) held by Debtor
to purchase common stock of Metromedia Asia Corporation ("MAC") shall be pledged
to the Secured Party in accordance herewith.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Defined Terms.
(a) Except as otherwise expressly provided herein, capitalized terms
used in this Agreement shall have the respective meanings assigned to them in
the Loan Agreement. Where applicable and except as otherwise expressly provided
herein, terms used herein (whether or not capitalized) shall have the respective
meanings assigned to them in the Uniform Commercial Code as enacted in each
applicable jurisdiction and as may be amended from time to time (the "Code").
(b) "Pledged Collateral" shall mean and include the following: (i) the
securities listed on Schedule A attached hereto and made a part hereof, and all
rights and privileges pertaining thereto, including, without limitation, all
securities and additional securities receivable in respect of or in exchange for
such securities, all rights to subscribe for securities incident to or arising
from ownership of such securities, all cash, interest, stock and other dividends
or distributions paid or payable on such securities, and all books and records
pertaining to the foregoing, including, without limitation, all stock record and
transfer books, (ii) any and all other securities hereafter pledged to the
Secured Party to secure the Secured Obligations (as hereinafter defined) of
Debtor, and all rights and privileges pertaining thereto, including, without
limitation, all securities and additional securities receivable in respect of or
in exchange for such securities, all rights to subscribe for securities incident
to or arising from ownership of such securities, all cash, interest, stock and
other dividends or distributions paid or payable on such securities, and all
books and records pertaining to the foregoing, including, without limitation,
all stock record and stock transfer books and (iii) whatever is received when
any of the foregoing is
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<PAGE>
sold, exchanged or otherwise disposed of, including any proceeds as such term is
defined in the Code.
2. Grant of Security Interests.
(a) Debtor, to secure on a first priority basis, the payment and
performance of all of its indebtedness and other obligations of every nature it
owes under the Loan Agreement, any and all Notes and all of the Other Documents
(the "Secured Obligations"), hereby grants to the Secured Party a security
interest in all of Debtor's now existing and hereafter acquired and/or arising
right, title and interest in, to and under the Pledged Collateral, whether now
or hereafter existing and wherever located.
(b) Upon the execution and delivery of this Agreement, Debtor has
delivered to and deposited with the Secured Party in pledge, stock and/or
warrant certificates and any other instruments evidencing the Pledged
Collateral, together with undated stock powers signed in blank by Debtor.
3. Further Assurances.
Prior to or concurrently with the execution of this Agreement,
and thereafter at any time and from time to time upon reasonable request of the
Secured Party, Debtor shall execute and deliver to the Secured Party all
financing statements, continuation financing statements, termination statements,
assignments, certificates and documents of title, affidavits, reports, notices,
schedules of account, letters of authority, further pledges, powers of attorney
and all other documents (collectively, the "Security Documents") which the
Secured Party may reasonably request, in form reasonably satisfactory to the
Secured Party, and take such other action which the Secured Party may request,
to perfect and continue perfected and to create and maintain the first priority
status of the Secured Party's security interest in (subject only to Permitted
Liens) the Pledged Collateral and to fully consummate the transactions
contemplated under the Loan Agreement, any and all Notes and this Agreement.
Debtor hereby irrevocably makes, constitutes and appoints the Secured Party (and
any of the Secured Party's officers or employees or agents designated by the
Secured Party) as Debtor's true and lawful attorney with power to sign the name
of Debtor on all or any of the Security Documents which the Secured Party
reasonably determines must be executed, filed, recorded or sent in order to
perfect or continue perfected the Secured Party's security interest in the
Pledged Collateral in the event Debtor fails to so execute such documents upon
Secured Party's request. Such power, being coupled with an interest, is
irrevocable until all of the Secured Obligations have been indefeasibly paid in
full and have terminated.
4. Representations and Warranties.
In addition to the representations and warranties of Debtor set
forth in the Loan Agreement which are incorporated herein by reference, Debtor
hereby represents and warrants to the Secured Party as follows:
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<PAGE>
(a) Debtor has, and will continue to have (or, in the case of
after-acquired Pledged Collateral, at the time Debtor acquires rights in such
Pledged Collateral, will have), title to the Pledged Collateral, free and clear
of all Liens.
(b) Debtor owns warrants or other ownership interests of MAC as
set forth in Schedule A hereto.
(c) The warrants to purchase shares of common stock constituting
the Pledged Collateral have been duly authorized and validly issued to Debtor
(as set forth on Schedule A hereto), and constitute all of the warrants to
purchase common stock of MAC owned by Debtor.
(d) The security interests in the Pledged Collateral granted
hereunder are valid, perfected and of first priority.
(e) There are no restrictions upon the transfer of the Pledged
Collateral and Debtor has the power and authority and right to transfer the
Pledged Collateral free of any encumbrances and without obtaining the consent of
any other person. It is acknowledged that a transfer of the Pledged Collateral
by Secured Party following a foreclosure may require compliance with federal and
state securities laws.
(f) Debtor has all necessary power to execute, deliver and
perform this Agreement and all necessary action to authorize the execution,
delivery and performance of this Agreement has been properly taken.
(g) There are no actions, suits, or proceedings pending or, to
Debtor's best knowledge after due inquiry, threatened against or affecting
Debtor with respect to the Pledged Collateral, at law or in equity or before or
by any commission, board, bureau, agency, department or instrumentality, and
Debtor is not in default with respect to any judgment, writ, injunction, decree,
rule or regulation which would adversely affect Debtor's performance hereunder.
(h) This Agreement has been duly executed and delivered and
constitutes the valid and legally binding obligation of Debtor, enforceable in
accordance with its terms, except to the extent that enforceability of this
Agreement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforceability of creditors'
rights generally or limiting the right of specific performance or by general
equitable principles.
(i) Neither the execution and delivery by Debtor of this
Agreement, nor the compliance with the terms and provisions hereof, will violate
any provision of the articles or certificates of incorporation or similar
organizational documents, bylaws or partnership agreement of Debtor or any law
or conflict with or result in a breach of any of the terms, conditions or
provisions of any judgment, order, injunction, decree or ruling of any court or
arbitration tribunal or any governmental authority to which Debtor is subject or
any provision of
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<PAGE>
any material agreement, understanding or arrangement to which Debtor is a party
or by which Debtor is bound.
(j) Debtor's principal place of business and chief executive
office is as set forth on the signature page hereto.
5. General Covenants.
In addition to any covenants and agreements of Debtor set forth
in the Loan Agreement, the Notes and Other Documents, which are incorporated
herein by this reference, Debtor hereby covenants and agrees as follows:
(a) Debtor shall do all reasonable acts that may be necessary and
appropriate to maintain, preserve and protect the Pledged Collateral; Debtor
shall be responsible for the risk of loss of, damage to, or destruction of the
Pledged Collateral owned by Debtor, unless such loss is the result of the gross
negligence or willful misconduct of the Secured Party. Debtor shall notify the
Secured Party in writing ten (10) days prior to any change in either the address
and location of Debtor's chief executive office or the address and location of
Debtor's principal place of business.
(b) Debtor shall pay promptly when due all taxes, assessments,
charges and obligations secured by encumbrances and liens now or hereafter
imposed upon or affecting any of the Pledged Collateral, except as otherwise
expressly permitted under the Loan Agreement.
(c) Debtor shall appear in and defend any action or proceeding of
which Debtor is aware which could reasonably be expected to affect Debtor's
title to, or the Secured Party's interest in, the Pledged Collateral owned by
Debtor and the proceeds thereof; provided, however, that Debtor may settle such
actions or proceedings with respect to the Pledged Collateral Debtor owns with
the consent of the Secured Party, which consent shall not be unreasonably
withheld or delayed.
