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EXHIBIT 5
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and entered into as of
March 5, 1998 by and among XXXXXXX FINANCIAL SERVICES CORPORATION, a Michigan
corporation ("Parent"), XXXXXX X. XXXXX, a shareholder of Bloomfield Acceptance
Company, L.L.C., a Michigan limited liability company ("BAC") and Bloomfield
Servicing Company, L.L.C., a Michigan limited liability company ("BSC"),
XXXXXXXXX X. XXXXX, a shareholder of BAC and BSC ("Xxxxx"), XXXXXX XXXXXXXXXX, a
shareholder of BAC and BSC ("Drolshagen"), XXXXX XXXXXXX, a shareholder of BAC
and BSC ("Xxxxxxx"), XXXXXXXX XXXXXXXXX, a shareholder of BAC and BSC
("Xxxxxxxxx"), XXXXXXX XXXXXXX, a shareholder of BAC and BSC, XXXXX XXXXXXXX, a
shareholder of BAC ("Xxxxxxxx"), XXXXX X. XXXXXXX, a shareholder of BAC and BSC
("Xxxxxxx"), XXXXXXXXX X. XXXXXXXX, a shareholder of BAC and BSC ("Zelenock")
and XXXXXXX X. XXXXX, a shareholder of BAC and BSC ("Urban") (each a
"Shareholder" and collectively, the "Shareholders"), and
________________________ as escrow agent ("Escrow Agent"). All capitalized terms
used, but not defined, in this Agreement have the same meanings as in the
Agreement and Plan of Merger (the "Merger Agreement"), dated
February 17, 1998, of which Parent and the Shareholders are parties to,
a copy of which (without Exhibits or Schedules) is attached to this Agreement
for reference purposes only.
RECITALS:
A. Pursuant to the Merger Agreement, BAC Acquiring Sub will merge with
and into BAC, with BAC's shareholders receiving common stock of Parent. BSC
Acquiring Corp. will merge with and into BSC, with BSC's shareholders receiving
common stock of Parent.
B. The Merger Agreement contemplates that certificates representing
shares of Parent common stock are to be held in escrow under this Agreement and
to be disbursed pursuant to this Agreement.
C. At the Closing of the transactions contemplated in the Merger
Agreement, 272,727 shares of Parent common stock constituting the Initial
Consideration, will be deposited into escrow to be held in trust by the Escrow
Agent for a period of two years, to secure the Shareholders' indemnification
obligations to Parent under the Merger Agreement.
D. Parent and the Shareholders have agreed to execute and deliver this
Agreement in order to more fully and completely document the understandings
generally described in Recitals A through C above.
NOW, THEREFORE, for and in consideration of the foregoing Recitals, the
mutual covenants and agreements set forth below and other good and valuable
consideration, the receipt and adequacy of which are acknowledged, the
undersigned agree as follows:
1. APPOINTMENT OF ESCROW AGENT. Parent and the Shareholders hereby appoint
_______________________ as Escrow Agent, to hold the Escrow Shares, as
defined, in trust for the benefit of the appropriate party and to act
in accordance with the terms and conditions set forth in this
Agreement, and Escrow Agent hereby accepts such appointment in
accordance with such terms and conditions.
2. DEPOSITS INTO ESCROW. Contemporaneously with the execution and delivery
of this Agreement, the Shareholders have deposited certificates
representing 272,727 shares of
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Parent common stock (the "Escrow Shares") with Escrow Agent (the
"Indemnity Amount"). Escrow Agent hereby acknowledges receipt of the
Escrow Shares, and Escrow Agent further agrees to hold and disburse the
Escrow Shares in accordance with the terms of this Agreement.
3. ADDITIONAL DEPOSITS INTO ESCROW. In the event that Parent issues the
Shareholders shares of Parent common stock in respect of the Additional
Consideration (the "Additional Shares"), at a time when the Escrow
Shares are still subject to this Agreement, such Additional Shares will
be deposited into escrow with the Escrow Agent and will be part of the
Escrow Shares, subject to the terms and provisions of this Agreement,
as if the Additional Shares had been deposited on the date of this
Agreement. The Escrow Agent agrees to hold and disburse the Additional
Shares as Escrow Shares in accordance with the terms of this Agreement.
4. DISBURSEMENTS FROM ESCROW.
4.1 Indemnity Amount.
4.11 From time-to-time after the date of this Agreement,
Parent may send Escrow Agent a notice (each, a "Claim
Notice") that it is entitled to indemnification
pursuant to the Merger Agreement. Each Claim Notice
shall set forth the amount which Parent contends it
is owed (or, if such amount cannot be determined
presently, the reasonably estimated amount which
Parent could be owed) and, in reasonable specificity,
the basis for such contention.
