EXHIBIT (d)(3)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as
of August 10, 2001 by and among SB Acquisition, Inc., a Delaware corporation
("Parent"), Xxx.xxx Inc., a Delaware corporation ("Company"), and First American
Trust, as Escrow Agent, with its office at 000 X. Xxxx Xxxxxx, Xxxxx Xxx,
Xxxxxxxxxx 00000 ("Escrow Agent").
R E C I T A L S
WHEREAS, Parent, Company and, for the limited purposes stated therein,
Xxxxx X. Xxxx, have entered into an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of August 10, 2001, pursuant to which a wholly owned
subsidiary of Parent will merge with and into Company and Company will
thereafter become a wholly owned subsidiary of Parent;
WHEREAS, simultaneously with the execution of the Merger Agreement,
Section 5.10 of the Merger Agreement provides that Parent shall deposit
$2,800,000 (the "Escrow Amount") into an escrow account to be held until
released pursuant to the terms hereof;
WHEREAS, Parent desires to establish an escrow account on the terms
and conditions set forth herein; and
WHEREAS, the parties hereto desire to appoint Escrow Agent to receive
the Escrow Amount; to hold and invest said Escrow Amount, together with any
interest or other income earned thereon; and to disburse said Escrow Amount,
together with any interest or other income earned thereon, in accordance with
the terms set forth herein, and Escrow Agent has agreed to act as such upon the
terms, covenants and conditions hereinafter set forth;
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises above, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereby agree as follows:
1. Defined Terms. Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Merger Agreement.
2. Deposit of Escrow Amount. Parent, simultaneously with the
execution and delivery of this Agreement, is transferring to Escrow Agent, in
accordance with Section 5.10 of the Merger Agreement, an amount in cash equal to
$2,800,000.
3. Escrow. Upon receipt of the Escrow Amount, Escrow Agent shall
send notices to Parent and Company acknowledging receipt of such amount and
shall hold, administer and dispose of the Escrow Amount pursuant to the terms of
this Agreement (the "Escrow"). All rights associated with the Escrow Amount
during the term of this Agreement, including any interest or other income
attributable thereto, shall be exercised by Escrow Agent. Until such
time as the Escrow Amount shall be distributed by Escrow Agent as provided
herein, the Escrow Amount and all income and interest shall be invested and
reinvested by Escrow Agent, in the name of Escrow Agent or its nominee, in money
market treasury obligations.
Escrow Agent shall be entitled to sell or redeem any such investment
as necessary to make any distributions required under this Agreement and shall
not be liable or responsible for any loss resulting from any such sale or
redemption.
4. Distribution of the Escrow Amount; Termination of the Escrow. The
Escrow Amount and all income or interest earned thereon shall be distributed by
Escrow Agent in accordance with the following:
(a) Closing of the Merger. On the Closing Date and upon joint
---------------------
written instruction from Parent and Company to Escrow Agent (the "Release
Instructions"), Escrow Agent shall distribute to the Exchange Agent (as
specified in the Release Instructions) the Escrow Amount, and shall distribute
any interest or income earned thereon to Parent.
(b) Termination of Merger Agreement. If the Merger Agreement is
-------------------------------
terminated for any reason and such fact has been certified to Escrow Agent in
writing by Parent, Escrow Agent shall upon written instruction solely from
Parent on the day that Escrow Agent receives such instruction and certification
from Parent, distribute to Parent the Escrow Amount, including any interest or
income earned thereon.
(c) Deadline for Closing. If (i) no distribution has been made
--------------------
pursuant to Section 4(a) or 4(b) hereof prior to November 30, 2001 and (ii)
Escrow Agent has not received joint written instructions from Parent and Company
changing the date in this Section 4(c) or joint written instructions otherwise
instructing Escrow Agent not to make the distribution contemplated by this
Section 4(c), Escrow Agent shall upon written instruction solely from Parent,
distribute to Parent the Escrow Amount, including any interest or income earned
thereon.
(d) Only Distributions; Termination of Escrow Upon Distribution.
-----------------------------------------------------------
No distribution of the Escrow Amount including any interest or income earned
thereon shall be made other than to Parent or the Exchange Agent as set forth in
Section 4(a), 4(b) or 4(c) hereof. After a distribution has been made to Parent
or the Exchange Agent pursuant to Section 4(a), 4(b) or 4(c) hereof, the Escrow
and this Agreement shall terminate.
(e) Notice to Company. In the event that Escrow Agent
-----------------
distributes the Escrow Amount hereunder, Escrow Agent agrees to provide notice
thereof to Company as provided in Section 10 hereof. Except as set forth in
Section 4(a) hereof, nothing herein shall confer any right upon Company in or to
the Escrow Amount or any interest or income earned thereon.
5. Duties of Escrow Agent. Escrow Agent shall have no duties or
responsibilities other than those expressly set forth in this Agreement, and no
implied duties or obligations shall be read into this Agreement against Escrow
Agent. Escrow Agent shall have no duty to enforce any obligation of any person,
other than as provided herein. Escrow Agent shall be under no liability to
anyone by reason of any failure on the part of any party hereto or any maker,
endorser or other signatory of any document or any other person to perform such
person's
2
obligations under any such document. Except as set forth in this Agreement,
Escrow Agent shall not have any duties or responsibilities under any provision
of any other agreement, including without limitation, the Merger Agreement.
