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EXHIBIT 2.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of September
10, 1999, by and among eSoft, Inc., a Delaware corporation ("Parent"), eSoft
Acquisition Corporation, a Georgia corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), Xxxxx X. Xxxxx (the "Representative") a representative of
the stockholders of Technologic, Inc., a Georgia corporation (the "Company"),
and Norwest Bank Colorado, N.A. (the "Escrow Agent").
1. This Escrow Agreement is entered into pursuant to the terms
of that certain Agreement and Plan of Merger dated as of September 10, 1999 (the
"Merger Agreement") executed by and among Parent, Merger Sub, and the Company,
pursuant to which Merger Sub shall be merged with and into the Company with the
Company surviving. This Escrow Agreement shall be without force and effect until
such time as Escrow Agent receives shares of common stock, $.01 par value, of
Parent (the "Parent Common Stock"), such Parent Common Stock to be delivered by
Parent from time to time pursuant to Section 9.1 of the Merger Agreement
(collectively, the "Stock Deposits"). The certificates representing the Stock
Deposits shall be issued in the name of the Escrow Agent or its nominee. Upon
receipt of the Stock Deposits, together with any dividends or distributions with
respect thereto relating to record dates for such dividends or distributions
after the date hereof (collectively, the "Distribution Deposits"), the Escrow
Agent shall hold the Stock Deposits and the Distribution Deposits in trust (the
Stock Deposits and the Distribution Deposits are referred to hereinafter as the
"Deferred Merger Consideration Fund"), to be disbursed as set forth under this
Escrow Agreement.
2. At any time on or before the date that is the earlier of
twelve months after the Closing Date (as defined in the Merger Agreement) or the
date on which Parent publishes audited financial statements for the fiscal year
ended December 31, 1999 (the "Survival Date"), Parent may give one or more
written notices to Escrow Agent and the Representative that Parent seeks payment
of a claim (pursuant to Section 9.5 of the Merger Agreement) from the Deferred
Merger Consideration Fund, which written notice shall state the nature and basis
of such Claim and Parent's estimate of the amount thereof. The failure to so
notify the Representative shall in no case prejudice the rights of Parent under
this Agreement unless the Stockholders (as defined in the Stockholders'
Agreement dated September 10, 1999 by and between Parent and the stockholders of
the Company listed therein (the "Stockholders' Agreement")) shall be materially
prejudiced by such failure, and then only to the extent of such prejudice. Upon
receipt of notice of any such Claim from Parent, Escrow Agent shall, on the
tenth day after receipt of such notice, deliver to Parent the amount of the
Claim stated in the notice, in securities valued at a price per share equal to
$4.00; provided, however, that if the Representative shall have delivered to the
Escrow Agent a notice of objection to the payment of a Claim, the Escrow Agent
shall not make any payment with respect to such Claim until the Escrow Agent
receives (i) a notice signed jointly by Parent and the Representative that
contains joint instructions to the Escrow Agent as to the delivery of all or any
portion of the Deferred Merger Consideration Fund with respect to such Claim, or
(ii) a final, non-appealable order of the arbitrators referred to in Sections
1.5 of the Stockholders' Agreement resolving the objection, after which the
Escrow Agent shall promptly deliver all or any portion of the Deferred Merger
Consideration Fund with respect to such Claim in accordance with the decision of
said arbitrators. Pending the receipt of such joint written instructions or
final order, Escrow Agent shall segregate from the Deferred Merger Consideration
Fund such amount in cash or securities, valued at a price per share at a price
per share equal to $4.00 per share, sufficient to discharge the Claim in full.
