EXHIBIT 2.2
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made and entered into as of the
16th day of March, 2000, by and among Advanced Knowledge, Inc., a Delaware
corporation ("AKI"), Soccer Magic Inc., an Ontario corporation ("SMI") (acting
for the benefit of all of the holders of the outstanding common shares of SMI
(the "SMI Shareholders")), and Xxxx X. Xxxxxxxxxx, a professional corporation,
as escrow agent (the "Escrow Agent"). All capitalized terms herein which are not
otherwise defined shall have the meanings given to them in that certain
Acquisition Agreement dated as of December 14, 1999 by and between AKI and SMI
(the "Acquisition Agreement").
WHEREAS, AKI has entered into the Acquisition Agreement with SMI and
related Purchase and Sale Agreements ("P&S Agreements") with each of the SMI
Shareholders, pursuant to which AKI has agreed to acquire SMI (the
"Acquisition") by purchasing from the SMI Shareholders all of the outstanding
common shares of SMI (the "SMI Shares") in exchange for a total of 10,000,000
newly issued shares of AKI common stock (the "AKI Shares");
WHEREAS, the terms of the Acquisition Agreement and the P&S Agreements
provide that certain items be placed in an escrow (the "Escrow") at the Closing
of the Acquisition to establish a means for rescinding the Acquisition if
certain post-closing conditions are not satisfied by June 30, 2000; and
WHEREAS, AKI and SMI each desire that the Escrow Agent serve as escrow
agent, and the Escrow Agent is willing to serve as escrow agent, on the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and obligations
herein contained, the parties hereby agree as follows:
1. Appointment of Escrow Agent. AKI and SMI hereby appoint the Escrow
Agent, and the Escrow Agent hereby accepts such appointment, to serve as escrow
agent on the terms and conditions set forth in this Agreement. As consideration
for the Escrow Agent's services hereunder, AKI and SMI shall each pay US$250 to
the Escrow Agent (for a total fee of US$500) at or before the Closing of the
Acquisition.
2. Establishment of Escrow. The Escrow Agent agrees to accept delivery
at the Closing of the following items (collectively, the "Escrowed Items") and
to hold them in the Escrow until required by the terms of Section 3 hereof to
release and deliver them:
(a) The certificates representing the SMI Shares and the
accompanying stock powers or other documentation transferring ownership of the
SMI Shares from the SMI Shareholders to AKI (the "SMI Escrowed Items"), delivery
of which the Escrow Agent shall receive for purposes of the Closing of the
Acquisition as agent for AKI pursuant to Article Three of the Acquisition
Agreement.
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(b) The certificates representing the AKI Shares (the "AKI Escrowed
Items"), delivery of which the Escrow Agent shall receive for purposes of the
Closing of the Acquisition as agent for SMI pursuant to Article Three of the
Acquisition Agreement.
(c) The conditional written resignations of each of the New AKI
Directors, as defined in Section 3.04 of the Acquisition Agreement (the "New
Director Resignations"), which shall become effective only as provided in
Section 3(b)(iv) of the Escrow Agreement.
(d) The conditional written resignations of each of the New AKI
Officers, as defined in Section 3.05 of the Acquisition Agreement (the "New
Officer Resignations"), which shall become effective only as provided in Section
3(b)(v) of the Escrow Agreement.
(e) The conditional Successor Director Resolutions, as defined in
Section 3.02(a)(v) of the Acquisition Agreement (the "Successor Director
Resolutions"), which will become effective only as contemplated by Section
3(b)(ii) hereof. Delivery to the Escrow Agent of the Successor Director
Resolutions shall be deemed to occur immediately after the Effective Time, i.e.,
after the appointment of the New AKI Directors has become effective.
(f) The Successor Director Acceptances, as defined in Section
3.02(a)(vi) of the Acquisition Agreement, which shall become effective only as
contemplated by Section 3(b)(ii) hereof.
