Exhibit 10.3 Annex B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement') is made and entered into as
of the ___ day of July, 1998, by and among Interiors, Inc., a Delaware
corporation ("Buyer"), U.S. Bank Trust, a national association (together with
its successors and assigns, the "Escrow Agent"), and Bentley International,
Inc., a Missouri corporation (the "Shareholder"). For purposes of this Escrow
Agreement, all capitalized terms shall have the meanings ascribed to such terms
in the Stock Purchase Agreement(defined below) unless otherwise defined herein.
RECITALS
A. Pursuant to that certain Stock Purchase Agreement, dated as of the date
hereof (the 'Stock Purchase Agreement") by and among Buyer and the Shareholder,
Buyer is purchasing all of the issued and outstanding shares of common stock,
par value $1.00 per share (the "Common Stock") of Windsor Art, Inc., a Missouri
corporation (the 'Company").
B. The Stock Purchase Agreement provides that Buyer shall be entitled to
indemnification pursuant to the terms set forth in the Stock Purchase Agreement
for certain Damages resulting from breaches of representations, warranties and
covenants made by the Shareholder in the Stock Purchase Agreement.
C. The Stock Purchase Agreement provides that an escrow account will be
established to secure the indemnification obligations of the Shareholder, and
the execution and delivery of this Escrow Agreement is a condition precedent to
the obligation of Buyer to consummate the transactions contemplated by the Stock
Purchase Agreement.
NOW THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained in this Escrow Agreement, and intending to be
legally bound, the parties hereto agree as follows:
1. Escrow.
(a) Shareholder hereby delivers to the Escrow Agent a certificate in the
name of the Escrow Agent representing 1,500,000 shares of the Buyer's Common
Stock (as
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defined in the Stock Purchase Agreement) (the "Escrow Shares') pursuant to
Section 2.03 of the Stock Purchase Agreement, the receipt of which the Escrow
Agent hereby acknowledges. The Escrow Shares shall be deposited in an account
established at the Escrow Agent for receipt of such Escrow Shares (the 'Escrow
Account") and shall be held in such Escrow Account and distributed in accordance
with the terms and provisions of this Escrow Agreement.
(b) Any securities, non-cash dividends or other property distributable in
respect of or in exchange for any of the Escrow Shares, whether by way of stock
dividends, stock splits or otherwise, shall be delivered to the Escrow Agent,
who shall hold such securities, non-cash dividends or other property in the
Escrow Account. Such securities shall be issued in the name of the Escrow Agent
or its nominee and all such securities, cash dividends or other property shall
be considered part of the Escrow Account for purposes hereof.
(c) Buyer shall have the right, in its sole discretion, to direct the
Escrow Agent in writing as to the exercise of any voting rights pertaining to
the Escrow Shares, and the Escrow Agent shall comply with any such written
instructions. In the absence of such instructions from Buyer, the Escrow Agent
shall not vote the Escrow Shares.
(d) The interest of the Shareholder in the Escrow Account shall not be
assignable or transferable, other than by operation of law. Notice of any such
assignment or transfer by operation of law shall be given to the Escrow Agent
and Buyer, and no such assignment or transfer shall be valid until such notice
is given. In addition, no such assignment shall terminate Shareholder's
obligations under the Voting Agreement between Shareholder and Buyer of even
date herewith.
2. Investment of Escrow Account. Cash dividends distributable in respect of
any of the Escrow Shares, if any, shall be held and invested or reinvested by
the Escrow Agent at the written or oral request of the Shareholder in any of the
following securities:
(a) obligations issued or guaranteed by the United States or any person
controlled or supervised by and acting as an instrumentality of the United
States pursuant to authority granted by Congress; and
(b) certificates of deposit of banks or trust companies, including those of
the Escrow Agent, organized under the laws of the United States of America.
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Such investments shall be made subject to any orders of the Shareholder with
respect thereto, provided that investments of monies in the Escrow Account shall
in any event mature or be redeemable or be subject to liquidation by sale or
otherwise at the option of the Escrow Agent at such time as may be necessary to
make timely disbursements from the Escrow Account. Subject to any such orders
with respect thereto, or in the absence of any orders from the Shareholder, the
Escrow Agent may from time to time sell such investments and reinvest the
proceeds therefrom in other investments of the type described in this Section
maturing or redeemable as aforesaid. Any such investments may be purchased from
the Escrow Agent or any affiliate of the Escrow Agent. The Escrow Account shall
be credited with all proceeds of sale and income from such investment.
