Exhibit 10.7
ESCROW AGREEMENT
THIS AGREEMENT is made this 23rd day of February, 2004 by and between
TOTAL IDENTITY CORP., a Florida corporation ("Shareholder"), XXXXXX XXXXX
("Secured Party"), and SHAPIRO, ROSENBAUM, XXXXXXXXXX & XXXXXX, LLP (`Escrow
Agent").
RECITALS
This Agreement is made in reference to the following, which Shareholder
and Secured party warrant and represent to Escrow Agent are true and correct:
a. Concurrently herewith, Shareholder and Secured Party have
entered into an Amended and Restated Pledge Agreement (the
"Amended Pledge Agreement"), a copy of which is annexed hereto
as Exhibit "A."
b. Pursuant to Section 3 of the Amended Pledge Agreement,
Shareholder is required to deliver to Escrow Agent the Pledged
Shares as defined in the Amended Pledge Agreement, and
executed stock powers (the "Stock Powers") with respect to
such Pledged Shares.
c. This Agreement is made pursuant to Section 3 of the Amended
Pledge Agreement for the purpose of establishing the
obligations and liabilities of the Escrow Agent with respect
to the Pledged Shares.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Secured Party, Shareholder and Escrow Agent hereby agree as
follows:
1. Unless otherwise expressly defined in this Agreement, capitalized
terms used in this Agreement shall have the meanings ascribed to such terms in
the Amended Pledge Agreement.
2. Shareholder and Secured Party do hereby appoint Shapiro, Rosenbaum,
Xxxxxxxxxx & Xxxxxx, LLP, as the Escrow Agent for the purposes set forth in
Section 3 of the Amended Pledge Agreement. Shareholder and Secured Party may, by
mutual written agreement, designate a different Escrow Agent.
3. Shareholder hereby warrants and represents that, it has heretofore
delivered to Xxxxxxx Xxxxxxx, Esq., the Pledged Shares and Stock Powers which it
is so required to deliver under the terms of the Amended Pledge Agreement and
has authorized Xx. Xxxxxxx to deliver same to Escrow Agent.
4. Escrow Agent signs this Agreement to signify its agreement and
consent to serve as Escrow Agent and to acknowledge receipt of the Pledged
Shares and the Stock Powers required to be delivered by Shareholder to Escrow
Agent by under the terms of the Amended Pledge Agreement.
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5. Subject to the further terms and conditions of this Agreement,
Shareholder and Secured Party hereby authorize Escrow Agent to retain the
Pledged Shares and the Stock Powers until such time as Shareholder shall have
fully paid and performed the Obligations secured under the Amended Pledge
Agreement.
6.
a. Upon the occurrence of an Event of Default, as defined in Section 6
of the Amended Pledge Agreement, the Secured Party may send Escrow Agent written
notice of the same. Said notice shall specify the nature of the Event of
Default. If the nature of the Event of Default is limited to a default under
sub-paragraphs (iv) and/or (v) of said Section 6, then the said Notice of
Default shall further specify the aggregate unpaid balances of the Restated
Promissory Note and the Purchase Price specified in Corporate Amendment No. 1
(as those respective terms are defined in the Amended Pledge Agreement), which
aggregate unpaid balances shall be deemed the "numerator" of a fraction the
denominator of which shall be $875,000 (such fraction hereinafter referred to as
the "Default percentage"). The product of the Default Percentage multiplied by
the total number of the Pledged Shares shall constitute the "Default Shares."
