ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of February 9, 1998, by and
among Commodore Environmental Services, Inc. ("COES"), Commodore Applied
Technologies, Inc. (the "Company"), Southbrook International Investments, Ltd.
("Southbrook"), Montrose Investments, Ltd. ("Montrose"), Xxxxxxxx Investment
L.P. ("Xxxxxxxx") (Southbrook, Montrose and Xxxxxxxx are each referred to herein
as a "Purchaser" and are collectively referred to herein as the "Purchasers."),
and Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP (the "Escrow Agent").
Recitals
A. Simultaneously with the execution of this Agreement, COES, the Company
and the Purchasers have entered into a Common Stock Purchase Agreement, dated as
of the date hereof (the "Purchase Agreement"), pursuant to which COES is selling
to the Purchasers shares (the "Shares") of the Company's common stock, $.001 par
value (the "Common Stock") and warrants to purchase shares of Common Stock (the
"Warrants") pursuant to the First Tranche Closing and the Second Tranche
Closing, if any. Capitalized terms that are used and not otherwise defined in
this Agreement that are defined in the Purchase Agreement shall have the meaning
set forth in the Purchase Agreement.
B. The Escrow Agent is willing to act as escrow agent pursuant to the terms
of this Agreement with respect to the receipt and subsequent delivery of the
First Tranche Purchase Price to be paid for the Initial First Tranche Shares and
the First Tranche Warrants pursuant to Section 1.1 of the Purchase Agreement
less any amounts any parties are to be paid or reimbursed by COES under the
Purchase Agreement (the "First Tranche Purchase Price") and the delivery of the
Initial First Tranche Shares and the First Tranche Warrants, together with the
Ancillary First Tranche Closing Documents (as defined below) and the First
Tranche Purchase Price (the "First Tranche Consideration").
C. If there is a Second Tranche Closing, the Escrow Agent is willing to act
as escrow agent pursuant to the terms of this Agreement with respect to the
receipt and subsequent delivery of the Second Tranche Purchase Price to be paid
for the Initial Second Tranche Shares and the Second Tranche Warrants pursuant
to Section 1.1 of the Purchase Agreement less any amounts any parties are to be
paid or reimbursed by COES under the Purchase Agreement (the "Second Tranche
Purchase Price") and the delivery of the Initial Second Tranche Shares and the
Second Tranche Warrants, together with the Ancillary Second Tranche Closing
Documents (as defined below) and the Second Tranche Purchase Price (the "Second
Tranche Consideration" and together with the First Tranche Consideration, the
"Consideration").
D. Upon the First Tranche Closing and the Second Tranche Closing
(collectively, the "Closing") and the occurrence of the events described in
Sections 2 and 4
below, the Escrow Agent shall cause the distribution of the First Tranche
Consideration and the Second Tranche Consideration, respectively, in accordance
with the terms of this Agreement.
NOW, THEREFORE, IT IS AGREED:
1. Deposit of Consideration for the First Tranche Closing.
a. Concurrently with the execution of this Agreement, the Purchasers shall
deposit with the Escrow Agent the First Tranche Purchase Price due for the
Initial First Tranche Shares and the First Tranche Warrants to be purchased by
them at the First Tranche Closing in accordance with Section 1.1(a)(ii) of the
Purchase Agreement and COES shall deliver to the Escrow Agent the Initial First
Tranche Shares and the First Tranche Warrants, registered in the name of the
Purchasers, and the maximum amount of Additional First Tranche Shares in
accordance with Sections 1.2(a)(ii) and (iii) of the Purchase Agreement and
wiring instructions for transfer of the First Tranche Purchase Price by the
Escrow Agent into an account specified by COES for such purpose. In addition,
the Purchasers and COES shall deposit with the Escrow Agent all other
certificates and other documents required under the Purchase Agreement to be
delivered by them at the First Tranche Closing (such certificates and other
documents being hereinafter referred to as the "Ancillary First Tranche Closing
Documents").
(i) The First Tranche Purchase Price shall be delivered by the
Purchasers to the Escrow Agent by wire transfer to the following account:
Citibank, N.A.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
ABA No.: 000-000-000
For the Account of
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx
& Xxxxxx LLP
Attorney Trust Account
Account No.: 00-000-000
Attention: Xxxxxx Xxxxxxxxxx
Reference: Commodore Applied Technologies, Inc. (10650-14)
(ii) The Initial First Tranche Shares, First Tranche Warrants and the
Ancillary First Tranche Documents shall be delivered to the Escrow Agent at
its address for notice indicated in Section 7(a).
b. Until termination of this Agreement as set forth in Section 2, all
additional First Tranche Consideration paid by or which becomes payable between
COES and the Purchasers shall be deposited with the Escrow Agent.
