EXHIBIT 10.7
ESCROW AGREEMENT
ESCROW AGREEMENT
AGREEMENT dated this 11th day of October, 1996, by and among the President
and Fellows of Harvard College ("Subscriber"), Flanders Corporation, a North
Carolina corporation ("Flanders"), and State Street Bank and Trust Company, a
Massachusetts corporation (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Flanders and Subscriber are parties to a Subscription Agreement
dated October ___, 1996 (the "Subscription Agreement") which provides for the
escrow of $4,000,000 with Escrow Agent (such amount and interest thereon being
sometimes referred to as the "Escrowed Assets") and the deposit of 444,444
shares of common stock of Flanders (the "Flanders Shares"); and
WHEREAS, Flanders and the Subscriber are desirous of entering into this
Agreement and the Escrow Agent is willing to act as escrow agent on the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained and subject to the conditions hereinafter set forth, the parties
hereto agree as follows:
1. Concurrently with the execution hereof, the Subscriber is paying the
sum of $4,000,000 referred to above, and Flanders is depositing the Flanders
Shares with the Escrow Agent, which shall hold the same, and any interest
earned on Escrowed Assets, in escrow on the terms and conditions hereinafter
set forth.
2. The Escrow Agent shall make payment of the Escrowed Assets to the
Subscriber as follows: If the Escrow Agent shall have received a written
notice from the Subscriber to the Escrow Agent given after January 15, 1997,
which notice shall (i) certify that the Registration Statement referred to in
the Subscription Agreement did not become effective on or before January 15,
1997, become effective and that the Subscriber has given written notice to
Flanders of the rescission of the transaction referred to in the Subscription
Agreement, and (ii) direct the Escrow Agent to pay the Escrowed Assets to the
Subscriber, the Escrow Agent shall transmit a copy of such notice to Flanders.
The Escrow Agent shall act in accordance with such notice from the Subscriber
to the Escrow Agent unless within ten days from transmittal by the Escrow
Agent to Flanders of the copy of such notice, Flanders shall notify the Escrow
Agent not to comply with the payment instruction contained in such notice from
the Subscriber to the Escrow Agent. Simultaneously with any payment of
Escrowed Assets to the Subscriber pursuant hereto, Escrow Agent shall deliver
the Flanders Shares to Flanders.
3. The Escrow Agent shall make payment of the Escrowed Assets to
Flanders as follows: If the Escrow Agent shall have received a written notice
from Flanders which
notice shall certify that the Registration Statement referred to in the
Subscription Agreement has become effective prior to January 15, 1997, and shall
direct the Escrow Agent to pay the Escrowed Assets to Flanders, the Escrow Agent
shall transmit a copy of such notice to the Subscriber. The Escrow Agent shall
act in accordance with such notice from Flanders to the Escrow Agent unless
within ten days from transmittal by the Escrow Agent to the Subscriber of the
copy of such notice the Subscriber shall notify the Escrow Agent not to comply
with the payment instruction contained in such notice from Flanders to the
Escrow Agent. Simultaneously with any payment of the Escrowed Assets to Flanders
pursuant hereto, the Escrow Agent shall deliver the Flanders Shares to
Subscriber.
4. After Flanders shall have notified the Escrow Agent not to comply
with the Subscriber's payment instruction (as referred to in paragraph 2
above) and after the Subscriber shall have notified the Escrow Agent not to
comply with Flanders payment instruction (as referred to in Paragraph 3
above), the Escrow Agent shall act with respect to the Escrowed Assets solely
in accordance with any of the following: (a) a new Instruction signed jointly
by Flanders and the Subscriber; (b) a certified copy of an arbitrator's award
issued under the rules of the American Arbitration Association as to which the
Escrow Agent shall have received an opinion of counsel, which may include the
Escrow Agent and which is addressed and delivered also to each of Flanders and
the Subscriber, satisfactory to the Escrow Agent and in its sole and absolute
discretion, that such award is final beyond appeal or (c) a certified copy of
a judgment of a court of competent jurisdiction as to which the Escrow Agent
shall have received an opinion of counsel, which may include the Escrow Agent
and which is addressed and delivered also to Flanders and the Subscriber,
satisfactory to the Escrow Agent in its sole and absolute discretion, that
such judgment is final beyond appeal. Anything in the foregoing to the
contrary notwithstanding, at the sole discretion of the Escrow Agent, the
Escrow Agent may at any time deposit the Escrowed Assets with a court selected
by the Escrow Agent and in such event all liability and responsibility of the
Escrow Agent as to acts or omissions and subsequent to such deposit shall
terminate upon such deposit having been made.
5. Upon any distribution of the Escrowed Assets to Subscriber pursuant
to paragraph 2 above, or to Flanders pursuant to paragraph 3 above, the Escrow
Agent shall deliver the Flanders Shares to Flanders, in the case of a delivery
of Escrowed Assets pursuant to paragraph 2 above, and to Subscriber, pursuant
to delivery of the Escrowed Assets to Flanders pursuant to paragraph 3 above.