6. Liability of Escrow Agent; Withdrawal. Escrow Agent shall not be
liable for any action taken or omitted by it, or any action suffered by it to be
taken or omitted, in good faith, and in the exercise of its reasonable judgment,
and may rely conclusively and shall be protected in acting upon any court order,
reasonable advice of counsel chosen by Escrow Agent, or document executed by (i)
with respect to Section 4(a), Parent and Company, or (ii) otherwise solely by
Parent authorizing action (or inaction) in accordance with these instructions by
Escrow Agent (not only as to its due execution and the validity and
effectiveness of its provisions, but also as to the truth and acceptability of
any information therein contained) which is reasonably believed by Escrow Agent
to be genuine and to be signed or presented by the proper person(s). Escrow
Agent shall not be held liable for any error in judgment made in good faith by
an officer of Escrow Agent unless it shall be proved that Escrow Agent was
negligent in ascertaining the pertinent facts or acted intentionally in bad
faith. Escrow Agent shall not be bound by any notice of demand, or any waiver,
modification, termination or rescission of this Agreement or any of the terms
hereof, unless evidenced by a writing delivered to Escrow Agent signed by the
proper party or parties and, if the duties or rights of Escrow Agent are
affected, unless it shall give its prior written consent thereto. Escrow Agent
may delegate ministerial and record keeping responsibilities hereunder to its
authorized agents.
Each of Parent and Company agrees to indemnify Escrow Agent for, and
to hold it harmless from and against, any loss, liability, claims, actions,
damages or expenses (including reasonable expenses and disbursements of its
counsel) incurred without gross negligence, bad faith or intentional misconduct
on the part of Escrow Agent arising out of or in connection with its entering
into this Agreement and carrying out its duties hereunder, including the costs
and expenses of defending itself against any such claim or liability.
In the event that Escrow Agent shall become involved in any
arbitration or litigation relating to the Escrow, Escrow Agent is authorized to
comply with any decision reached through such arbitration or litigation.
Escrow Agent (and any successor Escrow Agent) may at any time resign
as such by giving five (5) business days' prior written notice to Parent and
Company and delivering the Escrow Amount, including any income or interest
earned thereon, to any successor Escrow Agent designated by Parent and Company
in writing, or by 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. Prior to the effectiveness of such resignation,
Parent and Company shall come to mutual agreement on a new Escrow Agent, which
shall be a bank or national banking association. 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 that is ten (10)
days after the date of delivery of its written notice of resignation to Parent
and Company. 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 Amount, including any interest or income
earned thereon, until receipt of a designation
3
of successor Escrow Agent or a written disposition instruction by Parent and
Company or a final non-appealable order of a court of competent jurisdiction.
7. Escrow Agent's Fee. Escrow Agent's fees shall be as set forth on
Schedule A hereto, payable by the Company. Escrow Agent shall be entitled to
reimbursement for any reasonable expenses or disbursements incurred in
connection with the performance of Escrow Agent's obligations hereunder. Escrow
Agent shall be under no obligation to institute or defend any action, suit, or
legal proceeding in connection herewith, unless first indemnified and held
harmless to its satisfaction, except that Escrow Agent shall not be indemnified
against any loss, liability or expense arising out of its negligence or willful
misconduct. Such indemnity shall survive the termination or discharge of this
Agreement or resignation of Escrow Agent.
8. Inspection. All funds or other property held as part of the
Escrow shall at all times be clearly identified as being held by Escrow Agent
hereunder. Parent may at any time during Escrow Agent's business hours (with
reasonable notice) inspect any records or reports relating to the Escrow.
9. Accounting by Escrow Agent. Escrow Agent shall keep accurate and
detailed records of all investments, receipts, disbursements, and all other
transactions required to be made, including such specific records as shall be
reasonably required by Parent. Within five days after the removal or
resignation of Escrow Agent, Escrow Agent shall deliver to Parent a written
account of its administration of the Escrow from the date hereof to the date of
such removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a description of
all securities and investments purchased and sold with the cost or net proceeds
of such purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property held in the
Escrow as of the date of such removal or resignation.
10. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand, by facsimile transmission or mailed,
certified or registered mail with postage prepaid:
If to Parent:
SB Acquisition, Inc.
00 Xxxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxx
with copies to:
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
4
Attention: Xxxxx Xxxxxxx, Esq.
If to Company:
Xxx.xxx Inc.
00 Xxxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
If to Escrow Agent:
First American Trust
000 X. Xxxx Xxxxxx
Xxxxx Xxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxxxx X. Markorth
11. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California without regard to the
principles of conflicts of law.
12. Binding Effect; Benefit. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the parties hereto.
13. Modification. This Agreement may be amended or modified at any
time by a writing executed by Parent, Company and Escrow Agent.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
15. 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.
16. Entire Agreement; Severability and Further Assurances. This
Agreement and all exhibits and schedules attached hereto constitute the entire
agreement among the parties and supersedes all prior and contemporaneous
agreements and undertakings of the parties in connection herewith. No failure
or delay of Escrow Agent in exercising any right, power or remedy may be, or may
be deemed to be, a waiver thereof; nor may any single or partial exercise of any
right, power or remedy preclude any other or further exercise of any right,
power or remedy. In the event that any one or more of the provisions contained
in this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement. Each of the parties hereto shall, at the request of the
other party, deliver to the requesting party all further documents or other
assurances as may reasonably be necessary or desirable in connection with this
Agreement.
5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
SB ACQUISITION, INC.
By__________________________________
Name: Xxxxx X. Xxxx
Its: President
XXX.XXX INC.
By______________________________________
Name:
Its:
FIRST AMERICAN TRUST
By______________________________________
Name:
Its:
By_______________________________________
Name:
Its:
