EXHIBIT 99.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is entered into as of June 6,
2006, by and among Aether Holdings, Inc., a Delaware corporation (the
"Purchaser"), Xxxxxx X. X'Xxxxx, an individual resident in the state of New York
(solely in his capacity as the Securityholders' Representative pursuant to the
Merger Agreement (as defined below), the "Securityholders' Representative") and
Wilmington Trust Company, as escrow agent hereunder (the "Escrow Agent").
Capitalized terms used but not defined herein shall have the respective meanings
assigned to them in the Merger Agreement (as defined below). The Escrow Agent,
the Purchaser and the Securityholders' Representative are sometimes collectively
referred to herein as the "Parties" and individually as a "Party."
RECITALS
WHEREAS, pursuant to that certain Agreement and Plan of Merger (as amended
or otherwise modified from time to time, the "Merger Agreement") dated as of
June 6, 2006, by and among UCC Capital Corp., a New York corporation ("UCC
Capital"), UCC Consulting Corp., a New York corporation ("UCC Consulting"), UCC
Servicing, LLC, a New York limited liability company ("UCC Servicing," and
together with UCC Consulting and UCC Capital, the "Company"), AHINV Acquisition
Corp., a Delaware corporation ("AHI"), the Purchaser, the Securityholders'
Representative and each of the Securityholders (as defined therein), each
Company has agreed to merge with and into AHI;
WHEREAS, in order to fully and exclusively secure the indemnity
obligations of the Securityholders under Article IX of the Merger Agreement
(except as otherwise specifically set forth in such Article IX), the parties to
the Merger Agreement have agreed, pursuant to Section 2.3(d)(ii) of the Merger
Agreement, that the Purchaser shall, at the Closing, cause to be deposited with
the Escrow Agent 600,000 shares of common stock of the Purchaser (the "Indemnity
Escrow Shares") issued in the names of the Securityholders to be held in escrow
and disbursed therefrom pursuant to the terms and conditions set forth in this
Agreement; and
WHEREAS, in order to secure the certain of payment obligations of the
Purchaser under Section 2.15 of the Merger Agreement, the parties to the Merger
Agreement have agreed that the Purchaser shall, at the Closing, also cause to be
deposited with the Escrow Agent 900,000 shares of common stock of the Purchaser
(the "First Tranche Shares") issued in the names of the Securityholders to be
held in escrow and disbursed therefrom pursuant to Section 4 of this Agreement;
and
WHEREAS, the parties hereto agree and acknowledge that under no
circumstances are the First Tranche Shares to be utilized as collateral with
respect to any claim of indemnification under Article IX of the Merger
Agreement, except as permitted by the last sentence of Section 9.4(a) of the
Merger Agreement.
NOW, THEREFORE, in consideration of these premises and the mutual
obligations and covenants set forth herein and other good and valuable
consideration, the receipt and sufficiency whereof is hereby acknowledged, the
Parties agree as follows:
1. APPOINTMENT OF ESCROW AGENT; RECEIPT OF INITIAL ESCROW SHARES AND FIRST
TRANCHE SHARES.
(a) The Purchaser and the Securityholders hereby appoint the Escrow Agent
as their escrow agent for the purposes set forth herein, and the Escrow Agent
hereby accepts such appointment under the terms and conditions set forth herein.
(b) Following the execution of this Agreement, the Purchaser will deposit
with the Escrow Agent the Indemnity Escrow Shares and the First Tranche Shares.
Upon receipt by the Escrow Agent of the Indemnity Escrow Shares and the First
Tranche Shares, the Escrow Agent agrees to hold such Indemnity Escrow Shares
(including any securities into which such Indemnity Escrow Shares may be
reclassified or converted) (collectively, the "Aggregate Indemnity Escrow
Shares") and such First Tranche Shares (including any securities into which such
First Tranche Shares may be reclassified or converted) (collectively, the
"Aggregate First Tranche Shares") in a separate and distinct account (the
"Escrow Account"), subject to the terms and conditions of this Agreement. The
Escrow Agent shall not distribute or release the Aggregate Indemnity Escrow
Shares or Aggregate First Tranche Shares, except in accordance with the express
terms and conditions of this Agreement. In addition, the Escrow Agent holds (i)
the stock transfer powers (each a "Securityholder Stock Power" and collectively
the "Securityholder Stock Powers" or "Stock Powers"), of which each
Securityholder has executed ten in blank and delivered to the Escrow Agent in
connection with the execution of this Agreement, authorizing the Escrow Agent to
assign, transfer and deliver the Aggregate Indemnity Escrow Shares held in the
Escrow Account to the Purchaser in accordance with the terms herein, authorizing
the Escrow Agent to assign, transfer and deliver the Aggregate First Tranche
Shares held in the Escrow Account to, but only to, the Securityholders'
Representative in accordance with the terms herein.