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c. The Purchasers and COES understand that the First Tranche Consideration
delivered to the Escrow Agent pursuant to Section 1(a) shall be held in escrow
in the Escrow Agent's interest-bearing business account until the First Tranche
Closing. After the First Tranche Purchase Price has been received by the Escrow
Agent and all other conditions of First Tranche Closing are met, the parties
hereto hereby authorize and instruct the Escrow Agent to promptly effect the
First Tranche Closing.
d. At the First Tranche Closing, Escrow Agent is authorized and directed to
deduct from the First Tranche Purchase Price (i) $510,000 which will be paid to
Avalon Research Group, Inc. ("Avalon") in accordance with the engagement letter
between the Company and Avalon relating to the transactions contemplated by the
Purchase Agreement (the "Engagement Letter"), for remittance to Avalon in
accordance with its instructions and (ii) $20,000 which will be retained by the
Escrow Agent for its legal fees in accordance with the Purchase Agreement. In
addition, the portion of the First Tranche Purchase Price released to COES
hereunder shall be reduced by all wire transfer fees incurred thereupon.
2. Terms of Escrow for the First Tranche Closing.
a. The Escrow Agent shall hold the First Tranche Consideration in escrow
until the earlier to occur of (i) the receipt by the Escrow Agent of the First
Tranche Purchase Price, the Initial First Tranche Shares, the maximum amount of
Additional First Tranche Shares, the First Tranche Warrants and the Ancillary
First Tranche Closing Documents, and a writing signed by the Purchasers and COES
that all of the First Tranche Closing conditions have been met and instructing
the First Tranche Closing, and (ii) the receipt by the Escrow Agent of a written
notice, executed by COES or the Purchasers, stating that the Purchase Agreement
has been terminated in accordance with its terms and instructing the Escrow
Agent with respect to the First Tranche Purchase Price, the Initial First
Tranche Shares, the Additional First Tranche Shares, the First Tranche Warrants
and the Ancillary First Tranche Closing Documents.
b. If the Escrow Agent receives the items referenced in clause (i) of
Section 2(a) prior to its receipt of the notice referenced in clause (ii) of
Section 2(a), then, promptly thereafter, the Escrow Agent shall deliver (i) to
the Purchasers, the Initial First Tranche Shares, the First Tranche Warrants and
any interest earned on account of the First Tranche Purchase Price through the
First Tranche Closing, (ii) to COES, the First Tranche Purchase Price (net of
amounts described under Section 1(d)), and (iii) the Ancillary First Tranche
Closing Documents to the party entitled to receive the same.
c. If the Escrow Agent receives the notice referenced in clause (ii) of
Section 2(a) prior to its receipt of the items referenced in clause (i) of
Section 2(a), then the Escrow Agent shall promptly upon receipt of such notice
return (i) the First Tranche Purchase Price (together with any interest earned
thereon through such date) to the Purchasers, (ii) the Initial First Tranche
Shares, the Additional First Tranche Shares and the First Tranche Warrants
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to COES and (iii) the Ancillary First Tranche Closing Documents to the party
that delivered the same.
d. If the Escrow Agent, prior to delivering or causing to be delivered the
First Tranche Consideration in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold the First Tranche
Consideration until such time as the Escrow Agent shall receive (i) written
instructions jointly executed by the Purchasers and COES, directing distribution
of such First Tranche Consideration, or (ii) a certified copy of a judgment,
order or decree of a court of competent jurisdiction, final beyond the right of
appeal, directing the Escrow Agent to distribute said First Tranche
Consideration to any party hereto or as such judgment, order or decree shall
otherwise specify (including any such order directing the Escrow Agent to
deposit the First Tranche Consideration into the court rendering such order,
pending determination of any dispute between any of the parties). In addition,
the Escrow Agent shall have the right to deposit any of the First Tranche
Consideration with a court of competent jurisdiction pursuant to Section 1006 of
the New York Civil Practice Law and Rules without liability to any party if said
dispute is not resolved within 30 days of receipt of any such notice of
objection, dispute or otherwise.
