ESCROW AGREEMENT
THIS
ESCROW AGREEMENT
(this
“Agreement”),
dated
as
of [____], 2007, is made by and among KEY
HOSPITALITY ACQUISITION CORP.,
a
Delaware corporation (“Parent”),
PARENT,
F. XXXX XXXXX IRREVOCABLE TRUST UNDER AGREEMENT DATED AUGUST 31,
2004 (“Xxxxx”),
XXXXX
XXXXXXX
(“Xxxxxxx”
and
together with Xxxxx, the “Stockholders”);
and
CONTINENTAL
STOCK TRANSFER AND TRUST COMPANY,
in its
capacity as escrow agent hereunder (the “Escrow
Agent”,
which
term shall also include any successor escrow agent appointed in accordance
with
Section 5.3 hereof).
The
Stockholders and Parent are collectively referred to as the “Interested
Parties”).
A. Reference
is made to the Agreement and Plan of Merger, dated as of March 22, 2007 (the
“Merger
Agreement”)
by and
among Parent, Key Merger Sub, LLC, a Florida limited liability company and
a
direct wholly-owned subsidiary of Parent (the “Buyer”),
the
Company and the Members, providing for, among other things, the merger of the
Buyer with and into the Company (the “Merger”).
Capitalized terms used but not otherwise defined herein shall have the meanings
given them in the Merger Agreement.
B. This
Agreement is designed to implement the provisions of the Merger Agreement
pursuant to which Parent shall deposit with the Escrow Agent the shares of
Common Stock, $.0001 par value per share, of Parent (“Parent
Common Stock”)
identified as Escrow Shares pursuant to Section 1.6 of the Merger Agreement,
as
security for the satisfaction of the indemnification obligations of the Members
pursuant to Article VII of the Merger Agreement and to provide for the return
of
certain shares of Parent Common Stock in the event that certain performance
criteria set forth in Section 1.19 of the Merger Agreement are not
met.
NOW,
THEREFORE,
in
consideration of the promises and agreements contained herein, the parties
hereto agree as follows:
ARTICLE
I
ENGAGEMENT
OF THE ESCROW AGENT
The
Escrow Agent is hereby engaged to act as escrow agent hereunder, and the Escrow
Agent agrees to act as such.
ARTICLE
II
THE
ESCROW FUND
2.1 Establishment,
Maintenance and Investment of the Escrow Fund.
(a) In
accordance with Sections 1.6 and 1.15 of the Merger Agreement, the Parent shall
deposit or cause to be deposited with the Escrow Agent one or more certificates
registered in the name of the Stockholders representing the Escrow Shares issued
to the Stockholders in the Merger. The Escrow Shares, together with all stock
dividends issued in respect of the Escrow Shares (including, without limitation,
any shares issued pursuant to any stock dividend, stock split, reverse stock
split, combination or reclassification thereof) shall hereinafter be referred
to
as the “Escrow
Fund.”
(b) The
Escrow Agent shall hold the Escrow Fund for the benefit of (i) Parent and the
other Parent Indemnitees (collectively, the “Indemnified
Persons”)
and
(ii) the Stockholders, all pursuant to the provisions of this Agreement. Any
distributions of the Escrow Fund shall be made in accordance with Sections
2.3
and 2.4 hereof.
(c) If
the
Escrow Agent receives a joint written investment instruction (which may be
in
separate counterparts and/or in the form of standing instructions) on a timely
basis from Parent and the Stockholders directing it to invest any cash portion
of the Escrow Fund, the Escrow Agent shall invest such amounts as so instructed
(subject to investment availability). In such event, the Escrow Agent shall
have
no responsibility or liability for any losses incurred on any such investment
(including, without limitation, losses incurred upon liquidation prior to
maturity, when needed to make a distribution hereunder). If the Escrow Agent
has
not received a joint written investment instruction at the close of any Business
Day, the Escrow Agent shall invest any uninvested cash in the Escrow Fund in
an
interest-bearing account, until an investment instruction to the contrary is
received. For purposes hereof, the term “Business
Day”
shall
mean any day other than a Saturday, Sunday or other day on which the corporate
headquarters of the Escrow Agent is closed for business.
2.2 Rights
to the Escrow Fund.
The
Escrow Fund shall be for the exclusive benefit of the Indemnified Persons as
provided herein and in Article VII of the Merger Agreement, and no other Person
shall have any right, title or interest therein other than (i) the Stockholders’
residual underlying ownership interests in the Escrow Fund and (ii) the lien
of
the Escrow Agent for its fees and expenses pursuant to Article VII
hereof.
2.3 General
Operation of the Escrow Fund.
(a) The
Escrow Agent shall continue to hold the Escrow Fund in its possession until
authorized or required hereunder to make distributions therefrom.
