PERFORMANCE MILESTONE SHARES ESCROW AGREEMENT
THIS
PERFORMANCE MILESTONE SHARES ESCROW AGREEMENT (this “Escrow Agreement”) is
made as of the 25th day of
February 2010, among Game Trading Technologies, Inc. (formerly City Language
Exchange, Incorporated), a Delaware corporation (“Parent”), Vision
Capital Advisors, LLC on behalf of the Buyers identified in the Securities
Purchase Agreement, Xxxxxxxxx Xxxxxxx, LLP, as escrow agent (“Escrow Agent”), and
Xxxx Xxxx, Xxxxxx Xxxxxxx, Xxxx Xxxx, Xx., Xxxxxx Xxxx and Evolution Advisors,
LLC (collectively, the “Management
Stockholders”).
RECITALS
A. Parent
and Gamers Factory, Inc., a Maryland corporation (“Gamers”), and, for
certain limited purposes, Gamers’ stockholders, including the Management
Stockholders (collectively, the “Stockholders”), have
entered into a Securities Exchange Agreement, dated as of February 25, 2010 (the
“Exchange
Agreement”), pursuant to which Parent shall acquire Gamers as its
wholly-owned subsidiary.
B. Pursuant
to the Exchange Agreement, the Stockholders shall contribute, sell and transfer
to Parent all of the outstanding shares of capital stock of Gamers pursuant to
an offer by Parent to exchange therefor newly-issued shares of Common Stock, par
value $0.0001 per share, of Parent (“Parent Common
Stock”), all as specifically set forth in the Exchange
Agreement.
C. The
Exchange Agreement by its express terms requires the execution and
implementation of this Escrow Agreement and provides that 740,000 of the shares
of Parent Common Stock issuable to the Management Stockholders in the aggregate
be deposited with the Escrow Agent to be held in escrow as set forth in this
Escrow Agreement and in Section 1.4(b) of the Exchange Agreement.
D. Simultaneously
with the Closing, Parent (as it will exist as of the closing under the Exchange
Agreement) is selling between $3,700,000 and $4,100,000 (excluding certain unit
purchase options) in Units, with each unit consisting of one share of Parent’s
series A convertible preferred stock and a class A warrant to purchase one share
of its common stock, in a private placement (the “Private Placement”)
to accredited investors, pursuant to the terms of a Securities Purchase
Agreement, dated as of the date hereof, by and among Parent and the investors
listed on the Schedule of Buyers attached thereto (the “Securities Purchase
Agreement”).
NOW,
THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereby agree as follows:
1. Definitions. Unless
otherwise defined herein or the context otherwise requires, the terms which are
defined in the Exchange Agreement are used in this Escrow Agreement as so
defined.
2. Appointment of Escrow
Agent. Parent,
the Management Stockholders and each Buyer hereby appoint Escrow Agent as escrow
agent in accordance with the terms and conditions set forth herein and the
Escrow Agent hereby accepts such appointment.
3. Establishment
of Escrow.
(a) The
term “Escrow
Fund” shall include all securities, property, cash or other assets
delivered and to be delivered to and retained by Escrow Agent pursuant to this
Escrow Agreement, the Exchange Agreement and the Securities Purchase
Agreement. The Escrow Fund shall be held in escrow (“Escrow”) by Escrow
Agent pursuant to the terms hereof. At the Closing, Parent will
deliver to Escrow Agent certificates representing an aggregate of 740,000 shares
of Parent Common Stock, registered in the name of each such Management
Stockholder and issued pursuant to the Exchange Agreement and the Securities
Purchase Agreement (the “Escrowed Shares”),
such shares to be held in Escrow for the benefit of the Buyers and the
Management Stockholders. Each Management Stockholder shall provide at
the Closing a stock power duly executed in blank and with signature medallion
guaranteed by a national bank or trust company, to be similarly held in
Escrow. The respective interests of the Management Stockholders in
the Escrow Fund and the Escrowed Shares on the date hereof is set forth in Schedule 1
hereto.
(b) If
after the Closing there is a stock or cash dividend declared or paid, or any
other distribution of assets or property with respect to the Escrowed Shares, or
if the shares of Parent Common Stock shall be increased by reason of a
subdivision of such shares, or other similar transactions, there shall be added
to the Escrowed Fund all securities, property, cash or other assets receivable
by the Management Stockholders attributable to the Escrowed Shares.