3. Deposit of Consideration for the Second Tranche Closing.
a. Prior to the Second Tranche Closing Date, if any, the Purchasers shall
deposit with the Escrow Agent the Second Tranche Purchase Price due for the
Initial Second Tranche Shares and the Second Tranche Warrants to be purchased by
them at the Second Tranche Closing, if any, in accordance with Section 1.1(b) of
the Purchase Agreement and COES shall deliver to the Escrow Agent the Initial
Second Tranche Shares and the Second Tranche Warrants, registered in the name of
the Purchasers, and the maximum amounts of Additional Second Tranche Shares in
accordance with Sections 1.2(b)(ii) and (iii) of the Purchase Agreement and
wiring instructions for transfer of the Second Tranche Purchase Price by the
Escrow Agent into an account specified by COES for such purpose. In addition,
the Purchasers and COES shall deposit with the Escrow Agent all other
certificates and other documents required under the Purchase Agreement to be
delivered by them at the Second Tranche Closing (such certificates and other
documents being hereinafter referred to as the "Ancillary Second Tranche Closing
Documents").
(i) The Second Tranche Purchase Price shall be delivered by the
Purchasers to the Escrow Agent by wire transfer to the following account:
Citibank, N.A.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
ABA No.: 000-000-000
For the Account of
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx
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& Xxxxxx LLP
Attorney Trust Account
Account No.: 00-000-000
Attention: Xxxxxx Xxxxxxxxxx
Reference: Commodore Applied Technologies, Inc. (10650-14)
(ii) The Initial Second Tranche Shares, Second Tranche Warrants and
the Ancillary Second Tranche Documents shall be delivered to the Escrow
Agent at its address for notice indicated in Section 7(a).
b. Until termination of this Agreement as set forth in Section 4, all
additional Second Tranche Consideration paid by or which becomes payable between
COES and the Purchasers shall be deposited with the Escrow Agent.
c. The Purchasers and COES understand that the Second Tranche Consideration
delivered to the Escrow Agent pursuant to Section 1(a) shall be held in escrow
in the Escrow Agent's interest-bearing business account until the Second Tranche
Closing. After the Second Tranche Purchase Price has been received by the Escrow
Agent and all other conditions of Second Tranche Closing are met, the parties
hereto hereby authorize and instruct the Escrow Agent to promptly effect the
Second Tranche Closing.
d. At the Second Tranche Closing, Escrow Agent is authorized and directed
to deduct from the Second Tranche Purchase Price, (i) 8 1/2% of the Second
Tranche Purchase Price which will be paid to Avalon in accordance with the
Engagement Letter, for remittance to Avalon in accordance with its instructions.
In addition, the portion of the Second Tranche Purchase Price released to COES
hereunder shall be reduced by all wire transfer fees incurred thereupon.
4. Terms of Escrow for the Second Tranche Closing.
a. The Escrow Agent shall hold the Second Tranche Consideration in escrow
until the earlier to occur of (i) the receipt by the Escrow Agent of the Second
Tranche Purchase Price, the Initial Second Tranche Shares, the Second Tranche
Warrants and the Ancillary Second Tranche Closing Documents and a writing signed
by the Purchasers and COES that all of the Second Tranche Closing conditions
have been met and instructing the Second Tranche Closing, and (ii) the receipt
by the Escrow Agent of a written notice, executed by COES or the Purchasers,
stating that the Purchase Agreement has been terminated in accordance with its
terms and instructing the Escrow Agent with respect to the Second Tranche
Purchase Price, the Initial Second Tranche Shares, the Second Tranche Warrants
and the Ancillary Second Tranche Closing Documents.
b. If the Escrow Agent receives the items referenced in clause (i) of
Section 4(a) prior to its receipt of the notice referenced in clause (ii) of
Section 4(a), then, promptly thereafter, the Escrow Agent shall deliver (i) to
the Purchasers, the Initial Second
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Tranche Shares, the Second Tranche Warrants, any interest earned on account of
the Second Tranche Purchase Price through the Second Tranche Closing, (ii) to
COES, the Second Tranche Purchase Price (net of amounts described under Section
3(d), and (iii) the Ancillary Second Tranche Closing Documents to the party
entitled to receive the same.