(b)
The
Escrow Fund shall consist of the Escrow Shares, as defined in Section 1.6 of
the
Merger Agreement, subject to adjustments as provided herein.
(c) Section
1.19 of the Merger Agreement provides that the Stockholders may forfeit certain
Escrow Shares if certain performance targets set forth therein fail to be
achieved (such forfeited Escrow Shares constituting “Forfeited
Shares”).
If
the Interested Parties collectively deliver to the Escrow Agent a joint written
notice to such effect (a “Forfeiture Notice”),
which
Forfeiture Notice shall provide the number of Escrow Shares that then constitute
Forfeited Shares and shall instruct the Escrow Agent to deliver to Parent a
number of Escrow Shares within the Escrow Fund equal to the number of shares
that constitute such Forfeited Shares (or, if the number of shares that
constitute Forfeited Shares shall be greater than the Escrow Shares remaining
in
the Escrow Fund, the balance of the Escrow Fund). The Escrow Agent shall, within
five (5) days following its receipt of a Forfeiture Notice, disburse to the
Parent from the Escrow Fund a number of Escrow Shares equal to the Forfeited
Shares designated on the Forfeiture Notice (or, if the Forfeited Shares shall
be
greater than the Escrow Shares remaining in the Escrow Fund, the balance of
the
Escrow Fund). The Escrow Agent shall be entitled to rely on any Forfeiture
Notice without making any inquiry as to its validity or genuineness
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(d) Section
1.19 of the Merger Agreement provides that Escrow Shares that do not constitute
Forfeited Shares due to the achievement of certain performance targets set
forth
therein constitute Earned Shares. Whenever Escrow Shares constitute Earned
Shares under Section 1.19 of the Merger Agreement, the Interested Parties shall
collectively deliver to the Escrow Agent a joint written notice that identifies
the number of Escrow Shares that constitute Earned Shares (an “Earned
Share Notice”).
The
Earned Share Notice shall also designate those Earned Shares that shall be
maintained in the Earned Shares Indemnity Escrow Account (as defined below)
and
those Earned Shares, if any, that shall be returned to the Shareholders
(“Excess
Earned Shares”).
The
Escrow Agent shall, within five (5) days following its receipt of an Earned
Share Notice, disburse to the Stockholders Earned Shares from the Escrow Fund
in
an amount equal to the Excess Earned Shares, if any, designated on the Earned
Share Notice. The Escrow Agent shall be entitled to rely on any Earned Share
Notice without making any inquiry as to its validity or
genuineness.
(e) The
“Earned
Shares Indemnity Escrow Account”
consists of certain Earned Shares that the parties hereto have agreed to set
aside and treat as deposited into a separate account for the purpose of
providing for the possible satisfaction of the indemnification obligations
of
Xxxxx and Xxxxxxx pursuant to Article VII of the Merger Agreement.
2.4 Distribution
of the Escrow Fund - Indemnity Claims.
(a) If
any
Indemnified Person (the “Claiming
Person”)
asserts a right of indemnity against any of the Stockholders in accordance
with
Article VII of the Merger Agreement for which it seeks payment out of that
portion of the Escrow Fund equal to the number of shares of Parent Common Stock
identified by the parties hereto as deposited into the Earned Shares Indemnity
Escrow Account (the “Indemnity
Fund”),
such
Claiming Person shall deliver to the Escrow Agent (with a copy being sent to
the
Stockholders) a written notice to such effect (a “Notice
of Claim”;
and
the right of indemnity asserted in a Notice of Claim being hereinafter referred
to as a “Claim”),
which
Notice of Claim shall provide the date on which such Notice of Claim is deemed
to be delivered to the Stockholders in accordance with Section 10.1 hereof,
and
shall instruct the Escrow Agent to deliver to such Claiming Person that portion
of the Indemnity Fund equal to the Claimed Amount (as defined below) as
specified in the Notice of Claim (or, if the Claimed Amount shall be greater
than the remaining value of the Indemnity Fund, the balance of the Indemnity
Fund) and in accordance with the terms and conditions of Article VII of the
Merger Agreement; provided,
however,
the
following shall apply:
(1) In
order
to be effective hereunder, a Notice of Claim delivered to the Escrow Agent
pursuant to this Section 2.4(a) must (A) set forth the name of the Claiming
Person, the nature and description of such Claim (to the extent known) in
reasonable detail, and the amount thereof (or if not ascertainable, a reasonable
estimate of the maximum amount thereof) (the “Claimed
Amount”)
and
(B) be delivered to the Escrow Agent on or prior to the Escrow Agent’s close of
business on the 18-month anniversary of the date of this Agreement (or the
immediately succeeding Business Day if the Escrow Agent is not open for business
on such date) (the “Escrow
Expiration Date”).
