Exhibit 99.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement"), dated as of January 21, 2000,
is among ALLOY ONLINE, INC., a Delaware corporation ("Parent"), 00XX XXXXXX
ACQUISITION CORP., a New York corporation (the "Company"), Xxxxxx X. Xxxxxxxxxxx
("Xxxxxxxxxxx"), Xxx Xxxxxxxxx ("Xxxxxxxxx"), and STATE STREET BANK AND TRUST
COMPANY, in its capacity as Escrow Agent hereunder (the "Escrow Agent"; and the
term "Escrow Agent" shall also include any successor escrow agent appointed in
accordance with Section 8(d) hereof). Capitalized terms used and not defined
herein shall have the meanings given to them in the Reorganization Agreement
(hereinafter defined).
RECITALS
A. Reference is made to the Agreement and Plan of Reorganization dated
as of January 21, 2000 (the "Reorganization Agreement"), by and between Parent,
Alloy Acquisition Sub, Inc., a New York corporation and a wholly-owned
subsidiary of Parent ("Acquisition Sub"), the Company, and the shareholders of
the Company, providing for, among other things, the merger (the "Merger") of
Acquisition Sub with and into the Company, with the Company surviving the Merger
as a wholly-owned subsidiary of Parent (the "Surviving Corporation") and the
shareholders of the Company, each of whom is set forth on Schedule I attached
hereto (collectively referred to herein as the "Holders", and together with
Parent, the "Interested Parties") receiving, among other consideration, shares
of common stock of Parent, $0.01 par value per share ("Parent Common Stock") ,
with an aggregate Stipulated Price (as defined herein) of $3,500,000 (the "Stock
Consideration"), in exchange for shares of capital stock of the Company, all in
the manner provided in the Reorganization Agreement and the Certificate of
Merger.
B. This Agreement is designed to implement the provisions of the
Reorganization Agreement pursuant to which Parent, on behalf of the Holders, is
depositing with the Escrow Agent 64,552 shares of Parent Common Stock (equal to
thirty percent (30%) of the total Stock Consideration) (the "Escrow Shares"), as
security for (i) the satisfaction of the indemnification obligations of the
Holders pursuant to Article VIII of the Reorganization Agreement and (ii) any
reduction in the amount of the to Merger Consideration as a result of
adjustments thereto required to be made pursuant to Section 2.2 of the
Reorganization Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
representations and warranties and agreements contained herein, the parties
hereto agree as follows:
1. Appointment of Escrow Agent; Escrow Account. The Escrow Agent is
hereby appointed to act as escrow agent hereunder, and the Escrow Agent agrees
to act as such.
2. Escrow Fund and Escrow Account.
2 (a) In accordance with Section 2.4(d) of the Reorganization
Agreement, Parent shall deliver to the Escrow Agent on the date hereof a
certificate or certificates registered in the name of the Escrow Agent as escrow
agent hereunder (or in the name of its nominee) representing the Escrow Shares.
The Escrow Agent shall hold such certificate or certificates in escrow for the
benefit of (i) Parent and the Surviving Corporation, and their respective
directors, officers, employees, agents, affiliates and assigns (collectively,
the "Parent Indemnified Persons") and (ii) the Holders, all pursuant to the
provisions of this Agreement. The shares of Parent Common Stock to be delivered
to the Escrow Agent pursuant to this Section 2(a), together with all cash
dividends, stock dividends or stock distributions or any securities of Parent or
any other person or entity issued in respect thereof (including, without
limitation, any shares issued pursuant to any stock dividend, stock split,
reverse stock split, combination or reclassification thereof) shall become part
of, and are hereinafter referred to collectively as, the "Escrow Fund". The
number of Escrow Shares beneficially owned by each Holder is set forth in
Schedule I hereto. Such Schedule shall list each Holder, such Holder's address
and social security number and such Holder's interest in the Escrow Fund
(expressed as a share amount, based on the number of Escrow Shares delivered to
the Escrow Agent at the time the Merger becomes effective on behalf of such
Holder). At the time of its delivery to the Escrow Agent of any shares of Parent
Common Stock and any cash dividends, stock dividends or stock distribution or
securities issued in respect thereof, Parent shall provide the Escrow Agent with
the foregoing information. The Escrow Agent shall have no responsibility for the
genuineness, validity, market value, title or sufficiency for any intended
purpose of the Escrow Shares to be delivered to it under this Agreement. Any
distributions of the Escrow Fund to the Holders shall be made in accordance with
Section 4(b) and Section 4(d). The Escrow Agent shall have no responsibility to
invest any cash dividends or other amounts received with respect to the Escrow
Shares and held in the Escrow Fund absent a joint written instruction from
Parent and the Holders.