(d) Debtor shall keep separate, accurate and complete records of
the Pledged Collateral owned by Debtor, disclosing the Secured Party's security
interest hereunder.
(e) Debtor shall permit the Secured Party, its officers,
employees and agents at reasonable times and on reasonable prior notice to
inspect all books and records related to the Pledged Collateral.
(f) During the term of this Agreement, Debtor shall not sell,
assign, transfer, pledge, grant a security interest, place a lien on or
otherwise dispose of the Pledged Collateral except as permitted under the Loan
Agreement.
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<PAGE>
6. Other Rights With Respect to Pledged Collateral.
In addition to the other rights with respect to the Pledged
Collateral granted to the Secured Party hereunder, at any time and from time to
time, after and during the continuation of an Event of Default, the Secured
Party at its option and at the expense of Debtor, may (a) transfer into its own
name, or into the name of its nominee, all or any part of the Pledged
Collateral, thereafter receiving all dividends, income or other distributions
upon the Pledged Collateral; (b) take control of and manage all or any of the
Pledged Collateral; (c) apply to the payment of any of the Secured Obligations,
whether any be due and payable or not, any moneys, including cash dividends and
income from any Pledged Collateral, now or hereafter in the hands of the Secured
Party or any Affiliate of the Secured Party, on deposit or otherwise, belonging
to Debtor, as the Secured Party, in its sole discretion, shall determine; and
(d) do anything which Debtor is required but fails to do hereunder. The proceeds
of any collection, sale or other disposition of the Pledged Collateral of
Debtor, or any part thereof, shall, after the Secured Party has made all
deductions of expenses, including but not limited to reasonable attorneys' fees
and other expenses incurred in connection with repossession, collection, sale or
disposition of such Pledged Collateral or in connection with the enforcement of
the Secured Party's rights with respect to the Pledged Collateral in any
insolvency, bankruptcy or reorganization proceedings, be applied against the
Secured Obligations, whether or not all the same be then due and payable, in
such manner and order as set forth in the Loan Agreement.
7. Additional Remedies Upon Event of Default.
Upon the occurrence of any Event of Default and while such Event
of Default shall be continuing, the Secured Party shall have, in addition to all
rights and remedies of a secured party under the Code or other applicable Law,
and in addition to its rights under Section 6 above and under the Loan
Agreement, the Notes and the Other Documents, the following rights and remedies:
(a) The Secured Party may, after ten (10) days' advance notice to
Debtor, sell, assign, give an option or options to purchase or otherwise dispose
of the Pledged Collateral or any part thereof at public or private sale, at any
of the Secured Party's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Secured Party may deem commercially
reasonable. Debtor agrees that ten (10) days' advance notice of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. The Secured Party may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Debtor recognizes that the Secured Party may be compelled to resort
to one or more private sales of the Pledged Collateral to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
securities for its own account for investment and not with a view to the
distribution or resale thereof. Debtor acknowledges and agrees that any such
private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale
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<PAGE>
shall be deemed to have been made in a commercially reasonable manner. The
Secured Party shall be under no obligation to delay sale of any of the Pledged
Collateral for the period of time necessary to permit Debtor to register such
securities for public sale under the Securities Act of 1933, as amended, or
under applicable state securities laws, even if Debtor would agree to do so.
(b) The proceeds of any collection, sale or other disposition of
the Pledged Collateral of Debtor, or any part thereof, shall, after the Secured
Party has made all deductions of expenses, including but not limited to
reasonable attorneys' fees and other expenses incurred in connection with
repossession, collection, sale or disposition of such Pledged Collateral or in
connection with the enforcement of the Secured Party's rights with respect to
the Pledged Collateral in any insolvency, bankruptcy or reorganization
proceedings, be applied against the Secured Obligations, whether or not all the
same be then due and payable, in such manner and order as set forth in the Loan
Agreement.
8. Secured Party's Duties.
The powers conferred on the Secured Party hereunder are solely to
protect its interest in the Pledged Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any Pledged
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Secured Party shall have no duty as to any Pledged Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Pledged Collateral.
9. No Waiver; Cumulative Remedies.
No failure to exercise, and no delay in exercising, on the part
of the Secured Party, any right, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any further exercise thereof or the exercise of any
other right, power or privilege. The remedies herein provided are cumulative and
not exclusive of any remedies provided under the Loan Agreement, the Note, and
the Other Documents or by Law. Debtor waives any right to require the Secured
Party to proceed against any other person or to exhaust any of the Pledged
Collateral or other security for the Secured Obligations or to pursue any remedy
in the Secured Party's power.
10. Assignment.
All rights of the Secured Party under this Agreement shall inure
to the benefit of its successors and assigns. All obligations of Debtor shall
bind its successors and assigns; provided, however, Debtor may not assign or
transfer any of its rights and obligations hereunder or any interest herein.
11. Severability.
Any provision of this Agreement which shall be held invalid or
unenforceable shall be ineffective without invalidating the remaining provisions
hereof.
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<PAGE>
12. Governing Law and Jurisdiction.
This Agreement shall be construed in accordance with and governed
by the internal laws of the State of Delaware without regard to its conflicts of
law principles, except to the extent the validity or perfection of the security
interests or the remedies hereunder in respect of any Pledged Collateral are
governed by the law of a jurisdiction other than the State of Delaware. The
Debtor hereby irrevocably consents to the exclusive jurisdiction of the courts
of the Commonwealth of Pennsylvania located within Philadelphia County or the
United States District Court for the Eastern District of Pennsylvania for the
resolution of all claims, disputes and controversies arising hereunder.
13. Notices.
Debtor agrees that all notices, statements, requests, demands and
other communications under this Agreement shall be given to each of the parties
at the address set forth below their names and the manner provided in Section 7
of the Loan Agreement.
14. Specific Performance.
Debtor acknowledges and agrees that, in addition to the other
rights of the Secured Party hereunder and under the other Loan Documents,
because the Secured Party's remedies at law for failure of Debtor to comply with
the provisions hereof relating to the Secured Party's rights (i) to inspect the
books and records related to the Pledged Collateral, (ii) to receive the various
notifications Debtor is required to deliver hereunder, (iii) to obtain copies of
agreements and documents as provided herein with respect to the Pledged
Collateral, (iv) to enforce the provisions hereof pursuant to which Debtor has
appointed the Secured Party its attorney-in-fact, and (v) to enforce the Secured
Party's remedies hereunder, would be inadequate and that any such failure would
not be adequately compensable in damages, Debtor agrees that each such provision
hereof may be specifically enforced.
15. Dividends; Voting Rights in Respect of the Pledged Collateral.
So long as no Event of Default shall occur and be continuing
under the Loan Agreement, Debtor may exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof for
any purpose not inconsistent with the terms of this Agreement, the Loan
Agreement, the Notes or Other Documents; provided, however, that Debtor will not
exercise or will refrain from exercising any such right, as the case may be, if
such action would be inconsistent with the covenants and obligations of Debtor
under the Loan Agreement and the Other Documents or would have a material
adverse effect on the value of any Pledged Collateral. So long as no Event of
Default has occurred and is continuing, any lawful dividends paid in cash to
Debtor in respect of the Pledged Collateral may be used or applied by Debtor for
any purpose permitted by the Loan Agreement.
16. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior
agreements relating to a grant of a
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<PAGE>
security interest in the Pledged Collateral by Debtor. This Agreement may not be
amended or supplemented except by a writing signed by the Secured Party and
Debtor.
17. Counterparts.
This Agreement may be executed in any number of counterparts, and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed an original and all of which taken together shall
constitute but one and the same agreement.
18. Descriptive Headings.
The descriptive headings which are used in this Agreement are for
the convenience of the parties only and shall not affect the meaning of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SECURED PARTY:
VDC CORPORATION LTD.