3. Term. Subject to indemnification claims made by Buyer against the
Shareholder pursuant to the Stock Purchase Agreement, the term of this Escrow
Agreement shall commence on the date hereof and terminate on the later of (i)
the first anniversary of the Closing Date (the "Anniversary Date")and (ii) the
date on which the last pending claim is resolved and paid or not paid.
4. Claims Against Escrow Account.
(a) If, at any time during the term of this Escrow Agreement, Buyer has
incurred or suffered Damages to for which it is entitled to indemnification
under Article X of the Stock Purchase Agreement, Buyer shall give written notice
of such claim to Shareholder and the Escrow Agent, stating in reasonably
sufficient detail the events or circumstances which are the basis for and amount
of such claim. If Shareholder objects to any such claim, it shall give written
notice of such objection to Buyer and the Escrow Agent within ten (10) days
after the date of receipt of Buyer's notice, and shall state the basis for such
objection. Notwithstanding the foregoing, such ten (10) day period shall be
extended to a twenty (20) day period if within such original ten (10) day period
the Shareholder gives written notice to Buyer and the Escrow Agent that
additional time is necessary to respond to the claim. If no objection to Buyer's
claim is made by the Shareholder within such ten (10) day period, or twenty (20)
day period, as applicable, the claim shall be deemed resolved and shall be paid
by the Escrow Agent pursuant to Section 5 without further mutual instructions
from the parties.
(b) If Shareholder provides timely notice of objection to any claim, Buyer
and Shareholder shall attempt to resolve the dispute and, if they are able to do
so, shall give
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mutual written notice to the Escrow Agent of the resolution of the dispute and
the amount of the claim resolved, if any.
(c) If Buyer and the Shareholder are unable informally to resolve a
disputed claim pursuant to Section 4(b) above within twenty (20) days after the
date of the Shareholder's objection to Buyer's claim, the dispute shall be
settled by a court of competent jurisdiction in the State of Missouri or the
United States District Court for the Eastern District of Missouri. Any final
decision or award of such court shall be treated as a claim resolved under this
Escrow Agreement and shall be final and conclusive on the parties to this Escrow
Agreement and their respective affiliates. The parties hereto agree that any
action or proceeding pursuant to this Escrow Agreement shall be brought in an
appropriate Missouri court or in the United States District Court for the
Eastern District of Missouri, and in connection with such action or proceeding,
the laws of the State of Delaware shall govern. The parties hereto hereby
consent to the jurisdiction of such court. Buyer and the Shareholder may each
respectively appoint such attorneys, accountants and agents to act for them
before the court.
5. Payment of Resolved Claims. Within five (5) days following the day on
which a claim is resolved pursuant to Section 4 above, the Escrow Agent shall
release to Buyer Escrow Shares out of the Escrow Account having a Fair Market
Value equal to the lesser of (i) the amount of any such resolved claim or (ii)
the then current Fair Market Value of all Escrow Shares remaining in the Escrow
Account. For purposes of this Section 5, the "Fair Market Value" of Escrow
Shares shall be the average closing bid price per share of Buyer Common Stock
for the twenty (20) trading days immediately preceding the third trading day
prior to the date that the applicable claim is resolved.
6. Restrictions on Sale of Escrow Shares.
(a) If and to the extent that the Shareholder is distributed Escrow Shares
on the Anniversary Date pursuant to Section 7.1, the Shareholder covenants and
agrees with Buyer that, during the period commencing on the Anniversary Date and
continuing for ten (10) consecutive weeks from the Anniversary Date (the "Lockup
Period"), the Shareholder will not, in any calendar week during the Lockup
Period, sell more than ten percent (10%) of the aggregate number of shares of
Buyer Common Stock which it receives on the Anniversary Date (the "Lockup
Shares"). The Shareholder acknowledges and agrees that Buyer may notify Buyer's
transfer agent of this restriction on the transfer of the Lockup Shares during
the Lockup Period.