c. If the Escrow Agent receives the notice referenced in clause (ii) of
Section 4(a) prior to its receipt of the items referenced in clause (i) of
Section 4(a), then the Escrow Agent shall promptly upon receipt of such notice
return (i) the Second Tranche Purchase Price (together with any interest earned
thereon through such date) to the Purchasers, (ii) the Initial Second Tranche
Shares and Second Tranche Warrants to COES and (iii) the Ancillary Second
Tranche Closing Documents to the party that delivered the same.
d. If the Escrow Agent, prior to delivering or causing to be delivered the
Second Tranche Consideration in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold the Second Tranche
Consideration until such time as the Escrow Agent shall receive (i) written
instructions jointly executed by the Purchasers and COES, directing distribution
of such Second Tranche Consideration, or (ii) a certified copy of a judgment,
order or decree of a court of competent jurisdiction, final beyond the right of
appeal, directing the Escrow Agent to distribute said Second Tranche
Consideration to any party hereto or as such judgment, order or decree shall
otherwise specify (including any such order directing the Escrow Agent to
deposit the Second Tranche Consideration into the court rendering such order,
pending determination of any dispute between any of the parties). In addition,
the Escrow Agent shall have the right to deposit any of the Second Tranche
Consideration with a court of competent jurisdiction pursuant to Section 1006 of
the New York Civil Practice Law and Rules without liability to any party if said
dispute is not resolved within 30 days of receipt of any such notice of
objection, dispute or otherwise.
5. Duties and Obligations of the Escrow Agent.
a. The parties hereto agree that the duties and obligations of the Escrow
Agent are only such as are herein specifically provided and no other. The Escrow
Agent's duties are as a depositary only, and the Escrow Agent shall incur no
liability whatsoever, except as a direct result of its willful misconduct.
b. The Escrow Agent may consult with counsel of its choice, and shall not
be liable for any action taken, suffered or omitted by it in accordance with the
advice of such counsel.
c. The Escrow Agent shall not be bound in any way by the terms of any other
agreement to which the Purchasers, COES and the Company are parties, whether or
not it has knowledge thereof, and the Escrow Agent shall not in any way be
required to determine whether or not any other agreement has been complied with
by the Purchasers, COES and the Company, or any other party thereto. The Escrow
Agent shall not be bound by any
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modification, amendment, termination, cancellation, rescission or supersession
of this Agreement unless the same shall be in writing and signed by each of the
Purchasers, COES and the Company, and agreed to in writing by the Escrow Agent.
d. In the event that the Escrow Agent shall be uncertain as to its duties
or rights hereunder or shall receive instructions, claims or demands which, in
its opinion, are in conflict with any of the provisions of this Agreement, it
shall be entitled to refrain from taking any action, other than to keep safely,
all Consideration held in escrow until it shall jointly be directed otherwise in
writing by the Purchasers, COES and the Company or by a final judgment of a
court of competent jurisdiction.
e. The Escrow Agent shall be fully protected in relying upon any written
notice, demand, certificate or document which it, in good faith, believes to be
genuine. The Escrow Agent shall not be responsible for the sufficiency or
accuracy of the form, execution, validity or genuineness of documents or
securities now or hereafter deposited hereunder, or of any endorsement thereon,
or for any lack of endorsement thereon, or for any description therein; nor
shall the Escrow Agent be responsible or liable in any respect on account of the
identity, authority or rights of the persons executing or delivering or
purporting to execute or deliver any such document, security or endorsement.
f. The Escrow Agent shall not be required to institute legal proceedings of
any kind and shall not be required to defend any legal proceedings which may be
instituted against it or in respect of the Consideration.
g. If the Escrow Agent at any time, in its sole discretion, deems it
necessary or advisable to relinquish custody of the Consideration, it may do so
by giving five (5) days written notice to the parties of its intention and
thereafter delivering the consideration to any other escrow agent mutually
agreeable to the Purchasers, COES and the Company and, if no such escrow agent
shall be selected within three days of the Escrow Agent's notification to the
Purchasers, COES and the Company of its desire to so relinquish custody of the
Consideration, then the Escrow Agent may do so by delivering the Consideration
(a) to any bank or trust company in the Borough of Manhattan, City and State of
New York, which is willing to act as escrow agent thereunder in place and
instead of the Escrow Agent, or (b) to the clerk or other proper officer of a
court of competent jurisdiction as may be permitted by law within the State,
County and City of New York. The fee of any such bank or trust company or court
officer shall be borne one-half by the Purchasers and one-half by COES. Upon
such delivery, the Escrow Agent shall be discharged from any and all
responsibility or liability with respect to the Consideration and CEO, the
Company and the Purchasers shall promptly pay to the Escrow Agent all monies
which may be owed it for its services hereunder, including, but not limited to,
reimbursement of its out-of-pocket expenses pursuant to paragraph (i) below.