(c) Each Securityholder shall be deemed to have contributed a portion of
the Aggregate Indemnity Escrow Shares equal to the number of Indemnity Escrow
Shares multiplied by such Securityholder's Pro Rata Share set forth on Exhibit A
attached hereto (such amount for each Securityholder, the "Escrow
Contribution"). The Escrow Agent shall maintain a record of each
Securityholder's Securityholder Escrow Account Balance (as defined in Section
1(d) below). Subject to the limitations set forth in Article IX of the Merger
Agreement, (i) each payment by the Escrow Agent in respect of a Draw-Down
Request (as defined below) in accordance with Section 3 of this Agreement that
relates to an Indemnification Claim (as defined below) pursuant to Section
9.2(a) of the Merger Agreement shall be allocated one hundred percent (100%) to
the Securityholder against whom the breach is asserted and (ii) each payment by
the Escrow Agent in respect of a Draw-Down Request in accordance with Section 3
of this Agreement that relates to an Indemnification Claim pursuant to Section
9.2(b) of the Merger Agreement shall be allocated to each of the Securityholders
in accordance with each Securityholder's Pro Rata Share set forth on Exhibit A.
For purposes of determining the number of Aggregate Indemnity Escrow Shares to
be released pursuant to any claim for indemnification pursuant to Article IX of
the Merger Agreement (an "Indemnification Claim"), each Aggregate Indemnity
Escrow Share shall be valued at the average closing price per share of such
Aggegate Indemnity Escrow Share on the Nasdaq National Market or such other
market upon which it shall then be traded for the five (5) trading days
immediately preceding the actual date upon which such Aggregate Indemnity Escrow
Shares shall be released to satisfy such indemnification obligation (the "Deemed
Value").
(d) As used herein, "Securityholder Escrow Account Balance" means, as of
any time and for any Securityholder, such number of Aggregate Indemnity Escrow
Shares as is equal to such Securityholder's Escrow Contribution minus, unless a
Draw-Down request is satisfied in accordance with the Cash Payment Option
described in Section 3(e), the number of Aggregate Indemnity Escrow Shares
allocated to such Securityholder at or before such time pursuant to Section 1(c)
of this Agreement.
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2. ESCROW SHARES.
(a) Voting. Until a Draw-Down Request (as defined in Section 3(a)(i)) is
delivered, each of the Securityholders shall have the right to exercise any
voting or consent rights pertaining to the Aggregate Indemnity Escrow Shares
deposited by such Securityholder and held in the Escrow Account. In addition,
each of the Securityholders shall have the right to exercise any voting or
consent rights pertaining to the Aggregate First Tranche Shares at all times
prior to their release in accordance with Section 2.15 of the Merger Agreement
and Section 4 hereof. The Escrow Agent shall not have any right to exercise any
such voting or consent rights with respect to the Aggregate Indemnity Escrow
Shares or the Aggregate First Tranche Shares. Pursuant to a voting agreement
entered into as of the date hereof between the Securityholders and Purchaser,
Xxxxx Xxxx (or another individual selected by the Purchaser's Board of
Directors) shall have the right to vote the Aggregate First Tranche Shares so
long as such shares are held by the Escrow Agent pursuant to the terms of this
Agreement.
(b) Dividends. If and to the extent that during such time as the Aggregate
Indemnity Escrow Shares or the Aggregate First Tranche Shares are held in the
Escrow Account pursuant to the terms of this Agreement Purchaser shall declare
and distribute dividends with respect to the shares of its common stock, the
Purchaser shall deposit in the Escrow Account the amount of such dividends
allocable to such Aggregate Indemnity Escrow Shares or Aggregate First Tranche
Shares, as applicable. Any dividends so deposited in the Escrow Account,
together with any interest earned thereon, with respect to the Aggregate
Indemnity Escrow Shares shall first be released from the Escrow Account and
applied to satisfy any indemnification obligations of a Securityholder, pursuant
to Article IX of the Merger Agreement and Section 3 of this Agreement, with any
balance of any such indemnification obligations next being satisfied in
accordance with Section 3 hereof either through the release to the Purchaser
Indemnified Person of the Securityholder's Pro Rata Share of Aggregate Indemnity
Shares or the exercise of his Cash Payment Option. If and to the extent that a
Securityholder's Pro Rata Share of any such dividends so deposited in the Escrow
Account with respect to the Aggregate Indemnity Escrow Shares, together with any
interest earned thereon, exceeds the amount of such Securityholder's
indemnification obligations under Article IX of the Merger Agreement and Section
3 hereof, the Securityholder's Pro Rata Share (as determined under Exhibit A) of
any such dividends and interest earned thereon shall be released and distributed
from the Escrow Account to such Securityholder at such time as his Pro Rata
Share of the Aggregate Indemnity Escrow Shares would be fully released to him
under Section 3 hereof. Any dividends so deposited in the Escrow Account,
together with any interest thereon, with respect to the Aggregate First Tranche
Shares shall be released and distributed either to the Securityholders or
Purchaser (as the case may be) at such time as the Aggregate First Tranche
Shares are to be distributed and released in accordance with Section 4(a) or
Section 4(b) hereof, respectively. If and to the extent that dividends are
declared and deposited by Purchaser in the Escrow Account in accordance with the
provisions of this Section 2(b), the Securityholders shall include their Pro
Rata Share of such dividends in income for federal, state and local income tax
purposes, provided that either Purchaser or Escrow Agent timely provide such
Securityholders with copies of Internal Revenue Service ("IRS") Forms 1099 on
which is reported their allocable share of such dividend income. In addition,
such Securityholders shall include in income for federal, state and local income
tax purposes any interest earned on such dividends while held in the Escrow
Account, provided that the Escrow Agent shall timely provide such
Securityholders with IRS Forms 1099, on which is reported their allocable share
of any such interest income.
