EXHIBIT 2.2
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE: :
: CASE NO. 98-661(PJW)
PORTACOM WIRELESS, INC., :
: CHAPTER 11
DEBTOR. :
STIPULATION AND ORDER IN LIEU OF OBJECTION
------------------------------------------
This Stipulation and Order In Lieu of Objection ("Stipulation") is made as
of the 23rd day of April, 1998, by and among PortaCom Wireless, Inc. ("Debtor"),
VDC Corporation Ltd. ("Buyer") and the Official Committee of Unsecured Creditors
of PortaCom Wireless, Inc. ("Committee"), by and through their respective
undersigned counsel.
W I T N E S S E T H:
WHEREAS, 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"); and
WHEREAS, on March 29, 1998, the Office of the United States Trustee
convened a meeting of the twenty largest unsecured creditors of the Debtor for
the purpose of appointing a committee of creditors; and
WHEREAS, the Office of the United States Trustee appointed three creditors
to the committee, which Committee engaged counsel; and
WHEREAS, prior to the commencement of the Case, the Debtor and Buyer were
parties to an asset purchase agreement and amendments thereto, pertaining to the
Debtor's agreement to
sell to Buyer its interest in and to 2,000,000 shares of common stock ("MAC
Shares") of Metromedia Asia Corporation ("MAC") and warrants to purchase an
additional 4,000,000 of MAC common stock with a strike price of $4.00 per share
("MAC Warrants"); and
WHEREAS, the 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; and
WHEREAS, 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, which is attached hereto as
Exhibit A and incorporated herein; and
WHEREAS, the Committee expressed its intention to object to various
provisions of the Procedures Motion and Notice, however, in lieu thereof, the
Debtor, Buyer and Committee entered into that certain Stipulation and Order in
Lieu of Objection ("Procedures Stipulation"), which is attached hereto as
Exhibit B and incorporated herein; and
WHEREAS, pursuant to the terms of the Procedures Stipulation that parties
entered into an Escrow Agreement, among other things, to provide assurance to
unsecured creditors that their allowed claims would be paid in full as a result
of the consummation of the sale of the MAC Shares and MAC Warrants to Buyer
("Escrow Agreement"). A copy of the Escrow Agreement is attached hereto as
Exhibit C and incorporated herein; and
WHEREAS, on the petition date the Debtor fled the Motion of PortaCom
Wireless, Inc. to Obtain Post-Petition Financing Pursuant to 11 U.S.C. (S)
364(c) ("DIP Motion") and after
2
conducting a preliminary hearing in accordance with Fed.R.Bankr.P. 4001(c)(2),
the Court entered a Preliminary Order thereon and scheduled a final hearing
thereon for April 23, 1998; and
WHEREAS, the Committee filed objections to the entry of the final order on
the DIP Motion; and
WHEREAS, the Debtor, Buyer and Committee, have agreed to resolve the
Committee's concerns and objections by further modifying the terms of the
Purchase Agreement, as amended by the Procedures Stipulation and Escrow
Agreement, as more fully set forth below, in consideration of the Committee's
waiver of its objections to the Procedures Motion and DIP Motion and the
approval of the Amended Purchase Agreement, as defined below, at the hearing
scheduled for April 23, 1998 to approve the same and confirm the Buyer as the
"Successful Bidder;" and
NOW, THEREFORE, intending to be legally bound hereby, for and in
consideration of the mutual covenants set forth below, the parties agree as
follows:
1. The recitals set forth above are incorporated herein as though set
forth below at length.
2. The Purchase Agreement, as amended by the Procedures Stipulation and
Escrow Agreement (as amended, the "Amended Purchase Agreement"), is incorporated
herein and shall be amended pursuant to the terms set forth below. Capitalized
terms used herein and not defined herein shall have the meaning ascribed to such
term in the Amended Purchase Agreement.
3. Section 1.1 shall be amended by deleting the definition for "Cash
Purchase Escrow" and replacing it with the following:
3
"Cash Purchase Escrow" means that segregated, interest bearing escrow
account established and maintained by the Debtor, 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.