h. This Agreement shall not create any fiduciary duty on the Escrow Agent's
part to the Purchasers, COES or the Company, nor disqualify the Escrow Agent
from representing either party hereto in any dispute with the other, including
any dispute with respect
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to the Consideration. COES and the Company understand that the Escrow Agent has
acted and will continue to act as counsel to the Purchasers.
i. The reasonable out-of-pocket expenses paid or incurred by the Escrow
Agent in the administration of its duties hereunder, including, but not limited
to, all counsel and advisors' and agents' fees and all taxes or other
governmental charges, if any, shall be paid by COES.
j. Upon the occurrence of the First Tranche Closing, the Escrow Agent's
obligations pursuant to Sections 1 and 2 shall terminate, but shall continue
regarding Sections 3 and 4. Subsequently, if there is no Second Tranche Closing,
the Escrow Agent's obligations pursuant to Sections 3 and 4, shall terminate. If
Additional First Tranche Shares or Additional Second Tranche Shares are to be
conveyed to the Purchasers pursuant to the Purchase Agreement, Escrow Agent is
authorized to deliver such shares it is holding to counsel for COES so they can
effect such conveyance. The balance of any Additional First Tranche Shares or
Second Tranche Shares which are not conveyed in accordance with the Purchase
Agreement shall be returned by Escrow Agent to counsel for COES promptly
following the earlier to occur of the date on which Escrow Agent receives notice
from the Purchasers or COES that they will not be issued under the Purchase
Agreement or the date of termination of this Agreement.
6. Indemnification. The Purchasers, COES and the Company, jointly and
severally, hereby indemnify and hold the Escrow Agent, its employees, partners,
members and representatives harmless from and against any and all losses,
damages, taxes, liabilities and expenses that may be incurred, directly or
indirectly, by the Escrow Agent and/or any such person, arising out of or in
connection with its acceptance of appointment as the Escrow Agent hereunder
and/or the performance of its duties pursuant to this Agreement, including, but
not limited to, all legal costs and expenses of the Escrow Agent and any such
person incurred defending itself against any claim or liability in connection
with its performance hereunder and the costs of recovery of amounts pursuant to
this Section 6.
7. Miscellaneous.
a. All notices, requests, demands and other communications hereunder shall
be in writing, with copies to all the other parties hereto, and shall be deemed
to have been duly given when (i) if delivered by hand, upon receipt, (ii) if
sent by facsimile, upon receipt of proof of sending thereof, (iii) if sent by
nationally recognized overnight delivery service (receipt requested), the next
business day or (iv) if mailed by first-class registered or certified mail,
return receipt requested, postage prepaid, four days after posting in the U.S.
mails, in each case if delivered to the following addresses:
If to the Company: Commodore Applied Technologies, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
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Attn: Chief Financial Officer
With copies to: Xxxxxxxxx Traurig
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx Xxxxx, Esq.
If to the Purchasers: Southbrook International Investments, Ltd.
c/o Trippoak Advisors, Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
Xxxxxxxx Investments L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attn: Xxxx Xxxx
Fax: (000) 000-0000
Montrose Investments, Ltd.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attn: Xxxx Xxxx
Fax: (000) 000-0000
If to the Escrow Agent Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
(the Escrow Agent shall Xxxxxx LLP
receive copies of all 1290 Avenue of the Americas
communications under Xxx Xxxx, XX 00000
this Agreement) Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
or at such other address as any of the parties to this Agreement may hereafter
designate in the manner set forth above to the others.
(b) This Agreement shall be construed and enforced in accordance with the
law of the State of New York applicable to contracts entered into and performed
entirely within New York.
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[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be signed the day and year first above written.
COMMODORE APPLIED TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
COMMODORE ENVIRONMENTAL SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Senior Vice President, Chief Financial
and Administrative Officer, Secretary
and General Counsel
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Attorney-in-fact
XXXXXXXX INVESTMENTS L.P.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Authorized Signatory
MONTROSE INVESTMENTS, LTD.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Authorized Signatory
XXXXXXXX XXXXXXXXX XXXXXX
XXXXXXXX & XXXXXX LLP
BY: /s/
-----------------------------------------------
A Member of the Firm