The
Escrow Agent shall provide the Interested Parties notice of the Escrow
Expiration Date at least fifteen (15) days, but no greater than sixty (60)
days,
prior to the Escrow Expiration Date; provided,
however,
that
the Escrow Agent shall have no liability for failing to provide such notice
absent bad faith, willful misconduct or gross negligence. The Escrow Agent
shall
be entitled to rely on any Notice of Claim without making any inquiry as to
its
validity or genuineness.
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(2) Within
ten (10) Business Days after the delivery to it of a Notice of Claim, the
Stockholders shall provide to the Claiming Person and the Escrow Agent a written
response (the “Response
Notice”)
in
which the Stockholders shall: (i) agree that all of the Claimed Amount may
be
released from the Indemnity Fund to the Claiming Person in accordance with
the
terms and conditions of Article VII of the Merger Agreement, (ii) agree that
part, but not all, of the Claimed Amount (the “Agreed
Amount”)
may be
released from the Indemnity Fund to the Claiming Person in accordance with
the
terms and conditions of Article VII of the Merger Agreement or (iii) assert
that
none of the Claimed Amount may be released from the Indemnity Fund to the
Claiming Person. If the Stockholders do not provide the Claiming Person and
the
Escrow Agent a Response Notice in accordance with this Section 2.4(a)(2) within
such 10-Business Day period, the Stockholders shall be deemed to have agreed
that all of the Claimed Amount may be released to the Claiming Person from
the
Indemnity Fund.
(3) If
the
Stockholders agree in the Response Notice (or are deemed to have agreed pursuant
to the last sentence of Section 2.4(a)(2)) that all of the Claimed Amount may
be
released from the Indemnity Fund to the Claiming Person in accordance with
the
terms and conditions of Article VII of the Merger Agreement, the Escrow Agent
shall, within five (5) days following the earlier of the due date for the
Response Notice or receipt of the Response Notice, disburse to the Claiming
Person from the Indemnity Fund the Claimed Amount (or such lesser amount as
is
then the entire balance of the Indemnity Fund).
(4) If
the
Stockholders in the Response Notice agree that the Agreed Amount may be released
from the Indemnity Fund to the Claiming Person in accordance with the terms
and
conditions of Article VII of the Merger Agreement, the Escrow Agent shall,
within five (5) days following receipt of the Response Notice, disburse to
the
Claiming Person from the Indemnity Fund an amount equal to the Agreed Amount
set
forth in such Response Notice (or such lesser amount as is then the entire
balance of the Indemnity Fund), and the remainder of the Claimed Amount shall
be
subject to Section 2.4(a)(5).
(5) If
the
Stockholders in the Response Notice contest the release of all or part of the
Claimed Amount (the “Contested
Amount”),
the
Escrow Agent shall continue to hold the entire balance of the Escrow Fund until
such dispute has been resolved as provided in Article X below or until the
Escrow Agent has received joint written instructions from Parent and the
Stockholders with respect to such Contested Amount (any such resolution, a
“Determination”).
If
such Determination provides for payment by the Escrow Agent to the Claiming
Person of all or a portion of the Contested Amount in accordance with the terms
and conditions of Article VII of the Merger Agreement, within five (5) days
following the Escrow Agent’s receipt of such Determination, the Escrow Agent
shall disburse such portion of the Indemnity Fund (or such lesser amount as
is
then the entire balance of the Indemnity Fund) to the Claiming Person in
accordance with such Determination.
4
Any
distributions from the Indemnity Fund to satisfy a Claim shall be made by the
delivery of Earned Shares then held in the Indemnity Fund, with the Earned
Shares so distributed valued at the Release Price. For purposes hereof, the
“Release
Price”
shall
mean a value equal to $7.50 per Escrow Share notwithstanding the market price
for the Parent Common Stock as reported on the OTC BB or any other applicable
exchange or automated quotation system at the time any Claim is made
hereunder.
(b) If
the
Escrow Agent is authorized to deliver all or any portion of the Indemnity Fund
to a Claiming Person with respect to a Claim pursuant to Section 2.4(a), then
(i) such delivery shall be made regardless of the Escrow Agent’s prior or
subsequent receipt of any Notice of Claim or subsequent receipt of any notice
of
dispute with respect to any other Claim or Claims and (ii) the Escrow Agent
shall (1) deliver to Parent’s transfer agent for the Parent Common Stock (who
shall be identified to the Escrow Agent in writing by Parent) (the “Transfer
Agent”)
a
certificate or certificates representing at least such number of Escrow Shares
necessary to satisfy the Claim, together with a completed stock power or stock
powers and instructions necessary to transfer to such Claiming Person such
number of the Escrow Shares being delivered to such Claiming Person, and (B)
instruct the Transfer Agent to issue and deliver to the Escrow Agent for
retention hereunder as part of the Escrow Fund a new certificate in the name
of
the Escrow Agent as escrow agent hereunder (or in the name of its nominee)
representing the remaining balance of the portion of the Escrow Shares so
delivered to the Transfer Agent.
