ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of April 4, 2000 (the "Escrow
Agreement"), is made by and among XX0.XXX, INC. (the "Parent"), a Delaware
corporation, with offices at 000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx
10013,QUICKBAND, INC., a Delaware corporation (the "Purchaser"), with offices at
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, DVD MAGS, INC. (the
"Seller") having its principal address at 0000 Xxxxx Xxxxxxxxx Xxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 00000 and McGuire, Woods, Battle & Xxxxxx LLP (the "Escrow
Agent"), with offices at 0 Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX
00000-0000..
BACKGROUND
A. The Parent, the Purchaser and the Seller have entered into the Asset
Purchase Agreement (the "Purchase Agreement") dated as of March 9, 2000,
pursuant to which the Purchaser has acquired from the Seller all of the assets
relating to Seller's business of aggregating and producing short-form
entertainment content for distribution across digital and traditional channels
(collectively, the "Business") in exchange for the Share Consideration.
Capitalized terms used in this Agreement without definition shall have the
respective meanings given them in the Purchase Agreement.
B. The Parties hereto propose to engage the Escrow Agent for the
purpose of receiving depositing and holding certain portions of the Share
Consideration until such portions are available for delivery to the Seller or
returned to the Purchaser in accordance with the terms of this Agreement.
C. The Purchase Agreement provides that the Seller will deposit in
escrow 34,100 shares of the Parent's Series B Preferred Stock (the "Escrowed
Property") to secure the indemnification obligations of the Seller under Article
VII for release to the Seller twelve months from the Closing Date.
D. The Escrow Agent has agreed to act as escrow agent to hold and
distribute the Escrowed Property in accordance with the terms of this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, for
themselves, their successors and assigns, hereby agree as follows:
1. APPOINTMENT AND ACKNOWLEDGMENT OF THE ESCROW AGENT.. The Parent, the
Purchaser and the Seller hereby appoint the Escrow Agent, and the Escrow Agent
hereby agrees to serve, as escrow agent pursuant to the terms of this Agreement.
2. DEPOSIT INTO ESCROW There is hereby deposited into escrow 34,100
shares of the Parent's Series B Preferred Stock, which shall be comprised
entirely of shares that would otherwise be distributed to the Major Shareholders
pursuant to a plan of liquidation based on
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their percentage ownership of the Seller at the time of Closing, which shares,
together with any and all dividends paid thereon and all proceeds thereof,
constitute the Escrowed Property.
3. DISTRIBUTION OF SHARES HELD IN ESCROW. (a) If the Seller becomes
liable to a Purchaser Indemnified Party pursuant to Section 7.2 of the Purchase
Agreement prior to the date which is the first anniversary of the Closing Date
(the "Closure Date"), then thirty (30) days after delivery of the Claim Notice,
so long as any right to indemnification exists pursuant to Article 7 of the
Purchase Agreement, the Escrow Agent will redeliver to the Purchaser the number
of shares of the Escrowed Property necessary to satisfy its claim based on the
Per Share Price of such shares as of the date on which Purchaser made its claim.
Subject to shares retained pursuant to Section 4, if and to the extent that the
Seller has not received a Claim Notice by any Purchaser Indemnified Party
pursuant to Article 7 of the Purchase Agreement prior to the Closure Date, then
the Escrow Agent will deliver to the Seller one or more certificates
representing all shares of the Escrowed Property and all dividends paid thereon
and proceeds thereof constituting the Escrowed Property. In the event that the
Seller has liquidated pursuant to a plan of complete liquidation, then all
shares of the Escrowed Property will remain subject to the provisions of this
Agreement.
4. SHARES SUBJECT TO CLAIMS BY THE PURCHASER. If and to the extent that
prior to the Closure Date the Purchaser has notified the Escrow Agent that the
Purchaser has made a claim for indemnification under Article 7 of the Purchase
Agreement and that the threshold set forth in Section 7.5 has been exceeded by
claims payable thereunder and if the notice further specifies the number of
shares of the Escrowed Property that the Purchaser estimates will satisfy its
claim based on the current market price of such shares on the date on which the
Purchaser makes its claim (the "Estimated Shares"), then notwithstanding any
other provision of this Agreement the Escrow Agent shall retain and not
distribute the Estimated Shares and will hold the Estimated Shares until 30 days
after delivery of the Claim Notice for such indemnification claim.