3. Release and Delivery from Escrow. The Escrow Agent agrees to release
and deliver the Escrowed Items as provided below:
(a) No Rescission. If the Private Placement (as defined in Section
3(c)(i) hereof) is completed prior to the Private Placement Deadline (as defined
in Section 3(c)(ii) hereof) and AKI is then current in making all required
filings with the U.S. Securities and Exchange Commission under Sections 13(a)
and 14 of the Securities Exchange Act of 1934, as amended, the president and
secretary of AKI shall jointly certify such facts in writing to the Escrow Agent
(the "Joint Certification"). In such an event, if the Escrow Agent does not
receive, by 5:00 p.m. Pacific Time on the fifth business day after receipt of
the Joint Certification, any written objection from either party or any notice
of pending or threatened legal action by either party, then the Escrow Agent
shall promptly release the Escrowed Items in the manner described below and
shall thereafter be completely and fully released by the parties from any and
all liability whatsoever related to his role as escrow agent under this
Agreement:
(i) The Escrow Agent shall release the SMI Escrowed Items and
deliver them, at the address shown in Section 4 hereof for delivery of notices
to SMI, to the president of AKI;
(ii) The Escrow Agent shall release the AKI Escrowed Items and
deliver them to the SMI Shareholders at their respective addresses as set forth
on Schedule A attached hereto and incorporated by reference herein;
(iii) The Escrow Agent shall release the New Director
Resignations, each prominently marked "canceled," and deliver them, at the
address shown in Section 4 hereof for delivery of notices to SMI, to the
president of AKI;
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(iv) The Escrow Agent shall release the New Officer
Resignations, each prominently marked "canceled," and deliver them, at the
address shown in Section 4 hereof for delivery of notices to SMI, to the
president of AKI; and
(v) The Escrow Agent shall release the conditional Successor
Director Resolutions and Successor Director Acceptances (which shall not become
effective) and deliver them, at the address shown in Section 4 hereof for
delivery of notices to SMI, to the president of AKI.
(b) Rescission. If the Escrow Agent does not receive a Joint
Certification from the president and secretary of AKI prior to the Private
Placement Deadline, then the Acquisition shall be rescinded, as provided in the
Acquisition Agreement. In such an event, if the Escrow Agent does not receive,
by 5:00 p.m. Pacific Time on the fifth business day after the Private Placement
Deadline, any written objection from either party or any notice of pending or
threatened legal action by either party, then the Escrow Agent shall promptly
release the Escrowed Items in the manner described below and shall thereafter be
completely and fully released by the parties from any and all liability
whatsoever related to his role as escrow agent under this Agreement:
(i) The Escrow Agent shall release the SMI Escrowed Items and
deliver them to the SMI Shareholders at their respective addresses as set forth
in Schedule A hereto;
(ii) The Escrow Agent shall release the Successor Director
Resolutions and Successor Director Acceptances (which shall then become
effective) and deliver them, at the address shown in Section 4 hereof for
delivery of notices to AKI, to the person named in the Successor Director
Resolutions as the Successor Chairman of AKI's board of directors.
(iii) The Escrow Agent shall release the AKI Escrowed Items and
deliver them for cancellation, at the address shown in Section 4 hereof for
delivery of notices to AKI, to the person named in the Successor Director
Resolutions as the Successor Chairman of AKI's board of directors;
(iv) The Escrow Agent shall release the New Director
Resignations (which shall then become effective) and deliver them, at the
address shown in Section 4 hereof for delivery of notices to AKI, to the person
named in the Successor Director Resolutions as the Successor Chairman of AKI's
board of directors; and
(v) The Escrow Agent shall release the New Officer Resignations
(which shall then become effective) and deliver them, at the address shown in
Section 4 hereof for delivery of notices to AKI, to the person named in the
Successor Director Resolutions as the Successor Chairman of AKI's board of
directors.
(c) Definitions. For purposes of this Agreement, the terms listed below
shall be defined as follows:
(i) "Private Placement" shall mean a private placement of newly
issued shares of AKI common stock made by the New AKI Officers which raises
gross proceeds for AKI of at least US$2,700,000.
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(ii) "Private Placement Deadline" shall mean 5:00 p.m. Pacific
Time on June 30, 2000.
