ESCROW AGREEMENT
This Escrow Agreement is entered into as of October 21, 1997 by and
among IBJ Xxxxxxxx Bank & Trust Company, a banking corporation organized under
the laws of the State of New York (the "Escrow Agent"), Q.E.P. Co., Inc. a
Delaware corporation ("the "Purchaser") and RCI Holdings Inc. (the "Seller").
WHEREAS, the stock purchase agreement dated October 21, 1997 (the
"Purchase Agreement") between the Purchaser and Seller provides for the
acquisition of Xxxxxxx Consolidated Industries, Inc. (the "Company") by the
Purchaser through the purchase of all the outstanding shares of common stock of
the Company; and
WHEREAS, the Purchaser is depositing with you, as escrow agent,
$500,000 aggregate principal amount of the Purchaser's 8% Subordinated
Debentures due 2001 (the "Subordinated Debentures"); and
WHEREAS, the Escrow Agent is willing to establish an escrow account on
the terms and subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
Escrow Agent agrees to hold those Subordinated Debentures, and the
interest on those Subordinated Debentures and the interest on such interest (the
"Fund"), on the following terms:
1. The Fund shall be held and disposed of by you as follows:
a. On December 20, 1997, if (1) the sum of (A) the
aggregate principal amount of Subordinated Debentures included in the Fund plus
(B) the accrued and unpaid interest on such Subordinated Debentures, reduced by
(2) the amount, if any, you are then required to hold separately pursuant to
paragraphs 1(d) and 1(e) exceeds $250,000, you shall deliver to the Seller
Subordinated Debentures the aggregate principal amount of, and accrued and
unpaid interest thereon, which equals that excess. On April 20, 1998, if the sum
of (1) the aggregate principal amount of Subordinated Debentures included in the
Fund plus (2) the accrued and unpaid interest on such Subordinated Debentures
exceeds the amount, if any, Escrow Agent is then required to hold separately
pursuant to paragraphs 1(c) and 1(d), Escrow Agent shall deliver to the Seller
Subordinated Debentures the aggregate principal amount of, and accrued and
unpaid interest on, which equals that excess. The amount of all Damages (as
defined in paragraph 1(b)) and all Maximum Additional Damages (as defined in
paragraph 1(b)) in respect of affidavits delivered pursuant to paragraph 1(b)
Escrow Agent is not yet required to hold separately in escrow pursuant to
paragraph 1(c) or 1(d) and in respect of which Escrow Agent has not yet made any
payment shall, for purposes of this paragraph 1(a), be deemed to be required to
be held separately in escrow pursuant to paragraph 1(c) or 1 (d). All payments
and deliveries to the Seller shall be made as directed in an affidavit of the
Seller delivered to Escrow Agent.
b. (i) Escrow Agent receives an affidavit of an
officer of the Purchaser stating (A) that the Purchaser has incurred a loss,
liability, damage or expense, including attorneys' fees and expenses and the
expenses of investigating or defending against any claim or proceeding
for which the Purchaser is entitled to indemnification pursuant to the Purchase
Agreement (collectively, the "Damages") as a result of any misrepresentation or
any breach of warranty or agreement by the Seller in the Purchase Agreement for
which the Purchaser is entitled to indemnification pursuant to the Purchase
Agreement (collectively, a "Breach"), (B) the amount of the Damages incurred to
date by the Purchaser as a result of the Breach and the maximum amount of
additional Damages the Purchaser may incur (the "Maximum Additional Damages"),
and (C) that the amounts specified in clause (B) are reasonable estimates of
such Damages and Maximum Additional Damages, Escrow Agent shall promptly deliver
a copy of the affidavit to the Seller. The Purchaser shall deliver a copy of any
such affidavit to the Seller promptly after it delivers the affidavit to Escrow
Agent. Any affidavit delivered by the Purchaser pursuant to this paragraph shall
set forth in reasonable detail the individual items of Damages sustained by the
Purchaser and the nature of those items.
(ii) With respect to any Breach, the Purchaser may
from time to time submit additional affidavits stating the amount of additional
Damages incurred by it or revising the amount of the Maximum Additional Damages
and stating that those amounts are reasonable estimates of such Damages and
Maximum Additional Damages, and Escrow Agent shall promptly deliver a copy of
each such affidavit to the Seller. The Purchaser shall deliver a copy of any
such affidavit to the Seller promptly after it delivers the affidavit to Escrow
Agent.
c. Escrow Agent shall hold the amount of Damages
claimed in the Purchaser's affidavit separately for 30 days or for such
additional time as required by paragraph 1(d) hereof. If, 30 days after delivery
by Escrow Agent to the Seller of a copy of an affidavit from the Purchaser
claiming Damages, Escrow Agent has not received an affidavit from the Seller
disputing either the Purchaser's right to Damages or the amount of Damages
incurred by the Purchaser, Escrow Agent shall promptly deliver to the Purchaser
the amount specified in its affidavit as Damages and, if the Purchaser stated
that it may incur additional Damages as a result of the Breach, Escrow Agent
shall continue to hold separately in escrow an amount equal to the amount of the
Maximum Additional Damages with respect to the Breach.
