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EXHIBIT 2.5
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is dated as of the 11th day
of February 1998 among XXXXXX INTERNATIONAL INC., an Ohio corporation with a
mailing address of 000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxx 00000,
Attention: Xxxx X. Xxxxxx, Esq., Director of Legal Affairs ("Xxxxxx"), and
TZUO-XXX XXX ("TYL"), XXXX X. XXX ("JCL") , XXXXXXX XXXXX ("Minor"), XXXXXX XXX
("CL"), XXXXXX XXX ("SL"), JCL, as Trustee under a Trust dated March 8, 1991 fbo
XXXXXXXX XXX ("JL"), and CITICORP TRUST-SOUTH DAKOTA, as trustee under an
agreement dated May 15, 1997 made by TYL (the "Trust"), with a notice address of
000 Xxxxxxxxx Xxxxxx, Xxxx Xxxxx, Xxx Xxxxxx 00000, except that Minor's notice
address is 00 Xxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxxxx 00000 (TYL, Minor, CL, SL,
JL and the Trust collectively, the "Sellers"), and THE FIFTH THIRD BANK with a
mailing address of 00 Xxxxxxxx Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxx 00000, as the
escrow agent hereunder ("Escrow Agent").
BACKGROUND
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A. Effective as of February 11, 1998 Xxxxxx and the Sellers entered
into a Stock Purchase Agreement (the "Purchase Agreement"). Pursuant to the
terms of said Purchase Agreement, Xxxxxx (or its assignee) will purchase from
the Seller all of the issued and outstanding capital stock of ACER/EXCEL INC.
("Acer/Excel").
B. The parties desire to enter into this Escrow Agreement to provide
for an escrow of One Hundred Twenty Four Thousand Two Hundred Twenty Four
(124,224) shares of common stock, no par value per share, of Xxxxxx (the
"General Escrow Xxxxxx Shares"), Sixty Two Thousand One Hundred Twelve (62,112)
of which (subject to adjustment pursuant to Section 5(h) hereof) shall be
released, subject to the terms of this Escrow Agreement, to Sellers on the first
anniversary date of the closing of the transactions contemplated in the Purchase
Agreement and Sixty Two Thousand One Hundred Twelve (62,112) of which (subject
to adjustment pursuant to Section 5(h) hereof) shall be released, subject to the
terms of this Escrow Agreement, to Sellers on the second anniversary date of the
closing of the transactions contemplated in the Purchase Agreement, all to
provide financial support for Sellers' obligation to indemnify Xxxxxx for any
breaches of warranty or representation by Sellers under the Purchase Agreement.
C. The parties also desire to enter into this Escrow Agreement to
provide for an escrow of One Hundred Ninety Seven Thousand Five Hundred Sixteen
(197,516) shares of common stock, no par value per share, of Xxxxxx (the "Tax
Escrow Xxxxxx Shares") and Two Million Eight Hundred Twenty Thousand Dollars
($2,820,000)(the "Cash Escrow Amount") (the Tax Escrow Xxxxxx Shares and the
Cash Escrow Amount collectively, the "Tax Escrow Fund"), which shall be
released, subject to the terms of this Escrow Agreement, to Sellers upon receipt
of the Private Letter Ruling (as defined hereinafter).
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D. The Sellers' respective interests in the Escrow Fund (as defined
hereinafter) are as set forth on Schedule I.
NOW, THEREFORE, in consideration of the mutual covenants set forth below
and other good and valuable consideration, the parties hereto agree as follows:
1. DESIGNATION AND DELIVERY. Xxxxxx and Sellers hereby designate The
Fifth Third Bank as "Escrow Agent" under this Escrow Agreement. Xxxxxx and
Sellers hereby deliver to the Escrow Agent a copy of the Purchase Agreement,
which agreement is attached hereto as Exhibit "A." Xxxxxx, in accordance with
the Purchase Agreement, hereby delivers to the Escrow Agent, and the Escrow
Agent hereby acknowledges receipt of, a certificate or certificates, each duly
endorsed in blank or with stock powers duly endorsed in blank evidencing the One
Hundred Twenty Four Thousand Two Hundred Twenty Four (124,224) General Escrow
Xxxxxx Shares and the One Hundred Ninety Seven Thousand Five Hundred Sixteen
(197,516) Tax Escrow Xxxxxx Shares and cash in the amount of the Cash Escrow
Amount (the "Deposit").