BY: /s/Graham Ferguson Lacey
------------------------------------
Graham Ferguson Lacey, President
DEBTOR:
PORTACOM WIRELESS, INC.
BY: /s/Douglas C. MacLellan
------------------------------------
Douglas C. MacLellan,
President and Chief Executive Officer
[SEAL]
Principal Place of Business:
10061 Talbert Avenue - Suite 200
Fountain Valley, CA 92708
Chief Executive Office:
10061 Talbert Avenue - Suite 200
Fountain Valley, CA 92708
-8-
<PAGE>
SCHEDULE A
TO
PLEDGE AGREEMENT
Description of Pledged Collateral
Type and
Debtor Amount of Ownership
- ------ -------------------
PORTACOM WIRELESS, INC. 4,000,000 Warrants to Purchase Common
Stock of Metromedia Asia Corporation
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT is dated November 10, 1997 and is made between
PortaCom Wireless, Inc., a Delaware corporation ("Grantor") and VDC Corporation
Ltd. ("Lender") pursuant to the Loan Agreement referred to below.
WITNESSETH THAT:
WHEREAS, pursuant to that certain Loan Agreement dated November 10, 1997
(as it may hereafter be amended or otherwise modified from time to time, the
"Loan Agreement") between Grantor and the Lender, the Lender has agreed to make
certain loans to Grantor;
WHEREAS, the obligations of the Lender to make loans under the Loan
Agreement are subject to the condition, among others, that Grantor secure its
obligations to the Lender under the Loan Agreement by the grant of security
interests in the Collateral, as defined and more fully set forth herein; and
WHEREAS, Grantor is (or will be with respect to after-acquired property)
the legal and beneficial owner and holder of the Collateral (as defined in
Section 1 hereof), and has agreed to grant security interests in such Collateral
to the Lender on the terms and conditions set forth herein.
NOW, THEREFORE, intending to be legally bound hereby and for value
received, the parties hereto covenant and agree as follows:
1. Definitions. Terms which are defined in the Loan Agreement and not
otherwise defined herein are used herein as defined therein. In addition to the
words and terms defined elsewhere in this Security Agreement, the following
words and terms shall have the following meanings, respectively, unless the
context otherwise clearly requires:
(a) "Code" shall mean the Uniform Commercial Code of each state as
enacted and in effect on the date hereof in each applicable jurisdiction, and as
the same may subsequently be amended from time to time.
(b) "Collateral" shall mean, all of Grantor's right, title and interest
in, to and under the following described property, whether now owned or
hereafter acquired (words and terms defined in the Code shall have the same
meanings when used herein):
(i) warrants to purchase 4,000,000 shares of the common stock of
Metromedia Asia Corporation (the "Warrants") which the Grantor now beneficially
owns or may hereafter acquire, as the same have been described in the
Termination Agreement (the "Termination Agreement"), dated September 11, 1996,
by and among Grantor, Metromedia Asia Corporation ("MAC"), as
successor-in-interest to Asian American Telecommunications Corporation and Max
E. Bobbitt; and
<PAGE>
(ii) 2,000,000 shares (the "Shares") of the common stock of MAC held
beneficially and of record by Grantor, to the extent permissible under the terms
of the Termination Agreement, pursuant to which such shares are being held in
escrow until January 1, 1999.
The Shares and the Warrants collectively shall be referred to as the
"Securities". The term "Collateral" as it applies to the Shares and the Warrants
shall also include all rights and privileges pertaining thereto, including,
without limitation, all securities and additional securities receivable in
respect of or in exchange for such Securities, all rights to subscribe for
securities incident to or arising from ownership of such Securities, all cash,
interest, stock and other dividends or distributions paid or payable on such
Securities, and all books and records pertaining to the foregoing, including,
without limitation, all stock record and transfer books, and whatever is
received when any of the foregoing is sold, exchanged or otherwise disposed of,
including any proceeds as such term is defined in the Code.
(c) "Secured Indebtedness" shall mean (i) all obligations, whether of
principal, interest, fees, expenses or otherwise, of Grantor to Lender, whether
now existing or hereafter incurred, under the Loan Agreement, Notes or any of
the Other Documents as any of the same may from time to time be amended,
modified or supplemented, together with any and all extensions, renewals,
refinancings or refundings thereof in whole or in part by the Lender, (ii) all
out-of-pocket costs, expenses and disbursements, including reasonable attorneys'
fees and legal expenses, incurred by the Lender in the collection of any of the
obligations referred to in subclause 1(c)(i) above; and (iii) any advances made,
subsequent to an Event of Default, by the Lender, for the reasonable
maintenance, preservation, protection or enforcement of, or realization upon,
the Collateral, including advances for taxes and the like and reasonable
expenses incurred to sell or otherwise realize on, or prepare for sale or other
realization on, any of the Collateral.
2. Assignment and Grant of Security Interests. As security for the due and
punctual payment and performance of the Secured Indebtedness in full, Grantor
hereby agrees that the Lender shall have, and Grantor hereby grants to and
creates in favor of the Lender, for the benefit of the Lender, to secure all of
the Secured Indebtedness, a continuing first priority security interest in and
to Grantor's Collateral; provided, however, that the security interest granted
in all of the Shares is subordinated to any security interest in the Shares
granted by the Grantor to MAC (the "Permitted Lien") pursuant to the Termination
Agreement. Without limiting the generality of Section 4 below, Grantor further
agrees that with respect to each item of Collateral as to which (i) the creation
of valid and enforceable security interests is not governed exclusively by the
Code or (ii) the perfection of valid and enforceable security interests therein
under the Code cannot be accomplished by the Lender taking possession thereof or
by the filing in appropriate locations of appropriate Code financing statements
executed by the Grantor, Grantor will at its expense execute and deliver to the
Lender such documents, agreements, notices, assignments and instruments and take
such further actions as may be reasonably requested by the Lender from time to
time for the purpose of creating a valid and perfected first priority lien on
such item, enforceable against the Grantor and all third parties to secure the
Secured Indebtedness.
2
<PAGE>
3. Representations and Warranties. Except as otherwise set forth in the
Disclosure Statement attached as Exhibit B to the Loan Agreement, Grantor
represents, warrants and covenants to the Lender that:
(a) Grantor is the legal and beneficial owner and holder of the
Collateral and Grantor has and will continue to have good and marketable title
to the Collateral which Grantor purports to own or which is reflected as owned
in its books and records.
(b) The Grantor has received value from the Lender for Grantor's grant
of security interests hereunder and, except for the security interests granted
to and created in favor of the Lender hereunder, all of the Collateral is and
will continue to be free and clear of all liens, except the Permitted Lien.
(c) Grantor has full power to enter into, execute, deliver and carry
out this Security Agreement and to perform its obligations hereunder and all
such actions have been duly authorized by all necessary proceedings on its part.
This Security Agreement has been duly and validly executed and delivered by
Grantor. This Security Agreement constitutes the legal, valid and binding
obligations of Grantor, enforceable against it in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or limiting the right of specific
performance.
(d) Neither the execution and delivery of this Security Agreement nor
compliance with the terms and provisions hereof (i) will conflict with or result
in any breach of the terms and conditions of the articles of incorporation,
bylaws or equivalent documents of Grantor or of any law or of the Termination
Agreement or any material agreement or instrument to which Grantor is a party or
by which it is bound or to which it is subject, (ii) will constitute a default
under any of the documents referred to in clause 3(d)(i) above or (iii) will
result in the creation or enforcement of any lien (other than the Permitted
Lien) whatsoever upon any Collateral (now or hereafter acquired) of Grantor.