(d) Rescission Remedy for False Representation and Warranty. Under
Section 7.11 of the Acquisition Agreement, AKI is required to deliver to SMI at
the Closing of the Acquisition a Representation Letter, in which Xxxxx Xxxxx
makes and gives a representation and warranty to SMI that all of AKI's
representations and warranties in Article Five of the Acquisition Agreement are
true in all material respects at the time of the Closing. Section 3.06 of the
Acquisition Agreement provides that if, after the Effective Time and before the
Private Placement Deadline, SMI believes that Xx. Xxxxx'x representation and
warranty in the Representation Letter was untrue in any material respect when
AKI delivered the Representation Letter to SMI at the Closing, SMI may submit
the issue to arbitration pursuant to Section 14.05 of the Acquisition Agreement.
Section 3.06 provides further that, if the arbitrator finds, based on the
evidence presented to it, that such representation and warranty in the
Representation Letter was, in fact, untrue in any material respect at the time
of the Closing, SMI may deliver or cause to be delivered to the Escrow Agent a
certified written report of the arbitrator's finding to that effect, whereupon
the Acquisition shall be rescinded. Upon receiving such a report, the Escrow
Agent shall release all of the Escrowed Items and deliver them as set forth in
Section 3(b) of this Agreement.
(e) Notice to Transfer Agent. In the event that the Acquisition is
rescinded pursuant to Section 3 of this Agreement, the Escrow Agent shall
promptly send written notice of the rescission to AKI's stock transfer agent,
attention: Mr. Xxxxxxx Xxxxx, by certified mail to U.S. Stock Transfer
Corporation, 0000 Xxxxxxx Xxxxxx, 0xx Xxxxx, Xxxxxxxx, Xxxxxxxxxx 00000, and by
facsimile transmission to (000) 000-0000.
4. Procedure for Replacement of New AKI Directors. Section 13.04 of the
Acquisition Agreement provides that, if any New AKI Director resigns, is
removed, or otherwise ceases to serve as a director of AKI prior to the Private
Placement Deadline, the vacancy thereby created on the AKI board of directors
may be filled by the election or appointment of a new director prior to any
release of Escrowed Items pursuant to Section 3 of this Agreement only if the
person who is to become a director delivers his or her conditional written
resignation to the Escrow Agent in substantially the same form as the New
Director Resignations received by the Escrow Agent from the New AKI Directors at
the Closing. In such a case, Section 13.04 of the Acquisition Agreement further
provides that such person's conditional written resignation shall for all
purposes be deemed to be a New Director Resignation and shall become effective
in the event of a rescission as provided in Section 3(b)(iv) of this Agreement.
The Escrow Agent shall accept delivery into escrow of any such conditional
written resignation and shall thereafter treat it as a New Director Resignation
as contemplated by Section 13.04.
5. Notices. Any notice, communication or delivery required or permitted
to be given or made hereunder shall be in writing and shall be delivered either
by hand or by a courier service that guarantees next-business-day delivery,
addressed as follows:
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If to SMI, to:
Xx. Xxxxx Xxxxx
00 Xxxxxxxx Xxxx, Xxxx #00
Xxxxxxx, Xxxxxxx X0X 0X0
If to AKI, to:
Xx. Xxxxx Xxxxx
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
If to the Escrow Agent, to:
Xxxx X. Xxxxxxxxxx, a Professional Corporation
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. All such
notices shall be deemed effective upon delivery.
6. Provisions Relating to the Escrow Agent. To induce the Escrow Agent
to act hereunder, it is further agreed by AKI and SMI that:
(a) The Escrow Agent shall not be under any duty to give the
Escrowed Items held by it hereunder any greater degree of care than it gives its
own similar property.
(b) This Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall not be bound by the provisions of any agreement
among the other parties hereto except this Agreement.
(c) The Escrow Agent shall not be liable for any act or omission
under this Agreement unless his act or omission constitutes gross negligence or
willful misconduct. Other than claims based upon such gross negligence or
willful misconduct that are successfully asserted against the Escrow Agent, the
other parties hereto shall jointly and severally indemnify and hold harmless the
Escrow Agent from and against any and all losses, liabilities, claims, actions,
damages and expenses, including reasonable attorneys' fees and disbursements,
arising out of and in connection with this Agreement.
(d) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof. The Escrow Agent may act in reliance upon any instrument or
signature believed by it in good faith to be genuine and may assume, if in good
faith, that any person purporting
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to give notice or to execute any certification or other document in connection
with the provisions hereof has been duly authorized to do so.