2. INVESTMENT OF THE DEPOSIT; DIVIDENDS AND DISTRIBUTIONS WITH RESPECT
TO THE DEPOSIT. The Escrow Agent is hereby authorized to invest the Cash Escrow
Amount and any other cash in the Escrow Fund (as defined hereinafter) in money
market funds, including the Fountain Square U.S. Treasury Obligations Fund
sponsored by the Escrow Agent's affiliate, Fountain Square Funds. The Escrow
Agent shall cause all dividends, distributions (including shares distributed in
a stock split), proceeds from any sale or liquidation, or other income earned on
or with respect to the Deposit to be added to the Deposit. Such deposited
dividends, distributions or other income shall, together with the Deposit,
constitute the "Escrow Fund" to be distributed as provided in Section 5 hereof.
The Sellers shall be entitled to exercise all voting rights with respect to the
General Escrow Xxxxxx Shares, the Tax Escrow Xxxxxx Shares and any other
securities held from time to time as part of the Escrow Fund until such time as
any such securities are distributed to Xxxxxx in accordance with Section 5
hereof.
3. ESCROW AGENT AS CUSTODIAN; EXPENSES. The Escrow Agent shall, for all
purposes of this Escrow Agreement, be treated as and considered legally a
custodian. The Escrow Agent shall be entitled to rely conclusively upon the
written notice provided in Section 5 and may assume the genuineness of all
signatures and documents and the authority of all signatories. The Escrow Agent
shall have no liability except for gross negligence or willful misconduct in the
performance of its duties under this Escrow Agreement. Xxxxxx and the Sellers,
collectively, shall each assume and pay one half (1/2) of all costs and expenses
of the Escrow Agent incurred in its capacity as the Escrow Agent under this
Escrow Agreement. The fees of the Escrow Agent are set forth on Exhibit "B"
attached hereto and incorporated herein.
4. RESIGNATION; DISAGREEMENTS.
(a) Escrow Agent (and any successor Escrow Agent) may at any time
resign as such by delivering the Escrow Fund to any successor Escrow Agent
designated by the other
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parties hereto in writing, or to any court of competent jurisdiction as
provided below. The resignation of Escrow Agent will take effect on the
earlier of (a) the appointment of a successor (including a court of
competent jurisdiction), or (b) the day which is thirty (30) days after the
date of delivery of its written notice of resignation to the other parties
hereto. If at that time Escrow Agent has not received a designation of a
successor Escrow Agent, Escrow Agent's sole responsibility after that time
shall be to retain and safeguard the Escrow Fund until receipt of a
designation of successor Escrow Agent or a joint written disposition
instruction by the other parties hereto or a final non-appealable order of
a court of competent jurisdiction.
(b) In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the
Escrow Fund or in the event that Escrow Agent is in doubt as to what action
it should take hereunder, Escrow Agent shall be entitled to retain the
Escrow Fund until Escrow Agent shall have received (i) a final
non-appealable order of a court of competent jurisdiction directing
delivery of the Escrow Fund, or (ii) a written agreement executed by the
other parties hereto directing delivery of the Escrow Fund, in which event
Escrow Agent shall disburse the Escrow Fund in accordance with such order
or agreement. Any court order shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to Escrow Agent to the effect
that the order is final and non-appealable. Escrow Agent shall act on such
court order and legal opinion without further question.
