ESCROW AGREEMENT (the "Agreement") made this 4th day of August, 2000 among Power
Efficiency Corporation, a Delaware corporation with temporary offices at 0000
Xxxxxxx Xxxxx, Xxxxx X, Xxx Xxxxx, XX 00000, (the "Company"), Performance
Control, LLC, a Michigan limited liability company having an address 0000
Xxxxxxx Xxxxx, Xxxxx X, Xxx Xxxxx, XX 00000 ("Percon") and Continental Stock
Transfer & Trust Company, with an office at 0 Xxxxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000 (the "Escrowee"). The Company, Percon and the Escrowee are sometimes
collectively referred to as the "Parties" and individually as a "Party".
W I T N E S S E T H :
WHEREAS, the Company and Percon are party to an Asset Purchase Agreement
(the " Asset Agreement") dated July 28, 2000, a true copy of which is attached
hereto as Exhibit "A" and incorporated herein by reference; and
WHEREAS, the Asset Agreement provide for an aggregate of 50,000 shares of
the Company's Common Stock, $.001 par value per share (the "Shares"), to be
delivered into escrow in the event of a Claim (as that term is defined in the
Asset Agreement); and
WHEREAS, Section 17 of the Asset Agreement sets forth the conditions
precedent to the obligation of the Escrowee to deliver the Shares to the
Company; and
WHEREAS, the capitalized terms in this Agreement shall have the meaning
ascribed thereto in the Asset Agreement; and
WHEREAS, the Parties desire to set forth the terms and conditions governing
the release of the Shares by the Escrowee.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the Parties hereby incorporate the foregoing recitals
into this Agreement and agree as follows:
1. Creation of Escrow. By virtue of the execution of this Agreement and
the delivery of a certificate or certificates representing the Shares to the
Escrowee, the Company and Percon hereby create the escrow made the subject of
this Agreement and hereby authorize the Escrowee to deliver the Shares as
hereinafter provided. The Shares shall be delivered to the Escrowee registered
in the name of Percon and accompanied by a stock power endorsed in blank with
Medallion signature guaranteed by a bank or brokerage firm.
2. Terms of Escrow. The following terms shall apply:
(a). Duties of the Escrowee under the Asset Agreement.
(i) In The Event of No Claim. The Parties hereby agree
that the Escrowee shall accept delivery of and hold the Shares until the first
anniversary of the execution of this Agreement (the"Expiration Date"). In the
event no Claim is made on or before 5:00pm Eastern Daylight Time on the
Expiration Date, the Escrowee shall return the Shares to Percon and furnish the
Company with written notice of such return. Thereafter this
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Agreement shall automatically terminate and the Escrowee shall be discharged
without further action on behalf of any Party and without further notice to the
Company or Percon.
(ii) In the Event of a Claim. (ii) In the Event of a
Claim. In the event that, at any time prior to the Expiration Date, the Company
shall claim that Percon has breached any of its representations, warranties or
covenants under the Asset Agreement, or any claim is made against the Company by
a creditor of Percon with respect to a liability of Percon or the Business
accruing prior to the Expiration Date other than with respect to the Assumed
Liabilities, or if the Company shall incur any Cost, as that term is defined in
Paragraph 12.1(iii) of the Asset Agreement (collectively, a "Claim"), it shall
provide notice thereof to Percon, with a copy to the Escrowee (the "Claim
Notice"). The Claim Notice shall set forth with particularity the specifics of
any such Claim. Percon shall have the right to cure the Claim in accordance with
the provisions of Paragraph 17.2 of the Asset Agreement or to dispute or contest
any such Claim. In the event that Percon does not dispute or contest any such
Claim and/or fails to cure same pursuant to Paragraph 17.2 of the Asset
Agreement, the Company may thereafter furnish to the Escrowee and Percon a duly
executed and notarized affidavit setting forth the specifics of any such Claim
(the "Default Notice"). The Default Notice, shall include, without limitation,
the amount of the Claim and basis therefor, the date of the Claim Notice to
Percon and a certification by an executive officer of the Company that Percon
has not disputed or contested the Claim or has failed to cure the same within
the time provided for herein (the "Certification"). Unless Percon has paid to
the Company the amount of such Claim within ten (10) days after receipt by
Escrowee and Percon of the Default Notice and the Certification, the Escrowee
shall on the 10th day after receipt thereof, promptly deliver to the Company
such number of Shares as shall equal the amount of such Claim divided by $2.50.