2(b) The Escrow Agent shall establish a segregated account (the "Escrow
Account") at its office located at its address set forth on Schedule II in which
to hold the Escrow Fund.
3. Rights to the Escrow Fund. The Escrow Fund shall be for the
exclusive benefit of the Parent Indemnified Persons and their respective
successors and assigns, as provided herein and in the Reorganization Agreement,
and no other person or entity shall have any right, title or interest therein
other than the Holders' respective underlying ownership interests in the
property constituting the Escrow Fund.
4. Distribution of the Escrow Fund. The Escrow Agent shall continue to
hold the Escrow Fund in its possession until authorized hereunder to make
distributions from the Escrow Fund. The Escrow Agent shall distribute the Escrow
Fund as follows:
4(a) If any Parent Indemnified Person (the "Claiming Person") timely
asserts a right of indemnity against the Holders under Article VIII of the
Reorganization Agreement, Parent shall execute and deliver to the Escrow Agent
(with a copy being sent simultaneously to the Holders) 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") and instruct the Escrow Agent
to deliver that portion of the Escrow Fund equal to the Fair Market Value (as
defined in Section 5
2
hereof) of the Claim (or, if the amount of the Claim shall be greater than the
Fair Market Value of the Escrow Fund, the balance of the Escrow Fund) to such
Claiming Person; provided, however, the following shall apply:
(i) in order to be effective hereunder, a Notice of Claim
delivered to the Escrow Agent pursuant to this
Section 4(a) must (A) set forth the name of the
Claiming Person, the nature and details of such Claim
(to the extent known), and the amount thereof (or if
not ascertainable, a reasonable estimate of the
maximum amount thereof) and (B) be delivered to
Escrow Agent on or prior to the Escrow Agent's close
of business on the date that is the first anniversary
of the date hereof (or the next succeeding business
day, if Escrow Agent is not open for business on such
date); and
(ii) if within thirty (30) business days after the Escrow
Agent's receipt of any Notice of Claim by a Claiming
Person pursuant to this Section 4(a) the Escrow Agent
has not received a notification from either of the
Holders that the Claim, or the amount thereof, is
disputed, the Escrow Agent shall, within five (5)
days after the expiration of such 30-day period,
deliver to the Claiming Person that portion of the
Escrow Fund equal to the Fair Market Value of the
Claim as set forth in such Notice of Claim (or, if
the amount of the Claim shall be greater than the
Fair Market Value of the entire Escrow Fund as of
such date, the balance of the Escrow Fund) (the date
of any such delivery hereunder or under Section 4(b)
being referred to herein as a "Release Date"). If the
Holders timely notify the Escrow Agent in writing of
such dispute, the Escrow Agent shall not be
authorized to deliver, and shall not deliver, such
disputed amount to such Claiming Person until five
(5) days after such dispute has been settled as
provided in Section 12 below, but shall deliver to
the Claiming Person that portion of the Escrow Fund
as represents the undisputed amount of the Claim, if
any. Concurrently with the delivery of a notice of
dispute to Escrow Agent, the Holders shall deliver a
copy of such notice to Parent.