(c) The
twelve (12) month anniversary of this Agreement is referred to herein as the
“Initial
Reduction Date”.
On the
Initial Reduction Date, the Escrow Shares within the Indemnity Fund shall
automatically be reduced to 5,000,000 Earned Shares, if applicable, less the
number of Escrow Shares that may have already reduced the Indemnity Fund
pursuant to the payment of Claims prior to such date (the amount of such
distribution, being referred to as the “Initial
Escrow Disbursement”).
On or
before the third (3rd)
Business Day following the receipt of written notice from the Interested Parties
by the Escrow Agent notifying the Escrow Agent of the Initial Reduction Date,
the Escrow Agent shall issue to the Stockholders the Initial Escrow
Disbursement. The balance of the Indemnity Fund shall be held
in escrow
to
fund claims for indemnification by any Indemnified Person pursuant to Article
VII of the Merger Agreement.
(d) Subject
to Section 2.4(a) hereof,
promptly following the Escrow Expiration Date, the Escrow Agent shall distribute
to the Stockholders the entire then remaining balance, if any, of the Escrow
Fund; provided,
however,
that if
any Notices of Claim have been delivered in accordance with Section 2.3(a)
prior
to the Escrow Expiration Date but the Claims specified therein have not been
resolved or settled prior to the Escrow Expiration Date (the “Remaining
Claims”),
the
Escrow Agent will retain the entire balance of the Indemnity Fund, but shall
release all other shares remaining in the Escrow Fund, until all Remaining
Claims are resolved; provided,
however,
that in
the event there is a Contested Amount in a Remaining Claim, then within five
(5)
days following the receipt by the Escrow Agent of a Determination with respect
to any such Contested Amount in a Remaining Claim, the Escrow Agent shall
disburse the amount specified in such Determination from the Indemnity Fund
(to
the extent such amount is then in the Indemnity Fund) to the Claiming Person
in
accordance with such Determination. Any distributions from the Escrow Fund
to a
Claiming Person pursuant to this Section 2.4(d) shall be made in the same manner
as is specified in the last paragraph of Section 2.4(a).
5
(e) If
the
balance of the Escrow Fund is to be delivered to the Stockholders as provided
in
Section 2.3(d), the Escrow Agent shall deliver to the Transfer Agent a
certificate or certificates representing the remaining Escrow Shares in the
Escrow Fund, together with a completed stock power or stock powers and
instructions to deliver to each Stockholder such Stockholder’s Pro Rata Share of
such Escrow Shares.
(f) Under
no
circumstances shall the Escrow Agent (i) be required to release or distribute
any portion of the Escrow Fund or take any action under this Agreement sooner
than two (2) Business Days after the Escrow Agent has received the requisite
notices or other required documents in good form, or passage of the applicable
claims period or release date, as the case may be, or (ii) release or distribute
any portion of the Escrow Fund to any Person other than an Indemnified Person
without first providing Parent with at least two (2) Business Days’ prior
written notice of such release or distribution.
ARTICLE
III
COVENANTS
RELATING TO THE ESCROW SHARES AND THE STOCKHOLDERS
3.1 Rights
Incident to Ownership of Shares.
Except
as
otherwise expressly provided herein, each Stockholder shall at all times retain
and have the full and absolute right to exercise all rights and indicia of
ownership with respect to the Escrow Shares (collectively, the “Shares”)
beneficially owned by such Stockholder, including, without limitation, voting
rights; provided,
however,
that
the Stockholders shall have no right to transfer, pledge or encumber or
otherwise dispose of in any manner whatsoever any Shares that are held by the
Escrow Agent pursuant to this Agreement. The Shares shall be treated as having
been actually issued and transferred to the Stockholders in accordance with
the
terms of the Merger Agreement. In accordance with the provisions of Articles
II
and III hereof, Parent shall cause all dividends or distributions issued in
respect of the Shares to be paid to the Shareholders. If any shares of Parent
Common Stock are transferred to a Claiming Person in accordance with the
provisions of Article II hereof in satisfaction of a Claim or Claims, all rights
and indicia of ownership with respect to such shares (and any future dividends
or distribution with respect thereto) shall thereupon reside with such Claiming
Person or any subsequent holder thereof.
3.2 Transfer
of Shares.