(b). In the event, however, that Percon shall elect to
dispute or contest any such Claim, it shall be required, within ten (10) days of
the Claim Notice, to provide notice to the Company, with a copy to the Escrowee,
which notice shall set forth with particularity the specifics of any such
dispute or contest as between the parties hereto or their successors or
representatives (the "Dispute Notice"). In the event of the sending of a Dispute
Notice, the Company and Percon hereby covenant and agree that any such dispute
or contest made the subject of the Dispute Notice shall be settled in the City
of New York, by a single arbitrator appointed in accordance with the commercial
rules then in force of the American Arbitration Association. The decision of the
arbitrator shall be deemed to be final, and judgment upon any award or decision
rendered thereby may be entered in any court having jurisdiction thereof (the
"Award"). A copy of the arbitrator's decision as well as the Award shall
promptly be furnished to the Escrowee by the victorious Party. The Escrowee
shall retain the portion of the Shares covered by any such dispute until its
receipt of a certified copy of any such Award.
The Escrowee shall then convert the Award into Shares by
dividing the Award by $2.50. The resultant number of Shares shall, upon written
notice to the Percon, returned to the Company for restoration to authorized but
unissued status or to be held as treasury stock.
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Thereafter, and in the event no additional Claims are made
before the Expiration Date, any remaining Shares held by the Escrowee shall be
returned to Percon with notice of such return to the Company. Thereafter this
Agreement shall automatically terminate and the Escrowee shall be discharged
without further action on behalf of any Party and without further notice to the
Company or Percon.
(c) Compensation. The Escrowee shall receive a fee of
$100.00 per month for each month it serves as Escrowee and the reimbursement for
disbursements in connection with its time and expense incurred in fulfilling its
obligation pursuant to this Agreement. The Company agrees to pay the agreed upon
fee and disbursements to the Escrowee.
(d) Notice of Default or Dispute. If the Escrowee shall
receive a Default Notice or a Dispute Notice, the Escrowee may, at its sole
discretion, notify the Parties and cease its activities as Escrowee and deposit
the Shares being held pursuant to this Agreement with the American Arbitration
Association, at its offices in the City of New York. Upon such deposit or the
delivery of the Shares pursuant to this Paragraph 2(d), the Escrowee shall
automatically be relieved and fully discharged of all further obligations and
responsibilities hereunder. The Parties acknowledge that the Escrowee is acting
solely in its capacity as Escrowee at their request and for their convenience,
that the Escrowee shall not be deemed to be the agent of either of the Parties
nor shall he be liable for any act or omission on its part unless taken or
suffered in bad faith, in willful disregard of this Agreement or involving gross
negligence. The Company and Percon hereby agree to jointly and severally
indemnify and hold the Escrowee harmless from and against all costs, claims and
expenses, including reasonable attorney's fees, incurred in connection with the
performance of the Escrowee's duties hereunder, except with respect to actions
or omissions taken or suffered by the Escrowee in bad faith, in willful
disregard of this Agreement or involving gross negligence on the part of the
Escrowee. The Parties hereby further agree that the arbitration provisions of
the Agreement shall supersede and control the jurisdiction and venue provisions
of the Asset Agreement.
(e) Reliance. The Escrowee shall be protected in acting
upon any written notice, request, consent, certificate, receipt, authorization
or other paper or document which the Escrowee believes to be genuine and what it
purports to be;
(f) Counsel. The Escrowee may confer with legal counsel in
the event of any dispute or question as to the construction of any of the
provisions hereof, or its duties hereunder, and it shall incur no liability and
it shall be fully protected in acting in accordance with the opinions and
instructions of such counsel. The Parties hereby authorize the Escrowee to
utilize the Shares for the payment of any of the Escrowee's legal fees unless
the same are paid by the Parties, who shall be jointly and severally liable
therefore.
(g) Remedies of Escrowee. The Escrowee is hereby
authorized in the event of any doubt as to the course of action he should take
under this Agreement, to petition the American Arbitration Association in the
City of New York only, for instructions or to interplead the Shares. The Parties
agree to the jurisdiction of the American Arbitration Association over their
persons as well as the Shares held by the Escrowee, waive personal
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service of process, and agree that service of process by certified mail, return
receipt requested, to the address set forth herein shall constitute adequate
notice of service hereunder and shall confer personal jurisdiction on the
American Arbitration Association in the City of New York. The Parties hereby
agree to indemnify and hold the Escrowee harmless from any liability or losses
occasioned thereby and to pay any and all of its cost, expense and attorneys'
fees incurred in any such action and agree that on such petition or interpleader
action that the Escrowee or its employees will be relieved of further liability.
The Escrowee is hereby given a lien upon, and security interest in the Shares
deposited pursuant to this Agreement to secure the Escrowee's rights to payment
or reimbursement.