In no event shall the Escrow Agent deliver the Escrowed Assets without
contemporaneously delivering the Flanders shares to the party not receiving
the Escrowed Assets.
6. The Escrow Agent shall deliver the Escrowed Assets in accordance
with any instruction or instructions which shall be signed jointly by both
Flanders and the Subscriber.
7. Flanders shall be liable for any and all fees and expenses of the
Escrow Agent incurred in connection with this Agreement, including counsel
fees, if any, payable in connection with the delivery of the Escrowed Assets
hereunder. Flanders shall pay any such amounts due to the Escrow Agent
promptly upon demand therefor.
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8. Flanders and Subscriber acknowledge and agree that the Escrow Agent
may consult counsel satisfactory to it, including house counsel, and the
opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion of such counsel.
9. Neither the Escrow Agent nor any of its directors, officers or
employees shall be liable to anyone for any action taken or omitted to be
taken by it or any of its directors, officers or employees hereunder except in
the case of gross negligence or willful misconduct. Flanders covenants and
agrees to indemnify the Escrow Agent and hold it harmless without limitation
from and against any loss, liability or expense of any nature incurred by the
Escrow Agent arising out of or in connection with this Agreement or with the
administration of its duties hereunder, including but not limited to legal
fees and other costs and expenses of defending or preparing to defend against
any claim or liability in the premises, unless such loss, liability or expense
shall be caused by the Escrow Agent's willful misconduct or gross negligence.
In no event shall the Escrow Agent be liable for indirect, punitive, special
or consequential damages. The provisions of this paragraph 9 shall survive
termination of this Agreement.
10. The Escrow Agent shall not be bound in any way by any agreement or
contract (other than this Agreement) between Flanders and the Subscriber,
whether or not it has knowledge thereof, and the Escrow Agent's only duties
and responsibilities shall be to hold the Escrowed Assets as escrow agent and
to dispose of said assets in accordance with the terms of this Agreement. The
Escrow Agent may act upon any instruments or other writings believed by the
Escrow Agent to be genuine and to be signed or presented by the proper persons
and the Escrow Agent shall not be liable in connection with the performance of
its duties under this Agreement except for its own willful malfeasance, gross
negligence or bad faith.
11. The Escrow Agent may at any time resign as Escrow Agent hereunder
by giving thirty (30) days' prior written notice of resignation to Flanders
and Subscriber. Prior to the effective date of the resignation as specified
in such notice, Subscriber will issue to the Escrow Agent a written
instruction authorizing redelivery of the Escrowed Assets to a bank or trust
company that it selects, subject to the reasonable consent of Flanders. Such
bank or trust company shall have a principal office in New York, New York, and
shall have capital, surplus and undivided profits in excess of $50,000,000.
If however, Subscriber shall fail to name such a successor escrow agent within
twenty (20) days after the notice or resignation from the Escrow Agent,
Flanders shall be entitled to name such successor escrow agent. If no
successor escrow agent is named by Subscriber or Flanders, the Escrow Agent
may apply to a court of competent jurisdiction for appointment of a successor
escrow agent.
12. Neither Flanders nor Subscriber nor Escrow Agent shall be
responsible for delays or failures in performance resulting from acts beyond
its control. Such acts shall include but not be limited to acts of God,
strikes, lockouts, riots, acts or war, epidemics, governmental regulations
superimposed after the fact, fire, communication line failures, computer
viruses, power failures, earthquakes or other disasters.
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13. Any notice, report, demand or instruction required or permitted by
the provisions of this Agreement shall be deemed to have been sufficiently
transmitted, delivered, given or served for all purposes if delivered by hand
or if sent by prepaid registered mail or certified mail, or by responsible
overnight delivery service or telecopy to the parties at their addresses set
forth above, or at such other address as a party may hereinafter give by
written notice as herein provided:
If to Flanders:
Flanders Corporation
000 Xxxxxxxx Xxxxxxx Xxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx
If to Subscriber:
The President and Fellows of Harvard College
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
If to Escrow Agent:
State Street Bank and Trust Company
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Master Trust Services
The date of delivery or transmittal shall be the date of delivery, if by
hand or telecopy, or if mailed shall be deemed to be the date of mailing, or
if sent by overnight delivery service shall be deemed to be the next business
day except that no notice, report, demand or Instruction shall be deemed to
have been delivered or transmitted to the Escrow Agent until actual receipt
thereof by the Escrow Agent.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York and shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
successors and assigns. This Agreement may not be changed or amended in any
manner whatsoever except in writing signed by each of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
made and executed the day and year first above written.
ESCROW AGENT:
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------
Its: Vice President
SUBSCRIBER:
By: /s/ Xxxxxxx X. Xxxxxx
Its: Authorized Signatory
FLANDERS CORPORATION:
By: /s/ Xxxxxx X. Xxxxx
Its: CFO
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