4. Further Assurances. Grantor will, from time to time, at its expense,
faithfully preserve and protect the Lender's security interests in the
Collateral (other than the Shares) as continuing first priority perfected
security interests and the Lender's security interest in Grantor's Shares as a
continuing perfected security interest subordinate only to the Permitted Lien,
and will do all such other acts and things and will, upon request therefor by
the Lender, execute, deliver, file and record all such other documents and
instruments, including financing statements, security agreements, pledges,
assignments, documents and powers of attorney with respect to the Collateral,
and pay all filing fees and taxes related thereto as the Lender in its
reasonable discretion may deem necessary or advisable from time to time in order
to preserve, perfect or protect any security interest granted or purported to be
granted hereby or to enable the Lender to exercise and enforce its rights and
remedies hereunder with respect to any of the Collateral. Without limiting the
generality of the foregoing, to the extent Article 9 of the Code does not govern
the creation and/or perfection of the security interests intended to be created
hereunder,
3
<PAGE>
Grantor agrees to execute and deliver such further documents and instruments and
do such further acts as the Lender may from time to time require.
5. Covenants. Grantor covenants and agrees that, except as otherwise
required by the Termination Agreement, (a) it will not sell, assign or otherwise
dispose of any portion of the Collateral; (b) it will obtain and maintain sole
and exclusive possession of its Collateral; (c) it will keep materially accurate
and complete books and records concerning the Collateral and such other books
and records as may be required under the Loan Agreement; (d) it will promptly
furnish to the Lender such information and documents relating to the Collateral
as the Lender may reasonably request in order to confirm the status of the
Lender's security interests in such Collateral; (e) it will not take or omit to
take any actions, the taking or the omission of which might result in a material
adverse alteration or impairment of the Collateral or in a violation of this
Security Agreement; (f) it will execute and deliver to the Lender and record
such supplements to this Security Agreement and additional assignments as the
Lender reasonably may request to evidence and confirm the security interests
herein contained; and (g) it will not agree to change, modify, extend or
terminate the Termination Agreement without the prior written consent of the
Lender. The Grantor shall notify the Lender in writing ten (10) days prior to
the effective date of any change or modification to, or extension or terminate
of, the Termination Agreement.
6. Preservation of Security Interests. Grantor assumes full responsibility
for taking and hereby agrees to take any and all necessary steps to preserve and
defend the Lender's right, title and security interests in and to the Collateral
against the claims and demands of all persons. The Lender shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in the Lender's possession if, prior to the existence of an Event of Default,
the Lender takes such action for that purpose as such Grantor shall reasonably
request in writing, provided that such requested action will not, in the
judgment of the Lender, impair the security interests in the Collateral created
hereby or the Lender's rights in, or the value of, such Collateral, and provided
further that such written request is received by the Lender in sufficient time
to permit the Lender to take the requested action.
7. Lender's Rights with Respect to the Collateral. At any time and from
time to time, whether or not an Event of Default shall have occurred, and
without notice to or consent of the Grantor, the Lender may, at its option, do
any or all of the following: (a) do anything which the Grantor is required but
fails to do hereunder, and in particular the Lender may, if the Grantor fails to
do so, (i) insure or take any reasonable steps to protect the Collateral, (ii)
pay any or all taxes, levies, expenses and costs arising with respect to the
Collateral, or (iii) pay any or all premiums payable on any policy of insurance
required to be obtained or maintained hereunder, and add any amounts paid under
this Section 7 to the principal amount of the Loan Agreement, as evidenced by
the Notes, and other liabilities of Grantor secured by this Security Agreement;
(b) inspect the Collateral at any reasonable time; and (c) pay any amounts the
Lender reasonably elects to pay or advance hereunder on account of insurance,
taxes or other costs, fees or charges arising in connection with the Collateral,
either directly to the payee(s) of such cost, fee or charge, directly to the
Grantor, or to such payee(s) and Grantor, jointly.
4
<PAGE>
8. Remedies on Default. If there shall have occurred and be continuing an
Event of Default under the terms of the Loan Agreement, then the Lender shall,
subject to any restrictions set forth in the Termination Agreement, have such
rights and remedies with respect to the Collateral or any part thereof and the
proceeds thereof as are provided by the Code and such other rights and remedies
with respect thereto which it may have at law or in equity or under this
Security Agreement, including to the extent not inconsistent with the provisions
of the Code or any other applicable Law, the right to take over and collect the
Collateral which consists of amounts owing to Grantor to the extent not
prohibited by applicable law. To this end, the Lender shall have the right to
(a) transfer all or any part of any of the Collateral into the Lender's name or
into the name of its nominee or nominees and thereafter receive all cash, stock
and other dividends or distributions paid or payable in respect thereof, and
otherwise act with respect thereto as the absolute owner thereof; (b) notify the
obligors on any of the Collateral, whether accounts or otherwise, to make
payment thereon directly to the Lender, whether or not the Grantor was
theretofore making collections thereon; (c) take control of and manage the
Collateral; (d) apply to the payment of the Secured Indebtedness, whether it be
due and payable or not, any moneys, including cash dividends and income from the
Collateral, now or hereafter in the hands of the Lender, on deposit or
otherwise, belonging to Grantor, in accordance with Section 9 hereof; (e)
endorse the name of the Grantor upon any checks or other evidences of payment or
any document or instrument that may come into the possession of the Lender as
proceeds of or relating to such Grantor's Collateral; (f) demand, sue for,
collect, compromise and give acquittances for the Collateral; (g) prosecute,
defend or compromise any action, claim or proceeding with respect to the
Collateral; and (h) take such other action as the Lender may deem appropriate,
including extending or modifying the terms of payment of the debtors of Grantor.
In addition, upon the occurrence of an Event of Default but subject to any
restrictions set forth in the Termination Agreement, Grantor, at the request of
the Lender, shall assemble all or any portion of the Grantor's Collateral at
such locations as the Lender shall designate which are reasonably convenient to
Grantor, and the Lender may sell, assign, give an option or options to purchase
or otherwise dispose of all or any part of the Collateral at any public or
private sale at such place or places and at such time or times and upon such
terms, whether for cash or on credit, and in such manner, as the Lender may
determine, and apply the proceeds so received in accordance with Section 9
hereof. Written notice of sale mailed by certified mail, return receipt
requested, to the Grantor, at least ten (10) days prior to such sale shall be
deemed reasonable notice.
In the event of a breach by Grantor in the performance of any of the
terms of this Security Agreement, the Lender may demand specific performance of
this Security Agreement and seek injunctive relief and may exercise any other
remedy, available at law or in equity, it being recognized that the remedies of
the Lender at law may not fully compensate the Lender for the damages it may
suffer in the event of a breach hereof.
9. Application of Proceeds. The proceeds of the Collateral shall be applied
in accordance with the terms of the Loan Agreement. Grantor shall be liable for
any deficiency if the proceeds of any sale, assignment, giving of an option or
options to purchase or other disposition of the Collateral is insufficient to
pay all amounts to which the Lender is entitled.
5
<PAGE>
10. Attorneys-in-Fact. After an Event of Default the Grantor hereby
irrevocably appoints the Lender, its officers, employees and agents, or any of
them, as attorneys-in-fact, with full power of substitution, for Grantor for the
purpose of carrying out the provisions of this Security Agreement and taking any
action and executing, delivering, filing and recording any instruments which the
Lender may deem necessary or advisable to accomplish the purposes hereof, which
power of attorney being given for security is coupled with an interest and
irrevocable. The Grantor hereby ratifies and confirms and agrees to ratify and
confirm all action taken by the Lender, its officers, employees or agents
pursuant to the foregoing power of attorney.
11. Indemnity and Expenses.
(a) The Grantor unconditionally agrees to indemnify the Lender from and
against any and all claims, losses and liabilities arising out of or resulting
from this Security Agreement (including enforcement of this Security Agreement),
except claims, losses or liabilities resulting from the gross negligence or
willful misconduct of the Lender.