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(b) Upon termination of the Escrow Agreement, the parties shall enter into
a Voting Trust Agreement in the form of Exhibit A attached hereto.
7. Release of Escrow Property.
7.1 Immediately after the Anniversary Date, the Escrow Agent shall hold and
distribute the Escrow Shares and all other property then held in the Escrow
Account in accordance with the following:
(a) If there is on that date neither any claim asserted by the Buyer which
has not yet been resolved pursuant to Section 4 hereof (a "pending claim"), nor
any claim of Buyer resolved but not paid, the Escrow Agent shall distribute to
the Shareholder, the Escrow Shares and any other property in the Escrow Account
subject to Section 6(b) above.
(b) If there is on that date any pending claim, or any claim resolved but
not paid, the Escrow Agent shall retain in the Escrow Account for the purpose of
satisfying any such pending or resolved but unpaid claims an amount of cash or
cash equivalents equal to the amount of all pending claims and resolved but not
paid claims. If the cash and cash equivalents in the Escrow Account on the
Anniversary Date are not sufficient to cover all pending claims and claims
resolved but not paid, the Escrow Agent shall retain an amount of Escrow Shares
and/or other property having a Fair Market Value equal to the difference between
(i) the amount of cash in the Escrow Account on the Anniversary Date and (ii)
the total amount of all pending claims and resolved but not paid claims. In
addition to the foregoing, the Escrow Agent shall distribute to the Shareholder
any Escrow Shares and other property which is not retained in the Escrow Account
pursuant to this Section 7.1(b). Upon the written request of either Buyer or the
Shareholder, the Escrow Agent shall sell any Escrow Shares retained in the
Escrow Account pursuant to this Section 7.1(b) (the "Retained Shares") and
retain the proceeds of such sales in the Escrow Account; provided, however,
that, unless Buyer otherwise consents in writing, the Escrow Agent shall not
sell more than ten percent (10%) of the aggregate number of Retained Shares per
week.
7.2 Following the expiration of the term of this Escrow Agreement, as each
pending claim is paid or denied for which an amount was reserved according to
Section 7.1(b) hereof, the Escrow Agent shall distribute to the Shareholder the
balance of the cash and cash equivalents (and, to the extent Escrow Shares have
not been liquidated pursuant to Section 7.1(b) above, Escrow Shares), if any, in
the Escrow Account, subject to Section 6(b) above; provided, however, that
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if at that time there remain other pending claims or resolved but not paid
claims, the Escrow Agent shall continue to hold cash and cash equivalents in an
amount equal to the lesser of (i) the value of all cash and cash equivalents
(and, to the extent Escrow Shares have not been liquidated pursuant to Section
7.1(b) above, Escrow Shares) in the Escrow Account, or (ii) the total amount of
all pending claims or resolved but not paid claims. When no pending claims or
resolved but not paid claims remain, the Escrow Agent shall distribute to the
Shareholder the balance, if any, of the cash and cash equivalents (and, to the
extent Escrow Shares have not been liquidated pursuant to Section 7.1(b) above,
Escrow Shares) in the Escrow Account subject to Section 6(b) above.
8. Escrow Agent.
8.1 The duties of the Escrow Agent hereunder shall be entirely
administrative and not discretionary. The Escrow Agent shall be obligated to act
only in accordance with written or oral instructions received by it as provided
in this Escrow Agreement and is authorized hereby to comply with any orders,
judgments or decrees of any court of competent jurisdiction and shall not be
liable as a result of its compliance with the same.
8.2 As to any legal questions arising in connection with the administration
of this Escrow Agreement, the Escrow Agent may rely absolutely upon the opinions
given to it by its counsel and shall be free of liability for acting in reliance
on such opinions.
8.3 The Escrow Agent may rely absolutely upon the genuineness and
authorization of the signature and purported signature of any party upon any
instruction, notice, release, receipt or other document delivered to it pursuant
to this Escrow Agreement.
8.4 The Escrow Agent may, as a condition to the disbursement of monies as
provided herein, require from the payee or recipient a receipt therefor and,
upon final payment or disposition, a release of the Escrow Agent from any
liability arising out of its execution or performance of this Escrow Agreement,
such release to be in a form reasonably satisfactory to the Escrow Agent.