(c) Transferability. Except as contemplated herein, no Securityholder may
sell, transfer, assign, pledge or otherwise dispose of (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
any interest in the Aggregate Indemnity Escrow Shares or Aggregate First Tranche
Shares at any time that such Aggregate Indemnity Escrow Shares or Aggregate
First Tranche Shares are held in escrow pursuant to this Agreement.
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(d) New Certificates. If under any circumstance hereunder fewer than the
total number of the Aggregate Indemnity Escrow Shares or Aggregate First Tranche
Shares (as the case may be) represented by any certificate (or certificates)
representing the Aggregate Indemnity Escrow Shares or the Aggregate First
Tranche Shares are to be distributed to the Purchaser or the Securityholders'
Representative hereunder, the Purchaser shall deliver to the Escrow Agent a new
certificate (or certificates) representing the number of the Aggregate Indemnity
Escrow Shares or Aggregate First Tranche Shares not so distributed within five
(5) business days after the Escrow Agent's surrender of the certificate (or
certificates) representing the distributed Aggregate Indemnity Escrow Shares or
the Aggregate First Tranche Shares.
(e) Escrow Agent Obligations. Except as otherwise provided in Section 2(b)
hereof, the Escrow Agent's sole obligation with respect to any distribution of
the Aggregate Indemnity Escrow Shares to the Purchaser and with respect to any
distribution of the Aggregate First Tranche Shares to the Securityholders'
Representative shall be to (i) deliver the certificate (or certificates)
representing such Aggregate Indemnity Escrow Shares or Aggregate First Tranche
Shares, as applicable, and any related Stock Powers to the Purchaser or its
designated stock transfer agent with appropriate instructions to issue a new
certificate (or certificates) in the name of the Party or Parties entitled to
such Aggregate Indemnity Escrow Shares or Aggregate First Tranche Shares along
with proper delivery instructions and (ii) instruct the Purchaser or its
designated stock transfer agent to issue a new certificate (or certificates) to
be returned to the Escrow Agent for any undistributed Aggregate Indemnity Escrow
Shares or Aggregate First Tranche Shares (as the case may be). The Escrow Agent
shall have no liability whatsoever for any error, mistake, delay or failure to
act by the Purchaser or its designated stock transfer agent, including without
limitation any error, mistake, delay or failure in the delivery of the Aggregate
Indemnity Escrow Shares or the Aggregate First Tranche Shares.
3. RELEASE OF AGGREGATE INDEMNITY ESCROW SHARES. Subject to the terms of
the Merger Agreement, the Aggregate Indemnity Escrow Shares are intended to
provide the sole and exclusive source of collateral for the payment of any
amounts which may become payable in respect of the liabilities of the
Securityholders as determined pursuant to Article IX of the Merger Agreement
(other than with respect to indemnified claims that, pursuant to Article IX of
the Merger Agreement, are expressly not limited to payment from the Aggregate
Indemnity Escrow Shares). The Aggregate Indemnity Escrow Shares shall only be
distributed and released as follows:
(a) INDEMNIFICATION CLAIMS.
(i) Indemnification Claims shall be asserted and resolved as set forth in
the Merger Agreement. Subject to the terms of this Section 3(a), on each
occasion on which a Purchaser Indemnified Person makes an Indemnification Claim
under the Merger Agreement, the Purchaser shall deliver to the Securityholders'
Representative and Escrow Agent a written notice setting forth the nature of
such Indemnification Claim and the amount of such claim (a "Draw-Down Request").
For the convenience of the Escrow Agent, Article IX of the Merger Agreement is
restated in its entirety as Exhibit B attached hereto. The Escrow Agent shall
notify the Securityholders' Representative promptly upon receiving any Draw-Down
Request. Notwithstanding anything contained in this Agreement to the contrary,
the Purchaser agrees that the Purchaser Indemnified Persons shall only be
entitled to receive payments out of the Escrow Account with respect to a
particular Securityholder's obligations under Section 9.2(a) or Section 9.2(b)
of the Merger Agreement if and to the extent that such Securityholder has a
positive Securityholder Escrow Account Balance (which Securityholder Escrow
Account Balance shall consist only of a Securityholder's Pro Rata Share of the
Aggregate Indemnity Escrow Shares, as determined in accordance with Sections
1(c) and (d) hereof, and shall not include any of his Pro Rata Share of the
Aggregate First Tranche Shares to which he may be entitled) and then only to the
extent permitted by the limitations set forth in Article IX of the Merger
Agreement (the "Payment Limitations").
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(ii) Except as provided in clause (iii) below, within five (5) days after
receipt by the Securityholders' Representative and the Escrow Agent of a
Draw-Down Request, the Securityholders' Representative may deliver to the
Purchaser and the Escrow Agent a written objection to all or any part
(including, but not limited to, by reason of a claim made in excess of the
Securityholder Escrow Account Balance for any Securityholder or contrary to the
terms of Article IX of the Merger Agreement) of the Draw-Down Request (an
"Objection").