d. If, during the 30-day period referred to in
paragraph 1(c), Escrow Agent receives an affidavit of an officer of the Seller
disputing the Purchaser's right to Damages or the amount of Damages incurred by
the Purchaser, as the case may be, Escrow Agent shall (i) promptly forward a
copy of that affidavit to the Purchaser, (ii) pay to the Purchaser any
undisputed amount of Damages, and (iii) hold the balance of the amount claimed
by the Purchaser as Damages, separately in escrow until receipt of either an
affidavit signed by an officer of the Purchaser and an officer of the Seller
directing the disposition of all or part of the Fund or a certified copy of a
final, non-appealable order of a court of competent jurisdiction ordering Escrow
Agent to dispose of the amount subject to the dispute accompanied by an opinion
of legal counsel as to the finality and non-appealability of such order. The
Seller shall deliver to the Purchaser a copy of any affidavit delivered to
Escrow Agent hereunder promptly after it delivers the affidavit to you. Upon
receipt of an affidavit or court order, Escrow Agent shall promptly comply with
its terms. In any proceeding to resolve a dispute, part of the final
determination shall be an allocation of the costs of the proceeding (including
attorneys' fees), and the Purchaser shall bear all such costs, unless it is
finally determined that the Purchaser's claim for Damages was valid.
2. It is understood and agreed that Escrow Agent's duties are
purely ministerial in nature. It is further agreed that:
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a. Escrow Agent shall not be responsible for the
performance of Purchaser or Seller under this agreement or any other agreement;
b. Escrow Agent may conclusively rely and shall be
protected in acting or refraining from acting upon any document, instrument,
certificate, instruction or signature believed by you to be genuine and may
assume and shall be protected in assuming that any person purporting to give any
notice or instructions in accordance with this agreement or in connection with
any transaction to which this Escrow Agreement relates has been duly authorized
to do so. Escrow Agent shall not be obligated to make any inquiry as to the
authority, capacity, existence or identity of any person purporting to have
executed any such document or instrument or have made any such signature or
purporting to give any such notice or instructions;
c. Escrow Agent undertakes to perform only such
duties as are expressly set forth herein and shall not be bound in any way by
any agreement between Purchaser and Seller (whether or not Escrow Agent has
knowledge thereof); and
d. Escrow Agent shall not assume any responsibility
or liability for the completeness, correctness or accuracy of the Fund or for
any transactions between Purchaser and Seller.
e. Escrow Agent shall receive, as compensation for
your services hereunder, the sum of $1,500 as an Initial Acceptance Fee, which
fee shall be payable at closing and, as an Administration Fee, the sum of
$2,500, per annum or part thereof, payable by the Purchaser upon funding of the
Fund and annually thereafter. Escrow Agent shall also receive payment for
certain transaction fees as set forth in Schedule I hereto.
3. Escrow Agent shall hold and dispose of the Fund in the
manner set forth above and shall have no other duties as escrow agent; your
duties shall be determined only with reference to this agreement and applicable
law. Escrow Agent is not charged with knowledge of or any duties or
responsibilities under any other document or agreement. If in doubt as to its
duties and responsibilities under this agreement, Escrow Agent may consult with
counsel of its choice and shall be protected in any action taken or omitted upon
the advice or opinion of that counsel. The Purchaser and the Seller shall
indemnify Escrow Agent and hold Escrow Agent harmless against any loss,
liability, damage or expense you may incur as a result of acting as escrow agent
under this agreement, except for any loss, liability, damage or expense arising
from its own gross negligence or wilful misconduct, in the following
proportions: 50% by the Purchaser and 50% by the Seller. The Purchaser and the
Seller agree Escrow Agent shall not be liable to them for any actions taken by
Escrow Agent pursuant to this agreement. The provisions of this paragraph 3
shall survive any termination of this agreement.
4. In the event Escrow Agent is at any time confronted with
inconsistent claims or demands by the parties to this agreement, Escrow Agent
may interplead the parties in any court of competent jurisdiction and request
that the court determine the respective rights of the parties with respect to
this agreement, and, upon doing so, Escrow Agent automatically shall be released
from any obligation or liability as a consequence of any such claims or demands.
5. Escrow Agent may execute any of its powers or
responsibilities under this agreement and exercise any rights under this
agreement directly or by or through its agents or attorneys. Nothing in this
agreement shall be deemed to impose upon you any duty to qualify to
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do business or to act as fiduciary in any jurisdiction other than the state of
New York. Escrow Agent shall not be responsible for and shall not be under a
duty to examine into or pass upon the validity, binding effect, execution or
sufficiency of this agreement or of any amendment or supplement to this
agreement.