4(b) Upon final determination of the Actual Company Working Capital or
the Extraordinary Audit Expenses in accordance with the provisions of Section
2.2(c) of the Reorganization Agreement, Parent shall execute and deliver to the
Escrow Agent (with a copy being sent simultaneously to the Holders) a written
notice to such effect. If Parent shall be entitled to a Working Capital
Adjustment or an Audit Expense Adjustment under Section 2.2 of the
Reorganization Agreement, Parent and the Holders shall execute and deliver to
the Escrow Agent a written notice to such effect (a "Notice of Adjustment"; and
the right of adjustment to the Merger Consideration asserted in a Notice of
Adjustment being hereinafter referred to as an "Adjustment Claim") and instruct
the Escrow Agent to deliver that number of shares of Parent Common Stock, the
Stipulated Value of which (as defined in Section 5 hereof) equals the amount of
the Adjustment Claim (or, if the amount of the Adjustment Claim shall be greater
than the Stipulated Value of the Escrow Fund, the balance of the Escrow Fund) to
Parent. If either Parent, on the one hand, or the Holders, on the other hand,
refuse to execute such a Notice of Adjustment, the other party may execute and
deliver a Notice of Adjustment to the Escrow
3
Agent; provided, however, the following shall apply in respect of any Notice of
Adjustment delivered hereunder:
(i) in order to be effective hereunder, a Notice of
Adjustment delivered to the Escrow Agent by only one
party pursuant to this Section 4(a) shall (A) set
forth the amount of the Adjustment Claim sought and
(B) be delivered to Escrow Agent on or prior to the
Escrow Agent's close of business on the date that is
the tenth (10th) business day after the date on which
the Escrow Agent receives notice that the Actual
Company Working Capital has been determined in
accordance with the provisions of Section 2.2 of the
Purchase Agreement;
(ii) if within five (5) business days after the Escrow
Agent's receipt of any Notice of Adjustment by only
one party pursuant to this Section 4(b) the Escrow
Agent has not received a notification from the other
party(s) that the Adjustment Claim, or the amount
thereof, is disputed, the Escrow Agent shall, within
five (5) days after the expiration of such 5-day
period, or (in any event, subject to the provisions
of Section 4(f)) within five (5) days after receipt
of a Notice of Adjustment executed by Parent and the
Holders, deliver Escrow Shares as follows:
(A) deliver to Parent that number of Escrow Shares,
the Stipulated Value of which shall equal the amount
of the Adjustment Claim as set forth in such Notice
of Adjustment (or, if the amount of the Adjustment
Claim shall be greater than the Stipulated Value of
the remaining balance of the Escrow Fund, the balance
of the Escrow Fund); and
(B) if the number of Escrow Shares delivered to
Parent pursuant to subparagraph 4(B)(ii)(A) above is
less than 21,518 shares (as adjusted to reflect any
stock splits, reverse stock splits, stock dividends,
stock issuances and similar capital transactions
(collectively, "Capital Events"), deliver to the
Holders that number of Escrow Shares equal to the
difference between (x) the number of shares delivered
to Parent pursuant to subsection 4(B)(ii)(A) above
and (y) 21,518 shares (as adjusted to reflect any
Capital Events); provided, however, that if any
shares have been delivered to any Claiming Persons
pursuant to Section 4(a) above or any Notices of
Claim have been timely submitted to the Escrow Agent
pursuant to Section 4(a) above, and the number of
such shares previously so delivered plus the number
of shares in respect of which Notices of Claim have
been timely delivered, calculated at the Fair Market
Value thereof as of the proposed Release Date
thereof, exceeds two-thirds of the total number of
Escrow Shares delivered to Escrow Agent on the date
hereof, the number of shares delivered to the Holders
pursuant to this subsection 4(b)(ii)(B) shall be
reduced by the amount of such excess.