(c) Any
and all new, substituted or additional securities, cash, assets or other
property to which the Management Stockholders are entitled pursuant to a Change
in Control (as defined below) transaction by reason of their ownership of the
Escrowed Shares shall become part of the Escrow Fund. The Management
Stockholders may instruct Escrow Agent as to the manner of disposition of the
Escrowed Shares, whether by tender, exchange or otherwise, in accordance with
the nature of any transaction initiated to effect a Change in Control, subject
to the return of the consideration to be received in such transfer to the Escrow
Fund.
(d) During
the term of this Escrow Agreement, no sale, transfer or other disposition of the
Escrowed Shares may be made by the Management Stockholders.
4. Provision for Distribution
of Escrow Fund.
(a) Escrow
Agent shall transfer to the Buyers and/or the Management Stockholders, as
applicable, the number of Escrowed Shares contained in the Escrow Fund as are
specified below based on the achievement by the Parent (as it will exist as of
and after the closing under the Exchange Agreement) of the following EBITDA
(earnings before interest, taxes, depreciation and amortization) levels, less
any expenses related to monitoring fees paid to Vision Capital Advisors, LLC and
non-cash operating charges, for the years ending March 31, 2011 and
2012:
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Year
ending March 31, 2011
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|||||||||
|
Parent
EBITDA Levels
|
Escrowed
Shares
Delivered
to the Buyers
|
Escrowed
Shares
Returned
to the Management
Stockholders
|
|||||||
|
$4,500,000
and Above
|
0 | 370,000 | |||||||
| $3,750,000 to $4,449,999 | 185,000 | 185,000 | |||||||
| $3,000,000 to $3,749,999 | 277,500 | 97,500 | |||||||
|
Below
$3,000,000
|
370,000 | 0 | |||||||
|
Year
ending March 31, 2012
|
|||||||||
|
Parent
EBITDA Levels
|
Escrowed
Shares
Delivered
to the Buyers
|
Escrowed
Shares
Returned
to the Management
Stockholders
|
|||||||
|
$6,000,000
and Above
|
0 | 370,000 | |||||||
| $5,250,000 to $5,999,999 | 185,000 | 185,000 | |||||||
| $4,500,000 to $5,249,999 | 277,500 | 97,500 | |||||||
|
Below
$4,500,000
|
370,000 | 0 | |||||||
(b) Upon
receipt of a joint certificate instructing Escrow Agent to make a transfer in
accordance with this Section 4 (which certificate shall attach the relevant
consolidated financial statements of Parent supporting the EBITDA level
calculations), the Escrowed Shares shall be distributed within five (5) business
days to the Buyers and/or the Management Stockholders, as
applicable. Escrowed Shares shall be distributed to the Buyers in
proportion to their respective purchases of Units in the Private Placement
(including purchases pursuant to the exercise of the Unit Purchase Options, as
such term is defined in the Securities Purchase Agreement), and to the
Management Stockholders in accordance with the respective percentages set forth
in Schedule 1
hereto.
(c) The
Escrow shall terminate when all assets in the Escrow Fund have been distributed
in accordance with the terms of this Escrow Agreement.
5. Investment of
Cash.
(a) Escrow
Agent is hereby instructed and directed to invest any cash in the Escrow Fund in
a special interest-bearing attorneys’ escrow account to be maintained at a
national bank. If directed to do so jointly by Parent, the Management
Stockholders and the Buyers in
writing, the Escrow Agent may invest the Escrow Fund in money market funds
offered by such bank or in obligations of the United States of America having a
maturity of one year or less. If funds are to be distributed to the
Management Stockholders on a particular date, Escrow Agent shall liquidate such
investments into cash sufficient to make the required distributions to the
Management Stockholders and shall distribute such cash in accordance with
Section 4 hereof.
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(b) Escrow
Agent shall hold the income, interest or accretion with respect to the Escrow
Fund as part of the Escrow Fund to be disposed of in such manner as the
principal amount of the Escrow Fund shall be paid over to the Buyers and/or the
Management Stockholders.
6. Escrow
Agent.
(a) Escrow
Agent may act upon any instrument or other writing believed by it in good faith
to be genuine and to be signed or presented by the proper persons, and it shall
not be liable in connection with the performance by it of its duties pursuant to
the provisions of this Escrow Agreement, except for its own willful misconduct
or gross negligence. Without limiting the foregoing, Escrow Agent
shall have no responsibility for the accuracy of any report or other document or
certificate filed with it hereunder. Escrow Agent shall in no event
be liable for any payments except to the extent of the Escrow Fund.