6. Escrow Agent may resign at any time upon 30 days' notice to
the Purchaser and the Seller, but only if a successor escrow agent has been
appointed by the Seller and the Purchaser prior to the effective date of its
resignation. Upon receipt of notice of resignation, the Purchaser and the Seller
promptly shall use their best efforts to designate a successor escrow agent to
serve in accordance with this agreement. Upon receipt of an affidavit signed by
an officer of the Purchaser and an officer of the Seller directing the
disposition of the Fund to a successor escrow agent, Escrow Agent shall promptly
comply with that affidavit. In the case of Escrow Agent's resignation, its only
duty shall be to hold and dispose of the Fund in accordance with the original
provisions of this agreement until a successor shall be appointed by Purchaser
and Seller and a written notice of the name and address of such successor escrow
agent shall be given to Escrow Agent by Purchaser and Seller, whereupon its only
duty shall be to turn over the Fund to such successor in accordance with the
written instructions of Purchaser and Seller.
7. This agreement cannot be changed or terminated orally and
may be changed only with the prior written consent of the Purchaser, the Seller
and Escrow Agent. Should Purchaser and Seller attempt to change this agreement
in a manner which, in your sole opinion, is undesirable, Escrow Agent may resign
upon 30 days notice to Purchaser and Seller subject to the provisions of
paragraph 6 above.
8. Any notice or other communication under this agreement
shall be in writing and shall be considered given when delivered personally or
mailed by registered mail, return receipt requested, to the parties at the
following addresses (or at such other address as a party may specify by notice
to the others):
If to the Purchaser, to it at:
0000 Xxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attn: Chief Financial officer
with a copy to:
Holland & Knight LLP
Xxx Xxxx Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx
Attn: Xxxxxx Xxxxxxx, Esq.
If to the Seller, to it at:
c/o Balfour Investors Incorporated
Rockefeller Center
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxx, Esq.
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with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx, Esq.
If to the Escrow Agent, to it at:
Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: __________________
Notwithstanding the foregoing, any notice or other communication under
paragraph 1(d) or 1(e) shall be given by registered mail, return receipt
requested, and shall be considered given by you to the Seller or the Purchaser
two days after you receive a registered mail return receipt with respect to the
notice so given.
9. The Purchaser and the Seller each acknowledge that the
security procedures designated by each of them on Schedules A and B hereto with
respect to funds transfers from the Escrow Amount were selected from the
security procedures offered by the Escrow Agent. The Purchaser and the Seller
will each restrict access to confidential information relating to such security
procedures to authorized persons. Each party must notify the Escrow Agent
immediately if it has reason to believe unauthorized persons may have obtained
access to such information, or of any change in its authorized personnel. In
executing funds transfers, the Escrow Agent will rely upon account numbers or
other identifying numbers of a beneficiary, beneficiary's bank or intermediary
bank rather than names. The Escrow Agent shall not be liable for any loss,
liability or expense resulting from any error in an account number or other
identifying number provided it has accurately transmitted the numbers provided.
10. If any provision of this agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.
11. This agreement may be executed in several counterparts or
by separate instruments, and all of such counterparts or instruments shall
constitute one agreement, binding on all the parties hereto.
12. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural as the context may
require.
13. This agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings (written or oral) of the parties in
connection herewith.
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IN WITNESS WHEREOF, the parties hereto execute this agreement as of the
date first above written.
X.X.X.XX., Inc.
By: /s/ XXXXX XXXXX
-----------------------------
Name: Xxxxx Xxxxx
Title:
RCI HOLDINGS INC.
By: /s/ XXXX X. XXXXXX
-----------------------------
Name: Xxxx X. Xxxxxx
Title: President
IBJ XXXXXXXX BANK & TRUST COMPANY
By: /s/ XXXXXXX XXXXXXX
-----------------------------
Name: Xxxxxxx Xxxxxxx
Title:
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SCHEDULE A
Upon receipt of Disbursement Instructions from the Purchaser directing the
Escrow Agent to disburse amounts from the Escrow Funds, the Escrow Agent will
confirm the instructions set forth in such notice with one of the authorized
individual(s) listed below at an authorized telephone number appearing opposite
such individual's name:
AUTHORIZED INDIVIDUAL(S) AUTHORIZED TELEPHONE
OF THE PURCHASER NUMBER(S)
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SCHEDULE B
Upon receipt of Disbursement Instructions from the Seller directing the Escrow
Agent to disburse amounts from the Escrow Funds, the Escrow Agent will confirm
the instructions set forth in such notice with one of the authorized
individual(s) listed below at an authorized telephone number appearing opposite
such individual's name:
AUTHORIZED INDIVIDUAL(S) AUTHORIZED TELEPHONE
OF THE SELLER NUMBER(S)
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