5. FURTHER PROVISIONS RELATING TO THE ESCROW.
(a) The Purchaser shall indemnify and hold harmless the Escrow
Agent against and in respect of any and all claims, suits, actions, proceedings
(formal and informal), investigations, judgments, deficiencies, damages,
settlements, liabilities and legal and other expenses (including legal fees and
expenses of attorneys chosen by the Escrow Agent) as and when incurred arising
out of or based upon any act, omission, alleged act or alleged omission by the
Escrow Agent, or its agents, or any other cause, in any case in connection with
the acceptance of or the performance or non-performance by the Escrow Agent, or
its agents, of any of the Escrow Agent's duties under this Escrow Agreement. The
Escrow Agent shall be fully protected by acting in reliance upon any notice,
advice, direction, other document, or signature believed by Escrow Agent to be
genuine, by assuming that any person purporting to give the Escrow Agent any
notice, advice, direction or other document in accordance with the provisions
hereof, in connection with this Escrow Agreement, or in connection with the
Escrow Agent's duties under this Escrow Agreement, has been duly authorized so
to do, or by acting or failing to act in good faith on the advice of any counsel
retained by the Escrow Agent.
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(b) The Escrow Agent shall not be liable to the Parent, the
Purchaser or the Seller for any mistake of fact or of law, any error of
judgment, any act or omission to act or any act of negligence. The Parent, the
Purchaser and the Seller waive any such claim against the Escrow Agent.
(c) The Escrow Agent makes no representation as to the
validity, value, genuineness, or the collectibility of any security or other
document or instrument held by or delivered to the Escrow Agent.
(d) The Escrow Agent shall have no duties or responsibilities
except those expressly set forth herein. The Escrow Agent shall not be bound by
any notice of a claim, or demand with respect hereto, or any waiver,
modification, amendment, termination, cancellation, or revision of this Escrow
Agreement, unless it is in writing, signed by the other parties hereto and
received by the Escrow Agent. If the Escrow Agent's duties as the Escrow Agent
hereunder are affected by any such waiver, modification, amendment, termination,
cancellation or revision of this Agreement, then the Escrow Agent shall not be
bound thereby unless the Escrow Agent shall have given its prior written consent
thereto. The Escrow Agent shall not be bound by any assignment by the Purchaser
or the Seller of its rights hereunder unless the Escrow Agent shall have
received written notice thereof from the assignor. The Escrow Agent is
authorized to comply with and obey all laws, orders, judgments, decrees, and
regulations of any governmental authority, court, tribunal, or arbitrator. If
the Escrow Agent complies with any such law, order, judgment, decree, or
regulation, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person even if such law, order, judgment decree, or regulation is
subsequently reversed, modified, annulled, set aside, vacated, found to have
been entered without jurisdiction or found to be in violation of or beyond the
scope of a constitution or a law.
(e) If the Escrow Agent shall be uncertain as to the Escrow
Agent's duties or rights hereunder, shall receive any notice, advice, direction
or other document from any other party with respect to the Escrowed Property
which, in the Escrow Agent's opinion, is in conflict with any of the provisions
of this Escrow Agreement, or should be advised that a dispute has arisen with
respect to the payment, ownership, or right of possession of the Escrowed
Property or any part thereof (or as to the delivery, non-delivery or content of
any notice, advice, direction, or other document), the Escrow Agent shall be
entitled, without liability to anyone, to refrain from taking any action other
than to use the Escrow Agent's best efforts to keep safely the Escrowed Property
until the Escrow Agent shall be directed otherwise in writing by the other
parties hereto or by an order, decree, or judgment of a court of competent
jurisdiction which has been finally affirmed on appeal or which by lapse of time
or otherwise is no longer subject to appeal. The Escrow Agent shall be under no
duty to institute or to defend any such proceeding although the Escrow Agent
may, in the Escrow Agent's discretion and at the expense of the Purchaser,
institute or defend such proceedings.
(f) If McGuire, Woods, Battle & Xxxxxx, LLP shall be unable to
act or shall resign as the Escrow Agent hereunder, the successor escrow
agent shall be a proper entity chosen by the Purchaser in its sole discretion
(the "Successor"). McGuire, Woods, Battle & Xxxxxx, LLP
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and any other Escrow Agent may at any time give written notice of its
resignation (the "Resignation Notice") to the other parties hereto. Such
resignation shall take effect when the Successor accepts in writing its
appointment as successor escrow agent and receives the Escrowed Property. If
no successor escrow agent has been appointed and has accepted the Escrowed
Property within 5 days after the Resignation Notice is sent, the Purchaser or
the Seller may petition any court of competent jurisdiction for the
appointment of a successor escrow agent. Such court may thereupon appoint a
successor escrow agent after the Escrowed Property has been deposited into
court and after such notice, if any, to the other parties hereto as the court
may deem proper and prescribe. This Escrow Agreement shall not otherwise be
assignable by McGuire, Woods, Battle & Xxxxxx, LLP without the prior written
consent of the other parties hereto.