b. If the Escrow Agent shall receive from the Secured Party a written
notice of default in accordance with Section 6 (a), above, that an Event of
Default has occurred, Escrow Agent shall forward a copy of such Notice to the
Shareholder. Upon the expiration of ten (10) business days following the date of
the Escrow Agents receipt of such Notice, Escrow Agent shall deliver the Pledged
Shares and Stock Powers, or such portion thereof as shall represent the Default
Shares in the event that the said notice specifies only those Events of Default
set forth in sub-paragraphs (iv) and (v) of Section 6 of the Amended Pledge
Agreement to the Secured Party. In the event that said Notice applies to the
Default Shares only, then Escrow Agent be and hereby is authorized to deliver
the Pledged Shares and/or the Stock Powers to Total New York's stock transfer
agent with instructions that new share certificates of Total New York be
promptly issued for the Pledged Shares, one certificate representing the total
of the Default Shares and the other certificate representing the remaining
balance of the Pledged Shares, in both cases registered in the name of the
Shareholder. Shareholder does hereby constitute and appoint the Escrow Agent as
its attorney-in-fact, with full power of substitution, to act on its behalf in
providing such instructions to Total New York's stock transfer agent for the
purposes of reissuing certificates for the Default Shares and the balance of the
Pledged Shares. Upon delivery of the Pledged Shares or the Default Shares, as to
case may be, and Stock Powers to Secured Party, Escrow Agent shall be full
released and discharged from its obligations under this Agreement except to the
extent that Escrow Agent continues to hld any portion of the Pledged Shares
hereunder. Upon receipt of such reissued share certificates, Escrow Agent shall
deliver the Default Shares and Stock Powers to Secured Party, and shall retain
the balance of the Pledged Shares. However, if,prior to the expiration of said
ten (10) business day period and delivery of the Pledged Shares or Default
Shares and Stock Powers, as the case may be, Shareholder shall deliver to Escrow
Agent written notice that Shareholder is contesting the occurrence of an Event
of Default, and/or in the event that the said notice specifies only those Events
of Defaults set forth in sub-paragraphs (iv) and (v) of Section 6 of the Amended
Pledge Agreement, is contesting the Default Percentage, then the Escrow Agent
shall withhold delivery of such Pledged Shares or Default Shares, as the case
may be, and Stock Powers and may dispose of the same in accordance with the
provisions of Section 7, below.
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c. In the event that the Obligations are satisfied in full, Shareholder
may send the Escrow Agent written notice thereof. If Escrow Agent shall receive
a Notice from Shareholder that the Obligations which are secured by the Amended
Pledge Agreement have been satisfied in full, Escrow Agent shall forward a copy
of such Notice to the Secured Party. Upon expiration of ten (10) days business
days following the Escrow Agents' receipt of such Notice, Escrow Agent shall
deliver the Pledge Shares and the Stock Powers to the Shareholder, upon which
the Escrow Agent shall be fully released and discharged from its obligations
under this Agreement. However, if prior to the expiration of said ten (10)
business day period and the delivery of the Pledged Shares to the Shareholder,
Secured Party shall deliver to Escrow Agent written Notice that the Secured
Party is contesting the claim that the Obligations have been satisfied in full,
then the Escrow Agent shall withhold delivery of the Pledged Shares and Stock
Powers and may dispose of the same in accordance with Section 7, below.
d. For the purposes of the enforcement of the provisions of this
Section 6 of this Escrow Agreement, the parties hereto and Total New York hereby
designate Xxxxxxx Xxxxx as the transfer agent for the Pledged Shares. Said
Transfer Agent signs this Escrow Agreement for the limitd purposes of
acknowledging receipt of a copy of the same and its agreement to comply with the
provisions thereof by promptly reissuing the share certificates as required by
paragraph (b) of Section 6 of this Agreement upon receipt of the Pledged Shares,
Stock Powers and transfer instruction from the Escrow Agent. The parties hereto
may mutually agree in a subsequent writing signed by each of them to designate
and appoint a substitute Transfer Agent (a "Substitute Transfer Agent"), and
upon receipt by the respective parties of a written instrument signed by
Substitute Transfer Agent acknowledging receipt of a copy of this Escrow
Agreement and undertaking to be bound by the terms hereof, the previous Transfer
Agent shall be deemed released and discharged of any further duties under the
terms of this Escrow Agreement.
7. In the event that the Escrow Agent is required to withhold delivery
of the Pledged Shares and/or Default Shares and Stock Powers pursuant to Section
6, above, Escrow Agent may, at its option, either: (i) deliver the Pledge Shares
and/or Default Shares and Stock Powers to the Clerk of the Supreme Court in
Monroe County, New York, whereupon the Escrow Agent shall be released and
discharged from all further liability and responsibility with respect to the
Pledged Shares and/or Default Shares and Stock Powers and shall be fully
discharged from all obligations under this Agreement, or (ii) the Escrow Agent
may continue to withhold delivery of said Pledged Shares and/or Default Shares
and Stock Powers until directed to do so by a final and non-appealable order of
said Court, or by a written direction signed by Shareholder and Secured Party.