8.5 The parties agree that the Escrow Agent will be compensated for its
services in accordance with Exhibit B hereto, until termination of this Escrow
Agreement or resignation of the Escrow Agent. Buyer and the Shareholder shall
each pay one-half of the fees and expenses of the Escrow Agent.
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9. Indemnity.
9.1 Buyer and the Shareholder agree to and hereby do waive any suit, claim,
demand or cause of action of any kind which they or it may have or may assert
against the Escrow Agent arising out of or relating to the execution or
performance by the Escrow Agent of this Escrow Agreement, unless such suit,
claim, demand or cause of action is based upon the wilful neglect or gross
negligence or bad faith of the Escrow Agent. They further agree to indemnify the
Escrow Agent against and from any and all claims, demands, costs, liabilities
and expenses, including reasonable counsel fees, which may be asserted against
it or to which it may be exposed or which it may incur by reason of its
execution or performance of this Escrow Agreement. Such agreement to indemnify
shall survive the termination of this Escrow Agreement until extinguished by any
applicable statute of limitations.
9.2 In case any litigation is brought against the Escrow Agent in respect
of which indemnity may be sought hereunder, the Escrow Agent shall give prompt
notice of that litigation to the parties hereto, and the parties upon receipt of
that notice shall have the obligation and the right to assume the defense of
such litigation, provided that failure of the Escrow Agent to give that notice
shall not relieve the parties hereto from any of their obligations under this
Section unless that failure prejudices the defense of such litigation by said
parties. At its own expense, the Escrow Agent may employ separate counsel and
participate in the defense. The parties hereto shall not be liable for any
settlement without their respective consents.
10. Acknowledgment by the Escrow Agent. By execution and delivery of this
Escrow Agreement, the Escrow Agent acknowledges that the terms and provisions of
this Escrow Agreement are acceptable and it agrees to carry out the provisions
of this Escrow Agreement on its part.
11. Resignation or Removal of Escrow Agent; Successors.
11.1 (a) The Escrow Agent may resign as such following the giving of thirty
(30) days' prior written notice to the other parties hereto. Similarly, the
Escrow Agent may be removed and replaced following the giving of thirty (30)
days' prior written notice to the Escrow Agent by the Shareholder or by the
Buyer. In either event, the duties of the Escrow Agent shall terminate thirty
(30) days after the date of such notice (or as of such earlier date as may be
mutually agreeable); and the Escrow Agent shall then deliver the balance of the
Escrow Fund then in its possession to a
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successor Escrow Agent as shall be appointed by the other parties hereto as
evidenced by a written notice filed with the Escrow Agent.
(b) If for any reason any person or entity is unwilling to serve as
successor Escrow Agent and if the other parties hereto are unable to agree upon
a successor or shall have failed to appoint a successor prior to the expiration
of thirty (30) days following the date of the notice of resignation or removal,
the then acting Escrow Agent may petition any court of competent jurisdiction
for the appointment of a successor Escrow Agent or other appropriate relief; and
any such resulting appointment shall be binding upon all of the parties hereto.
11.2 Every successor appointed hereunder shall execute, acknowledge and
deliver to its predecessor and the other parties hereto, an instrument in
writing accepting such appointment hereunder, and thereupon such successor,
without any further act, shall become fully vested with all the duties,
responsibilities and obligations of its predecessor; but such predecessor shall,
nevertheless, on the written request of its successor or any of the parties
hereto, execute and deliver an instrument or instruments transferring to such
successor all the rights of such predecessor hereunder, and shall duly assign,
transfer and deliver all property, securities and monies held by it pursuant to
this Escrow Agreement to its successor. Should any instrument be required by any
successor for more fully vesting in such successor the duties, responsibilities
and obligations hereby vested or intended to be vested in the predecessor, any
and all such instruments in writing shall, on the request of any of the other
parties hereto, be executed, acknowledged and delivered by the predecessor.
11.3 In the event of an appointment of a successor, the predecessor shall
cease to be custodian of any funds, securities or other assets and records it
may hold pursuant to this Escrow Agreement, and the successor shall become such
custodian.