(iii) If, in connection with a Draw-Down Request for indemnification under
Section 9.2(a) or Section 9.2(b) of the Merger Agreement, the Securityholders'
Representative fails to deliver an Objection by the end of the fifth (5th) day
following the receipt by the Securityholders' Representative of such Draw-Down
Request, the Escrow Agent shall deliver to the applicable Purchaser Indemnified
Person out of the Escrow Account such number of Aggregate Indemnity Escrow
Shares as have an aggregate Deemed Value equal to the amount requested in the
Draw-Down Request (subject to the respective Payment Limitations applicable with
respect to each Securityholder). Any such delivery shall be made on or before
the third (3rd) day following the expiration of such five (5) day period. The
Escrow Agent shall continue to hold any Aggregate Indemnity Escrow Shares
remaining in the Escrow Account following the payment of any Draw-Down Request
in accordance with the terms of this Agreement.
(iv) If the Securityholders' Representative delivers a timely Objection
with respect to all or any portion of a Draw-Down Request, the Escrow Agent
shall not disburse, and shall continue to hold in the Escrow Account, the amount
requested in the Draw-Down Request or the disputed portion thereof, as the case
may be, pending receipt of either (A) written payment instructions signed by the
Purchaser and the Securityholders' Representative specifying the agreement of
the parties as to the action to be taken by the Escrow Agent in respect of such
Draw-Down Request (the "Payment Instructions") or (B) a notice from the
Purchaser and the Securityholders' Representative stating that such Draw-Down
Request has been submitted to a court of competent jurisdiction for judgment and
that a judgment with respect to such matters has been rendered (a "Judgment
Notice") which is accompanied by a copy of a final, non-appealable order of such
court (an "Order"), pursuant to which such court has determined whether and to
what extent the Purchaser Indemnified Person is entitled to the amount requested
in the Draw Down Request. Upon receipt of Payment Instructions or a Judgment
Notice, as applicable, the Escrow Agent shall thereafter act in accordance with
Section 3(a)(v) or Section 3(a)(vi) below, as applicable.
(v) Upon receipt by the Escrow Agent of Payment Instructions, if such
Payment Instructions indicate that the Purchaser Indemnified Person is entitled
to payment in respect of all or any portion of the applicable Draw-Down Request,
then the Escrow Agent shall release from the Escrow Account and deliver to such
Purchaser Indemnified Person the number of such Aggregate Indemnity Escrow
Shares as have a Deemed Value as are indicated by such Payment Instructions
(subject to the respective Payment Limitations applicable with respect to each
Securityholder). Such delivery shall be made on or before the fifth (5th) day
following the date on which such Payment Instructions are received by the Escrow
Agent. If such Payment Instructions indicate that the Purchaser Indemnified
Person is not entitled to all or any portion of the Aggregate Indemnity Escrow
Shares claimed in such Draw-Down Request (a "Discharge Notice"), then the Escrow
Agent shall (A) deliver to the Purchaser Indemnified Person that portion, if
any, of the Aggregate Indemnity Escrow Shares claimed in the Draw-Down Request
to which such Purchaser Indemnified Person is entitled, and (B) continue to hold
the remaining amount of such Aggregate Indemnity Shares in the Escrow Account in
accordance with the terms of this Agreement until such Aggregate Indemnity
Escrow Shares are to be delivered in accordance with the terms hereof.
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(vi) If the Escrow Agent has received a Judgment Notice and an Order with
respect to any particular Draw-Down Request, then the Escrow Agent shall release
from the Escrow Account and deliver to the applicable Purchaser Indemnified
Person(s) such number of Escrow Shares as have an aggregate Deemed Value equal
to the amount due such Purchaser Indemnified Person(s), as indicated in such
Order (subject to the respective Payment Limitations applicable with respect to
each Securityholder). Such delivery will be made on or before the fifth (5th)
day following the date on which the Escrow Agent received such Order. If such
Order indicates that the applicable Purchaser Indemnified Person(s) is not
entitled to all or any portion of the Aggregate Indemnity Escrow Shares claimed
in the Draw-Down Request (a "Determination Discharge"), then the Escrow Agent
shall continue to hold the amount of such Aggregate Indemnity Escrow Shares to
which such Purchaser Indemnified Person(s) was determined not to be entitled in
accordance with the terms of this Agreement until such Aggregate Indemnity
Escrow Shares are to be delivered in accordance with the terms hereof.