3. Within three business days after the Survival Date, the
Escrow Agent shall give the Representative and Parent written notice of its
intent to distribute any Deferred Merger Consideration to the Company's
Stockholders (other than holders of Dissenting Shares (as defined in the Merger
Agreement). Such notice shall state the total amount in the Deferred Merger
Consideration Fund, the amount paid by the Escrow Agent on account of Claims
presented by Parent, the amount segregated from the Deferred Merger
Consideration Fund to pay Claims that are then in dispute or disputable, and the
initial number of shares of Parent Common Stock immediately available for
distribution (the "Initial Distribution Amount") to the Company's Stockholders
(other than holders of Dissenting Shares) on such date. The Escrow Agent shall,
on the tenth day after delivery of such notice, deliver to the Company's
Stockholders (other than holders of Dissenting Shares) at such Stockholders'
last known addresses each Stockholder's pro rata share of the Initial
Distribution Amount (such pro rata share to be determined pursuant to Section 4
hereof); provided, however, that if the Representative
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or Parent shall have delivered to the Escrow Agent a notice of objection to the
distribution of the Initial Distribution Amount, the Escrow Agent shall not make
any distribution with respect to such Initial Distribution Amount until the
Escrow Agent receives joint written instructions from the Representative and
Parent or a final order from an arbitration conducted in accordance with
Sections 1.5 of the Stockholders' Agreement. Within ten days of the resolution
of all disputes involving any unpaid Claim for which Parent has delivered notice
to the Escrow Agent in accordance with Section 2 hereof, the Escrow Agent shall
calculate the remaining number of shares of Parent Common Stock available for
distribution (the "Final Distribution Amount") to the Company's Stockholders
(other than holders of Dissenting Shares) and shall provide this information to
the Representative. The Escrow Agent shall deliver to the Company's Stockholders
(other than holders of Dissenting Shares) at such Stockholders' last known
addresses each Stockholder's pro rata share of the Final Distribution Amount
(such pro rata share to be determined pursuant to Section 4 hereof).
4. Upon receipt of a notice from the Escrow Agent with respect
to any distribution to Stockholders, the Representative shall determine each
Stockholder's pro rata share of the Initial Distribution Amount and the Final
Distribution Amount by reference to the percentage interest indicated next to
each such Stockholder's name in the table of Stockholder interests attached
hereto as Exhibit A.
5. Upon the receipt by the Escrow Agent of any notice from
Parent that Parent is soliciting the vote or consent of any holder of Parent
Common Stock, the Escrow Agent shall promptly deliver to the Company's
Stockholders (other than holders of Dissenting Shares) at such Stockholders'
last known addresses a notice of such solicitation and shall request that each
such Stockholder deliver to the Escrow Agent instructions with respect to the
voting or consent of the shares of Parent Common Stock beneficially owned by
such Stockholder and held of record by the Escrow Agent. The Escrow Agent shall
timely vote the shares of Parent Common Stock held in the Deferred Merger
Consideration Fund, to the extent practicable, in accordance with instructions
received by the Escrow Agent from such Stockholders.
6. Any portion of the Deferred Merger Consideration Fund that
remains unclaimed by the former stockholders of the Company two years after the
Effective Time shall be delivered to the Company.
7. Upon delivery of the Deferred Merger Consideration Fund to
Parent or the Stockholders, as the case may be, this Escrow Agreement shall be
deemed to be terminated and the Escrow Agent shall be released and discharged
from all further obligations hereunder. Notwithstanding anything herein to the
contrary, all notices or instructions to the Escrow Agent hereunder shall be in
writing, and the Escrow Agent shall have no obligation to act on notice or
instructions that are not in writing.
8. In the event of the resignation of the Representative, the
resigning Representative shall appoint a successor either from among the
Stockholders or another person who shall otherwise be acceptable to Parent and
who shall agree in writing to accept such appointment, and the resigning
Representative's resignation shall not be effective until such a successor shall
have been appointed. If the Representative should die or become incapacitated,
his successor shall be appointed within 30 days of his death or incapacity by a
majority of the Stockholders, voting together as a class, and such successor
either shall be a Stockholder or another person otherwise acceptable to Parent.
The choice of a successor Representative appointed in any manner permitted above
shall be final and binding upon all of the Stockholders. The decisions and
actions of any successor Representative shall be, for all purposes, those of the
Representative as if originally named herein.
9. If at any time Escrow Agent shall receive a notice signed
jointly by Parent and the Representative containing instructions to Escrow Agent
regarding the disposition of the Deferred Merger Consideration Fund or any
portion thereof or any matter related thereto, Escrow Agent shall comply with
such instructions. Similarly, if at any time Escrow Agent shall receive a notice
signed jointly by Parent and the Representative that this Escrow Agreement has
been terminated, Escrow Agent shall deliver the Deferred Merger Consideration
Fund in accordance with the joint instructions contained in such notice and upon
such delivery this Escrow Agreement shall be deemed terminated and Escrow Agent
shall be released and discharged from all further obligations hereunder.
10. Escrow Agent shall not be responsible for the performance
of any agreement between the parties hereto except for those agreements and
duties that are explicitly set forth herein. It is understood and agreed that
the duties
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of Escrow Agent hereunder are purely ministerial in nature and that it shall not
be liable for any error or judgment regarding fact or law, or for any act done
or omitted to be done, except for its own negligence or willful misconduct.