5. TERMINATION AND DISTRIBUTION OF ESCROW.
(a) Except as provided in Sections 5(f), 5(h) or 5(i), this Escrow
Agreement shall terminate upon the earlier of (i) February 11, 2000, or
(ii) the date upon which the Escrow Agent shall have distributed the Escrow
Fund as provided herein;
(b) If, on or prior to February 11, 1999, the date that is the first
anniversary of the closing of the transactions contemplated by the Purchase
Agreement (the "Anniversary Date"), Xxxxxx shall not have delivered to the
Escrow Agent and Sellers a notice of claim with respect to the Escrow Fund
based on breaches by the Sellers of warranties or representations contained
in the Purchase Agreement ("General Escrow Notice of Claim"), one half
(1/2) of the General Escrow Xxxxxx Shares, plus all dividends,
distributions and other income earned thereupon, shall promptly be released
to Sellers by the Escrow Agent;
(c) If, on or prior to the Anniversary Date, Xxxxxx shall have
delivered a General Escrow Notice of Claim under Section 8(b) of the
Purchase Agreement to the Escrow Agent and Sellers and Sellers shall not
have disputed the General Escrow Notice of Claim within ten (10) business
days after their receipt of the General Escrow Notice of Claim, the General
Escrow Xxxxxx Shares, plus all dividends, distributions and other income
earned thereupon, (or such lesser amount as may be specified in Xxxxxx'x
General Escrow Notice of Claim), shall promptly be released to Xxxxxx by
the Escrow Agent;
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(d) If, on or prior to February 11, 2000, the date that is the second
anniversary of the closing of the transactions contemplated by the Purchase
Agreement (the "Second Anniversary Date"), Xxxxxx shall not have delivered
to the Escrow Agent and Sellers a General Escrow Notice of Claim, one half
(1/2) of the General Escrow Xxxxxx Shares, plus all dividends,
distributions and other income earned thereupon, shall be promptly released
to Sellers by the Escrow Agent;
(e) If, on or prior to the Second Anniversary Date, Xxxxxx shall have
delivered a General Escrow Notice of Claim to the Escrow Agent and Sellers,
and Sellers shall not have disputed the General Escrow Notice of Claim
within ten (10) business days after their receipt of the General Escrow
Notice of Claim, the remainder of the General Escrow Xxxxxx Shares, plus
all dividends, distributions and other income earned thereupon, (or such
lesser amount as may be specified in Xxxxxx'x General Escrow Notice of
Claim), shall promptly be released to Xxxxxx by the Escrow Agent; and,
(f) If, on or prior to the Second Anniversary, Xxxxxx shall have
delivered a General Escrow Notice of Claim or multiple General Escrow
Notices of Claim to the Escrow Agent and Sellers which is or are timely
disputed by Sellers, the Escrow Agent shall hold the General Escrow Xxxxxx
Shares, plus all dividends, distributions and other income earned
thereupon, until the dispute or disputes is or are resolved by a court of
competent jurisdiction, even if resolution of the disputes occurs after
February 11, 2000, and shall distribute the General Escrow Xxxxxx Shares,
plus all dividends, distributions and other income earned thereupon, either
pursuant to joint written instructions from Xxxxxx and Sellers or pursuant
to court order.
(g) The portion of the Escrow Fund represented by the General Escrow
Xxxxxx Shares, plus all dividends, distributions and other income earned
thereupon, shall be available to Xxxxxx, in the event Sellers receive an
unfavorable private letter ruling from the Internal Revenue Service ("IRS")
on the possible inadvertent termination of the Subchapter S election by the
shareholders of Acer/Excel or if Sellers withdraw their request for such a
private letter ruling, after Xxxxxx delivers to the Escrow Agent and
Sellers a General Escrow Notice of Claim, to compensate it for Adverse
Consequences (as defined in the Purchase Agreement) related to one half
(1/2) of the costs of adjustments under Section 481(a) of the Internal
Revenue Code and for the actual additional federal and state income tax
burden attributable to Acer/Excel being taxed as a regular "C" corporation
and as an accrual (as opposed to cash) basis taxpayer, the amount of said
Adverse Consequences to be determined after Xxxxxx and Sellers consult in
good faith with the goal of minimizing or mitigating such additional
federal and state income tax burden.
(h) Upon Sellers' receipt from the IRS of a favorable private letter
ruling on the possible inadvertent termination of the Subchapter S election
by the shareholders of Acer/Excel, to the effect that the termination of
that Subchapter S election was "inadvertent" within the meaning of Section
1362(f) of the Code and that ACER will be treated by the IRS
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as an S Corporation from the date of such "inadvertent termination" and
thereafter (the "Private Letter Ruling"), the Tax Escrow Fund, plus all
dividends, distributions and other income earned thereupon, shall be
promptly released to Sellers by the Escrow Agent other than Sixty Two
Thousand One Hundred Twelve (62,112) Tax Escrow Xxxxxx Shares [One Million
Dollars ($1,000,000) in value, valuing each such Xxxxxx Share at Sixteen
and 10/100 Dollars ($16.10),] which shall be added to and for all purposes
of this Agreement constitute a portion of the General Escrow Xxxxxx Shares.