(b) RELEASE OF REMAINING AGGREGATE INDEMNITY ESCROW SHARES. On the date
that is 12 months and one day after the Closing Date (or if such date is not a
Business Day, the immediately following Business Day)(the "Release Date"),
subject to the provisions of the following sentence, the Escrow Agent shall
promptly deliver to the Securityholders, as instructed in writing by the
Securityholders' Representative, the Aggregate Indemnity Escrow Shares remaining
in the Escrow Account on the Release Date (the "Disbursement Amount"); provided,
however, that if the Escrow Agent shall have received on or before the Release
Date one or more Draw-Down Requests which have not been paid in accordance with
Section 3(a) as of the Release Date and as to which, on the Release Date, the
Escrow Agent has not received and fully acted upon Payment Instructions or an
Order, nor received a Discharge Notice or a Determination Discharge (any such
Draw-Down Request being referred to as an "Outstanding Claim") (it being agreed
that to the extent that the precise amount of Damages with respect to any
Outstanding Claim is not known prior to the Release Date, the Purchaser shall
have the right to send the Securityholders' Representative and the Escrow Agent
on or before the Release Date a (or an updated) Draw-Down Request with respect
to each Outstanding Claim that provides such Parties notice of such Purchaser
Indemnified Person's good faith estimate of the maximum amount of Damages
resulting from such Outstanding Claim) the Escrow Agent shall retain and
continue to hold in accordance with the terms hereof such number of Aggregate
Indemnity Escrow Shares as have an aggregate Deemed Value equal to the amount
requested in all such Outstanding Claims up to a maximum of the amount of the
Securityholder Escrow Account Balance of each Securityholder that is potentially
liable (based on the most recent Draw-Down Request for each Outstanding Claim)
with respect to an Outstanding Claim (the "Retained Amount") but shall deliver
to the Securityholders as instructed by the Securityholders' Representative such
number of Aggregate Indemnity Escrow Shares as have an aggregate Deemed Value
equal to the excess, if any, of the Disbursement Amount less the Retained
Amount; and thereafter the Escrow Agent shall release from the Escrow Account
all or portions of the Retained Amount as and when it receives Payment
Instructions, Orders, Discharge Notices or Determination Discharges, as
applicable, related to the Outstanding Claims. Following the Release Date, in
the event that the Retained Amount at any time exceeds the maximum amount (based
on the most recent Draw-Down Request for each Outstanding Claim) of all
Outstanding Claims, the Escrow Agent shall deliver according to instructions of
the Securityholders' Representative, within five (5) days of the
Securityholders' Representative's written request for such delivery, such number
of Aggregate Indemnity Escrow Shares as have an aggregate Deemed Value equal to
such excess.
(c) JOINT WRITTEN INSTRUCTIONS. Notwithstanding the foregoing, if at any
time the Escrow Agent shall receive joint written instructions executed by the
Securityholders' Representative and the Purchaser ("Joint Written
Instructions"), to release all or any portion of the Aggregate Indemnity Escrow
Shares, then within five (5) business days after receipt of such Joint Written
Instructions, the Escrow Agent shall release the Aggregate Indemnity Escrow
Shares in accordance with such Joint Written Instructions. The Securityholders'
Representative and the Purchaser will cooperate in good faith in executing such
Joint Written Instructions wherever reasonably necessary to ensure distributions
of Aggregate Indemnity Escrow Shares to the Party entitled thereto under the
terms of the Merger Agreement.
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(d) WRITTEN STATEMENTS. As promptly as practicable following the delivery
of any Aggregate Indemnity Escrow Shares from the Escrow Account, the Escrow
Agent shall send a written statement to each of the Securityholders'
Representative and the Purchaser stating the number of Aggregate Indemnity
Escrow Shares so delivered and the amounts of the Aggregate Indemnity Escow
Shares remaining in the Escrow Account as of such date.
(e) CASH PAYMENT OPTION.
(i) Any Securityholder may, in lieu of having his or its Aggregate
Indemnity Escrow Shares surrendered pursuant to this Section 3, elect to pay the
aggregate Deemed Value of such Aggregate Indemnity Escrow Shares in cash to the
Purchaser (the "Cash Payment Option"). To exercise his or its Cash Payment
Option, a Securityholder must provide, within five (5) days of either (x) the
Securityholders' Representative's receipt of a Draw Down Request or (y) in the
event the Securityholders' Representative timely delivers an Objection, the
resolution of such dispute by either the mutual agreement of the Purchaser and
Securityholders' Representative or a final decision of a court of competent
jurisdiction directing the release to the Purchaser of the Aggregate Indemnity
Escrow Shares that are the subject of the Objection:
(1) to the Purchaser, cash payment in full or partial satisfaction of such
Securityholder's Optional Cash Payment (as defined below); and
(2) to the Escrow Agent, proof of such payment (with a copy to the
Purchaser) along with written notice of such Securityholder's election to
exercise his or its Cash Payment Option and specifying the portion of such
Securityholder's obligations being paid in cash and the portion to be satisfied
by release of his Pro Rata Share of the Aggregate Indemnity Escrow Shares.
(ii) With respect to each Securityholder that has effectively exercised
his or its Cash Payment Option, the Escrow Agent shall, in lieu of payment to
the Purchaser of the Aggregate Indemnity Escrow Shares as otherwise provided
herein, promptly release to such Securityholder Aggregate Indemnity Escrow
Shares with an aggregate Deemed Value equal to the amount that would have been
calculated with respect to such Securityholder with respect to such Draw Down
Request pursuant to Section 1(c) had such Securityholder not exercised its Cash
Payment Option (such amount, the "Optional Cash Payment") and, in the case of a
partial Cash Payment Option, shall release to Purchaser the balance of Aggregate
Indemnity Escrow Shares necessary to satisfy the Draw Down Request.