(b) The Grantor unconditionally agrees upon demand to pay to the Lender
the amount of any and all reasonable and necessary out-of-pocket costs, expenses
and disbursements, including fees and expenses of its counsel, which the Lender
may incur in connection with (i) the administration of this Security Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, the Collateral, (iii) the exercise or
enforcement of any of the rights of the Lender hereunder or (iv) the failure by
the Grantor to perform or observe any of the provisions hereof.
12. Security Interest Absolute; Waiver of Notices. All rights of the Lender
hereunder, all security interests hereunder, and all obligations of the Grantor
hereunder shall be absolute and unconditional, irrespective of: (a) any lack of
validity or enforceability of the Loan Agreement, the Notes or any of the Other
Documents; (b) any change in the time, manner or place or payment of, or in any
other term of, all or any of the Secured Indebtedness or any other amendment or
waiver of or any consent to any departure from the Loan Agreement, the Notes or
any of the Other Documents; (c) any exchange, release or non-perfection of any
other Collateral; or (d) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, any Grantor or any third party
mortgagors, pledgors or grantors of security interests. Grantor waives any and
all notice with respect to acceptance by the Lender of this Security Agreement,
the provisions of the Loan Agreement, the Notes or any of the Other Documents or
any other note, instrument or agreement relating to the Secured Indebtedness,
and any default in connection with the Secured Indebtedness. Grantor waives any
presentment, demand, notice of dishonor or nonpayment, protest, notice of
protest and any other notice of any kind in connection with the Secured
Indebtedness.
13. Termination. Upon payment in full of the Secured Indebtedness and
termination of the Loan Agreement and the Notes, this Security Agreement shall
terminate and be of no further force and effect, and the Lender, at the
Grantor's expense, shall thereupon promptly return to Grantor the Collateral and
such other documents delivered by Grantor hereunder as may
6
<PAGE>
then be in the Lender's possession. Upon any such termination, the Lender will,
at the Grantor's expense, execute and deliver to the Grantor such documents as
that Grantor shall reasonably request to evidence such termination.
14. Modifications, Amendments and Waivers. Any and all agreements amending
or changing any provision of this Security Agreement or the rights of any of the
Lender or the Grantor, and any and all waivers or consents to Events of Default
or other departures from the due performance of the Grantor hereunder shall be
made only pursuant to the provisions of Section 7 of the Loan Agreement.
15. No Implied Waivers; Cumulative Remedies. No course of dealing and no
failure or delay on the part of the Lender in exercising any right, remedy,
power or privilege hereunder shall operate as a waiver thereof or of any other
right, remedy, power or privilege of the Lender hereunder; and no single or
partial exercise of any such right, remedy, power or privilege shall preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights and remedies of the Lender under this
Security Agreement are cumulative and not exclusive of any rights or remedies
which it may otherwise have.
16. Notices. All notices, statements, requests, demands and other
communications given to or made upon the Grantor, the Lender in accordance with
the provisions of this Security Agreement shall be given or made as provided in
Section 7 of the Loan Agreement.
17. Severability.
(a) Grantor agrees that the provisions of this Security Agreement are
severable, and in an action or proceeding involving any state or federal
bankruptcy, insolvency or other law affecting the rights of creditors generally:
(i) if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such clause or provision in
any other jurisdiction, or any other clause or provision in this Agreement in
any jurisdiction;
(ii) if this Security Agreement would be held or determined to be
void, invalid or unenforceable on account of the amount of the aggregate
liability of Grantor under this Security Agreement, then, notwithstanding any
other provision of this Security Agreement to the contrary, the aggregate amount
of such liability shall, without any further action by the Lender, Grantor or
any other person, be automatically limited and reduced to the highest amount
which is valid and enforceable as determined in such action or proceeding.
(iii) If the grant of any security interest hereunder by Grantor is
held or determined to be void, invalid or unenforceable, in whole or in part,
such holding or determination shall not impair or affect the validity and
enforceability of any clause or provision not so held to be void, invalid or
unenforceable.
7
<PAGE>
18. Governing Law. This Security Agreement shall be deemed to be a contract
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the internal laws of said State, without
reference to its conflicts of law principles, except as required by mandatory
provisions of law and except to the extent that the validity or perfection of
security interests hereunder, or remedies hereunder with respect to the
Collateral, is governed by the laws of a jurisdiction other than the law of the
State of Delaware.
19. Successors and Assigns. This Security Agreement shall be freely
assignable and transferable by the Lender in connection with the assignment or
transfer of the Secured Indebtedness; provided, however, the duties and
obligations of the Grantor may not be delegated or transferred by the Grantor,
without the written consent of the Lender. The rights and privileges of the
Lender shall inure to their benefit and the benefit of its respective successors
and assigns (as permitted under the Loan Agreement) and the duties and
obligations of the Grantor shall bind the Grantor and its respective successors
and assigns.
20. Counterparts. This Security Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be deemed an original, but all
such counterparts shall constitute but one and the same instrument.
21. Consent to Jurisdiction; Waiver of Jury Trial. The Grantor hereby
irrevocably consents to the exclusive jurisdiction of the courts of the
Commonwealth of Pennsylvania located within Philadelphia County and the United
States District Court for the Eastern District of Pennsylvania and waives
personal service of any and all process upon it and consents that all such
service of process be made by certified or registered mail directed to the
Grantor at the addresses set forth or referred to in Section 16 hereof and
service so made shall be deemed to be completed upon actual receipt thereof. The
Grantor waives any objection to jurisdiction and venue of any action instituted
against it as provided herein and agrees not to assert any defense based on lack
of jurisdiction or venue, AND THE LENDER WAIVES TRIAL BY JURY IN ANY ACTION,
SUIT, PROCEEDING OR COUNTERCLAIM WITH RESPECT TO THIS SECURITY AGREEMENT TO THE
FULL EXTENT PERMITTED BY LAW.
WITNESS the due execution hereof as of the day and year first above
written.
PORTACOM WIRELESS, INC.
BY: /s/ Douglas C. MacLellan
---------------------------------
Douglas C. MacLellan,
President and Chief Executive Officer
VDC CORPORATION LTD.
BY: /s/ Graham Ferguson Lacey
---------------------------------
Graham Ferguson Lacey, President
8
DEBTOR IN POSSESSION LOAN, SECURITY AND PLEDGE AGREEMENT
THIS DEBTOR IN POSSESSION LOAN, SECURITY AND PLEDGE AGREEMENT (the
"Agreement") is made this 23rd day of March, 1998, by and between VDC
Corporation Ltd., a Bermuda corporation (the "Lender" or "VDC"), and PortaCom
Wireless, Inc., a Delaware corporation (the "Debtor").