(b) Escrow
Agent shall be reimbursed by Parent for its reasonable expenses (including
reasonable fees and disbursements of its counsel) incurred in connection with
the performance by it of such services.
(c) Until
such time as the Escrowed Shares are delivered pursuant to Section 4 above, the
Management Stockholders shall be entitled to vote the Escrowed Shares or other
securities in the Escrow Fund, provided that the Management Stockholders shall
not take any actions or inactions which would have a material adverse effect on
the provisions set forth under this Escrow Agreement.
(d) Escrow
Agent, or any successor to it hereafter appointed, may at any time resign by
giving notice in writing to the parties and shall be discharged of its duties
hereunder upon the appointment of the successor escrow agent as hereinafter
provided. In the event of any such resignation, the parties shall
appoint a successor escrow agent, which shall be a bank or trust company, or
other firm or corporation organized under the laws of the United States of
America or any state thereof. Any such successor escrow agent shall
deliver to the parties a written instrument accepting such appointment
hereunder, and thereupon it shall succeed to all the rights and duties of Escrow
Agent hereunder and shall be entitled to receive and hold in Escrow all the
Escrow Funds and any assets then held by the predecessor escrow agent
hereunder.
(e) Escrow
Agent shall not be responsible for the identity, authority or rights of any
person, firm or corporation, executing or delivering or purporting to execute or
deliver this Escrow Agreement or any document or security deposited hereunder or
any endorsement thereof or assignment thereof.
(f) Escrow
Agent shall have no duties or responsibilities except as expressly provided in
this Escrow Agreement and shall neither be obligated to recognize nor have any
liability or responsibility arising under any other agreement to which Escrow
Agent is not a party, even though reference thereto may be made herein or a copy
thereof attached hereto. Parent and the Management Stockholders
acknowledge that the Escrow Agent has rendered and will continue to render legal
advice to Vision Capital Advisors, LLC and its Affiliates, and Parent and
the Management Stockholders hereby waive any claims of conflict of interest by
reason of such legal representation.
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7. Miscellaneous.
(a) Notices. Any notice,
communication, request, reply or advice (hereinafter severally and collectively
called “notice”) in this
Escrow Agreement provided or permitted to be given or made by any party to
another must be in writing and may be given or served by depositing the same
postage prepaid and registered or, certified with return receipt requested, or
by delivering the same in person to the person to be notified. Notice
deposited in the mail in the manner hereinabove described shall be effective 48
hours after such deposit, except for notices to the Escrow Agent, which shall be
deemed effective upon receipt. For purposes of notice and addresses
of the parties, shall, until changed as hereinafter provided, be as
follows:
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(i)
|
If
to Parent:
|
Game Trading Technologies
Inc.
00000 XxXxxxxxx Xxxx
Xxxx Xxxxxx,
Xxxxxxxx 00000
Attention: Xx. Xxxx Xxxx,
President and CEO
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(ii)
|
If
to Vision Capital Advisors, LLC:
|
00 Xxxx
00xx
Xxxxxx, 0xx
Xxxxx
Xxx Xxxx, Xxx
Xxxx 00000
Attention: Xx. Xxxxxxx
Xxxxxxxx
Legal & Operations
or at
such other address as Parent, Vision Capital Advisors, LLC may have advised the
other parties in writing;
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(iii)
|
If
to the Management Stockholders, to their addresses provided under their
signatures below
|
with a
copy to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx, 00xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention: Xxxxxxx
Xxxxxxxxx, Esq.
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or at
such other addresses as the Management Stockholders may have advised Parent and
the Escrow Agent in writing;
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(iii)
|
If
to the Escrow Agent:
|
Xxxxxxxxx
Traurig, LLP
000 Xxxx
Xxxxxx, 00xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esq.
or at
such other address as the Escrow Agent may have advised the other parties in
writing.
Any
distribution of shares or assets from the Escrow Fund may be sent or given to
the Management Stockholders in the same manner as a notice, at the address
specified above.
