ESCROW AGREEMENT
Exhibit
10.116
This
Escrow Agreement, dated as of February 26, 2008 (the “Closing Date”), among
XFone, Inc., a Nevada corporation (“Purchaser”) and Xxxxx Xxxxxxxx, Xxxxxx
Xxxxxx and Xxxxx Xxxxxxxxx, (collectively the “Sellers’ Representative”) for
each of the persons and entities listed on Exhibit A hereto who were selling
Shareholders of NTS Communications, Inc. (the “NTS Sellers”), and Trustmark
National Bank, as escrow agent (“Escrow Agent”).
This
is
the Escrow Agreement referred to in the Stock Purchase Agreement dated August
22, 2007, as amended (the “Stock Purchase Agreement”), among Purchaser, the
Company and the NTS Sellers. Capitalized terms used in this agreement
without definition shall have the respective meanings given to them in the
Stock
Purchase Agreement.
In
order
to provide Purchaser security for obligations under Section 2.2(d) and (e)
of
the Stock Agreement for working capital adjustments and rights of
indemnification that the Purchaser possesses under Article VII of the Stock
Purchase Agreement, the NTS Sellers and the Purchaser have agreed that the
cash
and the XFone Common Stock (“XFone Common Stock”) as set forth in Exhibit “A”
for each of the NTS Sellers, which constitutes part of the Purchase Price under
the Stock Purchase Agreement, shall be deposited with the Escrow Agent by
Purchaser to be held and administered by Escrow Agent in accordance with the
terms and conditions herein set forth.
The
parties, intending to be legally bound, hereby agree as follows:
1.
ESTABLISHMENT OF ESCROW
(a)
Deposit. The
Purchaser hereby deposits in escrow the amount of cash and number of shares
of
XFone Common Stock set out opposite the names of the NTS Sellers on Exhibit
“A”
attached to this Agreement (collectively, the “Escrow Fund”). The
XFone Common Stock shall be registered in the name of the Escrow Agent or its
nominee. For all purposes, the value of the XFone Common Stock shall
be valued at the value as set forth on Exhibit “A.” For purposes of
clarity, such value shall be the average per share closing price on the American
Stock Exchange of XFone Common Stock for the ten (10) consecutive trading days
preceding the trading day immediately prior to the Closing Date. As
used herein, the “Pro-Rata Share” refers to each NTS Seller’s percentage of the
total Escrow Fund as of the date hereof as set forth on Exhibit “A” hereto which
shall equal each such NTS Seller’s Allocable Shares as set forth in the Stock
Purchase Agreement. For any NTS Seller that has had cash and XFone
Common Stock deposited into the Escrow Fund on it behalf, such NTS Seller’s
Pro-Rata Share shall be satisfied from the cash and XFone Common Stock in the
same proportions as the cash or XFone Common Stock originally deposited in
the
Escrow Fund on the date hereof for such NTS Seller, all as set forth in Exhibit
“A,” except that such NTS Seller’s Pro-Rata Share of fees or other amounts due
to the Escrow Agent pursuant to Section 4(i) shall be satisfied in
cash.
(b)
Escrow
Fund. Escrow Agent hereby acknowledges receipt of the Escrow
Fund as provided in Section 1(a). The Escrow Fund (as increased by
all income, property andEarnings
resulting therefrom) (“Escrow Fund”) shall be held and administered by the
Escrow Agent for the benefit of the NTS Sellers and Purchaser on the terms
set
out herein.
-1-
(c)
Investment of Escrow
Funds. Except as Purchaser and Sellers’ Representative may
from time to time jointly instruct Escrow Agent in writing, the cash portion
of
the Escrow Fund shall be invested from time to time, to the extent possible,
in
a money market fund comprised of United States Treasury bills having a remaining
maturity of ninety (90) days or less and repurchase obligations secured by
such
United States Treasury bills, with any remainder being deposited and maintained
in a money market deposit account with Escrow Agent until disbursement of the
entire Escrow Fund. Escrow Agent is authorized to liquidate in accordance with
its customary procedures any portion of the Escrow Fund consisting of
investments to provide for payments required to be made under this
Agreement. Interest, dividends, earnings and gains on the Escrow Fund
are hereinafter referred to collectively as the “Earnings.”