4. FIRST EARNOUT TRANCHE. Subject to the terms of the Merger Agreement,
the Aggregate First Tranche Shares are intended solely to provide a source of
equity for the payment of the First Earn-out Tranche which may become payable by
the Purchaser pursuant to Section 2.15(c)(i) of the Merger Agreement (and taking
into account Section 2.15(c)(iv) of the Merger Agreement). The Aggregate First
Tranche Shares shall only be distributed and released as provided in this
Section 4.
(a) In the event that the Securityholders are entitled to payment of the
First Earn-out Tranche pursuant to Section 2.15(c)(i) of the Merger Agreement
(and taking into account Section 2.15(c)(iv) of the Merger Agreement), then
within 5 days of the Purchaser's delivery of the Adjusted EBITDA Statement to
the Securityholders' Representative, the Purchaser and the Securityholders'
Representative shall cause to be delivered to the Escrow Agent written payment
instructions signed by the Purchaser and the Securityholders' Representative
(the "First Tranche Notice") specifying that the Aggregate First Tranche Shares
are to be distributed to the Securityholders as specified by the
Securityholders' Representative in the First Tranche Notice.
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(b) On the date that is one day after the expiration of the Earn-out
Period (or if such date is not a Business Day, the immediately following
Business Day), and if the criteria set forth in Section 2.15(c)(iv) of the
Merger Agreement were not satisfied during the Earn-out Period (the "First
Tranche Release Date") the Escrow Agent shall promptly deliver to the Purchaser,
as instructed in writing by the Purchaser, the Aggregate First Tranche Shares
remaining in the Escrow Account on the First Tranche Release Date.
5. CONDITIONS TO ESCROW. The Escrow Agent agrees to hold the Aggregate
Indemnity Escrow Shares and Aggregate First Tranche Shares and to perform its
responsibilties in accordance with the terms and provisions of this Agreement.
The Parties agree that the Escrow Agent shall not assume any responsibility for
the failure of either of the Purchaser, the Securityholders or the
Securityholders' Representative to perform in accordance with the Merger
Agreement or this Agreement. The acceptance by the Escrow Agent of its
responsibilities hereunder is subject to the following terms and conditions
which the Parties hereto agree shall govern and control with respect to the
Escrow Agent's rights, duties and liabilities hereunder:
(a) DOCUMENTS. The Escrow Agent shall be fully protected and shall incur
no liability (other than as a result of the Escrow Agent's gross negligence or
willful misconduct), in relying upon and acting upon any written certification,
notice, instruction, direction, request, waiver, consent, receipt,
communication, paper or other document that the Escrow Agent in good faith
believes to be genuine and duly executed and delivered, and shall have no duty
to inquire into or investigate the validity or accuracy of any thereof.
(b) LIABILITY. The Escrow Agent shall not be liable for anything which it
may do or refrain from doing in connection herewith, except for its own gross
negligence, bad faith or willful misconduct. In the event that the Escrow Agent
shall in any instance, after seeking the advice of legal counsel pursuant to
paragraph (c) of this Section 5, in good faith be uncertain as to its duties or
rights hereunder or reasonably believe any ambiguity or uncertainty exists
hereunder or in any notice, instruction, direction, request or other
communication, paper or document received by the Escrow Agent hereunder, it
shall be entitled to refrain from taking any action to which such ambiguity or
uncertainty relates and shall be fully protected and shall not be liable in any
way to the Purchaser, the Securityholders, the Securityholders' Representative
or any other Person for refraining from taking such action, and its sole
obligation, in addition to those of its duties hereunder as to which there is no
such ambiguity or uncertainty and which are not impacted by such ambiguity or
uncertainty, shall be to keep safe all property held in the Escrow Account until
it shall be directed otherwise in writing by the Purchaser and the
Securityholders' Representative or by a final, nonappealable order of a court of
competent jurisdiction; provided, however, in the event that the Escrow Agent
has not received such written direction or court order within 180 days after
requesting the same, it shall have the right to interplead the Purchaser and the
Securityholders' Representative in any court of competent jurisdiction and
request that such court determine its rights and duties hereunder.
(c) LEGAL COUNSEL. The Escrow Agent may seek the advice of legal counsel
selected with reasonable care, including in the event of any conflicting or
inconsistent claims or demands being made in connection with the subject matter
of this Agreement or any dispute or question as to the construction of any of
the provisions of this Agreement or its duties hereunder, and it shall incur no
liability and shall be fully protected in respect of any action taken, omitted
or suffered by it in good faith in accordance with the written advice of such
counsel.
8
(d) LIMITATION OF DUTIES. The Escrow Agent shall have no duties except
those which are expressly set forth herein and it shall not be bound by any
agreement of any other Party (whether or not it has any knowledge thereof). IN
NO EVENT SHALL THE ESCROW AGENT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY
SPECIAL, INDIRECT OR CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND WHATSOEVER
(INCLUDING BUT NOT LIMITED TO LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM
OF ACTION.