(b) Successors and
Assigns. All the terms and conditions of this Escrow Agreement shall be
binding upon, and inure to the benefit of and be enforceable by, the parties
hereto and their respective successors, assigns, heirs and legal
representatives. The Management Stockholders shall not voluntarily
transfer or otherwise assign any right in or to the Escrow Fund or any interest
in this Escrow Agreement without the prior written consent of Parent, the Buyers
and Escrow Agent, and any such attempted transfer or assignment without the
prior written consent of Parent, the Buyers and Escrow Agent shall be null and
void. No person, firm or corporation will be recognized by Escrow
Agent as a successor, heir or personal representative of any party hereto until
there shall be presented to Escrow Agent evidence satisfactory to it of such
succession.
(c) Rights as a
Stockholder. Except as otherwise provided herein, each Management
Stockholder shall, during the term of this Escrow Agreement, exercise all rights
and privileges of a stockholder of Parent with respect to his respective
interest in shares of Parent Common Stock or other securities in the Escrow
Fund.
(d) Governing Law. It is
the intention of the parties that the substantive laws (and not the laws of
conflicts of law) of New York shall govern the validity of this Escrow
Agreement, the construction of its terms and the interpretation of the rights
and duties of the parties.
(e) Counterpart
Execution. This Escrow Agreement may be executed in one or more
counterparts, with the same effect as if all parties had signed the same
document. Each such counterpart shall be an original, but all such counterparts
together shall constitute a single agreement. In the event that any
signature is delivered by facsimile transmission or by e-mail delivery of a
“.pdf” format data file, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
(f) Severability. Each
provision of this Escrow Agreement is intended to be severable. In
the event that any one or more of the provisions contained in this Escrow
Agreement shall for any reason be held to be invalid, illegal or unenforceable,
the same shall not affect any other provisions of this Escrow Agreement, but
this Escrow Agreement shall be construed
as if such invalid, illegal or unenforceable provisions had never been contained
therein.
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(g) Integrated Agreement.
Except as provided in the next following sentence, this Escrow Agreement
constitutes the entire understanding and agreement among the parties hereto with
respect to the subject matter hereof, and there are no agreements,
understandings, restrictions, representations or warranties among the parties
other than those set forth herein or herein provided for.
(h) Change in Control.
For the purposes hereof, a “Change in Control”
shall have occurred if (A) any person, corporation, limited liability company,
partnership, trust, association, enterprise or group shall become the beneficial
owner, directly or indirectly, of stock of Parent possessing at least 50% of the
voting power (for the election of directors) of the outstanding capital stock of
Parent or (B) at any time fewer than 51% of the members of the Board of
Directors of Parent shall be persons who are either nominated for election by
such Board of Directors or were elected by such Board of Directors, or (C) there
shall be a sale of all or substantially all of Parent’s assets or Parent shall
merge or consolidate with another corporation and the stockholders of Parent
immediately prior to such transaction do not own, immediately after such
transaction, stock of the purchasing or surviving corporation in this
transaction (or of the parent corporation of the purchasing or surviving
corporation) possessing more than 50% of the voting power (for the election of
directors) of the outstanding stock of that corporation, which ownership shall
be measured without regard to any stock of the purchasing, surviving or parent
corporation owned by, the stockholders of Parent before the
transaction.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
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GAME
TRADING TECHNOLOGIES INC.
|
|
|
By:
Xxxx
Xxxx
President
and Chief Executive Officer
|
|
|
XXXXXXXXX
XXXXXXX, LLP, as Escrow Agent
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VISION
CAPITAL ADVISORS, LLC, on behalf of the Buyers
|
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By:
An
Authorized Officer
|
By:
__________________________________
Xxxx
Xxxxxxxx
Portfolio
Manager
|
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MANAGEMENT
STOCKHOLDERS
|
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|
XXXX
XXXX
|
Address:
|
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XXXXXX
XXXXXXX
|
Address:
|
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XXXX
XXXX, XX.
|
Address:
|
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XXXXXX
XXXX
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Address:
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EVOLUTION
ADVISORS, LLC
By:
Name:
Title:
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Address:
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SCHEDULE
1
|
Name
and Address of Management Stockholders
|
Shares
of Parent Common Stock
and
Percentage Held in Escrow Fund
|
|
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Xxxx
Xxxx
|
472,000
shares (63.80%)
|
|
|
Xxxxxx
Xxxxxxx
|
67,000
shares (9.05%)
|
|
|
Xxxx
Xxxx, Xx.
|
67,000
shares (9.05%)
|
|
|
Xxxxxx
Xxxx
|
67,000
shares (9.05%)
|
|
|
Evolution
Advisors, LLC
|
67,000 shares (9.05%)
|
|
|
740,000 shares
(100.00%)
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