(i) Upon Sellers' receipt from the IRS of an unfavorable private
letter ruling on the possible inadvertent termination of the Subchapter S
election by the shareholders of Acer/Excel or if Sellers withdraw their
request for such a private letter ruling then the following shall occur:
(I) Sellers shall be deemed to have irrevocably waived their right to
appeal or to take further administrative steps with respect to such
unfavorable private letter ruling or the subject matter thereof (except for
appeals filed and finally determined at least ten (10) days prior to the
date Xxxxxx is required to file Form 8023); and (II) the Tax Escrow Fund,
plus all dividends, distributions or other income earned thereupon, or such
lesser amount as Xxxxxx sets forth in a notice of claim with respect to
Acer/Excel's terminated Subchapter S status delivered to the Escrow Agent
and the Sellers ("Tax Escrow Notice of Claim"), shall be promptly released
to Xxxxxx by the Escrow Agent. If the value of the Tax Escrow Fund, plus
all dividends, distributions or other income earned thereupon, valuing the
Tax Escrow Xxxxxx Shares pursuant to Section 5(j) hereof ("Tax Escrow Fund
Distribution Date Value"), released to Xxxxxx by the Escrow Agent is Six
Million Dollars ($6,000,000), the Sellers shall have no further liability
with respect to Xxxxxx'x inability to make an advantageous election under
Section 338(h)(10) of the Internal Revenue Code or for one half (1/2) of
the costs of adjustments under Section 481(a) of the Internal Revenue Code,
all as set forth in Section 8(b)(iv) of the Purchase Agreement (the
"Liquidated Damages Matters"). If the Tax Escrow Fund Distribution Date
Value is less than Six Million Dollars ($6,000,000), the Requisite Sellers,
jointly and severally, shall be liable to pay Xxxxxx the amount by which
the Tax Escrow Fund Distribution Date Value is less than Six Million
Dollars ($6,000,000) with five (5) business days after demand therefore
and, after such payment, the Sellers shall have no further liability with
respect to the Liquidated Damages Matters. If the Tax Escrow Fund
Distribution Date Value is greater than Six Million Dollars ($6,000,000),
the amount of such excess shall be promptly released by the Escrow Agent to
the Sellers.
(j) The value of any General Escrow Xxxxxx Shares or Tax Escrow Xxxxxx
Shares released to Xxxxxx (but not Tax Escrow Xxxxxx Shares converted into
General Escrow Xxxxxx Shares) pursuant to this Section 5 shall be
determined by reference to the average closing bid price for shares of
Xxxxxx common stock on the NASDAQ National Market System during the twenty
(20) trading days prior to either the date of a disputed claim is finally
determined or, if a claim is not disputed, the date of release.
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6. DUTIES OF ESCROW AGENT. The duties of the Escrow Agent under this
Escrow Agreement shall be entirely administrative and the Escrow Agent shall not
be liable to any third party as a result of any action or omission taken or made
by it, if taken in good faith, except for gross negligence or willful misconduct
in performing its duties. Except as otherwise set forth in Section 5(h), in the
event of disagreement or dispute between Xxxxxx and Sellers with respect to
disposition of the Escrow Fund, the Escrow Agent shall promptly initiate an
appropriate legal proceeding to obtain a judicial determination of the
respective parties' rights to the Escrow Fund. No rights are intended to be
granted to any third party hereunder. Xxxxxx and Sellers shall severally (each
being responsible for fifty percent (50%) of the indemnity account) indemnify,
defend and hold harmless the Escrow Agent and reimburse the Escrow Agent from
and for any and all liability, costs and expenses, including reasonable
attorneys' fees, the Escrow Agent may suffer or incur by reason of its execution
and performance of this Escrow Agreement. The Escrow Agent shall have no duties
except those which are expressly set forth herein, and it shall not be bound by
any notice of a claim, or demand with respect thereto, or any waiver,
modification, amendment, termination or recision of this Escrow Agreement,
unless in writing received by it and signed by Xxxxxx and/or Sellers.
In the event that the Escrow Agent shall find it necessary to consult
with counsel of its own choosing in connection with this Escrow Agreement, the
Escrow Agent shall not incur any liability for any action taken in good faith in
accordance with such advice. Xxxxxx and Sellers, jointly and severally, shall
indemnify and hold harmless the Escrow Agent for any liability, loss, claim or
damage incurred by the Escrow Agent in connection with this Escrow except for
any such liability, costs, expenses (including reasonable attorneys' fees),
loss, claims or damage which is a result of Escrow Agent's own gross negligence
or willful misconduct. This indemnification shall survive termination of this
Escrow Agreement. Xxxxxx and Sellers agree that Xxxxxx, on the one hand, and
Sellers, collectively, on the other hand, shall each assume and pay fifty
percent (50%) of all amounts due to Escrow Agent as a result of this
indemnification.