4.12 The Shareholders shall be entitled to provide Escrow
Agent with a written objection (each, a "Claim Notice
Objection") in respect of each Claim Notice. Each
Claim Notice Objection shall state that the
Shareholders dispute the facts set forth in the Claim
Notice in question in good faith and also shall state
the basis for such disputes.
4.13 If Escrow Agent does not receive a Claim Notice
Objection from the Shareholders in respect of a
particular Claim Notice on or before the thirtieth
(30th) calendar day after the date on which such
Claim Notice was given, Escrow Agent shall promptly
pay the amount specified in such Claim Notice to
Purchaser out of the Indemnity Amount by delivering
to Parent that portion of the Escrow Shares that is
equal in value to the amount specified in the claim
notice, determined in accordance with Section 4.16.
If the Claim Notice in question states that the
amount owed cannot then be determined, Escrow Agent
shall not make any payment until Parent issues a
follow-up Claim Notice to Escrow Agent in respect of
such claim setting forth the actual amount due, and
if Escrow Agent does not receive a Claim Notice
Objection from the Shareholders on or before the
fifteenth (15th) day after the date on which such
follow-up Claim Notice was given, Escrow Agent shall
then pay Parent the actual amount due.
4.14 If Escrow Agent receives a Claim Notice Objection
from the Shareholders in respect of a particular
Claim Notice on or before the thirtieth (30th) day
(the fifteenth (15th) day, in the case of a follow-up
Claim Notice, as provided in Section 4.13 above)
after the date on which such Claim Notice was given,
Escrow Agent shall have no obligation to disburse the
amount specified in such Claim Notice except on
receipt of a joint written direction signed by
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both Parent and the Shareholders or in accordance
with an order, judgment or award of a panel of
arbitrators or a court of competent jurisdiction.
4.15 Parent may not submit a Claim Notice after the second
(2nd) anniversary of the date of this Agreement (the
"Escrow Termination Date"). Promptly after the Escrow
Termination Date, if no unresolved claims filed by
Parent remain outstanding, the Escrow Agent shall
release the remaining Escrow Shares to the
Shareholders. If at the Escrow Termination Date,
indemnification claims are outstanding which equal or
exceed the fair market value of the Escrow Shares,
the Escrow Shares shall remain in escrow until the
final resolution of the claim or claims. If at the
Escrow Termination Date, indemnifiation claims are
outstanding and the value of the Escrow Shares
exceeds such indemnification claims, the Shareholders
have the option to request a release of a portion of
the Escrow Shares (the "Option"). In order to
exercise the Option, D.B. and C.W., as
representatives of the Shareholders, shall deliver a
written request to Escrow Agent in the form attached
hereto as Exhibit 4.15 (the "Request"). Upon receipt
of the Request, the Escrow Agent may release an
amount of Escrow Shares to the Shareholders on a pro
rata basis (the "Release Shares"), provided however,
that the Escrow Agent must retain in escrow
sufficient shares of Parent common stock the fair
market value of which is at least three (3) times the
amount of the indemnification claim or claims
outstanding (the "Reserve Shares"). Notwithstanding
Section 8.6(b) of the Merger Agreement, if the
Shareholders exercise the Option and receive the
Release Shares, and subsequently the Reserve Shares
are insufficient to cover the indemnification claims
as finally determined, the Shareholders will be
jointly and severally liable to Parent for an amount
equal to what the fair market value of the Release
Shares was on the Escrow Termination Date. Parent may
enforce this liability or obligation by any action or
proceeding seeking a money judgment against any one
or more of the Shareholders.
4.16 The Escrow Shares will be valued by taking the
average of the mean between the bid and ask closing
quotations (or, if available, the closing prices) of
such shares on the NASD Over the Counter Bulletin
Board (or equivalent trading market on which the
shares are then traded) for the last ten (10) trading
days prior to the date on which the Escrow Agent is
authorized to release the Escrow Shares or the Escrow
Termination Date in the case of the Release Shares.
