STOCK ESCROW AGREEMENT
STOCK
ESCROW AGREEMENT, dated as of
,
2005 (“Agreement”), by and among FORTRESS AMERICA ACQUISITION CORPORATION, a
Delaware corporation (“Company”), WASHINGTON CAPITAL ADVISORS, LLC, XXXXXX X.
XXXXX, XXXXX X. XXXXXXXX, XXXXXX X. XXXXXXX, XXX XXXXXXXXXX, PALADIN HOMELAND
SECURITY FUND, L.P., PALADIN HOMELAND SECURITY FUND (NY CITY), L.P., PALADIN
HOMELAND SECURITY FUND (CA), L.P. and PALADIN HOMELAND SECURITY FUND (CAYMAN
ISLANDS), L.P. (collectively “Initial Stockholders”) and CONTINENTAL STOCK
TRANSFER & TRUST COMPANY, a New York corporation (“Escrow
Agent”).
WHEREAS,
the Company has entered into an Underwriting Agreement, dated
, 2005
(“Underwriting
Agreement”), with Sunrise Securities Corp. (“Sunrise”) acting as representative
of the several underwriters (collectively, the “Underwriters”), pursuant to
which, among other matters, the Underwriters have agreed to purchase 7,000,000
units (“Units”) of the Company. Each Unit consists of one share of the
Company’s Common Stock, par value $.0001 per share, and two Warrants, each
Warrant to purchase one share of Common Stock, all as more fully described
in
the Company’s final Prospectus, dated
,
2005
(“Prospectus”) comprising part of the Company’s Registration Statement on Form
S-1 (File No. 333-123504) under the Securities Act of 1933, as
amended
(“Registration Statement”), declared effective on
,
2005 (“Effective Date”).
WHEREAS,
the Initial Stockholders have agreed as a condition of the sale of the Units
to
deposit their shares of Common Stock of the Company, as set forth opposite
their
respective names in Exhibit A attached hereto (collectively “Escrow Shares”), in
escrow as hereinafter provided.
WHEREAS,
the Company and the Initial Stockholders desire that the Escrow Agent accept
the
Escrow Shares, in escrow, to be held and disbursed as hereinafter
provided.
IT
IS
AGREED:
1.
Appointment of Escrow Agent.
The Company and the Initial Stockholders hereby appoint the Escrow Agent to
act
in accordance with and subject to the terms of this Agreement and the Escrow
Agent hereby accepts such appointment and agrees to act in accordance with
and
subject to such terms.
2.
Deposit of Escrow Shares.
On or before the Effective Date, each of the Initial Stockholders shall deliver
to the Escrow Agent certificates representing his respective Escrow Shares,
to
be held and disbursed subject to the terms and conditions of this
Agreement. Each Initial Stockholder acknowledges that the certificate
representing his Escrow Shares is legended to reflect the deposit of such Escrow
Shares under this Agreement.
3.
Disbursement of the Escrow Shares.
The Escrow Agent shall hold the Escrow Shares until the third anniversary of
the
Effective Date (“Escrow Period”), on which date it shall, upon written
instructions from each Initial Stockholder, disburse each of the Initial
Stockholder’s Escrow Shares to such Initial Stockholder; provided, however, that
if the Escrow Agent is notified by the Company pursuant to Section 6.7
hereof that the Company is being liquidated at any time during the Escrow
Period, then the Escrow Agent shall promptly destroy the certificates
representing the Escrow Shares; provided further, however, that if, after the
Company consummates a Business Combination (as such term is defined in the
Registration Statement), it (or the surviving entity) subsequently consummates
a
liquidation, merger, stock exchange or other similar transaction which results
in all of the stockholders of such entity having the right to exchange their
shares of Common Stock for cash, securities or other property, then the Escrow
Agent will, upon receipt of a certificate, executed by the Chief Executive
Officer or Chief Financial Officer of the Company, in form reasonably acceptable
to the Escrow Agent, that such transaction is then being consummated, release
the Escrow Shares to the Initial Stockholders upon consummation of the
transaction so that they can similarly participate. The Escrow Agent
shall
have no further duties hereunder after the disbursement or destruction of the
Escrow Shares in accordance with this Section 3.
4.
Rights of Initial Stockholders in Escrow Shares.
4.1
Voting Rights as a Stockholder.
Subject to the terms of the Insider Letter described in Section 4.4
hereof
and except as herein provided, the Initial Stockholders shall retain all of
their rights as stockholders of the Company during the Escrow Period, including,
without limitation, the right to vote such shares.
4.2
Dividends and Other Distributions in Respect of the Escrow
Shares.
During the Escrow Period, all dividends payable in cash with respect to the
Escrow Shares shall be paid to the Initial Stockholders, but all dividends
payable in stock or other non-cash property (“Non-Cash Dividends”) shall be
delivered to the Escrow Agent to hold in accordance with the terms hereof.
As used herein, the term “Escrow Shares” shall be deemed to include the Non-Cash
Dividends distributed thereon, if any.
4.3
Restrictions on Transfer.
During the Escrow Period, no sale, transfer or other disposition may be made
of
any or all of the Escrow Shares except (i) by gift to a member of Initial
Stockholder’s immediate family or to a trust, the beneficiary of which is an
Initial Stockholder or a member of an Initial Stockholder’s immediate family,
(ii) by virtue of the laws of descent and distribution upon death of any Initial
Stockholder, (iii) pursuant to a qualified domestic relations order, or (iv)
to
any partner, member or affiliate of any Initial Stockholder organized as an
entity;
provided,
however,
that
such permissive transfers may be implemented only upon the respective
transferee’s written agreement to be bound by the terms and conditions of this
Agreement and of the Insider Letter signed by the Initial Stockholder
transferring the Escrow Shares. During the Escrow Period, the Initial
Stockholders shall not pledge or grant a security interest in the Escrow Shares
or grant a security interest in their rights under this Agreement.