4. Section 3.2(b) of the Amended Purchase Agreement is hereby amended by
deleting the sub-section in its entirety and replacing it with the following:
(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 value $2.00 per share, of Buyer in
accordance with the provisions of Section 3.3 hereof (the "VDC
Shares"). The number of VDC Shares to be issued to Debtor 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 (the sum of the
Pre-Petition Indebtedness and Post-Petition Loan), divided by the
value of the VDC stock valued consistently with paragraph 14 of 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 Debtor is equal to 5,133,334
shares (5,300,000 - ((1,400,000 - 400,000)/6)); and
5. Section 3.4 of the Amended Purchase Agreement is hereby amended by
deleting the sub-section in its entirety and replacing it with the following:
3.4 Closing and Post-Closing Adjustments of Cash Purchase Escrow and
----------------------------------------------------------------
VDC Shares.
----------
(a) 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.
(b) At or before Closing, the Debtor shall deliver to the Escrow
Agent a schedule containing the amounts and names of the holders of
all priority unsecured and general unsecured claims which, as of the
Closing Date (as defined in the Amended Purchase Agreement), are
scheduled by the Debtor as fixed and liquidated, unsecured claims
against the Debtor's estate and for which no proof(s) of claim has
been filed or for which proof(s) of claim have been filed in the
scheduled or a lesser amount ("Closing Date Claims"). At Closing, the
Escrow
4
Agent shall deliver to Debtor from the Escrowed Funds cash in an
amount equal to the Closing Date Claims for distribution to the
holders of Closing Date Claims.
(c) Upon the later of (i) Closing or (ii) the entry of a final, non-
appealable Order by the Court approving or ratifying the settlement
agreements entered into by the Debtor prior to the commencement of the
Case ("Pre-Petition Settlements"), or otherwise authorizing a
settlement and compromise upon the terms of, the Pre-Petition
Settlements, including an Order confirming a plan of reorganization
providing for such approval, ratification, or authorization, the
Escrow Agent shall deliver to Debtor or the disbursing agent under
such plan, as the case may be, cash and a portion of the VDC Shares in
an amount equal to that to be distributed pursuant to the Pre-Petition
Settlements. The consideration payable to the non-Debtor party to any
Pre-Petition Settlement shall be deemed to constitute an Allowed Claim
having a value in the amount of such consideration. In the event
Debtor fails to obtain a final, non-appealable Order approving or
ratifying any of the Pre-Petition Settlements, or otherwise
authorizing a settlement and compromise upon the terms of such Pre-
Petition Settlement, then any resulting claim asserted against the
Debtor's estate shall constitute a Disputed Claim and be treated in
accordance with paragraph 3.4(e) below.
(d) Within seven (7) days after May 15, 1998 (the "Bar Date"), Debtor
shall deliver to the Escrow Agent, Buyer and the Committee a schedule
containing the amounts and names of holders of all claims, other than
the Closing Date Claims, as to which, as of the Bar Date, proof(s) of
claim have been filed in the scheduled or a lesser amount than that
which was scheduled by the Debtor (collectively, the "Bar Date
Claims"). The Bar Date Claims shall be deemed to constitute Allowed
Claims. Within five (5) days after delivery by the Debtor of such
schedule, the Escrow Agent shall deliver to Debtor from the Escrowed
Funds cash in an amount equal to the Bar Date Claims for distribution
to the holders of Bar Date Claims.
(e) All claims against the Debtor's estate other than the Closing
Date Claims, the Pre-Petition Settlements and the Bar Date Claims
constitute "Disputed Claims." From time to time, and to the extent
that any Disputed Claim becomes an Allowed Claim pursuant to a final,
non-appealable Order of the Court ("Other Allowed Claim(s)"), the
Escrow Agent shall deliver to Debtor or the disbursing agent under a
plan of reorganization confirmed in the Debtor's case, as the case may
be, for distribution to the holder(s) thereof, cash and/or a portion
of the VDC Shares having an aggregate value equal to the aggregate
amount of such Other Allowed Claim; and shall disburse to Buyer the
60% Credit (as defined 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 Letter of Credit and/or a
payment in cash to Buyer, whichever Buyer may
5
from time to time elect in writing. In the event Buyer has elected to
receive a reduction in its liability under the Letter of Credit, the
Escrow Agent shall as is necessary to implement paragraph 3.4(g)
hereof, send written notice of the 60% Credit(s) to the financial
institution issuing the Letter of Credit.