5. FUTURE RECEIPTS. If the Shareholders shall receive or become entitled
to receive any:
(a) stock certificate(s) issued in respect of the Escrow
Shares, including, without limitation, any certificate representing a
stock dividend or payable in respect of the Escrow Shares or issued in
connection with any increase or reduction of capital, reclassification,
merger, consolidation, sale of assets, combination of shares, stock
split, spin-off or split-off;
(b) option, warrant or right, whether issued as an addition
to, in substitution or in exchange for, or on account of, any of the
Escrow Shares; or
(c) dividends or distributions on the Escrow Shares payable
other than in cash, including securities issued by other than Parent;
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The Shareholders shall accept the same and shall deliver the same forthwith to
Escrow Agent, in the exact form received with, as applicable, the Shareholders'
endorsement when necessary or appropriate stock powers duly executed in blank.
Any property received by Escrow Agent hereunder shall be held by Escrow Agent
pursuant to the terms of this Agreement as additional security for the
indemnification obligations.
6. CASH DIVIDENDS AND DISTRIBUTIONS. The Shareholders acknowledge that any
cash dividends or distributions on the Escrow Shares will be delivered
directly to Escrow Agent and shall be held by Escrow Agent pursuant to
the terms of this Agreement as additional security for the
indemnification obligations of the Shareholders.
7. VOTING AND OTHER RIGHTS. So long as no Claim Notice Objection is
outstanding, the Shareholders shall be entitled to exercise any and all
voting and other consensual rights with respect to the Escrow Shares
for any purpose not inconsistent with the terms of this Agreement.
8. EXCULPATION AND INDEMNIFICATION OF ESCROW AGENT.
8.1 Escrow Agent will have no duties or responsibilities other
than those expressly set forth herein. Escrow Agent will be
under no liability to anyone by reason of any failure on the
part of any party hereto (other than Escrow Agent) or any
maker, endorser or other signatory of any document to perform
such person's or entity's obligations under any such document.
Except to the extent specifically provided for in this
Agreement, Escrow Agent is not obligated to render any
statements or notices of non-performance hereunder to any
party hereto but may, in its discretion, inform any party
hereto of any matters pertaining to this Agreement, provided
such information is also given to the other parties to this
Agreement and their counsel. Escrow Agent shall not be charged
with knowledge of any fact, including but not limited to
performance or non-performance of any condition herein, unless
it has actually received written notice thereof. Except for
this Agreement and the instructions to Escrow Agent pursuant
to the terms of this Agreement, Escrow Agent will not be
obligated to recognize any agreement between any or all of the
parties hereto, notwithstanding its knowledge thereof.
8.2 In the event of any disagreement or the presentation of
adverse claims or demands in connection with the Escrow
Shares, Escrow Agent shall, at its option, be entitled to (i)
implead the Escrow Shares in any court having jurisdiction
thereof; or (ii) refuse to comply with any such claims or
demands during the continuance of such disagreement and may
refrain from delivering any item affected thereby. As a result
of such action or inaction, Escrow Agent shall not become
liable to Parent or the Shareholders, or to any other person,
due to its failure to comply with any such adverse claim or
demand. Escrow Agent shall be entitled to continue, without
liability, to refrain and refuse to act:
8.21 Until all the rights of the adverse claimants have
been finally adjudicated by a court or panel of
arbitrators having jurisdiction over the parties and
the items affected thereby, after which time the
Escrow Agent shall be entitled to act in conformity
with such adjudication; or
8.22 Until all differences shall have been adjusted by
agreement and Escrow Agent shall have been notified
thereof and shall have been directed in
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writing signed jointly or in counterpart by Parent
and the Shareholders and by all persons making
adverse claims or demands, at which time Escrow Agent
shall be protected in acting in compliance therewith.
8.3 Escrow Agent may rely upon any written notice, request,
waiver, consent, certificate, receipt, authorization, power of
attorney or other instrument or document which Escrow Agent in
good faith believes to be genuine and to be what it purports
to be. Escrow Agent may rely on D.B.
and C.W. to serve as representatives of the Shareholders.
8.4 The bankruptcy, insolvency or absence of any of the parties to
this Agreement shall not affect or prevent performance by the
Escrow Agent of its obligations and instructions hereunder.
8.5 Parent and the Shareholders, jointly and severally, shall
indemnify and hold harmless Escrow Agent from and against any
fees, costs, expenses (including reasonable counsel fees and
disbursements), claims, damages or losses suffered by Escrow
Agent in connection with this Agreement, the services of
Escrow Agent hereunder, or the filing by Escrow Agent of any
action related to this Agreement, other than as a result of
Escrow Agent's gross negligence or willful misconduct. As
between Parent and the Shareholders, the party, if any, which
unreasonably causes the Escrow Agent to incur expenses shall
bear those expenses. If neither party is at fault, the costs
shall be paid one-half by Parent and one-half by the
Shareholders.