(iii) If no Notice of Adjustment has been delivered to
Escrow Agent on or prior to the Escrow Agent's close
of business on the date that is the tenth (10th)
4
business day after the date on which the Escrow Agent
receives notice that the Actual Company Working
Capital has been determined in accordance with the
provisions of Section 2.2 of the Purchase Agreement,
the Escrow Agent shall deliver to the Holders such
number of Escrow Shares as equals one-third of the
total number of Escrow Shares delivered to Escrow
Agent on the date hereof (as adjusted to reflect any
Capital Events); provided, however, that if any
shares have been delivered to any Claiming Persons
pursuant to Section 4(a) above or any Notices of
Claim have been timely submitted to the Escrow Agent
pursuant to Section 4(a) above, and the number of
such shares previously so delivered plus the number
of shares in respect of which Notices of Claim have
been timely delivered, calculated at the Fair Market
Value thereof as of the proposed Release Date
thereof, exceeds two-thirds of the total number of
Escrow Shares delivered to Escrow Agent on the date
hereof (as adjusted to reflect any Capital Events),
the number of shares delivered to the Holders
pursuant to this subsection 4(b)(iii) shall be
reduced by the amount of such excess.
(iv) If a party does timely notify the Escrow Agent in
writing of any dispute under this Section 4(b) (a
copy of such notice being simultaneously sent to
other parties), the Escrow Agent shall not be
authorized to deliver, and shall not deliver, such
disputed amount to such Parent or Holders until five
(5) days after such dispute has been settled as
provided in Section 12 below, and Escrow Agent has
received the mutual agreement or final order, decree
or judgment referenced in said Section, but shall
deliver to the Parent that portion of the Escrow Fund
as represents the undisputed amount of the Adjustment
Claim, if any, and the amount of Escrow Shares to be
released to Holders pursuant to this Section, if any,
shall be calculated as if Parent had received (i) the
amount actually so delivered and (ii) the amount in
dispute .
4(c) Anything contained herein to the contrary notwithstanding, if the
Escrow Agent is authorized, at any time pursuant to Sections 4(a) or 4(b) and
Section 12 hereof, to deliver all or any portion of the Escrow Fund to (i) a
Claiming Person with respect to any Claim, (ii) to Parent with respect to any
Adjustment Claim, or (ii) to the Holders as set forth in Section 4(b)(ii) or
(iii) hereof, then (1) such delivery shall be made regardless of the Escrow
Agent's prior or subsequent receipt of any Notice of Claim or Notice of
Adjustment Claim or subsequent receipt of any Notice of Dispute with respect to
any other Claim or Adjustment Claim and (2) the Escrow Agent shall (A) deliver
to Parent's transfer agent for the Parent Common Stock (who shall be identified
to the Escrow Agent in writing by Parent) the certificate or certificates
registered in the name of the Escrow Agent or its nominee representing at least
such number of Escrow Shares, the Fair Market Value of which equals the
undisputed amount of the Claim, the Stipulated Value of which equals the
Adjustment Claim, or the number of Escrow Shares to the Holders determined as
set forth in Section 4(b)(ii) or (iii), as applicable, together with a completed
stock power or powers and instructions transferring to such Claiming Person,
Parent or such Holders, as applicable, that number of the Escrow Shares being
delivered to such Claiming Person, Parent or such Holders, as applicable, and
(B) instruct such transfer agent to issue and deliver to the Escrow Agent for
retention hereunder as part of the Escrow Fund a new certificate or certificates
5
in the name of the Escrow Agent as escrow agent hereunder (or in the name of its
nominee or, if originally in the name of a Holder, that Holder) representing the
remaining balance of the portion of the Escrow Shares so delivered to the Escrow
Agent. Parent and the Holders shall take all such actions and execute and
deliver all such documents as are necessary to effectuate the intent and purpose
of this Section 4(c).