(d)
Voting Rights of
Shares in Escrow. The NTS Sellers shall retain all rights with
respect to the XFone Common Stock commensurate with the ownership of common
stock, including, without limitation, the right to dividends and the right
to
vote such shares. All voting rights with respect to the XFone Common
Stock composing a part of the Escrow Fund may be exercised by the NTS Seller
who
deposited such XFone Common Stock in escrow, and the Escrow Agent shall from
time to time execute and deliver to each NTS Seller such proxies, consents,
or
other documents as may be necessary to enable such NTS Seller to exercise such
rights with respect to its XFone Common Stock.
(e)
Distributions on
Escrow Fund. All Earnings made on the cash portion of the
Escrow Fund shall be deemed to be that of the NTS Sellers, in accordance with
their respective Pro-Rata Share of the cash portion of the Escrow Fund, for
income tax purposes, but shall be received by the Escrow Agent and constitute
part of the Escrow Fund.
(f)
Taxes and Charges
on
Escrow Fund. For those NTS Sellers who have provided the
Escrow Agent with a properly completed Internal Revenue Service W-9 Form
indicating that no taxes are to be withheld, the Escrow Agreement by no later
than March 15 of each year shall pay to such NTS Seller an amount equal to
30%
of such NTS Seller’s Pro-Rata share of the Earnings from the cash portion of the
Escrow Fund. The NTS Sellers, with respect to their respective
Pro-Rata Share of the Escrow Fund, shall maintain the Escrow Fund free and
clear
of all liens and encumbrances and shall, promptly upon request by the Escrow
Agent, pay and discharge all taxes, assessments, and governmental charges
imposed on or with respect to the Escrow Fund.
(g)
Acceptance of
Escrow. Escrow Agent hereby agrees to act as escrow agent and
to hold, safeguard, administer and disburse the Escrow Fund pursuant to the
terms and conditions hereof.
(h)
Notice of
Claim. Purchaser shall be entitled to recover under this
Escrow Agreement in respect of (i) any working capital adjustment as provided
in
Section 2.2(d) of the Stock Purchase Agreement (“Working Capital Adjustment”);
or (ii) any Adverse Consequences (as provided in Article VII of the Stock
Purchase Agreement) and, during the Escrow Period,may
give
notice in writing in the form attached hereto as Appendix A (“Pending Claims
Notice”) to the Escrow Agent and the Sellers’ Representative of any claim on
which any Working Capital Adjustment is asserted or Adverse Consequences may
be
based, which Pending Claims Notice shall include a brief description of the
nature of the claim, the identity of the party by whom it is being asserted,
and
an estimate of the amount of Adverse Consequences that may be sustained by
Purchaser (the “Estimated Adverse Consequences”).
-2-
(i)
Sellers’
Representative Action. The Sellers’ Representative
Committee
shall act on the affirmative vote of a majority of the members of such committee
and the Escrow Agent shall be entitled to rely on any direction given by any
two
members of the Sellers’ Representative Committee as the act of the Sellers’
Representative under this Agreement.
2.
DISTRIBUTIONS FROM ESCROW FUND
(a)
Purchaser
Request. If Purchaser submits a notice and request to the
Sellers’ Representative and Escrow Agent in substantially the form attached as
Appendix B stating that (i) a Working Capital Adjustment has been determined
to
be due to Purchaser by the NTS Sellers in accordance with Section 2.2(d) of
the
Stock Purchase Agreement and the dollar amount due to Purchaser by virtue of
the
Working Capital Adjustment; or (ii) Adverse Consequences (as defined in the
Stock Purchase Agreement) has been determined in accordance with Article VII
of
the Stock Purchase Agreement and specifying the dollar amount of the Adverse
Consequences, then on the 30th Business Day following such notice, Escrow Agent
shall release as directed in said notice an amount from the Escrow Fund equal
to
the amount of the Working Capital Adjustment or Adverse Consequences, as the
case may be, and applying such amount to each NTS Seller’s Pro-Rata share of the
Working Capital Adjustment or Adverse Consequences, as the case may be, unless
the Escrow Agent has received a Counter-Notice (as defined herein) from the
Sellers’ Representative that the requested release from the Escrow Fund is
disputed.
(b)
If a counter-notice (“Counter-Notice”) is given with respect to a request for
distributions from the Escrow Fund, then the Escrow Agent shall make a
distribution from the Escrow Fund only in accordance with (i) joint written
instructions of Purchaser and the Sellers’ Representative or (ii) a final
non-appealable order of a court of competent jurisdiction or, in the case of
a
Working Capital Adjustment, the binding determination of the Arbitrator pursuant
to Section 2.2(e) of the Stock Purchase Agreement. Any court order or
arbitrator order shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to the Escrow Agent to the effect that the order
is final and non-appealable. Escrow Agent shall act on such court or
arbitrator order and legal opinion without further question.