Escrow Agent is not a party to, and is not bound by, any agreement
which may be evidenced by, or arise out, the foregoing instruction, other than
as expressly set forth herein. In the event that any of the terms and provisions
of any other agreement (excluding any amendment to this Escrow Agreement)
between any of the parties hereto, conflict or are inconsistent with any of the
provisions of this Escrow Agreement, the terms and provisions of this Escrow
Agreement shall govern and control in all respects.
7. NOTICES. All notices, consents or other communications required or
permitted to be given under this Escrow Agreement shall be in writing and shall
be deemed to have been duly given:
(a) when delivered personally,
(b) five (5) business day after being sent by an overnight delivery
service, postage or delivery charges prepaid, or
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(c) on the date on which a telegram or facsimile is transmitted to the
parties at their respective addresses stated above.
Any party may change its address for notice and the address to which copies must
be sent by giving notice of the new addresses to the other parties in accordance
with this Section 7, except that any such change of address notice shall not be
effective unless and until received.
8. AMENDMENT. No amendment or modification of this Escrow Agreement shall
be effective unless in writing and signed by the parties.
9. PARTIES IN INTEREST. This Escrow Agreement shall bind, benefit, and be
enforceable by and against each party hereto and their successors, assigns,
heirs and personal representatives. No party shall in any manner assign any of
its rights or obligations under this Escrow Agreement without the express prior
written consent of the other parties.
10. NO WAIVERS. No waiver with respect to this Escrow Agreement shall be
enforceable unless in writing and signed by the party against whom enforcement
is sought. Except as otherwise expressly provided herein, no failure to
exercise, delay in exercising, or single or partial exercise of any right, power
or remedy by any party, and no course of dealing between or among any of the
parties, shall constitute a waiver of, or shall preclude any other or further
exercise of the same or any other right, power or remedy.
11. SEVERABILITY. If any provision of this Escrow Agreement is construed
to be invalid, illegal or unenforceable, then the remaining provisions hereof
shall not be affected thereby and shall be enforceable without regard thereto.
12. COUNTERPARTS. This Escrow Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall constitute
an original hereof, and it shall not be necessary in making proof of this Escrow
Agreement to produce or account for more than one original counterpart hereof.
13. CONTROLLING LAW. This Escrow Agreement is made under, and shall be
construed and enforced in accordance with, the laws of the State of Ohio
applicable to agreements made and to be performed solely therein, without giving
effect to principles of conflicts of law.
14. DEFINITIONS. To the extent not specifically defined herein, all terms
used herein shall have the meanings ascribed to them in the Purchase Agreement.
(remainder of page intentionally blank)
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IN WITNESS WHEREOF, the parties have executed, or caused their duly
authorized representatives to execute, this Escrow Agreement on the date first
written above.
XXXXXX INTERNATIONAL INC.
By:
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Name:
Title:
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TZUO-XXX XXX
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XXXX X. XXX
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XXXXXXX XXXXX
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XXXXXX XXX
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XXXXXX XXX
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XXXX X. XXX, as Trustee under a Trust dated
March 8, 1991 fbo XXXXXXXX XXX
CITICORP TRUST-SOUTH DAKOTA, as Trustee
under an agreement dated May 15, 1997
By:
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Name:
Title:
Received and accepted:
THE FIFTH THIRD BANK
Escrow Agent
By:
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Name:
Title:
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EXHIBIT "A"
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Purchase Agreement
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EXHIBIT "B"
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Escrow Agent Fees
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SCHEDULE I
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Seller Percentage Interest in Escrow Fund
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Tzuo-Xxx Xxx 35.4635%
Xxxx X. Xxx 31.7282%
Xxxxxxx Xxxxx 9. 9910%
Xxxxxx Xxx 6.4806%
Xxxxxx Xxx 6.4806%
Xxxx X. Xxx, as Trustee 6.4806%
Citicorp Trust-South Dakota, as Trustee 3.3753%