4(d) Subject to Sections 4(a) and 4(b) hereof, promptly following the
first anniversary of the Closing Date, the Escrow Agent shall distribute to the
Holders the entire then remaining balance, if any, of the Escrow Fund, that is
in excess of the aggregate amounts specified in all Notices of Claim and Notices
of Adjustment Claim which, on or prior to such date, have been delivered to the
Escrow Agent and the Holders but which have not been paid to Parent or otherwise
discharged or withheld pursuant to this Section 4. Any portion of the Escrow
Fund which shall continue to be held by the Escrow Agent pursuant to the
preceding sentence shall be so held until such time as all disputed Claims and
Adjustment Claims hereunder have been settled or resolved and notice of such
settlement or resolution setting forth the amounts to be paid to Parent and the
Parent Indemnified Parties, on the one hand, and the Holders, on the other hand,
have been delivered to the Escrow Agent in accordance with the terms hereof. If
a portion or all of the Escrow Fund is to be delivered to the Holders as
provided in this Section 4(d) or in Section 4(b), the Escrow Agent shall
disburse to each Holder such portion of the Escrow Fund as shall equal such
Holder's portion of the Escrow Fund (based on his, her or its proportionate
interest in the Escrow Fund as set forth on Schedule I).
4(e) If amounts from the Escrow Fund are retained by the Escrow Agent
or distributed to the Parent or any Claiming Person pursuant to any provisions
of this Section 4, such amounts from the Escrow Fund shall be taken from the
amounts in such Escrow Fund in proportion to each Holders percentage interest in
the Escrow Fund based on Schedule I hereto.
4(f) Under no circumstances shall the Escrow Agent be required to
release or distribute any of the Escrow Fund 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.
5. Valuation. For all purposes of this Agreement, (i) the "Fair Market
Value" per share of Parent Common Stock shall be, as of any date, the average
closing price for the Parent Common Stock as quoted on the NASDAQ National
Market System and as reported in the Eastern Edition of The Wall Street Journal
for the fifteen (15) trading days ending on the second trading day prior to such
date, as determined by Parent and consented to by the Holders as set forth in a
certificate, signed by Parent and each of the Holders and delivered to Escrow
Agent, and (ii) the "Stipulated Value" per share of Parent Common Stock shall be
$16.26563 (as adjusted to reflect any Capital Events.
6. Holder Rights.
6(a) Except as expressly provided otherwise herein, each Holder 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 owned by such Holder,
including, without limitation, voting and consensual rights; provided, however,
that the Holders shall have no right to transfer, pledge or encumber or
6
otherwise dispose of in any manner whatsoever any Escrow Shares that are held in
the Escrow Fund. The Escrow Shares shall be treated as having been actually
issued and transferred to the Holders at the time of the Merger. In accordance
with Section 2(a), all dividends or distributions or proceeds in stock or other
property issued in respect of the Escrow Shares shall be deposited into the
Escrow Account and become part of the Escrow Fund. Any such dividends or
distributions or proceeds deposited into the Escrow Fund shall be attributed to
each shareholder in his, her or its proportionate interest as set forth on
Schedule I hereto as of the date of their receipt by Escrow Agent . If any such
shares of Parent Common Stock are transferred to a Claiming Person in accordance
with the provisions of Section 4 hereof in satisfaction of a Claim or Claims,
all rights and indicia of ownership with respect to such shares shall thereupon
reside with such Claiming Person or any subsequent holder thereof.
6(b) Anything contained herein to the contrary notwithstanding, Escrow
Shares shall not be registrable pursuant to the Securities Act of 1933, as
amended, so long as they are held in the Escrow Fund and the Escrow Agent shall
not release such Escrow Shares from the Escrow Account, except pursuant to
Section 4 hereof, or take any other actions to register such Escrow Shares.