(c)
Notwithstanding anything to the contrary contained in this Agreement, the Escrow
Agent shall make distributions from the Escrow Fund in accordance with the
joint
written instructions of Purchaser and the Sellers’ Representative.
-3-
3.
DURATION AND TERMINATION OF ESCROW
(a)
On the second anniversary date of this Agreement (“Escrow Period”), the Escrow
Agent shall retain an amount of the then remaining Escrow Fund (taken on a
Pro-Rata Share from each NTS Seller’s portion of the Escrow Fund) equal to the
aggregate dollar value of the Estimated Adverse Consequences for all outstanding
Pending Claims Notices, if any, received during the Escrow Period and the
remainder of each NTS Seller’s portion of the Escrow Fund (including all
Earnings) shall be disbursed to each NTS Seller to the address as provided
in
Exhibit “A” hereto. After the resolution of all outstanding Pending
Claims Notices received during the Escrow Period, the Escrow Agent shall
promptly deliver the balance, if any, of the Escrow Fund (including all
Earnings) to each NTS Seller to the address provided in Exhibit
“A”.
(b)
The Escrow Agreement shall terminate and be of no further force or effect on
the
first to occur of (i) the close of business on the date on which the Escrow
Agent delivers to Purchaser and/or the NTS Sellers, as the case may be, the
entire Escrow Fund (and any Earnings thereon) in accordance with the terms
of
this Agreement or (ii) December 31, 2020, at which time this Escrow Fund shall
terminate and any Escrow Fund remaining shall be interpled with the registry
or
custody of any court of competent jurisdiction and thereupon the Escrow Agent
shall be discharged of all further duties under this Agreement.
4.
DUTIES OF ESCROW AGENT
(a)
Escrow Agent shall not be under any duty to give the Escrow Fund held by it
hereunder any greater degree of care than it gives its own similar property
and
shall not be required to invest any funds held hereunder except as directed
in
this Agreement. Uninvested funds held hereunder shall not earn or accrue
interest.
(b)
Escrow Agent shall not be liable, except for its own gross negligence or willful
misconduct and, except with respect to claims based upon such gross negligence
or willful misconduct that are successfully asserted against Escrow Agent,
the
others hereto shall jointly and severally indemnify and hold harmless Escrow
Agent (and any successor Escrow Agent) from and against any and all losses,
liabilities, claims, actions, damages and expenses, including reasonable
attorneys’ fees and disbursements, arising out of and in connection with this
Agreement.
(c)
Escrow Agent shall be entitled to rely upon any order, judgment, certification,
demand, notice, instrument or other writing delivered to it hereunder without
being required to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity of the service thereof. Escrow
Agent
may act in reliance upon any instrument or signature believed by it to be
genuine and may assume that the person purporting to give receipt or advice
or
make any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so. Escrow Agent may conclusively presume
that the undersigned representative of any party hereto which is an entity
other
than a natural person has full power and authority to instruct Escrow Agent
on
behalf of that party unless written notice to the contrary is delivered to
Escrow Agent.
-4-
(d)
Escrow Agent may act pursuant to the advice of counsel with respect to any
matter relating to this Agreement and shall not be liable for any action taken
or omitted by it in good faith in accordance with such advice.
(e)
Escrow Agent does not have any interest in the Escrow Fund deposited hereunder
but is serving as escrow holder only and having only possession thereof. Any
payments of income from this Escrow Fund shall be subject to withholding
regulations then in force with respect to United States taxes. The parties
hereto will provide Escrow Agent with appropriate Internal Revenue Service
Forms
W-9 for tax identification number certification, or non-resident alien
certifications. Section 4(e) and Section 4(b) shall survive notwithstanding
any
termination of this Agreement or the resignation of Escrow Agent.
(f)
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 it.
(g)
Escrow Agent (and any successor Escrow Agent) may at any time resign as such
by
delivering the Escrow Fund to any successor Escrow Agent jointly designated
by
the other parties hereto in writing, or to any court of competent jurisdiction,
whereupon Escrow Agent shall be discharged of and from any and all further
obligations arising in connection with this Agreement. 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 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.
(h)
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 or arbitrator 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 or arbitrator 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.