(h) Resignation. The Escrowee may resign for any reason,
upon thirty (30) days written notice to the Parties to this Agreement. Upon the
expiration of such thirty (30) day period, the Escrowee may deliver the Shares
in its possession under this Agreement to any successor Escrowee appointed by
the other Parties hereto, or if no successor Escrowee has been appointed, to the
American Arbitration Association in the City of Pittsburgh, State of
Pennsylvania. Upon either such delivery, the Escrowee shall automatically be
released from any and all liability under this Agreement. Termination under this
Paragraph shall in no way change the terms of this Agreement concerning
reimbursement of expenses, indemnity and fees of the Escrowee.
3. Representations and Warranties of the Company. The Company
hereby represents and warrants to Percon and the Escrowee that all of the
representations, warranties and covenants contained in the Asset Agreement are
true and correct and the same are hereby incorporated herein by this reference.
4. Representations, Warrants and Covenants of Percon. Percon
hereby represents and warrants to the Company and the Escrowee that all of the
representations, warranties and covenants contained in the Asset Agreement (as
limited therein) are true and correct and the same are hereby incorporated
herein by this reference.
5. Expenses. Each of the Parties hereby agrees to pay and be
solely responsible for its own legal fees incurred by it in connection with a
Claim made under this Agreement.
6. Dividends. So long as the Shares remain in escrow, all
dividends upon the Shares shall belong to Percon. However, the Escrowee shall
hold any and all dividends in escrow for disbursement in accordance with the
terms of Paragraph 2 of this Agreement.
7. Voting. So long as the Shares remain in escrow, Percon
shall vote the Shares.
8. Assignments and Successors. This Agreement shall not be
assigned by the Company or Percon without the prior written consent of the other
Party, the delivery of written notice to the Escrowee and the written agreement
by any assignee to be bound by the terms of this Agreement. All of the terms and
provisions of this Agreement shall
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be binding upon and inure to the benefit of and be enforceable by and against
the successors and assigns of the Parties hereto.
9. Additional Instruments. Each of the Parties shall from time
to time, at the request of the others, execute, acknowledge and deliver to the
other any and all further instruments that may be reasonably required to give
full effect and force to the provisions of this Agreement.
10. Entire Agreement. Each of the Parties hereby covenants that
this Agreement is intended to and does contain and embody herein all of the
understandings and agreements, both written or oral, of the Parties hereby with
respect to the subject matter of this Agreement, and that there exists no oral
agreement or understanding, express or implied liability, whereby the absolute,
final and unconditional character and nature of this Agreement shall be in any
way invalidated, empowered or affected. There are no representations, warranties
or covenants other than those set forth herein.
11. Laws of the State of New York. This Agreement shall be
governed by and interpreted under and construed in all respects in accordance
with the laws of the State of New York, irrespective of the place of domicile or
residence of the Parties.
12. Originals. This Agreement may be executed in counterparts
each of which so executed shall be deemed an original and constitute one and the
same agreement.
13. Address of Parties. Each Party shall at all times keep the
other Party and the Escrowee informed of its principal place of business if
different from that stated herein, and shall promptly notify the other Party and
the Escrowee in writing of any change, giving the address of the new principal
place of business.
14. Notices. All notices that are required to be or may be
sent pursuant to the provision of this Agreement shall be sent by certified
mail, return receipt requested, or via overnight courier, to each of the Parties
and the Escrowee at the following addresses, and shall count from the date of
receipt as shown on the return receipt mailing or the date after the date of the
airbill:
Performance Control, LLC
0000 Xxxxxxx Xxxxx, Xxxxx X
Xxx Xxxxx, XX 00000
With a copy to:
Seyburn, Kahn, Xxxx, Xxxx and Xxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
Power Efficiency Corporation
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0000 Xxxxxxx Xxxxx, Xxxxx X
Xxx Xxxxx, XX 00000
With a copy to:
Xxxxxx Xxxxxxxxxxx, Esq.
0000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
15. Modification and Waiver. A modification or waiver of any
of the provisions of this Agreement shall be effective only if made in writing
and executed with the same formality as this Agreement. The failure of any Party
to insist upon strict performance of any of the provisions of this Agreement
shall not be construed as a waiver of any subsequent default of the same or
similar nature or of any other nature or kind.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
Power Efficiency Corporation
BY:
----------------------------------
Xxxxxxxx Xxxxxxxx, President
Performance Control LLC
By:
----------------------------------
Xxxxxx Xxxxx, Manager
Continental Stock Transfer & Trust Company
As Escrowee Only
By:
----------------------------------
Xxxxx Xxxxxxxxxx, Vice President
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