(e) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in good faith and in accordance with such
advice.
(f) The Escrow Agent does not have any interest in the Escrowed
Items deposited hereunder and is serving as escrow agent only.
(g) The Escrow Agent makes no representation as to the validity,
value, genuineness of any security or other document or instrument held by or
delivered to him.
(h) After the Effective Time, AKI and SMI may not, either
individually or together, take any action that would have the effect of amending
this Agreement or of terminating the Escrow Agent's duties and obligations
hereunder (referred to hereinafter as a "termination"), except by jointly
petitioning a court of competent jurisdiction for good cause shown. The Escrow
Agent may at any time resign by giving written notice of resignation to AKI and
SMI (referred to hereinafter as a "resignation"). Upon any such termination or
resignation, the Escrow Agent shall deliver the Escrowed Items to a court of
competent jurisdiction, whereupon the Escrow Agent shall be discharged of and
from any and all further obligations arising in connection with this Escrow
Agreement. Such court shall act as successor to the Escrow Agent until such time
(if ever) that the court appoints a successor to the Escrow Agent.
(i) In the event that the Escrow Agent is, in good faith, in doubt
about what action it should take under this Agreement, or if any adverse claim
or demand is made with respect to any of the Escrowed Items, the Escrow Agent
shall be entitled to retain any or all of the Escrowed Items until the Escrow
Agent shall have received a final, non-appealable order of a court of competent
jurisdiction directing delivery of the Escrowed Items. Upon receiving such a
court order, the Escrow Agent shall act promptly in accordance with the order.
(j) AKI and SMI jointly and severally agree to reimburse the Escrow
Agent for all of his reasonable expenses, disbursements and advances incurred or
made in the performance of his duties hereunder.
(k) AKI and SMI hereby irrevocably (i) submit to the jurisdiction
of any California state or federal court sitting in the County of Los Angeles in
any action or proceeding arising out of or relating to this Agreement, (ii)
agree that all claims with respect to such action or proceeding shall be heard
and determined in such California state or federal court, and (iii) waive, to
the fullest extent possible, the defense of an inconvenient forum. AKI and SMI
hereby consent to and grant any such court jurisdiction over the persons of such
parties and over the subject matter of any such dispute and agree that delivery
or mailing of process or other papers in connection with any such action or
proceeding in the manner provided herein, or in such other manner as may be
permitted by law, shall be valid and sufficient service thereof.
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7. Miscellaneous.
(a) This Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and the SMI Shareholders, as well as their
respective successors and assigns, heirs, administrators and representatives,
and shall not be enforceable by or inure to the benefit of any other third
party. No party may assign any of its rights or obligations under this Agreement
except as provided in Section 5(h) with respect to the termination or
resignation of the Escrow Agent.
(b) This Agreement shall be governed by and construed in accordance
with the internal law of the State of California, without reference to its rules
as to conflicts of law.
(c) This Agreement may be modified after the Effective Time only in
the manner permitted by Section 5(h) hereof. Prior to the Effective Time, this
Agreement may be modified only by a writing signed by all of the parties hereto
and consented to by any SMI Shareholders adversely affected by such
modifications. No waiver hereunder shall be effective unless in a writing signed
by the party to be charged.
(d) This Agreement shall terminate upon the delivery pursuant to
Section 3 hereof of all Escrowed Items.
(e) The section headings in this Agreement are for convenience only
and shall not affect the construction hereof. Unless otherwise indicated,
references to sections are to sections contained in this Agreement.
(f) This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject matters herein and
supersedes and replaces any prior agreements and understandings, whether oral or
written, between them with respect to such matters.
(g) This Agreement may be executed in one or more counterparts, but
all such separate counterparts shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
ADVANCED KNOWLEDGE, INC.
By: /s/ Xxxxx Xxxxx
--------------------
Name: Xxxxx Xxxxx
Title: President and Chief Executive Officer
SOCCER MAGIC INC.
By: /s/ Xxxxx Xxxxx
--------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
"ESCROW AGENT"
/s/ Xxxx X. Xxxxxxxxxx
------------------------
Name: Xxxx X. Xxxxxxxxxx, a professional corporation
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