W I T N E S S E T H:
WHEREAS, the Lender and the Debtor entered into a Loan Agreement, Security
Agreement, and Pledge Agreement all dated November 10, 1997, in order to
evidence the terms and conditions pursuant to which the Lender agreed to advance
funds to Debtor (the "Loan"); and
WHEREAS, in order to secure the Debtor's obligations to Lender for amounts
advanced under the Loan, the Debtor granted to Lender a first-priority security
interest in all of the Debtor's rights, title, and interest in and to those
certain warrants to purchase 4,000,000 shares of common stock of Metromedia Asia
Corporation (the "Warrants") and those certain 2,000,000 shares of the common
stock of Metromedia Asia Corporation (the "Shares" and together with the
Warrants sometimes collectively referred to as the "Securities"), together with
all rights and privileges pertaining thereto, including, without limitation, all
securities and additional securities receivable in respect of or in exchange for
such Securities, all rights to subscribe for securities incident to or arising
from ownership of such Securities, all cash, interest, stock and other dividends
or distributions paid or payable on such Securities, and all books and records
pertaining to the foregoing, including, without limitation, all stock record and
transfer books, and whatever is received when any of the foregoing is sold,
exchanged or otherwise disposed of, including any proceeds as such term is
defined in the Uniform Commercial Code of each state as enacted and in effect on
the date hereof in each applicable jurisdiction, and as the same may
subsequently be amended from time to time (the "UCC") (collectively, the
"Collateral"), as further defined in and pursuant to the Security Agreement; and
WHEREAS, VDC's interest in the Warrants was perfected as a result of (i)
the parties' execution of the Pledge Agreement, whereby Debtor pledged the
Warrants to VDC as collateral to secure Debtor's obligations to VDC, (ii) VDC's
possession of the Warrants, and (iii) the filing of UCC Financing Statements
with the Secretary of State for the States of Delaware, California, Ohio, New
Jersey, New York (collectively, the "UCC-1's"); and
WHEREAS, pursuant to the Loan, Lender agreed to advance certain amounts to
the Debtor to be used by the Debtor for working capital, as further described at
Section 4(e) of the Loan Agreement; and
WHEREAS, on March 23, 1998 (the "Petition Date"), the Debtor filed a
Voluntary Petition for relief under Chapter 11 of Title 11 of the United States
Code (the "Code"); and
<PAGE>
WHEREAS, the Debtor remains in control of its property and is maintaining
and managing its business as a debtor-in-possession pursuant to Code ss.ss. 1107
and 1108; and
WHEREAS, prior to the commencement of the case, VDC extended $366,725.00 to
Debtor under the Loan, which advances are evidenced by Credit Notes
(collectively, the "Credit Notes") in the principal amount of $366,725.00,
together with any and all accrued and unpaid interest, costs and fees, including
attorneys' fees (collectively, the "Pre-Petition Indebtedness"). The Loan
Agreement, Security Agreement, and Pledge Agreement dated November 10, 1997, and
Credit Notes shall be collectively referred to herein as the "Pre-Petition Loan
Documents"; and
WHEREAS, by virtue of the Pre-Petition Loan Documents, UCC-1's, and
possession of the Warrants, VDC has a first-priority lien on and security
interest in and to the Warrants; and
WHEREAS, Lender and Debtor have entered into an Asset Purchase Agreement
dated November, 1997, and amendments thereto (as amended, the "Purchase
Agreement"), whereby Lender agreed to purchase and Debtor agreed to sell the
Securities in consideration of 5.3 million shares of the common stock of Lender
plus $700,000.00 plus deferred purchase consideration, and which Purchase
Agreement has been superseded by an Asset Purchase Agreement entered into
between the parties post-petition (the "Transaction"); and
WHEREAS, Debtor has requested additional advances under the Loan
post-petition in accordance with the terms and conditions set forth below; and
WHEREAS, Lender has agreed to advance additional funds to Debtor
("Post-Petition Loan") only in accordance with the terms and conditions set
forth below and upon the Court's approval of such financing under Code
ss. 364(c), secured by a Court-approved grant of a post-petition lien on and
security interest in all of the Debtor's property (the "Post-Petition Financing
Order"); and
WHEREAS, Lender and Debtor have entered into this Agreement to evidence the
terms and conditions pursuant to which the Lender has agreed to extend credit
and advance funds to the Debtor post-petition; and
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants contained herein, and intending to be legally bound hereby, subject
only to the entry of the Post-Petition Financing Order by the Court, the Lender
and the Debtor hereby agree as follows:
1. Recitals Incorporated. The Recitals set forth above are incorporated
herein as though set forth at length below.
2. Ratification and Acknowledgment. The Debtor, for itself, its creditors
and its estate, hereby ratifies and confirms for the benefit of Lender, its
successors and assigns, the full extent of the Pre-Petition Indebtedness, the
enforceability of the Pre-Petition Loan
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<PAGE>
Documents in accordance with their respective terms, and the extent,
validity, priority, enforceability and perfection of Lender's lien on and
interest in and to the Warrants. The Debtor hereby acknowledges and confirms
that it has no defenses, counterclaims, set-offs, recoupments or other claims or
rights to disallow, in whole or in part, the Pre-Petition Indebtedness or
Lender's lien on and interest in and to the Warrants, and no objection to, or
the allowance of, the secured claim of Lender. Prior to the making of any
advances hereunder, Lender holds an allowed secured claim to the full extent of
the Pre-Petition Indebtedness and will hold an allowed secured claim to the full
extent of the Pre-Petition Indebtedness plus all advances hereunder, if any,
plus all accrued interest, costs and fees, including attorneys' fees due
hereunder.
3. The Post-Petition Loan. The Lender has agreed to extend credit and
advance funds to the Debtor and make the Post-Petition Loan upon the terms and
subject to the conditions hereinafter set forth. Lender shall have no obligation
to provide advances, except in its sole discretion. Any amounts advanced by
Lender under this Agreement shall be evidenced by a properly completed and
executed Note, the form of which is attached hereto as Exhibit A, dated as of
the date of advancement (the "Note"), made by the Debtor in favor of the Lender
in such amounts as may be requested by Debtor and approved by Lender. The
principal amount of the Post-Petition Loan, or any portion thereof, that may be
issued under this Agreement is limited to the difference between (a) $700,000.00
and (b) the Pre-Petition Indebtedness (approximately $333,000.00).
Notwithstanding anything to the contrary contained herein or in the
Post-Petition Financing Order, Lender shall not be obligated to extend credit or
advance funds under the Pre-Petition Loan Documents and the Post-Petition Loan
in the aggregate principal amount in excess of $700,000.00.
4. Payment of Interest and Principal.
(a) Payment of Post-Petition Loan. The unpaid principal balance under
the Post-Petition Loan (as evidenced by any Notes which may be issued herewith
or hereafter), together with all accrued and unpaid interest on the unpaid
principal balance, which shall accrue at the rate of ten percent (10%) per annum
(the "Interest Rate"), shall be paid in full upon the earlier to occur (the
"Maturity Date") of: (i) the forty-fifth (45th) day following the entry of the
Order for Relief under Code ss. 301; or (ii) the date approved by the Court as
the sale or auction date of the Transaction; or (iii) April 30, 1998.
Notwithstanding anything herein to the contrary, the Maturity Date may be
extended from time to time upon the written consent of Lender, which consent
shall be in Lender's absolute and sole discretion, may be withheld without cause
and shall not constitute or be deemed a waiver or cure of any Event of Default.
(b) Prepayment. The Debtor shall have the right to prepay at any time
and from time to time, without penalty or premium, all or any portion of the
outstanding balance of the Pre-Petition Indebtedness and Post-Petition Loan. All
prepayments of the Pre-Petition Indebtedness and the Post-Petition Loan shall be
applied first to accrued interest, and second to the unpaid principal balance
due thereunder respectively first to the Post-Petition Loan and second to the
Pre-Petition Indebtedness.
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<PAGE>
(c) Place of Payment. The Debtor shall make all payments to the Lender
at the place set forth in Section 9(d) hereunder, or at such other place or
places as the Lender, from time to time, shall designate in writing to the
Debtor in accordance with Section 9(d) hereunder.