(g) The Purchaser and the Seller authorize McGuire, Woods,
Battle & Xxxxxx, LLP if McGuire, Woods, Battle & Xxxxxx, LLP is threatened with
litigation or is sued, to interplead all interested parties in any court of
competent jurisdiction and to deposit the Escrowed Property with the clerk of
that court.
(h) The responsibilities and liabilities of McGuire, Woods,
Battle & Xxxxxx, LLP hereunder, except as a result of the bad faith or gross
negligence of McGuire, Woods, Battle & Xxxxxx, LLP, will terminate upon the
delivery by McGuire, Woods, Battle & Xxxxxx, LLP of all the Escrowed Property
under any provision of this Escrow Agreement.
6. FURTHER ACTION. At any time and from time to time, the Purchaser
agrees, at its expense, to take such actions and to execute and deliver such
documents as may be reasonably necessary to effectuate the purposes of this
Escrow Agreement. The Purchaser shall pay any transfer tax arising out of the
placing of the Escrowed Property into the Escrow, the delivery of the Escrowed
Property out of the Escrow, or the transfer of the Escrowed Property into the
name of a person or entity other than the Purchaser if the Escrowed Property is
delivered other than to the Purchaser pursuant to the terms of this Escrow
Agreement. McGuire, Woods, Battle & Xxxxxx, LLP shall have no liability if the
Purchaser fails to comply with the obligations set forth in the prior sentence.
7. SURVIVAL. The covenants, agreements, representations, and warranties
contained in or made pursuant to this Escrow Agreement shall survive the
delivery by McGuire, Woods, Battle & Xxxxxx, LLP of the Escrowed Property.
8. MODIFICATION. This Escrow Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements among them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
9. NOTICES. Any notice, advice, direction, or other document or
communication required or permitted to be given hereunder shall be in writing
and shall be delivered either by certified mail, return receipt requested,
Federal Express, or similar overnight delivery or courier service, or delivered
(in person or by telecopy, or similar telecommunications equipment) against
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receipt to the party to whom it is to be given at the address of such party set
forth in the preamble or Schedule A to this Escrow Agreement (or to such other
address as the party shall have furnished in writing in accordance with the
provisions of this Section 9). Any notice, advice, direction, or other document
or communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party's address which
shall be deemed given at the time of receipt thereof. Any notice given by other
means permitted by this Section 9 shall be deemed given at the time of receipt
thereof
10. WAIVER. Any waiver by any party of a breach of any provision of
this Escrow Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Escrow Agreement. The failure of a party to insist upon strict adherence to any
term of this Escrow Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Escrow Agreement. Any waiver
must be in writing.
11. BINDING EFFECT. The provisions of this Escrow Agreement shall be
binding upon and inure to the benefit of the Purchaser, the Parent and each
other Purchaser Indemnified Party and the Escrow Agent and their respective
heirs, executors, successors and assigns.
12. NO THIRD PARTY BENEFICIARIES. This Escrow Agreement does not
create, and shall not be construed as creating, any rights enforceable by any
person not a party to this Escrow Agreement.
13. GOVERNING LAW. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the rules governing the conflict of laws.
14. JURISDICTION. The parties hereby irrevocably consent to the
jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out of
or relating to this Escrow Agreement, any document or instrument delivered
pursuant to, in connection with, or simultaneously with this Escrow Agreement, a
breach of this Escrow Agreement or of any such document or instrument, or the
Escrowed Property. The parties also agree that service of process may be
satisfied by the delivery of notice of such process as set forth in Section 9 of
this Escrow Agreement which shall constitute good and sufficient service.
15. SEPARABILITY. To the extent any provision of this Escrow Agreement
is held to be invalid by a court of competent jurisdiction, such provision shall
be unenforceable without affecting the enforceability of the remainder of such
provision or the remaining provisions of this Escrow Agreement.
16. HEADINGS. The headings in this Escrow Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Escrow Agreement.
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17. COUNTERPARTS. This Escrow Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Signatures appear on the following page.]
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IN WITNESS WHEREOF, the parties have duly executed this Escrow
Agreement as of the date first written above.
PARENT:
XX0.XXX INC.
By: /s/
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Name: Xxxxx X. Xxxxxx
Title: President and Chief Executive
Officer
THE PURCHASER:
QUICKBAND, INC.
By: /s/
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Name: Xxxxxx X. Xxxxxx
Title: President
THE SELLER:
DVD MAGS, INC.
By: /s/
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Name: Xxxxx Xxx
Title: Vice President
THE ESCROW AGENT:
MCGUIRE, WOODS, BATTLE &
XXXXXX LLP
By: /s/
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