ESCROW AGREEMENT
This
ESCROW AGREEMENT (the “Agreement”),
dated
as of November 13, 2006 (the “Effective
Date”),
is
made by and among Zeus Promotions, LLC, a Delaware limited liability company
(“Zeus”),
Handheld Entertainment, Inc., a Delaware corporation (“Handheld”),
Xxxx
Xxxxx, an individual (the “Member”),
and
Xxxxxx Curls Xxxxxxxx & Xxxxx, LLP, a California limited liability
partnership, as escrow agent (the “Escrow
Agent”).
R
E C
I T A L S:
WHEREAS,
Zeus and Handheld are parties to that certain Membership Interest Purchase
Agreement, dated as of November 13, 2006 (the “Purchase
Agreement”),
pursuant to which Handheld will purchase, and Zeus will sell, one hundred
percent (100%) of the outstanding membership interest of Dorks, LLC (the
“Interest”),
which
is entirely owned by Zeus;
WHEREAS,
Article 7 of the Purchase Agreement provides for the indemnification of Handheld
by Zeus and Member from certain losses that may be incurred by it;
and
WHEREAS,
consummation of the Purchase Agreement is conditioned upon the execution and
delivery of this Agreement and this Agreement is an essential part of the
consideration for which Handheld is willing to enter into the Purchase Agreement
and to consummate the transactions contemplated thereby.
NOW,
THEREFORE, in consideration of the foregoing premises, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, it is hereby agreed as follows:
1. Appointment
of Escrow Agent.
(a) The
parties hereto hereby designate and appoint the Escrow Agent as escrow agent
to
act in accordance with the terms of this Agreement, and the Escrow Agent agrees
to act as such escrow agent on the terms, conditions and provisions provided
in
this Agreement.
(b) On
or
before the Effective Date, Handheld will deposit:
(i) Twenty
Five Thousand Dollars ($25,000.00) in cash (the “Escrow
Amount”)
with
the Escrow Agent for the account of Zeus. The Escrow Amount, together with
any
interest accrued thereon, shall be hereinafter referred to as the “Escrow
Account.”
The
Escrow Agent shall hold, administer, distribute and dispose of the Escrow
Account in accordance with the terms and conditions of this Agreement;
2. Escrow
Account.
(a) The
Escrow Agent shall establish the Escrow Account as an Attorney Trust Account
with such bank with offices in San Francisco, California, as it shall deem
appropriate. Xxxxxx X. Xxxxxx shall be the only signatory on the Escrow Account.
The Escrow Agent shall provide each of Handheld, Zeus and Member with complete
information concerning the Escrow Account, including a telephone access code
allowing each to determine the balance of the Escrow Account on any banking
day.
3. Payments
From Escrow.
The
Escrow Agent shall hold the Escrow Account in accordance with this Agreement
and
shall make payments from the Escrow Account only as provided by Sections 3
and 4
hereof or as further directed in writing by both Zeus and Handheld:
(a) In
the
event the Escrow Agent is duly instructed to disburse funds from the Escrow
Account to any party, (i) the Escrow Agent shall disburse such funds by mailing
a check to such party at the address set forth in the instruction; or (ii)
if
the Escrow Agent is instructed to transfer funds from the Escrow Account to
any
bank for the account of any party, the Escrow Agent shall disburse such funds
by
electronic transfer; provided, however, that the Escrow Agent may require the
party issuing the instruction to agree to appropriate security procedures to
verify that the instruction is that of such issuing party;
(b) Handheld
shall be paid such amounts as are authorized to be paid to Handheld pursuant
to
Section 4 below.
(c) Six
(6)-months following the Effective Date, Zeus shall be paid an amount equal
to
the entire Unclaimed Deposit (as hereinafter defined). For purposes of this
agreement, the “Unclaimed
Deposit”
shall
mean the entire balance of the Escrow Account then remaining, minus the
aggregate of the then existing Claim Reserves for Open Claims and any interest
accrued thereon.