8. Escrow Agent's acceptance of its appointment as Escrow Agent is
subject to the following additional terms and conditions each of which are
acceptable to and agreed to by Shareholder and Secured Party:
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a. Escrow Agent makes no representation or warranty as to the
value, validity or enforceability of the Amended Pledge
Agreement or as to the correctness of any statement contained
therein or in Agreement.
b. Escrow Agent may exercise its powers and perform its duties
under this Agreement either directly or through its agents or
attorneys.
c. Escrow Agent shall be entitled to obtain from counsel selected
by it with reasonable care, advice with respect to legal
matters pertaining to this Agreement and the Amended Pledge
Agreement and shall not be liable for any action taken,
omitted to be taken or suffered in good faith in accordance
with the advice of such counsel.
d. Escrow Agent shall not be required to use its own funds in the
performance of any of its duties or in the exercise of any of
its rights or powers hereunder, and Escrow Agent shall not be
obligated to take any action which, in its reasonable
judgment, would involve any expense or liability unless Escrow
Agent shall have been furnished security or indemnity in an
amount and in form and substance satisfactory to it.
e. Escrow Agent shall be entitled to rely on any notice, consent,
certificate, affidavit, letter, telegram, telecopy, facsimile
or teletype message, statement, order, instrument or other
document believed by it to be genuine and correct and to have
been signed or sent by the proper person or persons. Escrow
Agent shall deem and treat the Secured Party as the absolute
owner of the Obligations secured by the Amended Pledge
Agreement for all purposes hereof until such time as it
receives actual notice of an assignment of such Secured
Party's interest, together with the written agreement of the
assignee in form and substance satisfactory to Escrow Agent
that such assignee is bound by the Amended Pledge Agreement
and this Agreement as the "Secured Party" thereunder. If
Escrow Agent receives a notice or any such assignment by
Secured Party, it shall forward a copy of the same to
Shareholder.
f. Neither Escrow Agent nor any of its partners, employees or
agents shall be liable in any manner to any Secured Party for
any action taken, omitted to be taken or suffered in good
faith by it or them hereunder or in connection herewith, or be
responsible for the consequences of any oversight or error of
judgment, expressly including any liabilities arising out of
the mere negligence of Escrow Agent or its partners, employees
or agents, except for any liabilities due to the gross
negligence or willful misconduct of Escrow Agent or such
partner, employee or agent.
g. Secured Party agrees to indemnify Escrow Agent from and
against any and all liabilities, obligations, losses, damages,
penalties, interests, actions, judgments and suits ("Escrow
Agent Liabilities") of any kind or nature whatsoever which may
be imposed on, incurred by or asserted against Escrow Agent
relating to, growing out of or resulting from of this Escrow
Agreement, the Amended Pledge Agreement or relating to any
action taken or omitted by such Escrow Agent under this Escrow
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Agreement or the Amended Pledge Agreement, expressly including
Escrow Agent Liabilities arising out of mere negligence of
Escrow Agent, except to the extent that such Escrow Agent
Liabilities result solely from Escrow Agent's own gross
negligence or willful misconduct as determined by a court of
competent jurisdiction. The obligations of the Secured Party
in this Section 8(g) shall survive the termination of this
Escrow Agreement and the Amended Pledge Agreement and the
discharge of any party's obligations under this Escrow
Agreement, the Amended Pledge Agreement and the Obligations
secured thereby.
h. The Secured Party agrees to pay Escrow Agent a customary
hourly rate for its services rendered hereunder as Escrow
Agent. The Secured Party further agrees to reimburse Escrow
Agent for any out-of-pocket costs or expenses incurred by
Escrow Agent in connection with its duties under this Escrow
Agreement (including, but not limited to, fees and
disbursements of counsel and other professionals). The Secured
Party shall pay the costs and fees of Escrow Agent within
thirty days of the delivery to the Secured Party by Escrow
Agent of a statement showing in reasonable detail the costs
and fees incurred by Escrow Agent under this Escrow Agreement.
8. All notices required or permitted to be given pursuant to this
Escrow Agreement shall be given by certified mail, return receipt requested,
postage prepaid, addressed as follows:
To Shareholder at: Total Identity Corp.
