EXHIBIT B ESCROW AGREEMENT
EXHIBIT
B
This
ESCROW AGREEMENT (the “Agreement”) is made and entered into this 29th day
of June, 2007, by and among MCC, INC., a Pennsylvania
corporation (the “Company”); nCoat, INC., a Delaware
corporation, its successors or assigns, (“Buyer”); the stockholders of
the Company (the “Stockholders”); and Durham Xxxxx & Xxxxxxx,
PC, a Utah professional corporation (“Escrow
Agent”).
RECITALS
A. The
Company, Buyer and the Stockholders are parties to a Stock Purchase Agreement
dated as of June 19, 2007 (the “Stock Purchase Agreement”) pursuant to
which Buyer agreed to purchase, and the Stockholders agreed to sell to Buyer,
all issued and outstanding shares of common stock of the
Company. Unless otherwise defined herein, all capitalized terms shall
have the meanings given them in the Stock Purchase Agreement.
B. Under
the Stock Purchase Agreement, Buyer agreed to pay the Purchase Price for
the
Shares to the Stockholders by the payment of cash and common stock at
Closing.
C. Pursuant
to Section 8.2 of the Stock Purchase Agreement, the Stockholders agreed to
indemnify Buyer as set forth therein. In furtherance of such
indemnity obligation, Buyer agreed pursuant to Section 1.5 of the Stock Purchase
Agreement to deposit the Purchase Shares consisting of the Escrow Amount
as the
exclusive recourse of Buyer for satisfaction of the indemnity obligations
of the
Stockholders, if any, pursuant to Section 8.2 of the Stock Purchase Agreement,
except as otherwise set forth in Section 8.3(c) of the Stock Purchase
Agreement.
D. The
parties hereto desire to arrange for such escrow and appoint Escrow Agent
as
escrow agent in accordance with the terms hereof.
E. Escrow
Agent is willing to act as Escrow Agent pursuant to the terms of this Agreement
with respect to the receipt and then delivery of the Escrow Amount.
F. Upon
the occurrence of the events described in Section 4 below, Escrow Agent shall
cause the distribution of the Escrow Amount in accordance with the terms
set
forth below.
NOW,
THEREFORE, IT IS AGREED:
1. Interpretation
and Definitions. This Agreement is being executed and delivered
pursuant to Sections 1.5 and 8.5 of the Stock Purchase Agreement and is the
Escrow Agreement referred to therein. The provisions of this
Agreement shall not in any event be construed so as to enlarge or diminish
the
rights of any of the parties hereto under the Stock Purchase
Agreement. Escrow Agent will not be responsible for the Stock
Purchase Agreement.
2. Appointment
of Escrow Agent. Escrow Agent is hereby appointed to act as
Escrow Agent in accordance with the terms hereof, and Escrow Agent hereby
accepts such appointment. Escrow Agent shall have all the rights,
powers, duties and obligations provided herein.
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3.
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Deposit
of Escrow Amount.
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3.1. At
the Closing, the Escrow Amount shall be deposited with the Escrow Agent,
such
deposit to constitute the escrow fund (the "Escrow Fund") and to be
governed by the terms set forth herein. The Escrow Fund shall be
available to compensate Buyer pursuant to the indemnification obligations
of the
Stockholders as set forth in Section 8.2 of the Stock Purchase
Agreement. The Escrow Fund shall be the exclusive recourse of Buyer
in the event said indemnification obligations exceed the amount of the Escrow
Fund, except as otherwise set forth in Section 8.3(c) of the Stock Purchase
Agreement.
3.2. The
Escrow Amount shall be delivered to Escrow Agent at its address for notice
indicated in Section 7.1.
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4.
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Terms
of Escrow.
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4.1 The
Escrow Agent shall hold the Escrow Fund (or any then remaining portion thereof),
subject to any earlier releases of any portion of the Escrow Fund pursuant
to
Section 4.4 below, in escrow until that the date on which the Escrow Agent
receives instructions to terminate the escrow and distribute the Escrow Fund
signed by Buyer and the Stockholders, or, if the Escrow Agent has not received
such instructions, the Escrow Fund shall be released and paid out on the
eighteen (18th)
month anniversary of the Stock Purchase Agreement; provided, however,
that the Escrow Fund shall be net of (a) any amounts paid in connection with
the
Stockholders’ indemnification obligations under the Stock Purchase Agreement,
and (b) any amounts claimed in any Indemnification Claim Notice which have
not
been resolved at the time of such payment (such amount being referred to
as the
"Disputed Claim Amount").