6(c) The Escrow Agent shall be under no duty to preserve, protect or
exercise rights in the Escrow Shares, and shall be responsible only for
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 the Holders 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 the Holders a proxy or
other instrument in the form supplied to it by the Holders for voting or
otherwise exercising any right of consent with respect to any of the Escrow
Shares held by it hereunder, and shall vote all Escrow Shares then held in the
Escrow Fund in the manner instructed by each Holder in writing based on upon
such Holders pro rata percentage of the Escrow Shares referred to in Schedule I
so long as such instructions are received by Escrow Agent not later than three
(3) Business Days prior to the date on which such vote is required, and as
Escrow Agent may determine in its sole discretion, if such instruction is not
timely received.. The Escrow Agent will not be responsible for authenticating
the right of the Holders to exercise voting or consent-giving authority in
respect of Escrow Shares held by it hereunder. The Escrow Agent shall, upon
receiving proper written instructions from the Holders (which instructions shall
be received at least three 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, written, received by the Escrow Agent from an
issuer or other person with respect to Escrow Shares held by the Escrow Agent
hereunder, including, without limitation, any proxy material, tenders, options,
the pendency of calls and maturities and the expiration of rights.
7. Termination. This Agreement shall automatically terminate if and
when all Escrow Shares and other property in the Escrow Account shall have been
distributed by the Escrow Agent in accordance with the terms of this Agreement.
7
8. Concerning the Escrow Agent.
8(a) 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 Reorganization 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 are 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, if so requested, refraining from acting) upon and in
accordance with 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 for determining the accuracy 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.
8(b) 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 or willful misconduct in breach of the terms of this
Agreement. 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.
8(c) The Escrow Agent shall have no more or less responsibility or
liability on account of any action or omission of any book-entry depository or
securities intermediary employed by the Escrow Agent than any such book-entry
depository or securities intermediary has to the Escrow Agent, except to the
extent that such action or omission of any book-entry depository or securities
intermediary was caused by the Escrow Agent's own gross negligence, bad faith or
willful misconduct in breach of this Agreement.
8(d) 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 Parent and the Holders specifying a date upon which such
resignation shall take effect; provided, however, that the Escrow Agent shall
continue to serve until its successor accepts the Escrow Fund. Upon receipt of
such notice, a successor escrow agent shall be appointed by Parent and the
Holders, such successor escrow agent to become the Escrow Agent hereunder 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 Parent petition any court of
competent jurisdiction for the appointment of a successor escrow agent. Parent
and the Holders acting jointly, 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 Parents' paying all fees and expenses of such Escrow Agent accrued
as of such date.
8
9. Indemnification. Without determining or limiting any rights as
between the Holders and Parent (the "Interested Parties"), each of the
Interested Parties 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 this Agreement or with the administration
of its duties hereunder, 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. The foregoing indemnification and agreement to
hold harmless shall survive the termination of this Agreement and the
resignation or removal of the Escrow Agent.
10. Fees of Escrow Agent. Parent agrees (i) to pay or reimburse the
Escrow Agent for its reasonable attorneys' fees and expenses incurred in
connection with the preparation of this Agreement and (ii) to pay the Escrow
Agent's compensation for its normal services hereunder in accordance with the
attached Schedule II, which may be subject to change hereafter, provided that
such changes are consistent with changes to fees generally charged to all
similar escrow accounts maintained by the Escrow Agent. Each of the Interested
Parties agree, 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 or Adjustment Claim made by a party to this Agreement. Without altering or
limiting the joint and several liability of the Interested Parties under this
paragraph and under Section 9 of this Agreement, the Interested Parties agree,
as among themselves, that Parent shall pay the Escrow Agent's fees and all of
its costs and expenses incurred by the Escrow Agent for its normal services
(which shall not, however, include costs and expenses incurred in connection
with any dispute arising hereunder, which the Interested Parties shall share
equally). The Escrow Agent shall periodically xxxx Parent for such out of pocket
fees and expenses. The Escrow Fund shall not be available to, and shall not be
used by, the Escrow Agent to set off any obligations of any party hereto owing
the Escrow Agent in any capacity.
11. Tax Indemnification.
11(a) Without determining or limiting any rights as between the Holders
and Parent, each of the Interested Parties agree, 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
Funds 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
9
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 and agreement to hold harmless shall survive the termination of
this Agreement and the resignation or the removal of the Escrow Agent.