(d) Within
two banking days of the Escrow Agent’s having received a copy of a Final
Determination (as hereinafter defined) for an Open Claim, the amount payable
to
Handheld under the Final Determination for such Open Claim shall be paid to
Handheld from the Claim Reserve for such Open Claim and the balance of such
Claim Reserve shall then be paid to Zeus, to the extent authorized in Section
4
below.
(e) Within
two banking days of the Escrow Agent’s having received a joint written
instruction by Handheld and Zeus that an Open Claim is no longer disputed,
the
Escrow Agent shall pay the Claim Reserve for such Open Claim plus any interest
accrued thereon to Zeus; provided, however that if the date set forth in Section
3(c) has not yet passed, such portion of the Claim Reserve plus any interest
accrued thereon shall simply cease to be a reserved portion of the Escrow
Account.
4. Handheld
Claims.
The
procedure for payments from the Escrow Account shall be as follows:
(a) From
time
to time prior to the date identified in Section 3(c) above as Handheld
determines that it is entitled to an indemnification payment under Article
VII
of the Purchase Agreement, it may request payment from the Escrow Account by
giving written notice of its claim to the Escrow Agent and Zeus in accordance
with the provisions of Section 13 below, certifying in such notice (i) the
nature of the claim, (ii) the amount thereof if then ascertainable and, if
not
then ascertainable, the estimated maximum amount thereof (provided however,
that
Handheld shall provide the Escrow Agent with a specific amount), (iii)
provisions in the Purchase Agreement on which the claim is based, (iv) that
such
request for payment is being made in good faith, and (v) that notice of
Handheld’s request for indemnification has been provided to Zeus in accordance
with Article VII of the Purchase Agreement (a “Claim
Notice”).
(b) If
the
Escrow Agent has not received written objection to a Claim Notice given by
Handheld in accordance with the preceding Section 4(a) from Zeus within twenty
(20) days after receipt by the Escrow Agent of the Claim Notice of such claim
from Handheld, the Escrow Agent shall promptly thereafter pay to Handheld,
in
the manner specified in the Claim Notice, from the Escrow Account the amount
of
such claim to the extent of the funds in the Escrow Account, plus any interest
accrued on such amount through the date of payment.
(c) If
within
said twenty (20) days the Escrow Agent shall have received from Zeus an
objection to the claim by Handheld, certifying the nature of and grounds for
such objection and that such objection is being made in good faith (a copy
of
which shall in each case be sent to Handheld by Zeus in accordance with the
provisions of Section 13 below), then such claim shall be deemed to be an
“Open
Claim”
and
the
Escrow Agent shall reserve within the Escrow Account an amount equal to the
amount of the Open Claim (which amount for each Open Claim is referred to herein
as the “Claim
Reserve”).
(d) The
amount constituting the Claim Reserve for each Open Claim shall be paid by
the
Escrow Agent from the Escrow Account to Handheld only either (i) in accordance
with a joint written instruction by Handheld and Zeus or (ii) if and to the
extent consistent with either (A) a certified copy of a final order, decree
or
judgment from a court of competent jurisdiction pertaining to the Open Claim
or
(B) a certified copy of a final result, determination, finding, judgment and/or
award from an arbitrator pertaining to the Open Claim, sent to the Escrow Agent
by Handheld (a “Final
Determination”),
and
any portion of the Claim Reserve for such Open Claim not so required to be
paid
to Handheld shall be paid by the Escrow Agent to Zeus in accordance with Section
3(c) or Section 3(d) above and such Claim Reserve shall be reduced to zero;
provided, however that if the date set forth in Section 3(c) has not yet passed,
such portion of the Claim Reserve shall simply cease to be a reserved portion
of
the Escrow Account.