4.2 Within
three (3) Business Days after the date of the eighteen (18th) month
anniversary
of the Stock Purchase Agreement (which shall constitute the “Release
Date”), the Escrow Agent shall release from escrow to the Stockholders all
or any then remaining portion of the Escrow Fund, less the Disputed Claim
Amount, if applicable. The Escrow Agent shall in all events release
all of the remaining Escrow Fund (including the Disputed Claim Amount) on
or
before that date that shall be three (3) months after the Release Date (the
"Disputed Claim Release Date") unless on or prior to the Disputed Claim
Release Date, the parties to this Agreement (other than the Escrow Agent)
shall
have (i) resolved any dispute by settlement and provided the Escrow Agent
with
mutually executed delivery instructions with respect to the portion of the
Escrow Fund then held by the Escrow Agent, of (ii) any party shall have
commenced a legal action or arbitration to resolve such dispute, in which
case
the Escrow Agent shall continue to hold any then remaining portion of the
Escrow
Fund (including the Disputed Claim Amount) until such action or arbitration
is
concluded.
4.3 The
Escrow Fund, or any beneficial interest therein, may not be pledged, sold,
assigned or transferred, including by operation of law, by any Stockholders
or
be taken or reached by any legal or equitable process in satisfaction of
debt or
other liability of any Stockholders, prior to the delivery to the Stockholders
of the Escrow Fund by the Escrow Agent as provided herein.
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4.4 (A) At
any time after the Closing, Buyer may give written notice to the Stockholders
and Escrow Agent that Buyer claims all or any part of the Escrow Fund in
satisfaction of any damages for which Buyer is entitled to be indemnified
pursuant to the Stock Purchase Agreement (such claim is herein referred to
as an
"Indemnification Claim" and any such written notice of a claim is
hereinafter referred to as an "Indemnification Claim Notice"). The
Indemnification Claim Notice shall set forth in reasonable detail: (i) the
nature of the Indemnification Claim; and (ii) the amount of the Indemnification
Claim (hereinafter referred to as the "Indemnification Claim Amount"). In
the event Buyer gives any Indemnification Claim Notice to Escrow Agent, Buyer
shall also give such Notice to the Stockholders at the same time such Notice
is
given to the Escrow Agent.
(B) Within
fifteen (15) calendar days following receipt of an Indemnification Claim
Notice
which specifies the amount of the Indemnification Claim, Escrow Agent shall
charge the Escrow Fund for the Indemnification Claim Amount and pay to Buyer
the
Indemnification Claim Amount unless Escrow Agent receives a written notice
from
the Stockholders (the“Stockholders' Notice") objecting to such charge and
payment and disputing the Indemnification Claim. The Stockholders’ Notice shall
be given to Buyer and Buyer's counsel at the same time the Stockholders’ Notice
is given to the Escrow Agent, and shall set forth (i) the amount of the
Indemnification Claim Amount in dispute, (ii) the amount of the Indemnification
Claim not in dispute, and (iii) in reasonable detail the basis for the
dispute.
(C) In
the event of such a dispute, the Escrow Agent shall pay to Buyer that portion
of
the Indemnification Claim Amount which is not in dispute, if any, and Buyer
and
the Stockholders shall use reasonable efforts to mutually resolve the dispute
within ten (10) days of Buyer's receipt of the Stockholders’ Notice. In the
event such resolution does not occur within said ten-day time period, the
dispute shall be promptly submitted to binding arbitration, conducted in
accordance with the Commercial Rules of the American Arbitration Association,
to
determine which Party is entitled to the disputed portion of the Indemnification
Claim Amount; provided, however, that if the disputed amount is
greater than $500,000, either Party shall have the option, prior to the
commencement of arbitration proceedings, to pursue and obtain resolution
of such
dispute and determination through litigation. The disputed portion of the
Indemnification Claim Amount shall then be paid by the Escrow Agent pursuant
to
the arbitrators' award or judgment of the court, as the case may be. In
resolving such dispute, the arbitrator or the court, as the case may be,
shall
determine the "prevailing party" for purposes of Section 12.5
below.
(D) Any
amount paid to Buyer from the Escrow Fund pursuant to the foregoing provisions
of this Agreement shall be deemed a reduction in the Purchase
Price.
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5.
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Duties
and Obligations of Escrow
Agent.
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5.1. The
parties hereto agree that the duties and obligations of Escrow Agent are
only
such as are herein specifically provided and no other. Escrow Agent’s
duties are as a depositary only, and Escrow Agent shall incur no liability
whatsoever, except as a direct result of its willful misconduct or gross
negligence.