0000 Xxxxxxxx-Xxxxxxxxx Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
To Secured Party at: Xxxxxx Xxxxx
0000 Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
To Escrow Agent: Shapiro, Rosenbaum, Liebschutz & Xxxxxx, LLP
0000 Xxxxxxxxxx Xxxxxxxx
Xxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx, Esq.
To Transfer Agent: Xxxxxxx Xxxxx
0000 Xxxxxxxx-Xxxxxxxxx Xxxx Xxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
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All such notices, requests and other communications will be deemed
given upon receipt. Any party from time to time may change its address for the
purpose of notices to that party by giving notice specifying such change to the
other parties hereto.
9. This Escrow Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Escrow Agreement to produce or account for more than one
such counterpart.
10. Governing Law. This Pledge Agreement shall be governed by, and
shall be construed and enforced in accordance with, the internal laws of the
State of New York, without regard to conflicts of laws principles.
11. Severability. If any provision of any of the Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
12. No Interpretation Against Drafter. This Escrow Agreement has been
entered into between persons sophisticated and knowledgeable in business
matters. Accordingly, any rule of law or legal decision that would require
interpretation of this Escrow Agreement against the party that has drafted it is
not applicable and is irrevocably and unconditionally waived. The provisions of
this Escrow Agreement shall be interpreted in a reasonable manner to effect the
purposes of the parties and this Escrow Agreement.
13. Entirety. This Escrow Agreement represents the entire agreement of
the parties hereto and thereto, and supersede all prior agreements and
understandings, oral or written, if any, relating to the transactions
contemplated herein and therein.
14. Survival. All representations and warranties of Secured Party and
Shareholder hereunder shall survive the execution and delivery of this Pledge
Agreement and the Secured Party Notes.
15. Consent and Waiver of Conflict of Interest. Shareholder
acknowledges that Xxxxxx X. Xxxxxxxxx, Esq., a partner in Escrow Agent, has
acted as counsel for Secured Party in connection with the Amended Pledge
Agreement, the Obligations secured thereby and related agreements. Shareholder
and Secured Party hereby consent to such representation by Xxxxxx X. Xxxxxxxxx
and waive any conflict of interest which may arise by virtue of his law firm
serving as Escrow Agent hereunder. Shareholder further consents and agrees that
in the event of any dispute between Shareholder and Secured Party pertaining to
this Agreement, the Amended Pledge Agreement, the Obligations secured thereby or
any related agreements, upon deposit of the Pledged Shares and Stock Powers with
the Clerk of the Supreme Court as provided for in Section 7, above, Xxxxxx X.
Xxxxxxxxx, Esq. and the firm of Shapiro, Rosenbaum, Xxxxxxxxxx & Xxxxxx, LLP,
may represent and continue to represent Secured Party in connection with such
dispute and in any litigation arising out such dispute. Shareholder hereby
waives and relinquishes any claims of confidentiality or conflict of interest
arising out of the service by Shapiro, Rosenbaum, Xxxxxxxxxx & Xxxxxx, LLP as
Escrow Agent hereunder, and agrees that such service shall not be the basis of a
motion to disqualify Shapiro, Rosenbaum, Xxxxxxxxxx & Xxxxxx, LLP from
representing Secured Party in any litigation between Shareholder and Secured
Party.
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IN WITNESS WHEREOF, the Shareholder, Secured Party and Escrow Agent
have signed this Agreement as of the date first above written.
SHAREHOLDER:
TOTAL IDENTITY CORP., a Florida corporation
by: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------
name: Xxxxxx X. Xxxxxxxxx
title: President
SECURED PARTY: /s/ Xxxxxx Xxxxx
-------------------------------------------
Xxxxxx Xxxxx
ESCROW AGENT: SHAPIRO, ROSENBAUM, XXXXXXXXXX & XXXXXX, LLP
by: /s/ Warrren X. Xxxxxxxxx
----------------------------------------
name: Xxxxxx X. Xxxxxxxxx, Esq.
title: Partner
TRANSFER AGENT: by: /s/ Xxxxxxx Xxxxx
----------------------------------------
name: Xxxxxxx Xxxxx
title: Transfer Agent
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