5. Termination.
(a) This
Agreement shall terminate on the earliest to occur of:
(i) the
date
on which the Escrow Agent shall have been notified in writing by Handheld and
Zeus that this Agreement shall be terminated; or
(ii) the
date
on which the Escrow Agent shall have delivered the entire Escrow Account to
Handheld or Zeus in accordance with the provisions of Sections 3(c), 3(d) or
4.
(b) Upon
termination of this Agreement as set forth in this Section 5, the Escrow Agent
shall be discharged from all further obligations or responsibilities
hereunder.
6. Duties
of Escrow Agent.
(a) The
instructions of the parties set forth herein are irrevocable, and the Escrow
Agent shall act only in accordance with such instructions and in any amendment
or amendments executed by all parties hereto and not in accordance with any
contrary instructions from any third person. The duties and obligations of
the
Escrow Agent shall be determined solely by the express provisions of this
Agreement, and the Escrow Agent shall not be liable except for the performance
of its duties and obligations as are specifically set forth herein.
(b) The
Escrow Agent shall provide to Zeus and Handheld monthly statements reflecting
the balance of the Escrow Account and the interest earned thereon. In addition,
the Escrow Agent shall forward all account records or statements related to
the
Escrow Account to Handheld and Zeus promptly upon receipt of the same. The
Escrow Agent shall deliver to Handheld and Zeus, upon final disbursement, a
complete accounting of all transactions relating to this Agreement.
7. Liability
of Escrow Agent.
In
order to induce the Escrow Agent to act as escrow agent hereunder, the parties
hereto agree that:
(a) The
Escrow Agent shall not be responsible for or be required to enforce any of
the
terms or conditions of the Purchase Agreement or any other agreement between
Handheld, Member and Zeus.
(b) The
Escrow Agent shall not be responsible or liable in any manner whatsoever for
the
performance of or by Handheld, Zeus and Member of their respective obligations
under this Agreement nor shall the Escrow Agent be responsible or liable in
any
manner whatsoever for the failure of the other parties to this Escrow Agreement
or of any third party to honor any of the provisions of this Escrow
Agreement.
(c) The
parties hereto represent to the Escrow Agent that they are authorized to enter
into the Escrow Agreement by their duly authorized representatives and that
the
Escrow Agent is entitled to rely on this representation without the need to
confirm the authority of the representatives.
(d) The
duties and obligations of the Escrow Agent shall be limited to and determined
solely by the express provisions of this Escrow Agreement and no implied duties
or obligations shall be read into this Escrow Agreement against the Escrow
Agent.
(e) The
Escrow Agent is not bound by and is under no duty to inquire into the terms
or
validity of any other agreements or documents, including any agreements or
documents which may be related to, referred to in or deposited with the Escrow
Agent in connection with this Escrow Agreement.
(f) The
Escrow Agent shall not be liable for any act which the Escrow Agent may do
or
omit to do hereunder while acting in good faith, unless caused by or arising
from its own gross negligence, willful misconduct or failure to act in good
faith.
(g) It
is
understood that all checks received by the Escrow Agent hereunder are subject
to
clearance time and the funds represented thereby cannot be drawn upon or
disbursed until such time as the same constitute good and collected funds.
If
any checks are returned to the Escrow Agent as uncollectible, the Escrow Agent
shall notify the party on whose account the check was drawn and redeposit such
check for collection upon the verbal instructions of such party. Notwithstanding
the foregoing, if for any reason any check or instrument entered for collection
by the Escrow Agent hereunder is uncollectible after payment of the funds
represented thereby has been made pursuant to the terms hereof, the party on
whose account the check was drawn shall immediately reimburse of the Escrow
Agent and the Escrow Agent shall deliver the returned check or instrument to
such party.
(h) Neither
this Escrow Agreement, nor any other agreement between Handheld, Zeus, Member
and the Escrow Agent shall be deemed to create a joint venture between the
Escrow Agent and Handheld, Zeus or Member. Nor shall the Escrow Agent be
considered the alter ego of Handheld, Zeus or Member by virtue of this
Agreement, or any other agreement.