11.4 Upon acknowledgment by any successor Escrow Agent of the receipt of
the then remaining balance of the Escrow Fund, the then acting Escrow Agent
shall be fully released and relieved of all duties, responsibilities and
obligations under this Escrow Agreement.
12. Amendments and Waivers. No amendment, supplement, modification or
waiver of this Escrow Agreement shall be binding unless executed in writing by
the Escrow Agent, Buyer and the Shareholder. No waiver of any of the
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provisions of this Escrow Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided. In addition
to the remedies provided in this Escrow Agreement, any party may pursue any and
all remedies now or hereafter existing at law or in equity.
13. Execution Counterparts. This Escrow Agreement may be executed in one or
more counterparts (including by facsimile), each of which shall be regarded as
an original and all of which shall constitute but one and the same instrument.
14. Severability. If any provision of this Escrow Agreement, or any
covenant, obligation or agreement contained herein is determined by a court to
be invalid or unenforceable, such determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed
and enforced as if such invalid or unenforceable portion were not contained
therein. Such invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision, covenant, obligation
or agreement shall be deemed to be effective, operative, made, entered into or
taken in the manner and to the full extent permitted by law.
15. Headings. The headings in this Escrow Agreement shall be solely for
convenience of reference and shall in no way define, limit or describe the scope
or intent of any provisions or sections of this Escrow Agreement.
16. Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be deemed to be sufficiently
given (a) if delivered personally, upon delivery, (b) if delivered by registered
or certified mail (return receipt requested), postage prepaid, upon the earlier
of actual delivery or upon three days after being mailed, and (c) if delivered
by telecopy, upon confirmation of transmission by telecopy, in each case to the
parties at the following address:
(a) As to Buyer: Interiors, Inc. 000 Xxxxxxxxxx Xxxxxx Xx. Xxxxxx, Xxx Xxxx
00000 Attention: Xxx Xxxx Facsimile: (000) 000-0000
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With a copy to: XxXxxx X. Xxxxx, Esq. Paul, Hastings, Xxxxxxxx & Xxxxxx LLP 000
Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx Xxx Xxxxxxx, Xxxxxxxxxx 00000 Facsimile: (213)
627-0705
(b) As to Escrow Agent: U.S. Bank Trust 000 Xxxxx Xxxx Xxxxxx Xxx Xxxxxxx,
Xxxxxxxxxx 00000 Facsimile: (000) 000-0000
(c) As to Shareholder: Bentley International, Inc. 0000 Xxxxxx Xxxx Xx.
Xxxxx, Xxxxxxxx 00000 Facsimile: (000) 000-0000
With a copy to:
Xx. Xxxxxxx X. Xxxxxxx Riezman & Blitz, P.C. 0000 Xxxxxxxx Xxxxxx, Xxxxxxx Xxxxx
Xx. Xxxxx, Xxxxxxxx 00000 Facsimile: (000) 000-0000
Any of the parties hereto may, by notice given hereunder, designate any further
or different address to which subsequent notices or other communications shall
be sent.
17. Expenses. Except as otherwise provided for herein, each party shall be
responsible for its own costs and expenses with respect to matters involving
this Escrow Agreement.
18. Successors. This Escrow Agreement shall be binding upon, and inure to,
the benefit of the heirs, executors, successors and assignees of the parties
hereto, and no other person shall have any right, benefit or obligation
hereunder.
19. Gender. Words of the masculine gender include the feminine and the
neuter, and when the context so requires, words of the neuter gender may refer
to any gender.
20. Applicable Law. This Escrow Agreement shall be governed by and
construed and enforced in accordance with the internal laws (and not the law of
conflicts) of the State of Delaware.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Escrow
Agreement to be executed on its behalf as of the day and year first above
written.
BUYER:
INTERIORS, INC., a Delaware
corporation
By: _____________________________
An Authorized Officer
ESCROW AGENT:
U.S. BANK TRUST, a national
association
By:
An Authorized Officer
SHAREHOLDER:
BENTLEY INTERNATIONAL, INC., a
Missouri corporation
By: _____________________________
An Authorized Officer
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