The
Parent shall be solely responsible for providing, at its cost and expense,
any
certification, opinion of counsel or other instrument or document necessary
to
comply with or satisfy any transfer restrictions to which the Shares are
subject, including, without limitation, any opinion of counsel required to
be
delivered pursuant to any restrictive legend appearing on the certificate
evidencing Shares in connection with any distribution of Shares to be made
by
the Escrow Agent under or pursuant to this Agreement. Any such opinion of
counsel shall include the Escrow Agent as an addressee or shall expressly
consent to the Escrow Agent’s reliance thereon.
6
3.3 Voting
of and Other Rights with Respect to Shares.
The
Escrow Agent shall be under no duty to preserve, protect or exercise rights
in
the Shares, and shall be responsible only for taking reasonable measures to
maintain the physical safekeeping thereof, and otherwise to perform such duties
on its part as are expressly set forth in this Agreement, except that it will,
at the written request of a Stockholder given to the Escrow Agent at least
three
(3) Business Days prior to the date on which the Escrow Agent is requested
therein to take any action, deliver to such Stockholder a proxy or other
instrument in the form supplied to it by Parent for voting or otherwise
exercising any right of consent with respect to any of the Shares held by the
Escrow Agent hereunder on behalf of such Stockholder, and shall vote such Shares
in the manner instructed by such Stockholder in writing. The Escrow Agent will
not be responsible for authenticating the right of any Stockholder to exercise
voting authority in respect of Shares held by it hereunder. The Escrow Agent
shall, upon receiving proper written instructions from a Stockholder (which
instructions shall be received at least three (3) Business Days prior to the
date on which Escrow Agent is required to take any action hereunder), be
responsible for forwarding to or notifying any party or taking any other action
with respect to any reasonable notice (as specifically set forth in such written
instruction), solicitation or other document or information, received by the
Escrow Agent from an issuer or other Person with respect to Shares held by
the
Escrow Agent on behalf of such Stockholder hereunder, including, without
limitation, any proxy material, tenders, options, the pendency of calls and
maturities or the expiration of rights.
3.4 The
Stockholders.
(a) The
Stockholders represent and warrant that each has the irrevocable right, power
and authority to enter into and perform this Agreement.
(b) The
Escrow Agent and Parent may rely conclusively and act upon the directions,
instructions and notices of the Stockholders if such direction, instruction
and
notice are signed by a Stockholder entitled to a majority of the Escrow Shares
as set forth on Schedule I attached hereto.
ARTICLE
IV
TERMINATION
This
Agreement shall automatically terminate if and when the entire Escrow Fund
shall
have been completely distributed by the Escrow Agent in accordance with the
terms of this Agreement.
ARTICLE
V
THE
ESCROW AGENT
5.1 Obligations
of the Escrow Agent.
Each
party acknowledges and agrees that the Escrow Agent (i) shall not be responsible
for any of the agreements referred to or described herein (including, without
limitation, the Merger Agreement), or for determining or compelling compliance
therewith, and shall not otherwise be bound thereby, (ii) shall be obligated
only for the performance of such duties as are expressly and specifically set
forth in this Agreement on its part to be performed, each of which is
ministerial (and shall not be construed to be fiduciary) in nature, and no
implied duties or obligations of any kind shall be read into this Agreement
against or on the part of the Escrow Agent, (iii) shall not be obligated to
take
any legal or other action hereunder that might in its judgment involve or cause
it to incur any expense or liability unless it shall have been furnished with
acceptable indemnification, (iv) may rely on and shall be protected in acting
or
refraining from acting upon any written notice, instruction (including, without
limitation, wire transfer instructions, whether incorporated herein or provided
in a separate written instruction), instrument, statement, certificate, request
or other document furnished to it hereunder and believed by it to be genuine
and
to have been signed or presented by the proper Person, and shall have no
responsibility to inquire as to or to determine the genuineness, accuracy or
validity thereof, and (v) may consult counsel satisfactory to it, including
in-house counsel, and the opinion or advice of such counsel in any instance
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance
with
the opinion or advice of such counsel.
7
5.2 Limitation
of Liability.
The
Escrow Agent shall not be liable to anyone for any action taken or omitted
to be
taken by it hereunder except in the case of the Escrow Agent’s gross negligence,
bad faith or willful misconduct. In no event shall the Escrow Agent be liable
for indirect, punitive, special or consequential damage or loss (including
but
not limited to lost profits) whatsoever, even if the Escrow Agent has been
informed of the likelihood of such loss or damage and regardless of the form
of
action.
5.3 Resignation
and Removal of the Escrow Agent.