(i) the
Escrow Agent shall not in any way be bound or affected by any amendment or
modification of this Agreement, unless the same shall have been agreed to in
writing by the Escrow Agent;
(j) the
Escrow Agent shall not be under any duty to give the property held hereunder
any
greater degree of care than it gives its own similar property;
(k) the
Escrow Agent may act in reliance upon and shall incur no liability for or in
respect of any action taken or omitted to be taken or anything suffered by
it in
reliance upon, any notice, direction, consent, certificate, affidavit, statement
or other paper or document reasonably believed by the Escrow Agent to be genuine
and to have been presented or signed by the proper party or
parties;
(l) the
Escrow Agent shall not at any time be under any duty or responsibility to make
a
determination of any facts contained in any certificate delivered pursuant
hereto or to make any independent verification of the statements or signatures
in such certificate or amounts delivered thereby. The Escrow Agent shall not
be
responsible for any failure by Handheld, Zeus or Member to comply with any
of
their respective covenants contained in this Agreement, the Purchase Agreement
or any other agreement;
(m) the
Escrow Agent shall be under no duty or obligation to take any legal action
in
connection with this Agreement or to enforce, through the institution of legal
proceedings or otherwise, any of its rights as Escrow Agent hereunder or any
rights of any other party hereto pursuant to this Escrow Agreement or any other
agreement, nor shall it be required to defend any action or legal proceeding
which, in its opinion, would or might involve the Escrow Agent in any cost,
expense, loss or liability;
(n) the
Escrow Agent may engage or be interested in any financial or other transaction
with the parties hereunder as freely as if it were not the Escrow Agent
hereunder;
(o) the
Escrow Agent shall be entitled to rely upon advice of counsel (the cost of
which
shall be borne by Handheld and Zeus) of its choosing in reference to any matter
connected herewith, and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and
in
accordance with the opinion of such counsel and shall not be liable for any
mistake of fact or error of judgment, or for any acts or omissions of any kind
unless caused by its willful misconduct, gross negligence or failure to act
in
good faith;
(p) notwithstanding
anything to the contrary contained herein, if the Escrow Agent shall be
uncertain as to its duties or rights hereunder, shall receive any notice,
advice, direction, or other document from any other party with respect to this
Agreement which, in its opinion, is in conflict with any of the provisions
of
this Agreement, or should be advised that a dispute has arisen with respect
to
the payment, ownership, or right of possession of or to the Escrow Account
or
any interest on the Escrow Account or any part thereof (or as to the delivery,
non-delivery, or content of any notice, advice, direction or other document),
the Escrow Agent shall be entitled (but not obligated), without liability to
anyone, to refrain from taking any action other than to use its best efforts
to
keep safely the Escrow Account until the Escrow Agent shall be directed
otherwise in writing by the other parties hereto or by an order, decree or
judgment of a court of competent jurisdiction which has been finally affirmed
on
appeal or which by lapse of time or otherwise is no longer subject to appeal,
but the Escrow Agent shall be under no duty to institute or to defend any
proceeding, although it may institute or defend such proceedings;
(q) Handheld
and Zeus hereby authorize the Escrow Agent, if the Escrow Agent is threatened
with litigation or is sued, to interplead all interested parties in any court
of
competent jurisdiction and to deposit the Escrow Account with the clerk of
that
court; and
(r) this
Agreement sets forth exclusively the duties of the Escrow Agent with respect
to
any and all matters pertinent hereto and no implied duties or obligations shall
be read into this Agreement against the Escrow Agent.