5. Security Interest. To secure all of the Debtor's obligations under
the Post-Petition Loan, Notes and this Agreement, pursuant to Code ss. 364(c)
the Debtor hereby grants and pledges to Lender a security interest in and lien
on all now owned and hereafter acquired property of the Debtor, including,
without limitation, the Collateral, accounts, accounts receivable, inventory,
equipment, chattel paper, instruments, general intangibles and documents, and
the proceeds of all of the foregoing, whether arising pre- or post-petition,
which liens and security interests shall (i) have priority equal to the
pre-petition lien and security interest granted to Lender under the Loan, and
(ii) have first-priority in all other property of the Debtor's estate, and (iii)
be deemed perfected without the necessity of Lender taking possession of the
Shares or Warrants, filing UCC-1 Financing Statements, or taking any other
action to perfect such liens and interests in any other property of the Debtor's
estate. With respect to property of the Debtor in which other creditors hold a
valid and perfected pre-petition interest, the pledge, lien and security
interest granted and pledged to Lender in accordance herewith shall have
priority equal to other creditors' interests in such property.
6. Representations and Warranties of the Debtor. As a further inducement
to the Lender to execute and deliver this Agreement and to make the
Post-Petition Loan available to the Debtor, the Debtor, except as otherwise set
forth in the disclosure statement attached as Exhibit B to the Loan Agreement,
hereby represents and warrants to, and makes the following agreements with the
Lender, and the Post-Petition Financing Order shall declare, find, determine and
conclude, as follows:
(a) Authority.
(i) The Debtor is a corporation, duly organized, validly existing and
subsisting under the laws of Delaware.
(ii) The Debtor has full power and authority to borrow the Post-
Petition Loan, to execute and deliver this Agreement and any and all
Notes and any other instruments and documents required to be executed in
connection herewith and therewith (such other instruments and documents being
collectively called the "Other Documents") without further Order of the Court.
(b) Validity and Enforceability. This Agreement, each Note and each of
the Other Documents have been, and will be, validly executed and delivered by
the Debtor and are the legal, valid and binding obligations of the Debtor,
enforceable against the Debtor in accordance with their respective terms.
(c) No Conflicts. The execution and delivery by the Debtor of this
Agreement, any Note and each of the Other Documents and the performance by the
Debtor of all of its obligations hereunder and thereunder (a) will not violate
or be in conflict with any law,
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<PAGE>
order, rule or regulation of any court of other governmental authority
applicable to the Debtor; (b) will not constitute a default (with or without the
giving of notice or the passage of time or both) under any indenture, agreement
or other instrument to which it is a party or by which it or any of its
properties or assets is or may be bound or subject; and (c) will not result in
the creation or imposition of any lien, security interest, charge or encumbrance
of any nature upon any of its properties or assets, except the Permitted Lien,
as such term is defined in the Security Agreement.
(d) No Consents. No consent, approval or authorization of, or
registration, declaration or filing with, any governmental authority or other
third party is required as a condition to, or in connection with, the due and
valid execution and delivery by the Debtor of this Agreement, any Note or any of
the Other Documents.
(e) Use of Loan Proceeds. The proceeds from the Post-Petition Loan
issued hereunder shall be used by the Debtor only for working capital purposes
in the ordinary course of business, or in connection with the case or the
Transaction.
(f) Business Qualification. The Debtor is duly qualified to transact
business in the United States and in each state of the United States where it
conducts business and is in good standing in each jurisdiction in which its
failure to be so qualified and in good standing would have a materially adverse
effect on its financial condition of business, and it has the corporate power
and ability to own and operate its properties and to carry on its business as
now conducted.
(g) SEC Filings. The Debtor has filed all necessary reports and filings
(collectively, the "Filings") required to be filed with the Securities and
Exchange Commission as of the date hereof and all Filings are true and correct
and contain no material misrepresentations or omissions of material fact.
(h) Taxes. The Debtor has paid all federal and state income and other
applicable taxes levied by the United States and all deficiencies or other
additions to any tax interest and penalties owed by the Debtor in connection
with any tax requiring to be paid relating to the Debtor or any of its assets or
business as of the date hereof. The Debtor shall timely pay all taxes relating
to it or its business or assets, including additions, interests, penalties and
estimated payments required to be paid by it under the applicable law after the
date hereof.
(i) Liens. The Debtor has all right, title and interest in, and good and
marketable title to, the Securities and Collateral, free and clear of any claim,
pledge, security interest, restriction, lien or encumbrance of any kind or
nature whatsoever, except for the pre-petition lien to the Lender and the
Permitted Lien on the Shares, as such term is defined in the Security Agreement.
-5-
<PAGE>
7. Events of Default: Remedies.
(a) Events of Default. The following shall constitute events of default
under this Agreement ("Events of Default"):
(i) The Debtor fails to pay when due any principal, interest or other
sums due hereunder or under any of the Notes.
(ii) Except for Events of Default described in sub-paragraph
(i) hereof, the Debtor defaults in the observance or performance of any
condition or covenant contained in this Agreement or any Note and the Debtor
shall not have remedied the default within fifteen (15) days after receipt of
written notice of such default has been given by Lender to the Debtor.
(iii) A breach by the Debtor of any warranty or any representation
contained in this Agreement or any Note, and such breach shall not have been
remedied within fifteen (15) days after receipt of written notice of such breach
has been given by Lender to the Debtor.
(iv) The conversion of the Debtor's case to a case proceeding under
Chapter 7 of the Code, or the dismissal of the Debtor's Chapter 11 case, or the
appointment of a trustee in either a Chapter 7 or Chapter 11 case of the Debtor.
(v) The appeal, rehearing, reconsideration, reversal, modification,
vacation or stay of the Post-Petition Financing Order.
(vi) The failure to have scheduled a hearing on approval of the
post-petition Asset Purchase Agreement and the Transaction ("Sale Hearing")
within thirty (30) days following the commencement of the Case.
(vii) The failure to have obtained approval of the proposed bidding
procedures and Break-Up Fee, as described in the Transaction documents and in
connection with the Sale Hearing.
(viii) The failure to have obtained approval of the post-petition
Asset Purchase Agreement and the Transaction within thirty-five (35)
days following the commencement of the Case.
(ix) The appeal, rehearing, reconsideration, reversal, modification,
vacation or stay of the Order approving the Transaction.
(x) The failure of the parties to close the Transaction within fifty
(50) days of the commencement of the Case.
(xi) If there shall have occurred an Event of Default under any other
agreements between the Debtor and the Lender, except that the commencement of
the Debtor's case shall not be deemed to constitute a default hereunder or
thereunder.
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<PAGE>
(b) Remedies. In the event an Event of Default shall occur, then, in the
sole discretion of the Lender and without further notice to the Debtor or any
other party, the unpaid principal amount of the Pre-Petition Indebtedness and
the Post-Petition Loan, together with all accrued interest thereon at the
applicable rate specified in the Note, and all other sums due by the Debtor
under any Note or this Agreement shall become immediately due and payable,
without presentment, demand, protest or other requirements of any kind, all of
which are hereby expressly waived by the Debtor. Upon the occurrence of an Event
of Default, the Lender shall have the right to charge and accrue interest at a
rate per annum equal to the Interest Rate plus three percent (3%) (the "Default
Rate"). In addition, in each case, the Lender may recover all costs of suit and
other expenses incurred by the Lender (including attorneys' fees) in connection
with the collection of any sums due under any and all Notes or under this
Agreement. In addition to all other remedies available to it, the Lender may
exercise its rights under any and all Notes delivered to the Lender or under any
of the Other Documents. The remedies set forth herein shall be in addition to,
and not in lieu of, any other additional rights or remedies the Lender may have
at law or in equity. In addition, upon the occurrence of an Event of Default the
automatic stay imposed by Code ss. 362, and all other stays and injunctions, if
any, following three (3) business days' notice to Debtor shall be deemed
modified and dissolved, and of no further force or effect, in order to permit
Lender to exercise all rights or remedies with respect to or in the Collateral
and recover therefrom the Pre-Petition Indebtedness and all obligations due
Lender hereunder and the Notes. Further, Lender and Debtor agree that upon the
occurrence of an Event of Default or the Maturity Date, whichever shall first
occur, Lender shall be entitled to (i) exercise its rights in and to the
Warrants, (ii) credit the Debtor, and (iii) apply the Warrants to and in
satisfaction of the obligations of Debtor to Lender with respect to the
Pre-Petition Indebtedness and all obligations under the Post-Petition Loan.