The
Escrow Agent may resign and be discharged from its duties hereunder at any
time
by giving at least thirty (30) days’ prior written notice of such resignation to
the Interested Parties specifying a date upon which such resignation shall
take
effect; provided,
however,
that
the Escrow Agent shall continue to serve as escrow agent hereunder until its
successor accepts the Escrow Fund and assumes the Escrow Agent’s obligations
under this Agreement. Upon receipt of such notice, a successor escrow agent
shall be appointed by the Interested Parties, such successor escrow agent to
become the Escrow Agent hereunder and to succeed to all of the rights and
obligations of the resigning Escrow Agent on the resignation date specified
in
such notice. If a written instrument of acceptance by a successor escrow agent
shall not have been delivered to the Escrow Agent within forty (40) days after
the giving of such notice of resignation, the resigning Escrow Agent may at
the
expense of the Interested Parties petition any court of competent jurisdiction
for the appointment of a successor escrow agent. The Interested Parties may
at
any time substitute a new escrow agent by giving ten (10) days’ prior written
notice thereof to the Escrow Agent then acting and by the Interested Parties
paying all fees and expenses of such Escrow Agent accrued as of such
date.
5.4 Self-Dealing.
The
Escrow Agent is hereby authorized, in making or disposing of any investment
permitted by this Agreement, to deal with itself (in its individual capacity)
or
with any one or more of its affiliates, whether it or such affiliate is acting
as a sub-agent of the Escrow Agent or for any third Person or dealing as
principal for its own account.
5.5 Payments.
Unless
and except to the extent otherwise expressly provided herein, all deposits
and
payments to the Escrow Agent hereunder, or pursuant to the terms hereof
(including without limitation all payments to the Escrow Agent pursuant to
Article VII), shall be in U.S. dollars.
ARTICLE
VI
INDEMNIFICATION
Except
as
otherwise provided in Article VII, and without determining or limiting any
rights as between the Interested Parties, the Parent and each of the
Stockholders (up to each Stockholder’s Pro Rata Share) covenants and agrees,
jointly and severally, to indemnify the Escrow Agent (and its directors,
officers and employees) and hold it (and such directors, officers and employees)
harmless from and against any loss, liability, damage, cost and expense of
any
nature incurred by the Escrow Agent arising out of or in connection with third
party claims relating to this Agreement, including but not limited to,
reasonable attorney’s fees and other costs and expenses of defending or
preparing to defend against any claim of liability unless and except to the
extent such loss, liability, damage, cost and expense shall be caused by the
Escrow Agent’s gross negligence, bad faith or willful misconduct. Without
altering or limiting the joint and several liability of the Parent and the
Stockholders under this Article VI, the Parent and the Stockholders as a group
shall each be responsible for one-half (1/2) of all amounts that become due
to
the Escrow Agent pursuant to this Article VI. The foregoing indemnification
obligation shall survive the termination of this Agreement and the resignation
or removal of the Escrow Agent.
ARTICLE
VII
FEES
AND EXPENSES
7.1 Customary
Fees and Expenses.
The
Parent
agrees to pay the Escrow Agent’s compensation for its normal services hereunder
in accordance the fee schedule set forth in Schedule
II
attached
hereto.
7.2 Extraordinary
Fees and Expenses. The
Parent and each of the Stockholders (up to each Stockholder’s Pro Rata Share)
agrees, jointly and severally, to reimburse the Escrow Agent on demand for
all
costs and expenses incurred in connection with the administration of this
Agreement or the escrow created hereby or the performance or observance of
its
duties hereunder which are in excess of its compensation for normal services,
including without limitation, payment of any reasonable legal fees and expenses
incurred by the Escrow Agent in connection with the resolution of any claim
made
by a party to this Agreement. Without altering or limiting the joint and several
liability of the Parent and the Stockholders under this Section 7.2, the Parent
and the Stockholders as a group shall each be responsible for one-half (1/2)
of
all amounts that become due to the Escrow Agent pursuant to this Section 7.2.
The Escrow Agent shall periodically xxxx Parent and the Stockholders for such
fees and expenses, as applicable. Notwithstanding anything herein to the
contrary, the Escrow Agent shall have and is hereby granted a possessory lien
on
and security interest in the Escrow Fund, and all proceeds thereof, to secure
payment of all amounts owing to it from time to time under this Section 7.2,
whether now existing or hereafter arising. The Escrow Agent shall have the
right
to deduct from the Escrow Fund, and proceeds thereof, any such sums, upon two
(2) Business Day’s notice to the Interested Parties of its intent to do so. If,
pursuant to the preceding sentence, the Escrow Agent deducts any sums from
the
Escrow Fund as a result of Parent’s or the Stockholders’ failure to pay or
reimburse the Escrow Agent for its fees and expenses as required by this Section
7.2, the party failing to make such payment shall indemnify the other party
for
the full amount deducted by the Escrow Agent as a result of such
failure.
8
ARTICLE
VIII
TAX
MATTERS
8.1 Obligations
of the Interested Parties.
