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
WHEREAS, the Debtor remains in control of its property and is maintaining
and managing its business as a debtor-in-possession pursuant to Code xx.xx. 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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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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(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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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.
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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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(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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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.
00000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx Xxxxxx, XX 00000
with a copy to: Xxxxxxx X. Xxxxxx, Xx., Esquire
Xxxxx and Monzack, P.A.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
and
Xxxxxxx Xxxxxxxx, Esquire
Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
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If to the Lender:
VDC Corporation Ltd.
X.X. Xxx XX 0000
00 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx
with a copy to: Xxxxxxx X. Xxxxx, Esquire
Xxxxxx X. Xxxxx, Esquire
Xxxxxxxx Ingersoll Profession Corporation
00 Xxxx Xxxxxx, 00xx Xxxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(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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(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/Xxxxxxxxx X. Xxxxx
------------------------------------
Xxxxxxxxx X. Xxxxx,
Chief Executive Officer
PORTACOM WIRELESS, INC.
BY: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
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