9. REIMBURSEMENT FOR OUT-OF-POCKET EXPENSES OF ESCROW AGENT; FEES.
9.1 Escrow Agent shall be entitled to reimbursement from Parent
and the Shareholders for out-of-pocket expenses paid or
incurred by it in the administration of its duties hereunder,
including, but not limited to, all reasonable counsel,
advisors' and agents' fees and disbursements (except those for
which indemnification would not be available under Section 8.5
hereof) and all taxes or other governmental charges. Escrow
Agent is hereby granted a lien on, and security interest in,
the Escrow shares to secure its rights to payment or
reimbursement under this Agreement and may, without notice,
set-off against any and all amounts held by it hereunder, and
retain for its own account, the full amount of any and all
fees, costs, losses, liabilities, damages and expenses. All
such expenses shall be paid one-half by Parent and one-half by
the Shareholders. Escrow Agent shall provide copies of
invoices and the like evidencing such expenses to both Parent
and the Shareholders
9.2 Escrow Agent's fees for serving as Escrow Agent shall be
payable one-half by Parent and one-half by the Shareholders.
10. TERMINATION OF AGREEMENT. This Agreement will terminate on the final
disposition to Parent or the Shareholders of the Escrow Shares in
accordance herewith, except for the respective rights and obligations
of Escrow Agent and the other parties hereto under Sections 8, 9 or 12
hereof, which will survive such disposition.
11. RESIGNATION OF ESCROW AGENT.
11.1 The Escrow Agent may resign as such following the giving of thirty
(30) days' prior written notice to the other parties hereto. Similarly,
the Escrow Agent may be removed and replaced following the giving of
thirty (30) days' prior written notice to the Escrow Agent
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by all of the other parties hereto. In either event, the duties of the
Escrow Agent shall terminate thirty (30) days after the date of such
notice (or as of such earlier date as may be mutually agreeable), and
the Escrow Agent shall then, upon payment of its fees, costs and
expenses, deliver the Escrow Shares to a successor Escrow Agent as
shall be appointed by the other parties hereto as evidenced by a
written notice filed with the Escrow Agent.
11.2 If the other parties hereto are unable to agree upon a
successor prior to the expiration of thirty (30) days
following the date of the notice of resignation or removal,
the then acting Escrow Agent may petition any court of
competent jurisdiction for the appointment of a successor
Escrow Agent or other appropriate relief; and any such
resulting appointment shall be binding upon all of the parties
hereto.
11.3 Upon payment of the fees, costs and expenses of the Escrow
Agent, and acknowledgment by any successor Escrow Agent of the
receipt of the Escrow Shares, the then acting Escrow Agent
shall be fully released and relieved of all further duties,
responsibilities, and obligations under this Agreement.
12. RECORDS. Escrow Agent will maintain accurate records of all
transactions hereunder. Promptly after the termination of this
Agreement, and promptly after the end of each calendar month prior to
such termination, Escrow Agent shall provide Parent and the
Shareholders with a complete copy of such records, certified by Escrow
Agent to be a monthly statement showing all transactions in the account
established by this Agreement. The authorized representatives of Parent
and the Shareholders will also have access to such records at all
reasonable times during normal business hours upon reasonable notice to
Escrow Agent.
13. NOTICES. Any and all notices, requests, demands and other
communications permitted under or required pursuant to this Agreement
(each, a "notice") shall be in writing and shall be deemed given if
personally delivered, faxed (to be followed by hard copy delivered in
one of the manners contemplated in this Section 13) or mailed, postage
prepaid, certified or registered mail, return receipt requested, to the
parties at the addresses or fax numbers set forth below, or at such
other addresses as they may indicate by written notice given as
provided in this Section 13:
If to Shareholders: With a required copy to:
Xxxxxx X. Xxxxx Xxxxxxx Zelenock, P.C.
000 X. Xxxxx Xxxxxx, Xxxxx 000 000 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000 Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxx
If to Parent: With a required copy to:
00000 Xxxxxxxxxx Xxxx, Xxxxx 000 Jaffe, Raitt, Heuer & Xxxxx
Xxxxxxxxxx Xxxxx, XX 00000 Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Fax: (000) 000-0000 Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx Fax: (000) 000-0000
Attention: Xxxxx Sugar
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If to Escrow Agent:
______________________________
______________________________
______________________________
______________________________
Parent and the Shareholders each shall provide the other with a copy of any
notices given to Escrow Agent.