Escrow Agent's determination as to whether an event or condition has occurred,
or been met or satisfied, or as to whether a provision of this Escrow Agreement
has been complied with, or as to whether sufficient evidence of the event or
condition or compliance with the provision has been furnished to it, shall not
subject it to any claim, liability, or obligation whatsoever, even if it shall
be found that such determination was improper or incorrect, provided only that
Escrow Agent shall not have been guilty of negligence or willful misconduct in
making such determination. The Escrow Agent shall not be obligated to take any
legal or other action hereunder that might in its judgment involve expense or
liability unless it shall have been furnished with indemnity acceptable to it.
In addition, the Escrow Agent may consult counsel satisfactory to it, and the
advice or 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 advice or opinion of such counsel.
11. Escrow Agent shall not be responsible for the genuineness,
accuracy, or validity of any document or item deposited with it or any notice or
instruction given to it, and it is fully protected in acting in accordance with
any written instruction or instrument given to it hereunder and reasonably
believed by it to have been signed by the proper parties. Each party hereto
represents and warrants that this Escrow Agreement has been duly and validly
authorized, executed, and delivered by such party and constitutes a valid and
binding obligation of such party, enforceable against such party in accordance
with its terms.
12. If at any time Escrow Agent shall receive conflicting
notices, claims, demands, or instructions with respect to the Deferred Merger
Consideration Fund, or if for any other reason it shall be unable in good faith
to determine the party or parties entitled to receive any part of the Deferred
Merger Consideration Fund, Escrow Agent may refuse to make any payment and
retain the Deferred Merger Consideration Fund in its possession until Escrow
Agent shall have received instructions in writing signed jointly by Parent and
the Representative, or until directed by a final, non-appealable order of the
arbitrators referred to in Sections 1.5 of the Stockholders' Agreement,
whereupon Escrow Agent shall make such disposition in accordance with such joint
instructions or order.
13. (a) 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 negligence, bad faith, or willful misconduct.
Parent 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
Escrow Agreement or with the administration of its duties hereunder, including,
but not limited to, legal fees and expenses and other costs and expenses of
defending or preparing to defend against any claim of liability in the premises,
unless such loss, liability, or expense shall be caused by the Escrow Agent's
negligence, bad faith or willful misconduct. In no event shall the Escrow Agent
be liable for indirect, punitive, special, or consequential damages.
(b) Parent agrees to assume any and all obligations
imposed now or hereafter by any applicable tax law with respect to the payment
of funds or other property under this Escrow Agreement, and to indemnify and
hold the Escrow Agent harmless from and against any taxes, additions for late
payment, interest, penalties, and other expenses, that may be assessed against
the Escrow Agent on any such payment or other activities under this Escrow
Agreement. Parent undertakes to instruct the Escrow Agent in writing with
respect to the Escrow Agent's responsibility for withholding and other taxes,
assessments, or other governmental charges, certifications, and governmental
reporting in connection with its acting as Escrow Agent under this Escrow
Agreement. Parent agrees to indemnify and hold the Escrow Agent harmless from
any liability on account of taxes, assessments, or other governmental charges,
including without limitation the withholding or deduction or the failure to
withhold or deduct same, and any liability for failure to obtain proper
certifications or to properly report to governmental authorities, to which the
Escrow Agent may be or become subject in connection with or which arises out of
this Escrow Agreement, including costs, expenses (including reasonable legal
fees and expenses), interest, and penalties.
14. Escrow Agent may resign at any time upon giving the
parties hereto ten days' prior written notice to that effect. In such event, the
successor escrow agent shall be such person, firm, or corporation as shall be
mutually selected by Parent and the Representative. It is understood and agreed
that such resignation shall not be effective until a successor agrees to act as
escrow agent hereunder; provided, however, if no successor is appointed and
acting hereunder
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within ten days after such notice is given, Escrow Agent may pay and deliver the
Deferred Merger Consideration Fund into any court of competent jurisdiction and
may apply to any court of competent jurisdiction for the appointment of a
successor escrow agent. The provisions of Section 14 hereof shall survive the
resignation or removal of the Escrow Agent or the termination of this Escrow
Agreement.
15. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered,
two days after deposit in the mail if mailed by certified mail, return receipt
requested, or when received if delivered via Federal Express or similar
overnight courier service, or by facsimile. Such notices or other communications
shall be sent to the following addresses, unless other addresses are
subsequently specified in writing:
If to Parent:
eSoft, Inc.