8. Indemnification.
(a) Handheld
and Zeus each covenant and agree to indemnify and hold harmless the Escrow
Agent
against any costs or expenses (including attorneys’ fees and expenses),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to this Agreement, and in the event
of any such claim, action, suit, proceeding or investigation: (i) Handheld
and
Zeus shall each pay the reasonable fees and expenses of counsel selected by
the
Escrow Agent, promptly as statements therefor are received; and (ii) Handheld
and Zeus will cooperate in the defense of any such matter; except that Handheld
and Zeus shall not have any obligation to indemnify the Escrow Agent against
any
cost, expense, judgment, fine, loss, claim, damage, liability or settlement
amount arising out of or pertaining to this Agreement arising from the Escrow
Agent’s own gross negligence, willful misconduct or failure to act in good
faith. The obligations of Handheld and Zeus under this paragraph shall survive:
(i) the delivery of the Escrow Account or any interest on the Escrow Account
pursuant to this Agreement; (ii) the termination of this Agreement; and (iii)
the resignation or removal of the Escrow Agent. In the event Handheld or Zeus
makes any payment pursuant to this Section 8, the party making the payment
shall
have the right to seek contribution from the other party in the amount of 50%
of
the amount so paid.
(b) Handheld
and Zeus jointly and severally agree to assume any and all obligations imposed
now or hereafter by any applicable tax law with respect to the payment of the
Escrow Account under this 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 Agreement. Handheld and Zeus
undertake 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 Agreement. Handheld and Zeus, jointly
and severally, agree 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
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 Agreement, including costs and expenses (including reasonable
legal fees), interest and penalties.
9. Resignation.
The
Escrow Agent may at any time resign as Escrow Agent by mailing written notice
to
Handheld and Zeus of such intention on its part, specifying the date on which
its desired resignation shall become effective, with such resignation being
effective upon Escrow Agent’s delivery of the Escrow Account to any successor
Escrow Agent designated by Handheld and Zeus in writing or by any court of
competent jurisdiction as provided below. Upon receiving such notice of
resignation, Handheld and Zeus shall promptly appoint a successor escrow agent
by written instrument signed on behalf of Handheld and Zeus, one copy of which
shall be delivered to each of the resigning Escrow Agent and the successor
escrow agent. If Handheld and Zeus shall fail to make such appointment within
a
period of thirty (30) days after they have been notified in writing of such
resignation by the resigning Escrow Agent, then the resigning Escrow Agent
may
apply to any court of competent jurisdiction in the State of California for
the
appointment of a successor escrow agent. Such resignation shall become effective
upon the acceptance of the appointment by the successor escrow agent as provided
in this Section 9.
Upon
resignation, the Escrow Agent shall be entitled to payment by Handheld and
Zeus
of any amounts then due it hereunder. Any successor escrow agent shall have
all
the rights, obligations and immunities of the Escrow Agent set forth
herein.
10. Assignment.
This
Agreement and all of the provisions hereof shall be binding upon and inure
to
the benefit of the parties hereto and their respective successors and permitted
assigns, but except as set forth in Section 9,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties, nor is this Agreement intended to confer upon any other
person except the parties hereto any rights or remedies hereunder.
11. Banking
Days.
If any
date on which the Escrow Agent is required to make a delivery pursuant to the
provisions hereof is not a banking day, then the Escrow Agent shall make such
delivery on the next succeeding banking day.
12. Escrow
Costs.
The
fees, costs and expenses payable to the Escrow Agent hereunder shall be borne
by
Handheld. The Escrow Agent shall not collect any fee from the Escrow Account.
In
consideration for services rendered in connection with this Agreement, the
Escrow Agent shall be compensated in accordance with the hourly billing rate
which is customarily paid for Escrow Agent’s legal services. Handheld hereby
agrees that it is Handheld’s obligation to compensate Escrow Agent in accordance
with this Section 12 for services rendered in connection with this
Agreement.
13. Miscellaneous.
(a) Notices.
All notices, demands or other communications to be given or delivered under
or
by reason of the provisions of this Agreement shall be in writing and shall
be
deemed to have been given (i) when delivered personally to the recipient, (ii)
when sent to the recipient by telecopy (receipt electronically confirmed by
sender’s telecopy machine) if during normal business hours of the recipient,
otherwise on the next Business Day, (iii) one Business Day after the date when
sent to the recipient by reputable express courier service (charges prepaid),
or
(iv) seven Business Days after the date when mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid.