14. PROHIBITION AGAINST SECURITY INTERESTS. Parent and the Shareholders
hereby covenant and warrant that each shall keep its respective
interests in this Agreement and all amounts, sums, monies, and deposits
to be made pursuant hereto free from all liens, claims, encumbrances
and third-party interests of any kind whatsoever without the prior
written consent of the other party. In addition, Purchaser and the
Shareholders hereby agree that neither party shall allow its respective
interests in this Agreement and all amounts, sums, monies and deposits
to be made pursuant hereto to be pledged, hypothecated, mortgaged or
otherwise used as collateral or security without the prior written
consent of the other party. The Shareholders covenant and warrant that
while the Escrow Shares are subject to this Agreement, the Shareholders
will not sell, convey or otherwise dispose of any of the Escrow Shares
or any interest therein, or create, incur, or permit to exist on any
pledge, mortgage, lien, charge, encumbrance or any security interest
whatsoever in or with respect to any of the Escrow Shares except for
that created hereby. The Shareholders warrant, and will at their own
expense defend, Parent's right, title and interest in and to the Escrow
Shares against the claims of any person.
15. COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed in
more than one counterpart, all of which shall together constitute a
single agreement. The parties may execute more than one copy of this
Agreement, in which case each executed copy shall constitute an
original. Copies (whether facsimile, photostatic or otherwise) of
signatures to this Agreement shall be deemed to be originals and may be
relied on to the same extent as the originals.
16. ASSIGNMENT AND MODIFICATION. This Agreement and the rights and
obligations hereunder of any of the parties hereto may not be assigned
without the prior written consent of the other parties hereto having
been obtained. Subject to the foregoing, this Agreement will be binding
upon and inure to the benefit of each of the parties hereto and their
respective successors and permitted assigns. No other person will
acquire or have any rights under, or by virtue of, this Agreement. This
Agreement may be changed or modified only in writing signed by all of
the parties hereto. In the event that there is a conflict between the
terms and conditions of the Purchase Agreement and the terms and
conditions of this Agreement, the terms and conditions of this
Agreement shall control.
17. GOVERNING LAW. The parties agree that all actions or proceedings
arising in connection with this Agreement and the instruments,
agreements and documents executed pursuant to the terms of this
Agreement shall be tried, litigated and arbitrated only in courts of
the United States located in the Eastern District of Michigan, the
Oakland County, Michigan Circuit Court, or the office of the American
Arbitration Association located nearest Southfield, Michigan The
parties each waive any objection to such venue and any claim that such
action has been brought in an inconvenient forum. The provisions of
this Section 13 shall survive the termination of this Agreement.
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18. HEADINGS. Headings in this Agreement are for the purposes of reference
only and shall not limit or otherwise affect any of the terms hereof.
19. SHAREHOLDER REPRESENTATIVES. The Shareholders, by execution of this
Agreement hereby grant to D.B. and C.W. the authority to act as
representatives for and on behalf of all of the Shareholders, including
but not limited to those actions to be taken with respect to Section
4.15. Escrow Agent and Parent are entitled to rely on D.B. and C.W. as
the representatives of the Shareholders.
IN WITNESS WHEREOF, the parties have duly executed this Escrow
Agreement as of March 5, 1998.
XXXXXXX FINANCIAL SERVICES CORPORATION,
a Michigan corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxxx
Its: President, Chief Executive Officer and Chief
Financial Officer
/s/ Xxxxxx X. Xxxxx /s/ Xxxxxxxx Xxxxxxxxx
_________________________ ___________________________
XXXXXX X. XXXXX XXXXXXXX XXXXXXXXX
/s/ Xxxxxxxxx X. Xxxxx /s/ Xxxxxxx Xxxxxxx
_________________________ ___________________________
XXXXXXXXX X. XXXXX XXXXXXX XXXXXXX
/s/ Xxxxxx Xxxxxxxxxx /s/ Xxxxx Xxxxxxxx
_________________________ ___________________________
XXXXXX XXXXXXXXXX XXXXX XXXXXXXX
/s/ Xxxxx Xxxxxxx /s/ Xxxxx X. Xxxxxxx
_________________________ ___________________________
XXXXX XXXXXXX XXXXX X. XXXXXXX
/s/ Xxxxxxxxx X. Xxxxxxxx /s/ Xxxxxxx X. Xxxxx
_________________________ ___________________________
XXXXXXXXX X. XXXXXXXX XXXXXXX X. XXXXX
________________________________, AS ESCROW AGENT
By:_____________________________
Its:____________________________
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