(i)
Purchaser and the NTS Sellers shall pay Escrow Agent compensation (as payment
in
full) for the services to be rendered by Escrow Agent hereunder in the amount
of
$1,500.00 at the time of execution of this Agreement and $1,500.00 annually
thereafter (the “Annual Fee”) and $25.00 per distribution to each Seller, and
agree to reimburse Escrow Agent for all reasonable expenses, disbursements
and
advances incurred or made by Escrow Agent in performance of its duties hereunder
(including reasonable fees, expenses and disbursements ofits
counsel). Any such compensation and reimbursement to which Escrow Agent is
entitled shall be borne 50% by Purchaser, and 50% by the NTS Sellers with each
NTS Seller responsible for its Pro-Rata Share of such 50% which may be deducted
from each NTS Seller’s cash portion of its share of the Escrow
Fund.
-5-
(j)
No printed or other matter in any language (including, without limitation,
prospectuses, notices, reports and promotional material) that mentions Escrow
Agent’s name or the rights, powers, or duties of Escrow Agent shall be issued by
the other parties hereto or on such parties’ behalf unless Escrow Agent shall
first have given its specific written consent thereto.
5.
LIMITED RESPONSIBILITY
This
Agreement expressly sets forth all the duties of Escrow Agent with respect
to
any and all matters pertinent hereto. No implied duties or obligations shall
be
read into this agreement against Escrow Agent. Escrow Agent shall not be bound
by the provisions of any agreement among the other parties hereto except this
Agreement.
6.
OWNERSHIP FOR TAX PURPOSES
Each
NTS
Seller will be treated as the owner of its respective portion of the Escrow
Fund, and each NTS Seller will report all income, if any, that is earned on,
or
derived from, each NTS Seller’s portion of the Escrow Fund as their income, in
such proportions, in the taxable year or years in which such income is properly
includible and pay any taxes attributable thereto.
7.
NOTICES
All
notices, consents, waivers and other communications under this Agreement must
be
in writing and will be deemed to have been duly given when (a) delivered by
hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt) provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if
sent by a nationally recognized overnight delivery service (receipt requested),
in each case to the appropriate addresses and telecopier numbers set forth
below
(or to such other addresses and telecopier numbers as a party may designate
by
notice to the other parties):
IF
TO
COMPANY OR SHAREHOLDER REPRESENTATIVE, TO:
Xxxxx
Xxxxxxxx
Xxxxxx
Xxxxxx
c/o
Telephone Electronics Corporation
000
Xxxx
Xxxxxxx Xxxxxx
Xxxxxxx,
XX 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
Email:
xxxxxxxxx@xxxxxxxxxxxx.xxx
and xxxxxxx@xxx.xxx
and
-6-
Xxxxx
Xxxxxxxxx
0000
Xxxxxx Xxxxxx
Xxxxxx,
XX 00000
Telephone:
_________________
Facsimile:
_________________
Email:
_________________
|
|
IF
TO PURCHASER, TO:
|
XFone,
Inc.
Xxxxxxxxx
Xxxxx
000
Xxxx
Xxxx
Xxxxxx,
X000XX
Xxxxxx
Xxxxxxx
|
|
Attention:
|
Xxx
Xxxxxxxxx
|
|
|
Telephone:
|
x00
000-000-0000
|
|
|
Facsimile:
|
x00
000-000-0000
|
|
|
Email:
|
xxx@xxxxx.xxx
|
and
XFone,
Inc.
c/o
XFone
USA, Inc.
0000
Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attention: Xxxx
Xxxxxxx
|
Telephone:
|
(000)
000-0000
|
|
Facsimile:
|
(000)
000-0000
|
|
|
Email:
|
xxxxxxxx@xxxxx.xxx
|
and
Xxxxxxx
Xxxxxx Winter & Stennis, P.A.
000
Xxxxx
Xxxxx Xxxxxx (39202)
P.
O. Xxx
000
Xxxxxxx,
XX 00000-0000
Attention: Xxxx
X. Xxxxxx
|
|
Telephone:
|
000-000-0000
|
Facsimile: 601-949-4804
|
|
Email:
|
xxxxxxx@xxxxxxxxxxxxx.xxx
|
|
|
IF
TO ESCROW AGENT:
|
Trustmark
National Bank
000
Xxxx
Xxxxxxx Xxxxxx
Xxxxxxx,
XX 00000
Attention:
X. Xxxxxxx (“Xxxxx”) Xxxxxx, X.X.
-7-
8. JURISDICTION;
SERVICE OF PROCESS
Any
action or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement may be brought against any of the parties in
the
courts of Xxxxx County, Mississippi, State of Mississippi or, if it has or
can
acquire jurisdiction, in the United States District Court for the Southern
District of Mississippi, and each of the parties consents to the jurisdiction
of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
9.