Such
notices, demands and other communications shall be sent to Handheld, Member,
or
the Escrow Agent at the addresses indicated below:
|
If
to Handheld:
|
Attn:
Xxxx Oscodar, President
000
Xxxxxx Xxxxxx, Xxxxx 000
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000
|
|
With
a copy to:
(which
shall not constitute notice)
|
Xxxxxx
Curls Xxxxxxxx & Xxxxx LLP
00
Xxx Xxxxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxxxxxxx, XX 00000
Attn:
Xxxxxx X. Xxxxxx, Esq.
Fax:
(000) 000-0000
|
|
If
to Zeus:
|
Zeus
Promotions, LLC
ATTN:
0000-00xx
Xxxxxx Xxxxx
Xxxxxxx,
XX 00000
Fax:
|
|
With
a copy to:
(which
shall not constitute notice)
|
Helsell
Xxxxxxxxx, LLP
0000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
XX 00000
ATTN:
Xxxx Rising, Esq.
Fax:
(000) 000-0000
|
|
If
to Member:
|
Xxxx
Xxxxx
0000-00xx
Xxxxxx Xxxxx
Xxxxxxx,
XX 00000
Fax:
|
|
With
a copy to:
(which
shall not constitute notice)
|
Helsell
Xxxxxxxxx, LLP
0000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
XX 00000
ATTN:
Xxxx Rising, Esq.
Fax:
(000) 000-0000
|
|
If
to the Escrow Agent:
|
Xxxxxx
Curls Xxxxxxxx & Xxxxx LLP
00
Xxx Xxxxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxxxxxxx, XX 00000
Attn:
Xxxxxx X. Xxxxxx, Esq.
Fax:
(000) 000-0000
|
or
to
such other address as either party hereto may, from time to time, designate
in
writing delivered pursuant to the terms of this Section.
(b) Amendment
and Modification. This Agreement may be amended, modified or supplemented only
by written agreement of each of the parties hereto.
(c) Conflict
with Purchase Agreement. If any conflict should arise between this Agreement
and
the Purchase Agreement, the terms of the Purchase Agreement shall control.
(d) Governing
Law. This Agreement shall be governed by the laws of the State of California
(regardless of the laws that might otherwise govern under applicable California
principles of conflicts of law) as to all matters, including but not limited
to
matters of validity, construction, effect, performance and remedies, and such
operating circulars of any Federal Reserve Bank, federal laws and regulations,
funds transfer system rules and general commercial bank practices applicable
to
funds transfer and related activities.
(e) Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original, but all of which together shall constitute one
and
the same instrument.
(f) Interpretation.
The section headings contained in this Agreement are solely for the purpose
of
reference, are not part of this Agreement and shall not in any way effect the
meaning or interpretation of this Agreement.
(g) Entire
Agreement. This Agreement, including the exhibit attached hereto, together
with
the Purchase Agreement embody the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof. There are no
restrictions, promises, representations, warranties, covenants or undertakings,
other than those expressly set forth or referred to herein or
therein.
[SIGNATURES
ON FOLLOWING PAGE]
IN
WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as of
the
Effective Date.
|
/s/
Xxxx
Oscodar
Signature
Name:
Xxxx Oscodar
Title:
President & CEO
|
ZEUS
PROMOTIONS, LLC
/s/
Xxxx
Xxxxx
Signature
Name:
Xxxx Xxxxx
Title:
VP Business Development
|
|
MEMBER
- XXXX XXXXX
/s/
Xxxx
Xxxxx
Signature
|
ESCROW
AGENT -
/s/
Xxxxxx Curls Xxxxxxxx & Xxxxx LLP
by
Xxxxxx X.
Xxxxxx
Signature
Name:
Xxxxxx X. Xxxxxx
Title:
Partner
|