11(b) The Interested Parties agree that all earnings, if any, with
respect to the Escrow Fund will be reported by the Escrow Agent as earnings of
the Holders in accordance with their respective interests as set forth on
Schedule I whether or not distributed. The Interested Parties agree that
promptly after the date hereof, they will each provide the Escrow Agent with a
completed IRS Form W-9 certifying thereon their taxpayer identification numbers.
The Interested Parties acknowledge that withholding of a portion of the earnings
on the Escrow Fund may be required for federal income tax purposes in the event
any Interested Party fails to certify such party's taxpayer identification
number to the Escrow Agent. Parent shall indemnify the Holders for and in
respect of all tax liabilities which may be incurred by the Holders in respect
of any earnings on the Escrow Fund that actually are distributed to Parent.
12. Disputes. If any dispute should arise with respect to the payment
or ownership or right of possession of the Escrow Fund, 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 Parent and the
Holders (evidenced by appropriate instructions in writing to the Escrow Agent
signed by Parent and the Holders) 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 Parent and
the Holders are parties, but the Escrow Agent shall be under no duty whatsoever
to institute or defend any such proceedings.
13. Miscellaneous.
13(a) Notices. All notices or other communications which are required
or permitted hereunder shall be in writing and shall be deemed given (i) when
received by the addressee if delivered personally or sent by
nationally-recognized overnight courier (ii) when received by the addressee if
sent by registered or certified mail, return receipt requested and postage
prepaid, or (iii) when sent by facsimile, provided that a confirmation copy
thereof is sent the same day by postage prepaid U.S. mail. Notices shall be sent
to the addresses given below for the parties, or to such other address for any
party notice of which, complying with these requirements, is given by that party
to all others.
(i) if to the Holders, then to each Holder at the
locations specified in Schedule I;
10
with a copy to:
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier: (000) 000-0000
E-Mail: xxxxxxxx@xxxxxxxxx.xxx
Attention: Xxxxxxxx Xxxxxxx Xxxxxxxxx
(ii) if to Parent, to:
Alloy Online, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
with copies to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
000 Xxxxxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Attention: Xxxxxxx X. Xxxx, Esquire
Telecopier: (000) 000-0000
Email: xxxxx@xxxxx.xxx
(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.
Any funds to be paid to or by the Escrow Agent hereunder shall be sent
by wire transfer pursuant to the following instructions (or by such method of
payment and pursuant to such instruction as may have been given in advance and
in writing to or by the Escrow Agent, as the case may be, in accordance with the
above):
If to Alloy: or the Stockholders:
At such addresses at shall be given to Escrow Agent
in writing by such party.
11
If to the Escrow Agent:
Bank: State Street Bank and Trust Company
ABA #: 0110 0002 8
A/C #: 0000-000-0
Attn: Corporate Trust Department
Ref.: Alloy Online/17th Street Escrow
Account # 124014-010
13(b) Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
13(c) Governing Law. This Agreement will be governed by and construed
and enforced in accordance with the laws of the Commonwealth of Massachusetts
without giving effect to any choice of law or conflicting provision or rule
(whether of the Commonwealth of Massachusetts, or any other jurisdiction) that
would cause the laws of any jurisdiction other than the Commonwealth of
Massachusetts to be applied.
13(d) 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, by notice in compliance with Section 13(a) of this Agreement.
13(e) 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 hereto
without the consent of the other parties hereto.
13(f) 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 Escrow Agreement,
unless such waiver is specified in writing, and then only to the extent so
specified. A waiver of any of the terms and conditions of this Escrow Agreement
on one occasion shall not constitute a waiver of the other terms of this Escrow
Agreement, or of such terms and conditions on any other occasion. Upon a sale of
Parent, the parties shall negotiate in good faith appropriate amendments to the
Agreement so as to reflect that the Escrow Fund will cease to be constituted of
Parent Shares but will instead be constituted by the consideration received
therefore in such sale.