(e) RESIGNATION OR TERMINATION OF ESCROW AGENT. The Escrow Agent shall
have the right to resign at any time by delivering not less than thirty (30)
days' advance written notice of such resignation to the Purchaser, the
Securityholders' Representative and the Purchaser and the Securityholders'
Representative shall have the right to terminate the services of the Escrow
Agent hereunder at any time by delivering not less than thirty (30) days'
advance written notice (with such written notice being signed by the Purchaser
and the Securityholders' Representative) of such termination to the Escrow
Agent, in each case specifying the effective date of such resignation or
termination. Within thirty (30) days after receiving or delivering the aforesaid
notice, as the case may be, the Purchaser and the Securityholders'
Representative shall agree to jointly appoint a successor escrow agent
hereunder. The Escrow Agent's resignation shall not be effective until (i) such
appointment has been made, (ii) the Aggregate Indemnity Escrow Shares and
Aggregate First Tranche Shares have been delivered to the successor escrow
agent, and (iii) the successor's acceptance of this Agreement and receipt of the
Aggregate Indemnity Escrow Shares and Aggregate First Tranche Shares from the
successor escrow agent and copies thereof shall have been sent to the Purchaser
and the Securityholders' Representative. The Escrow Agent may petition a court
of competent jurisdiction for the appointment of a successor escrow agent if one
is not designated by the Purchaser and the Securityholders' Representative
within sixty (60) days of receipt of such resignation from the Escrow Agent.
(f) DISCHARGE OF ESCROW AGENT. Upon the latter of the delivery of (i) all
of the Aggregate Indemnity Escrow Shares pursuant to the terms of Section 3
above or to a successor escrow agent and (ii) all of the Aggregate First Tranche
Shares pursuant to the Terms of Section 4 above or to a successor escrow agent,
the Escrow Agent shall thereafter be discharged from any further obligations
hereunder. The Escrow Agent is hereby authorized, in any and all events, to
comply with and obey any and all final judgments, orders and decrees of any
court of competent jurisdiction which may be filed, entered or issued, and all
final arbitration awards and, if it shall so comply or obey, it shall not be
liable to any other Person by reason of such compliance or obedience.
6. INDEMNIFICATION AND FEES OF THE ESCROW AGENT. In consideration of its
acceptance of the appointment as Escrow Agent, the Purchaser, on the one hand,
and the Securityholders, on the other hand, each agree to indemnify and hold the
Escrow Agent harmless as to fifty percent (50%) (for an aggregate of one hundred
percent (100%)) of any loss, liability, cost or expense incurred without gross
negligence, bad faith or willful misconduct by the Escrow Agent to any Person by
reason of its having accepted the same or in carrying out any of the terms
hereof. The Purchaser, on the one hand, and the Securityholders, on the other
hand, each agree to reimburse the Escrow Agent on request for fifty percent
(50%) (for an aggregate of one hundred percent (100%)) of its reasonable
attorneys' fees and for other reasonable costs and expenses incurred by it in
connection with carrying out its duties hereunder, including such amounts as set
forth on the Escrow Agent Schedule of Fees. In consideration of the Escrow
Agent's duties hereunder, the Escrow Agent shall be entitled to a fee in an
amount set forth on Schedule I (the "Escrow Fee"), with such fee payable by the
Purchaser. Any amounts payable by the Securityholders under this Section 5
(including any indemnification obligations, the Escrow Fee and any other fees or
expenses) shall be payable directly by the Securityholders' Representative, on
behalf of the Securityholders. Notwithstanding anything to the contrary
contained herein, with respect to any amounts payable by the Securityholders
hereunder (including any indemnification obligations, the Escrow Fee or any
other fees or expenses), the Securityholder's Representative shall be
responsible for any such amounts.
9
7. NOTICES. All notices and other communications hereunder will be in
writing. Any notice or other communication hereunder shall be deemed duly given
if (and then two business days after) it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Securityholders' Representative:
x/x XXX Xxxxxxx Xxxx.
0000 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. X'Xxxxx
Fax: 000-000-0000
with a copy to (which shall not constitute notice):
Xxxxxxx Krooks LLP
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx X. Xxxxxxx, Esq.
Fax: 000-000-0000
If to the Purchaser:
Aether Holdings, Inc.
000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Chief Executive Officer
Fax: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxxxx & Xxxxx LLP
000 Xxxxxxxxx Xxxxxx XX
Xxxxxxxxxx, XX 00000
Attn: Xxxx X. Director
Fax: (000) 000-0000
If to the Escrow Agent:
Wilmington Trust Company
0000 X. Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxx
Fax: (000) 000-0000
or to such other address as such party shall specify by written notice to the
other Parties. Any notice sent to the Escrow Agent shall also be sent to the
other Parties to this Agreement.
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8. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Merger
Agreement, contains the entire understanding of the Parties with respect to the
subject matter hereof and supersedes any prior understandings or agreements by
or among the Parties, whether written or oral, which may have related to the
subject matter hereof in any way. This Agreement may be amended, or any
provision of this Agreement may be waived, so long as such amendment or waiver
is set forth in a writing executed by each of the Purchaser and the
Securityholders' Representative (a copy of which shall be promptly provided by
the Purchaser to the Escrow Agent); provided that if any such amendment or
waiver would have the effect of increasing or expanding the Escrow Agent's
obligations or duties under this Agreement, the written consent of the Escrow
Agent shall be required in addition to the written consent of the Purchaser and
the Securityholders' Representative. No course of dealing between or among the
parties hereto shall be deemed effective to modify, amend or discharge any part
of this Agreement of any rights or obligations of any Party under or by reason
of this Agreement.