Debtor hereby acknowledges notice of the Lender's intention to retain the
Warrants in satisfaction of such obligations of Debtor to Lender and expressly
waives its right to receive any further notice from Lender of its intention to
do so, either before or after the occurrence of any Event of Default or the
Maturity Date. All of the foregoing rights and remedies shall be cumulative and
the exercise of any such right or remedy shall not exhaust or act to waive any
other rights or remedies available to the Lender. No failure to exercise, or
delay by the Lender in exercising, any right, power or privilege under this
Agreement or otherwise shall preclude any other or further exercise thereof, or
the exercise of any other right, power or privilege of the Lender.
8. Survival of Representations and Covenants. This Agreement and all
covenants, agreements, representations and warranties made herein, in the
disclosure statement attached as Exhibit B to the Loan Agreement, and in any
Other Documents delivered pursuant hereto shall survive the making of the
Post-Petition Loan and the execution and delivery of any Note and this
Agreement, and shall continue in full force and effect until all of the
obligations have been fully paid, performed, satisfied and discharged.
9. Miscellaneous.
(a) Entire Agreement: Amendments. This Agreement, all Notes and all of
the Other Documents executed and delivered pursuant hereto constitute the entire
agreement between the Lender and the Debtor with respect to the subject matter
hereof. The
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<PAGE>
provisions of this Agreement, any Note or any of the Other Documents
shall not be modified, rescinded or waived except in writing executed by the
party against whom such modification, rescission or waiver is sought to be
enforced.
(b) Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the Lender and the Debtor and their respective heirs,
personal representatives, successors and assigns, including, without limitation,
any committee of creditors or equity security holders appointed in the Debtor's
case, as well as any trustee appointed in the Debtor's case, whether interim,
permanent or elected, and whether under Chapter 7 or 11 of the Code, except that
the Debtor shall not make any assignment of its rights hereunder without the
prior written consent of the Lender.
(c) Rights Cumulative. The remedies of the Lender as provided in any and
all Notes, or in this Agreement and all of the Other Documents shall be
cumulative and concurrent; may be pursued singly, successively, or together at
the sole discretion of the Lender; may be exercised as often as occasion for
their exercise shall occur; and in no event shall the failure to exercise any
such right or remedy be construed as a waiver or release of it.
(d) Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given and made when received by the party to whom the
notice, request, etc. is directed, and which shall be delivered personally, by
courier service such as Federal Express, or by messenger, or by United States
mail, registered or certified mail, postage pre-paid, return receipt requested,
addressed as set forth below.
If to the Debtor:
PortaCom Wireless, Inc.
10061 Talbert Avenue
Suite 200
Fountain Valley, CA 92708
with a copy to: Francis A. Monaco, Jr., Esquire
Walsh and Monzack, P.A.
1201 Orange Street, Suite 400
Wilmington, DE 19899
and
Jeffrey Kurtzman, Esquire
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
-8-
<PAGE>
If to the Lender:
VDC Corporation Ltd.
P.O. Box HM 1255
44 Church Street
Hamilton, Bermuda
with a copy to: Stephen M. Cohen, Esquire
Stuart M. Brown, Esquire
Buchanan Ingersoll Profession Corporation
11 Penn Center, 14th Floor
1835 Market Street
Philadelphia, PA 19103
(e) Controlling Law and Jurisdiction. This Agreement and all questions
relating to its validity, interpretation and performance shall be governed by
and construed in accordance with the laws of the State of Delaware of the United
States. The Debtor hereby consents to the exclusive jurisdiction of the United
States Bankruptcy Court for the District of Delaware for the resolution of all
claims, disputes and controversies arising hereunder.
(f) Notice of Default. The Debtor hereby agrees to promptly notify the
Lender of any event or circumstance which gives rise to or which is reasonably
likely to give rise to an Event of Default hereunder.
[remainder of page intentionally left blank]
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<PAGE>
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
(h) Severability. If any provisions of this Agreement shall be held
invalid under any applicable laws, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provisions and, to this end, the provisions hereof are severable.
IN WITNESS WHEREOF, the parties hereto have caused this Debtor In
Possession Loan, Security And Pledge Agreement to be executed and delivered as
of the date first written above.
VDC CORPORATION LTD.
BY: /s/Frederick A. Moran
------------------------------------
Frederick A. Moran,
Chief Executive Officer
PORTACOM WIRELESS, INC.
BY: /s/ Michael A. Richard
------------------------------------
Michael A. Richard
Chief Executive Officer
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WAIVER
WAIVER (the "Waiver") dated as of June 8, 1998, by VDC CORPORATION LTD., a
Bermuda Corporation ("VDC").
RECITALS
WHEREAS, VDC and PORTACOM WIRELESS, INC., a Delaware corporation
("PortaCom"), are the parties to that certain Asset Purchase Agreement dated as
of March 23, 1998 (the "Asset Purchase Agreement"), as amended by two
Stipulations and Orders in Lieu of Objection, dated as of April 3, 1998 and
April 23, 1998, respectively, and the Escrow Agreement dated April __, 1998
among PortaCom, VDC, the Committee of Unsecured Creditors of PortaCom Wireless,
Inc. and Klehr, Harrison, Harvey, Branzburg & Ellers LLP.
WHEREAS, Section 8.10 of the Asset Purchase Agreement states that VDC's
obligations under the Asset Purchase Agreement are subject to the condition,
unless such condition is expressly waived in writing by VDC, that "[PortaCom]
shall have provided validly executed releases, waivers and/or settlement
agreements, satisfactory in form and substance to [VDC], evidencing agreements
for the satisfaction of substantially all indebtedness of, and claims against,
[PortaCom]."
WHEREAS, Section 6.2(a) of the Asset Purchase Agreement states that "at or
prior to the Closing, Seller shall deliver to Buyer. . . in form and substance
satisfactory to Buyer, a written release by all of the parties to the
Termination Agreement agreeing to the release of the MAC Common Stock to the
Buyer."
WHEREAS, Section 6.2(b) of the Asset Purchase Agreement states that "at or
prior to the Closing, Seller shall deliver to Buyer. . . in form and substance
satisfactory to Buyer, written evidence from MAC confirming that, as of the
Closing Date, no part of the Assets pledged as collateral under the Termination
Agreement has been sold, assigned, transferred or otherwise disposed of or
subject to any action for any of the foregoing (other than the transaction
contemplated in this Agreement), and that, as of the Closing Date, neither MAC
nor its parent corporation, Metromedia International Group, Inc., contemplates
taking any of the foregoing actions."
WHEREAS, Section 3.3(a) of the Asset Purchase Agreement states that
"[PortaCom] will deliver a . . . Debt Schedule . . . identifying its
indebtedness as of the Closing Date".
WHEREAS, VDC and PortaCom have mutually determined and agreed that the
aforementioned conditions set forth in Sections 3.3(a), 6.2(a), 6.2(b) and 8.10
of the Asset Purchase Agreement is no longer applicable to the closing of the
transactions contemplated by the Asset Purchase Agreement.
<PAGE>
NOW THEREFORE, VDC, intending to be legally bound hereby, hereby waives the
satisfaction of the conditions set forth in Sections 3.3(a), 6.2(a), 6.2(b) and
8.10 of the Asset Purchase Agreement as a condition to VDC's obligations under
the Asset Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Waiver as of the
date and year first written above.
VDC CORPORATION LTD.
By: /s/ Frederick A. Moran
-------------------------------
Frederick A. Moran,
Chief Executive Officer