000 Xxxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxx
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
and: Xxxxx, Xxxxxx & Xxxxxx LLP
000 - 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
If to the Representative:
Xxxxx X. Xxxxx
Technologic, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
With a copy to:
Xxxxx, Xxxxxxxx & Xxxxxxx, LLP
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
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If to Escrow Agent:
Norwest Bank Colorado, N.A.
Corporate Trust and Escrow Services
0000 Xxxxxxxx
XXX X0000-000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxx
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
16. Parent agrees to pay the Escrow Agent's reasonable
compensation for its normal services hereunder in accordance with Exhibit B
attached hereto, which may be subject to change on an annual basis. The Escrow
Agent shall be entitled to reimbursement on demand for all expenses incurred in
connection with the administration of the escrow created hereby which are in
excess of its compensation for normal services hereunder, including without
limitation, payment of any legal fees and expenses incurred by the Escrow Agent
in connection with the resolution of any claim by any party hereunder.
17. Parent and Representative hereby absolutely and
irrevocably consent and submit to the jurisdiction of the courts of the State of
Colorado, and of any federal court located in said the State of Colorado having
jurisdiction over such matters, in connection with any actions or proceedings
brought against Parent and/or Representative by the Escrow Agent arising out of
or relating to this Escrow Agreement. In any such action or proceeding, Parent
and Representative hereby absolutely and irrevocably waive personal service of
any summons, complaint, declaration, or other process and hereby absolutely and
irrevocably agree that service thereof may be made by certified or registered
first class mail directed to Parent and Representative, as the case may be, at
their respective addresses in accordance with Section 15 hereof.
18. The Escrow Agent shall not be responsible for delays or
failures in performance resulting from acts beyond its control. Subject to the
limitations set forth in Section 14 above, such acts shall include but not be
limited to acts of God, strikes, lockouts, riots, acts of war, epidemics,
governmental regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other disasters.
19. This Escrow Agreement and all documents relating thereto,
including, without limitation, (a) consents, waivers, and modifications which
may hereafter be executed, and (b) certificates and other information previously
or hereafter furnished may be reproduced by any photographic, photostatic,
microfilm, optical disk, micro-card, miniature photographic, or other similar
process. The parties hereto agree that any such reproduction shall be admissible
in evidence as the original itself in any judicial or administrative proceeding,
whether or not the original is in existence and whether or not such reproduction
was made by a party in the regular course of business, and that any enlargement,
facsimile, or further reproduction shall likewise to be admissible in evidence.
20. This Escrow Agreement, the Merger Agreement and the
Stockholders' Agreement contain the entire agreement among the parties with
respect to the subject matter hereof. This Escrow Agreement may not be amended,
supplemented, or discharged, and no provision hereof may be modified or waived
except by an instrument in writing signed by all of the parties hereto. No
waiver of any provision hereof by any party shall be deemed a continuing waiver
of any matter by such party.
21. This Escrow Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
22. This Escrow Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Executed counterparts transmitted by fax
shall be effective as originals.
SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the undersigned have executed this Escrow
Agreement as of the date first set forth above, to be effective as set forth in
Section 1 hereof.
ESCROW AGENT:
Norwest Bank Colorado, N.A.
By: /s/ Xxxxx X. Xxxx
----------------------------
Name: Xxxxx X. Xxxx
Title: Vice President
PARENT:
eSOFT, INC.
By: /s/ Xxxxxxx Xxxx
----------------------------
Name: Xxxxxxx Xxxx
Title: President
THE REPRESENTATIVE:
/s/ Xxxxx X. Xxxxx
----------------------------
Name: Xxxxx X. Xxxxx
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EXHIBIT A
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STOCKHOLDER PERCENTAGE
NAME INTEREST
Xxxxx X. Xxxxx 27.55%
Xxxxx X. Xxxxx 18.37%
Xxxx X. Xxxxx 16.53%
Xxxxxxx X. XxXxxxxxx 13.33%
Xxxxxx X. Xxxxxx 8.54%
Xxxxx X. Xxxxxxx 3.67%
Xxxxxxx X. Xxxx 3.30%
Xxx "Dutch" Xxxxxxx 2.79%
Xxxx X. Xxxxx 2.20%
Xxxxxxxx Xxxxxxx 2.20%
Xxxxxxx Xxxxxxxx 1.10%
Xxxx Xxxx 0.37%