COUNTERPARTS
This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original and all of which, when taken together, will be deemed
to constitute one and the same.
10.
SECTION HEADINGS
The
headings of sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation.
11.
WAIVER
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Except as set forth in this Agreement or the Stock Purchase
Agreement, neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to
in
this Agreement will operate as a waiver of such right, power, or privilege,
and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or
the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement
can be discharged by one party, in whole or in part, by a waiver or renunciation
of the claim or right unless in writing signed by the other party; (b) no
waiver that may be given by a party will be applicable except in the specific
instance for which it is given; and (c) no notice to or demand on one party
will be deemed to be a waiver of any obligation of such party or of the right
of
the party giving such notice or demand to take further action without notice
or
demand as provided in this Agreement or the documents referred to in this
Agreement.
12.
EXCLUSIVE AGREEMENT AND MODIFICATION
This
Agreement supersedes all prior agreements among the parties with respect to
its
subject matter and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may
not
be amended except by a written agreement executed by the Purchaser, the
Principals and the Escrow Agent.
-8-
13.
GOVERNING LAW
This
Agreement shall be governed by the laws of the State of Mississippi, without
regard to conflicts of law principles.
IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of
the date first written above.
| PURCHASER: | SELLERS’ REPRESENTATIVE: | |||
| XFone, Inc. | ||||
|
/s/ Xxx
Xxxxxxxxx
|
/s/
Xxxxx Xxxxxxxx
|
|||
|
Xxx
Xxxxxxxxx
|
Xxxxx
Xxxxxxxx
|
|||
|
President
and CEO
|
|
| ESCROW AGENT: | ||||
|
/s/
X. Xxxxxxx "Xxxxx" Xxxxxx, Jr.
|
/s/
Xxxxxx Xxxxxx
|
|||
|
X.
Xxxxxxx "Xxxxx" Xxxxxx, Jr.
|
Xxxxxx
Xxxxxx
|
|||
|
First
Vice President & Trust Officer
|
|
|
/s/
Xxxxx Xxxxxxxxx
|
||||
|
|
Xxxxx
Xxxxxxxxx
|
|||
|
|
|
-9-
APPENDIX
A
PENDING
CLAIM
NOTICE
To:
_______________________, or its successor (“Escrow Agent”)
_______________________
(“Sellers’
Representative”)
|
From:
|
XFone,
Inc. (“Purchaser”)
|
|
Date:
|
_____________________
|
Please
be
advised that, pursuant to Section 1(h) of the Escrow Agreement dated
____________, 200___ by and among the undersigned, the Escrow Agent, and the
Sellers’ Representative, each of you are hereby notified that, Purchaser
believes that the Purchaser has or may suffer Adverse Consequences pursuant
to
the provisions of Article VII of the Stock Purchase Agreement dated as of
_______________________ (“Stock Purchase Agreement”) by virtue of
Purchaser
estimates that the Adverse Consequences is $_____________ (“Estimated Adverse
Consequences”).
Signed
this _____ day of _________________, 2008.
| XFone, Inc. | |||
|
|
By:
|
/s/ | |
| Name | |||
| Title | |||
-00-
XXXXXXXX
X
PURCHASER
DEPOSITION NOTICE
REQUEST
|
To:
|
______________________,
or its successor (“Escrow Agent”)
|
______________________
(“Sellers’ Representative”)
|
From:
|
XFone,
Inc. (“Purchaser”)
|
|
Date:
|
_______________________
|
|
Re:
|
Escrow
Agreement Dated ____________, 200__ Among the Above-referenced Parties
(“Escrow Agreement”)
|
Please
be
advised that pursuant to Section 2(a) of the Escrow Agreement you are hereby
notified that Adverse Consequences (as defined in the Stock Purchase Agreement
dated August 22, 2007) has been determined and you are hereby instructed to
deliver to XFone, Inc. each NTS Seller’s Pro-Rata Share thereof from the Escrow
Funds.
Check
One:
|
____
|
This
is the Adverse Consequences as determined for Pending Claims Notice
dated.
|
|
____
|
This
notice also constitutes a Pending Claims Notice and the Adverse
Consequences arises out of the following:
|
| Sincerely, | |||
| XFone, Inc. | |||
|
|
By:
|
/s/ | |
| Name | |||
| Title | |||
-11-