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5.2. Escrow
Agent shall be entitled to consult with competent and responsible counsel
of its
choice with respect to the interpretation of the provisions hereof, and any
other legal matters relating hereto, and shall be fully protected in taking
any
action or omitting to take any action in good faith in accordance with the
advice of such legal counsel. As to any matter not specifically
provided for in this Agreement, Escrow Agent shall be entitled to request
written instructions mutually executed by the Company, Buyer, and the
Stockholders, and shall have the right to refrain from acting until it has
received such written instructions.
5.3. Escrow
Agent shall not be bound in any way by the terms of any other agreement to
which
the Stockholders, Buyer, and the Company are or may be parties, whether or
not
it has knowledge thereof, and Escrow Agent shall not in any way be required
to
determine whether or not any other agreement has been complied with by the
Stockholders, Buyer, and/or the Company, or any other party
thereto. Escrow Agent shall not be bound by any modification,
amendment, termination, cancellation, rescission or supersession of this
Agreement unless the same shall be in writing and signed by each of the
Stockholders or the Stockholders on behalf of all of the Stockholders, Buyer,
and the Company, and agreed to in writing by Escrow Agent.
5.4. If
at any time during the term of this Agreement, Escrow Agent shall be uncertain
as to its duties or rights hereunder or shall receive instructions, claims
or
demands which, in its opinion, are in conflict with any of the provisions
of
this Agreement, it shall be entitled to refrain from taking any action, other
than to keep safely, the Escrow Amount held in escrow until it shall jointly
be
directed otherwise in writing by the Stockholders, Buyer, and the Company
or by
a final judgment of a court of competent jurisdiction.
5.5. Escrow
Agent shall be fully protected in relying upon any written notice, demand,
certificate or document which it, in good faith, believes to be
genuine. Escrow Agent shall not be responsible for the sufficiency or
accuracy of the form, execution, validity or genuineness of documents or
securities now or hereafter deposited hereunder, or of any endorsement thereon,
or for any lack of endorsement thereon, or for any description therein; nor
shall Escrow Agent be responsible or liable in any respect on account of
the
identity, authority or rights of the persons executing or delivering or
purporting to execute or deliver any such document, security or
endorsement.
5.6. Escrow
Agent shall not be required to institute legal proceedings of any kind and
shall
not be required to defend any legal proceedings which may be instituted against
it or in respect to the Escrow Amount, any dividends thereon and any other
property deposited with Escrow Agent pursuant to this Agreement.
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5.7. If
Escrow Agent at any time, in its sole discretion, deems it necessary or
advisable to relinquish custody of the Escrow Stock or other deposited property,
it may do so by giving five (5) days’ written notice to the parties of its
intention and thereafter delivering the Escrow Amount or other property to
any
other escrow agent mutually agreeable to the Stockholders, Buyer, and
the Company and, if no such escrow agent shall be selected within three (3)
days
of Escrow Agent’s notification to the Stockholders, Buyer, and the Company of
its desire to so relinquish custody of the Escrow Amount or other property,
then
Escrow Agent may do so by delivering the Escrow Amount or other property
(a) to
any bank or trust company in North Carolina, which is willing to act as escrow
agent hereunder in place and instead of Escrow Agent, or (b) to the clerk
or
other proper officer of a court of competent jurisdiction as may be permitted
by
law within North Carolina. The fee of any such bank or
trust company or court officer shall be borne one-half by the Stockholders
and
one-half by Buyer. Upon such delivery, Escrow Agent shall be
discharged from any and all responsibility or liability with respect to the
Escrow Amount or other property and the Company and the Stockholders shall
promptly pay to Escrow Agent all monies which may be owed it for its services
hereunder, including, but not limited to, reimbursement of its out-of-pocket
expenses pursuant to Section 5.9 below.
5.8. This
Agreement shall not create any fiduciary duty on Escrow Agent’s part to the
Stockholders, Buyer, or the Company, nor disqualify Escrow Agent from
representing any party hereto (or any affiliate of any party hereto) in any
dispute with the other, including any dispute with respect to the Escrow
Amount
or other property deposited with Escrow Agent or otherwise.
5.9. The
reasonable out-of-pocket expenses paid or incurred by Escrow Agent in the
administration of its duties hereunder, including, but not limited to, all
counsel and advisors’ and agents’ fees
and all taxes
or other governmental charges, if any, shall be paid by one-half by the
Stockholders and one-half by Buyer.
6. Indemnification.
The Stockholders, Buyer, and the Company, jointly and severally, hereby
indemnify and hold Escrow Agent harmless from and against any and all losses,
damages, taxes, liabilities and expenses that may be incurred, directly or
indirectly, by Escrow Agent, arising out of or in connection with its acceptance
of appointment as Escrow Agent hereunder and/or the performance of its duties
pursuant to this Agreement, including, but not limited to, all legal costs
and
expenses of Escrow Agent incurred defending itself against any claim or
liability in connection with its performances hereunder and the costs of
recovery of amounts pursuant to this Section 6.