13(g) 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.
13(h) Entire Agreement. This Agreement and, with respect to the
Interested Parties only, the Reorganization Agreement, the Certificate of
Merger, and the Related Agreements referenced therein, 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.
12
13(i) Force Majeure. The Escrow Agent will 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, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes or
other disasters.
13(j) Reproduction of Agreement. This Agreement and all documents
relating hereto, including, without limitation, (i) consents, waivers and
modifications that may hereafter be executed, and (ii) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. It is agreed that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence and
whether or not the reproduction was made by a party in the regular course of
business, and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
13(k) Consent to Jurisdiction and Service. Each of the Interested
Parties hereby absolutely and irrevocably consents and submits to the
jurisdiction of the courts in the Commonwealth of Massachusetts and of any
Federal court located in said Commonwealth in connection with any actions or
proceedings brought against any of the Interested Parties (or each of them) by
the Escrow Agent arising out of or relating this Escrow Agreement. In any such
action or proceeding, the Interested Parties each hereby absolutely and
irrevocably (i) waives any objection to jurisdiction or venue, (ii) waives
personal service of any summons, complaint, declaration or other process, and
(iii) agrees that the service thereof may be made by certified or registered
first-class mail directed to such party, as the case may be, at their respective
addresses in accordance with Section 13(a) hereof.
13
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed and delivered on the date first above written.
ALLOY ONLINE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
00XX XXXXXX ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
Title: Co-President
/s/ Xxxxxx X. Xxxxxxxxxxx
--------------------------------
XXXXXX X. XXXXXXXXXXX
/s/ Xxx Xxxxxxxxx
--------------------------------
XXX XXXXXXXXX
Accepted and Agreed to as of the date first above written:
STATE STREET BANK AND TRUST COMPANY
As Escrow Agent:
By: /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: Assistant Vice President
14
SCHEDULE I
----------
HOLDERS
Holder Social Security Number Escrow Shares
------ ---------------------- -------------
Xxxxxx X. Xxxxxxxxxxx ###-##-#### 32,276
000 Xxxx 00xx Xxxxxx, #00X
Xxx Xxxx, XX 00000
Telephone: (___) ___-_____
Facsimile: (000) 000-0000
###-##-#### 32,276
Xxx Xxxxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Telephone: (___) ___-_____
Facsimile: (000) 000-0000
15
SCHEDULE II
-----------
Fees of Escrow Agent
ESCROW AGENT:
-------------
If by courier:
State Street Bank and Trust Company
Global Investor Services Group - Corporate Trust
0 Xxxxxx xx Xxxxxxxxx - 0xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxxxxx, Ref: Alloy Online, Inc./17th St.. Acq. Corp. Escrow
Fax: (000) 000-0000
Tel. (000) 000-0000
or, if by mail:
State Street Bank and Trust Company
Global Investor Services Group - Corporate Trust
X.X. Xxx 000
Xxxxxx, XX 00000
Attn: Alloy Online, Inc./17th St. Acq. Corp. Escrow
Fax: (000) 000-0000
Tel. (000) 000-0000
Wire Transfer Information:
Bank:
ABA#:
A/C#:
Attn:
Ref:
Fees And Expenses:
Acceptance Fee: Waived
Annual Fee: $3500.00 per year or any part thereof ; the Annual
Fee shall be due and payable in advance, upon signing
of the Escrow Agreement; thereafter upon each
anniversary date.
Sweep Fee: 40 Base Points per annum of the average daily net
assets
Wire Fee: $20.00 per wire
16
Out-of-Pocket Expenses: At Cost
Legal Fees: At Cost
Extraordinary Administrative Expenses
In addition to the Annual Fee, fees for extraordinary services will be
determined and charged by appraisal. Such services may include, but are not
limited to, additional responsibilities and services incurred in case of
default, or dispute or third party claim upon the escrow fund.
17