Without
determining or limiting any rights as between the Interested Parties, each
of
the Interested Parties agrees severally, and not jointly, (i) to assume any
and
all obligations now or hereafter arising under any applicable tax law with
respect to any payment or distribution of the Escrow Fund to, or performance
of
other activities under this Agreement by, such Interested Party, (ii) to
instruct the Escrow Agent in writing with respect to the Escrow Agent’s
responsibility for withholding and other taxes, assessments or other
governmental charges, and to instruct the Escrow Agent with respect to any
certifications and governmental reporting that may be required under any laws
or
regulations that may be applicable in connection with its action as Escrow
Agent
under this Agreement, and (iii) to indemnify and hold the Escrow Agent harmless
from any liability or obligation on account of taxes, assessments, additions
for
late payment, interest, penalties, expenses and other governmental charges
that
may be assessed or asserted against the Escrow Agent in connection with or
relating to any payment made or other activities performed under the terms
of
this Agreement including, without limitation, any liability for the withholding
or deduction of (or the failure to withhold or deduct) the same, and any
liability for failure to obtain proper certifications or to report properly
to
governmental authorities in connection with this Agreement, including costs
and
expenses (including reasonable legal fees and expenses), interest and penalties,
to the extent that it relates to such individual Interested Party. The foregoing
indemnification obligation shall survive the termination of this Agreement
and
the resignation or the removal of the Escrow Agent.
8.2 Treatment
of Earnings.
The
Interested Parties agree that the Stockholders will be treated for federal,
state and local income and other tax purposes as owning the Escrow Fund
(including any distributions in respect thereof) in accordance with their
respective Pro Rata Share thereof, and agree that all earnings, if any, with
respect thereto will be reported by the Escrow Agent as earnings of the
Stockholders according to such respective interests whether or not distributed.
On or promptly after the date hereof, the Stockholders shall, on behalf of
the
Stockholders, provide the Escrow Agent with a completed IRS Form W-9 for each
Stockholder certifying thereon such Stockholder’s taxpayer identification or
social security number. The Stockholders acknowledges that withholding of a
portion of the earnings on the Escrow Fund may be required for federal, state
or
local income tax purposes in the event any Stockholder fails to certify such
party’s taxpayer identification number or social security number to the Escrow
Agent.
9
ARTICLE
IX
DISPUTES
If
any
dispute should arise with respect to the distribution or ownership or right
of
possession of all or any portion the Escrow Fund (including, without limitation,
any Contested Claim), or the duties of the Escrow Agent hereunder, or should
any
claim be made upon the Escrow Agent or the Escrow Fund by any third party,
the
Escrow Agent is authorized and shall be entitled (at its sole option and
election) to retain in its possession, without liability to anyone, all or
any
part of the Escrow Fund in dispute until such dispute shall have been settled
either by mutual agreement of the Interested Parties (evidenced by appropriate
instructions in writing to the Escrow Agent signed by the Interested Parties)
or
by the final order, decree or judgment of a court of competent jurisdiction
or
arbitral panel, with respect to any arbitrated disputes, in the United States
of
America (the time for appeal having expired with no appeal having been taken)
in
a proceeding to which the Interested Parties are parties, but the Escrow Agent
shall be under no duty whatsoever to institute or defend any such
proceedings.
ARTICLE
X
MISCELLANEOUS
10.1 Notices.
All
notices or other communications which are required or permitted hereunder shall
be in writing and sufficient if delivered personally or sent by
nationally-recognized overnight courier, or by facsimile or electronic mail
transmission with a copy thereof to be delivered by nationally-recognized
overnight courier within 24 hours of such facsimile transmission addressed as
follows:
(i)
|
if
to Parent, to:[add
email]
|
____________________________
____________________________
____________________________
Attention:
Chief Executive Officer
Phone:
(___) ___-____
Facsimile:
(___) ___-____
with
a
copy to (which copy shall not constitute notice):
Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
000
Xxxxx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxx, Esq.
Phone:
(000) 000-0000
Facsimile:
(000) 000-0000
10
(ii) |
if
to the Stockholders, to;
|
____________________________
____________________________
____________________________
with
a
copy to (which copy shall not constitute notice):
____________________________
____________________________
____________________________
(iii) |
if
to the Escrow Agent, to the address set forth on Schedule
II
hereto,
|
or
to
such other address as the party to whom notice is to be given may have furnished
to the other parties hereto in writing in accordance herewith. All
such
notices or communications shall be deemed to be delivered and received (a)
in
the case of personal delivery, on the date of such delivery, (b) in the case
of
nationally-recognized overnight courier, on the next Business Day after the
date
when sent, or (c) in the case of facsimile transmission or electronic mail
upon
confirmed receipt; provided, however, that no notice to the Escrow Agent shall
be deemed delivered until actually received by the Escrow Agent.