9. ASSIGNS AND ASSIGNMENT. This Agreement and all actions taken hereunder
shall inure to the benefit of and shall be binding upon all of the Parties and
upon all of their respective successors and assigns; provided that (a) no
assignment of the interest of any other Party shall be binding upon the Escrow
Agent unless and until written notice of such assignment shall be filed with and
acknowledged by the Escrow Agent and (b) the Escrow Agent shall not be permitted
to assign its obligations hereunder except as provided in Section 4(e) above and
Section 18 below.
10. NO OTHER THIRD PARTY BENEFICIARIES. Nothing herein expressed or
implied is intended or shall be construed to confer upon or to give any Person
other than the Escrow Agent, the Purchaser, the Purchaser Indemnified Persons,
the Securityholders and the Securityholders' Representative and their permitted
assigns any rights or remedies under or by reason of this Agreement.
11. INTERPRETATION. The headings in this Agreement are inserted for
convenience of reference only and shall not be a part of or control or affect
the meaning hereof.
12. NO WAIVER. No failure or delay by a party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, and no
single or partial exercise thereof shall preclude any right of further exercise
or the exercise of any other right, power or privilege. The right of the
Purchaser and Securityholders' Representative to receive all or any portion of
the Aggregate Indemnity Escrow Shares or the Aggregate First Tranche Shares
under the circumstances described in Section 3 above is in addition to, and not
in lieu of, any other remedies that any such Party may have against another
Party pursuant to the Merger Agreement or in the event of a breach of the Merger
Agreement.
13. SEVERABILITY. The Parties agree that (a) the provisions of this
Agreement shall be severable in the event that for any reason whatsoever the
provisions hereof are invalid, void or otherwise unenforceable, (b) such
invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are as similar as possible in terms to such
invalid, void or otherwise unenforceable provisions, but are valid and
enforceable, and (c) the remaining provisions shall remain enforceable to the
fullest extent permitted by law.
14. NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the Parties hereto to express their
collective mutual intent, and no rule of strict construction shall be applied
against any person. The term "including" as used herein shall be by way of
example, and shall not be deemed to constitute a limitation of any term or
provision contained herein. Each defined term used in this Agreement has a
comparable meaning when used in its plural or singular form.
11
15. RELEASES ON NON-BUSINESS DAYS. In the event that a release from the
Escrow Account hereunder is required to be made on a date that is not a business
day, such release may be made on the next succeeding business day with the same
force and effect as if made when required.
16. GOVERNING LAW; JURISDICTION. This Agreement, and the rights of the
Parties under this Agreement, shall be governed by and construed in accordance
with the laws of the State of Delaware that are applicable to contracts that are
made in and to be fully performed in such state, without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
17. COUNTERPARTS. This Agreement may be executed by the Parties
individually or in any combination, in one or more counterparts (including by
means of telecopied signature pages), each of which shall be an original and all
of which shall together constitute one and the same agreement.
18. SUCCESSOR ESCROW AGENT ENTITY. Any banking association or corporation
into which the Escrow Agent may be merged, converted or with which the Escrow
Agent may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Escrow Agent shall be a party, or any
banking association or corporation to which all or substantially all of the
corporate trust or escrow business of the Escrow Agent shall be sold or
otherwise transferred, shall succeed to all the Escrow Agent's rights,
obligations and immunities hereunder without the execution or filing of any
paper or any further act on the part of any of the Parties, anything herein to
the contrary notwithstanding.
[END OF PAGE]
[SIGNATURE PAGE FOLLOWS]
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To evidence their agreement, the parties have caused this Agreement to be
executed on the date first written above.
AETHER HOLDINGS, INC.
By:
--------------------------------------------
Name: Xxxxx X. Xxxx
Title: Chief Executive Officer
XXXXXX X. X'XXXXX,
IN HIS CAPACITY AS A SECURITYHOLDER AND AS
ATTORNEY-IN-FACT FOR ALL OTHER SECURITYHOLDERS
By:
--------------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY
By:
--------------------------------------------
Name:
Title:
EXHIBIT A
LIST OF SECURITYHOLDERS' PRO RATA SHARES
SECURITYHOLDER NUMBER OF INDEMNITY PRO RATA SHARE
-------------- ------------------- --------------
ESCROW SHARES
-------------
Xxxxxx X. X'Xxxxx 102,166 17.0276612%
D'Loren Realty, LLC 318,086 53.014398%
The Xxxxxx X'Xxxxx Family Trust 64,477 10.7461616%
Dated Xxxxx 00, 0000
X'Xxxxx Xxxxxx Group, LLC n/a n/a
Xxxxx X. Xxxxxx 54,371 9.061806%
Xxxxx X. Xxxxx 60,900 10.1499728%
TOTAL 600,000 100.000%