(g) Following the entry of an order confirming a plan of
reorganization in the Case that provides for the consummation of the
Amended Purchase Agreement and sale to Buyer, then the Escrow Agent
may disburse not more than one million VDC Shares of the first
allocation of VDC Shares that may be alienated by Debtor pursuant to
Section 7.6 of the Amended Purchase Agreement to Debtor, which VDC
Shares may be liquidated by Debtor, 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, Pre-Petition
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 Pre-Petition Settlements, and cash
paid to holders of Other Allowed Claims, plus all interest and other
earnings on the Escrowed 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 Escrowed Funds
distributed on account of the Closing Date Claims, Bar Date Claims,
Pre-Petition 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 VDC stock valued consistently with paragraph 14 of the
Procedures Motion; and
(ii) To the Debtor: of all of the VDC Shares remaining after
distribution of the Returned Shares to Buyer and the Administrative
Shares, or portion thereof, to Debtor.
(i) The Escrowed Funds shall comprise in part the amount of
$82,000.00, which amount may be disbursed by the Escrow Agent to the
Debtor from time to time for the payment of administrative claims
("Administrative Advance"). The Administrative Advance may not be
disbursed unless and until an Order is entered by the Bankruptcy Court
approving the Sale Motion and confirming VDC as the Purchaser
thereunder, but may be disbursed prior to Closing under the Amended
Purchase Agreement. Thereafter, the Debtor shall submit advance
requests to the Escrow Agent and Committee (to its counsel) and funds
from the Administrative Advance will be disbursed by the Escrow Agent
to the Debtor in amounts
6
approved by the Committee, which approval shall not be unreasonably
withheld. The Committee shall be deemed to approve any advance
requests as to which it has not notified the Debtor's counsel and
Escrow Agent of an objection thereto within three (3) business days of
its receipt of any such request.
6. A final order shall be entered approving the Debtor In Possession
Loan, Security and Pledge Agreement between the Debtor and Buyer ("DIP Financing
Agreement"), authorizing Debtor to obtain post-petition financing in the amount
advanced of $18,000.00, and prohibiting VDC from making further advances of
funds or credit thereunder without further order of the Court.
7. The Committee's objections to the DIP Motion and entry of the final
order thereon are hereby withdrawn.
8. Except as expressly modified hereby, the Amended Purchase Agreement,
as amended by the Stipulation and Order in Lieu of Objection dated April 6, 1998
and the Escrow Agreement, Motion, Notice, DIP Financing Agreement and Final
Order on the DIP Financing Agreement shall remain in full force and effect.
9. The Committee hereby waives any and all objections to the Motion,
Notice and approval of the Amended Purchase Agreement by the Court and
confirmation of Buyer as the Successful Bidder and approved purchaser
thereunder.
10. The Debtor shall use its best efforts to review the claims asserted
against the estate and interpose and pursue objects thereto. Any and all
objections to claims shall be filed on or before May 22, 1998.
11. This Stipulation and the approved form of Final Order on the DIP
Motion set forth the entire agreement of the parties hereto with respect to the
subject matter hereof and may be amended only by a writing signed by each party
hereto and approved by the Court.
7
12. This Stipulation shall inure to and be binding upon the parties hereto
and their respective successor and assigns upon approval hereof by an Order of
the Court.
13. Counsel signing this Stipulation on behalf of the parties hereto each
represent that they have all the requisite authority to bind their client
hereto.
14. This Stipulation may be executed in counterparts.
IN WITNESSETH WHEREOF, the parties hereto through their duly authorized
counsel, have signed this Stipulation the day and year first above written.
PORTACOM WIRELESS, INC.
Dated: April 23, 1998 /s/ Jeffrey Kurtzman
-----------------------------------
By: Jeffrey Kurtzman, Esquire
Special Counsel to PortaCom Wireless, Inc.
VDC CORPORATION, LTD.
Dated: 4/23/98 /s/ Stuart M. Brown
-----------------------------------
By: Kenneth E. Aaron, Esquire
Stuart M. Brown, Esquire
Counsel to VDC Corporation, Ltd.
8
OFFICIAL COMMITTEE OF UNSECURED CREDITORS
Dated: /s/ Francis Lawall
----------------------------------------
By: Francis Lawall, Esquire
J. Gregg Miller, Esquire
Counsel to Official Committee of Unsecured
Creditors
ESCROW AGENT - KLEHR, HARRISON, HARVEY,
BRANZBURG & ELLERS, LLP
Dated: April 23, 1998 /s/ Jeffrey Kurtzman
----------------------------------------
By: Jeffrey Kurtzman, Partner
APPROVED and so ORDERED, ADJUDGED and DECREED, this 23 day of April, 1998.
/s/ Peter J. Walsh
----------------------------------------
Peter J. Walsh,
United States Bankruptcy Judge
9