7. Miscellaneous.
7.1. Notices. All
notices, requests, demands and other communications hereunder shall be in
writing, with copies to all the other parties hereto, and shall be deemed
to
have been duly given or delivered when (i) if delivered by hand, upon receipt,
(ii) if sent by facsimile, upon receipt of proof of sending thereof, (iii)
if
sent by nationally recognized overnight delivery service (receipt requested),
the next Business Day or (iv) if mailed by first-class registered or certified
mail, return receipt requested, postage prepaid, four days after posting
in the
U.S. mails, in each case if delivered to the following addresses:
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If
to the Company:
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MCC,
Inc.
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000
Xxxx
Xxxx
Xxxx
xx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attn: President
Facsimile
No.: (000) 000-0000
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With
a copy to:
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Xxxxxxx,
Xxxxx, Xxxxxxx, Xxxxxx & Xxxxxx,
LLP
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000
Xxxxx
Xxxx Xxxxxx
Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxx
Xxxxxxx
Facsimile
No.: (000) 000-0000
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If
to the Stockholders:
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Xxxxxxx
Xxxxxxxxx
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000
Xxxxx
Xxxxxx Xxxx Xxxx
Xxxxxxxxx,
Xxxxxxxxxxxx 00000
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With
a copy to:
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Xxxxxxx,
Xxxxx, Xxxxxxx, Xxxxxx & Xxxxxx,
LLP
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000
Xxxxx
Xxxx Xxxxxx
Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxxxxx
Xxxxxxx
Facsimile
No.: (000) 000-0000
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If
to Buyer:
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0000
Xxxx
Xxxxx
X.X.
Xxx
00
Xxxxxxxx,
XX 00000
Attn: Xxxx
Xxxxxxx or Xxxxx Xxxxxx
Facsimile
No.: 000-000-0000
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With
a copy to:
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Durham
Xxxxx & Xxxxxxx
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000
Xxxx
Xxxxxxxx
Xxxxx
000
Xxxx
Xxxx
Xxxx, Xxxx 00000
Attn: Xxxxxxx
Xxxxx, Esq.
Facsimile
No.: 801-415-3500
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If
to Escrow Agent:
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Durham
Xxxxx & Xxxxxxx, PC
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(to
receive copies
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000
Xxxx Xxxxxxxx, Xxxxx 000
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of
all communications
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Xxxx
Xxxx Xxxx, Xxxx 00000
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pursuant
to this Agreement)
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ATTN:
President
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Facsimile
No.: (000) 000-0000
or
at
such other address as any of the parties to this Agreement may hereafter
designate in the manner set forth above to the others. Notices shall
be effective when mailed, sent or dispatched to the addressee.
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7.2. Choice
of Law; Jurisdiction. This Agreement shall be construed and
enforced in accordance with the laws of the State of Delaware applicable
to
contracts entered into and performed entirely within the State of
Delaware. In any action in which Escrow Agent is a party, whether as
plaintiff, defendant or third party, the exclusive jurisdiction in which
such
action may be brought shall be the federal or state courts located in the
County
and State in which the principal office of Escrow Agent is then
located.
7.3. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall
be deemed an original but all of which together will constitute one and the
same
instrument.
7.4. Headings. The
section headings contained in this Agreement are inserted for convenience
only
and shall not affect in any way the meaning or interpretation of this
Agreement.
7.5. Limited
Effect; Integration. The parties to this Agreement intend for
this Agreement to be the final agreement between and among them as pertaining
to
the subject matter hereof, provided, however, that the parties do
not intend hereby to modify or amend the Stock Purchase Agreement, but intend
the provisions of this Agreement to supplement and otherwise to not affect
in
any way the Stock Purchase Agreement.
7.6. Incorporation
of Recitals. The recitals of this Agreement are hereby
incorporated into and made part of this Agreement as if fully set forth
herein.
[Remainder
of page intentionally left blank.
Signature
page follows.]
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IN
WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be
signed the day and year first above written.
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COMPANY:
MCC,
INC.
By:
/s/
Name:
________________________
Title: _________________________
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ESCROW
AGENT:
Durham
Xxxxx & Xxxxxxx, PC
By:
/s/
Name:
________________________
Title: _________________________
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STOCKHOLDER:
By:
/s/
Name: Xxxxxxx
Xxxxxxxxx
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BUYER:
By:
/s/
Name:
________________________
Title: ________________________
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By:
/s/
Name:
Xxxxx Xxxxxxxxx
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