10.2 Counterparts.
This
Agreement may be executed in any number of counterparts by original or facsimile
signature, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
10.3 Governing
Law.
This
Agreement will be governed by and construed and enforced in accordance with
the
laws of the State of New York without giving effect to any choice of law or
conflicting provision or rule that would cause the laws of any jurisdiction
other than the State of New York to be applied.
10.4 Wiring
Instructions.
All
funds, if any, to be paid to or by the Escrow Agent shall be sent by wire
transfer in accordance with the instructions provided on Schedule
II
hereto,
or by such other method of payment and in accordance with such instructions
as
may be given in advance and in writing to the Escrow Agent or the Interested
Parties by notice in compliance with Section 10.1 of this Agreement. The parties
acknowledge that the Stockholders may request that all or any part of any
payment required to be delivered to the Stockholders pursuant to this Agreement
may, at the request of the Stockholders, be wired directly to the Stockholders
pursuant to wire transfer instructions provided by the Stockholders to the
Escrow Agent at least two (2) Business Days prior to the date on which such
payment is due, provided that, the Escrow Agent shall be entitled to rely
exclusively on any such instructions received from the Stockholders without
liability to the Escrow Agent or any other Interested Parties.
10.5 Parties
in Interest.
This
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by,
the parties hereto and their respective successors and assigns. Anything
contained herein to the contrary notwithstanding, this Agreement shall not
be
assigned by any party without the consent of the other parties hereto;
provided,
however,
that
if
the
Escrow Agent consolidates, mergers or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation,
the
successor corporation without any further act shall be the successor Escrow
Agent.
11
10.6 Amendments.
This
Agreement may be amended only by a written instrument duly executed by the
parties hereto. No course of conduct shall constitute a waiver of any of the
terms and conditions of this Agreement, unless such waiver is specified in
a
writing signed by the party against whom enforcement of any waiver is sought,
and then only to the extent so specified. A waiver of any of the terms and
conditions of this Agreement on one occasion shall not constitute a waiver
of
the other terms of this Agreement, or of such terms and conditions on any other
occasion.
10.7 Headings.
The
section and paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
10.8 Entire
Agreement.
This
Agreement and, with respect to the Interested Parties only, the Merger Agreement
and the documents delivered in connection therewith, contain the entire
agreement among the parties hereto with respect to the transactions contemplated
hereby and supersede all prior agreements or understandings, written or oral,
among the parties identified above with respect thereto; provided,
however,
that
anything contained herein to the contrary notwithstanding, the parties hereto
agree that the Escrow Agent shall perform its obligations under this Agreement
solely by reference to this Agreement.
10.9 Force
Majeure.
The
Escrow Agent shall not be responsible for delays or failures in performing
its
duties resulting from acts beyond its control such as, but not limited to,
acts
of God, strikes, lockouts, riots, acts of war, epidemics, acts of terrorism,
governmental regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other
disasters.
10.10 Severability.
If any
provision of this Agreement, including any phrase, sentence, clause, section
or
subsection is inoperative or unenforceable for any reason, such circumstances
shall not have the effect of rendering the provision in question inoperative
or
unenforceable in any other case or circumstance, or of rendering any other
provision or provisions herein contained invalid, inoperative, or unenforceable
to any extent whatsoever.
10.11 Waiver
of Jury Trial.
THE
ESCROW AGENT AND THE INTERESTED PARTIES HEREBY WAIVE A TRIAL BY JURY OF ANY
AND
ALL ISSUES ARISING IN ANY ACTION OR PROCEEDING BETWEEN THEM OR THEIR SUCCESSORS
OR ASSIGNS, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF ITS PROVISIONS
OR ANY NEGOTIATIONS IN CONNECTION HEREWITH.
[Remainder
of Page Intentionally Left Blank]
12
IN
WITNESS WHEREOF,
the
parties hereto have caused this Escrow Agreement to be executed and delivered
on
the date first above written.
PARENT:
By:
Name:
Title:
THE
STOCKHOLDERS:
F.
Xxxx Xxxxx Irrevocable Trust under Agreement dated August 31,
2004
By: F.
Xxxx Xxxxx, as TrusteeXxxxx
Xxxxxxx
THE
ESCROW AGENT:
CONTINENTAL
STOCK TRANSFER AND TRUST COMPANY
By:
Name:
Title:
|
[Signature
Page to Escrow Agreement]
Schedule
I
Stockholders
Stockholder
(including
address and taxpayer or social security number)
|
Pro
Rata Share
|
F.
Xxxx Xxxxx Irrevocable Trust under Agreement dated August 31,
2004
|
|
Xxxxx
Xxxxxxx
|
|
Schedule
II
Information
Concerning The Escrow Agent