4.4
Insider Letters.
Each of the Initial Stockholders has executed a letter agreement with Sunrise
and the Company, dated as indicated on Exhibit A hereto, and which is
filed
as an exhibit to the Registration Statement (“Insider Letter”), respecting the
rights and obligations of such Initial Stockholder in certain events, including
but not limited to the liquidation of the Company.
5.
Concerning the Escrow Agent.
5.1
Good
Faith Reliance.
The Escrow Agent shall not be liable for any action taken or omitted by it
in
good faith and in the exercise of its own best judgment, and may rely
conclusively and shall be protected in acting upon any order, notice, demand,
certificate, opinion or advice of counsel (including counsel chosen by the
Escrow Agent), statement, instrument, report or other paper or document (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 believed by the Escrow Agent to be genuine and
to be
signed or presented by the proper person or persons. The Escrow Agent
shall not be bound by any notice or demand, or any waiver, modification,
termination or rescission of this Agreement unless evidenced by a writing
delivered to the Escrow Agent signed by the proper party or parties and, if
the
duties or rights of the Escrow Agent are affected, unless it shall have given
its prior written consent thereto.
5.2
Indemnification.
The Escrow Agent shall be indemnified and held harmless by the Company from
and
against any expenses, including counsel fees and disbursements, or loss suffered
by the Escrow Agent in connection with any action, suit or other proceeding
involving any claim which in any way, directly or indirectly, arises out of
or
relates to this Agreement, the services of the Escrow Agent hereunder, or the
Escrow Shares held by it hereunder, other than expenses or losses arising from
the gross negligence or willful misconduct of the Escrow Agent. Promptly
after the receipt by the Escrow Agent of notice of any demand or claim or the
commencement of any action, suit or proceeding, the Escrow Agent shall notify
the other parties hereto in writing. In the event of the receipt of
such
notice, the Escrow Agent, in its sole discretion, may commence an action in
the
nature of interpleader in an appropriate court to determine ownership or
disposition of the Escrow Shares or it may deposit the Escrow Shares with the
clerk of any appropriate court or it may retain the Escrow Shares pending
receipt of a final, non-appealable order of a court having jurisdiction over
all
of the parties hereto directing to whom and under what circumstances the Escrow
Shares are to be disbursed and delivered. The provisions of this
Section 5.2 shall survive in the event the Escrow Agent resigns or is
discharged pursuant to Sections 5.5 or 5.6 below.
5.3
Compensation.
The Escrow Agent shall be entitled to reasonable compensation from the Company
for all services rendered by it hereunder. The Escrow Agent shall also
be
entitled to reimbursement from the Company for all expenses paid or incurred
by
it in the administration of its duties hereunder including, but not limited
to,
all counsel, advisors’ and agents’ fees and disbursements and all taxes or other
governmental charges.
5.4
Further Assurances.
From time to time on and after the date hereof, the Company and the Initial
Stockholders shall deliver or cause to be delivered to the Escrow Agent such
further documents and instruments and shall do or cause to be done such further
acts as the Escrow Agent shall reasonably request to carry out more effectively
the provisions and purposes of this Agreement, to evidence compliance herewith
or to assure itself that it is protected in acting hereunder.
5.5
Resignation.
The Escrow Agent may resign at any time and be discharged from its duties as
escrow agent hereunder by its giving the other parties hereto written notice
and
such resignation shall become effective as hereinafter provided. Such
resignation shall become effective at such time that the Escrow Agent shall
turn
over to a successor escrow agent appointed by the Company, the Escrow Shares
held hereunder. If no new escrow agent is so appointed within the 60
day
period following the giving of such notice of resignation, the Escrow Agent
may
deposit the Escrow Shares with any court it reasonably deems
appropriate.
5.6
Discharge of Escrow Agent.
The Escrow Agent shall resign and be discharged from its duties as escrow agent
hereunder if so requested in writing at any time by the Company and a majority
of the Initial Stockholders, jointly, provided, however, that such resignation
shall become effective only upon acceptance of appointment by a successor escrow
agent as provided in Section 5.5.
5.7
Liability.
Notwithstanding anything herein to the contrary, the Escrow Agent shall not
be
relieved from liability hereunder for its own gross negligence or its own
willful misconduct.
6.
Miscellaneous.
6.1
Governing Law.
This Agreement shall for all purposes be deemed to be made under and shall
be
construed in accordance with the laws of the State of New York.
6.2
Third
Party Beneficiaries.
Each of the Initial Stockholders hereby acknowledges that the Underwriters
are
third party beneficiaries of this Agreement and this Agreement may not be
modified or changed without the prior written consent of Sunrise.
6.3
Entire Agreement.
This Agreement contains the entire agreement of the parties hereto with respect
to the subject matter hereof and, except as expressly provided herein, may
not
be changed or modified except by an instrument in writing signed by the party
to
be charged.
6.4
Headings.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation thereof.
6.5
Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the respective
parties hereto and their legal representatives, successors and
assigns.
6.6
Notices.
Any notice or other communication required or which may be given hereunder
shall
be in writing and either be delivered personally or be mailed, certified or
registered mail, or by private national courier service, return receipt
requested, postage prepaid, and shall be deemed given when so delivered
personally or, if mailed, two days after the date of mailing, as
follows:
If
to the
Company, to:
0
Xxxxxxxx Xxxxx Xxxxxx
Xxxxx
000
Xxxxxxxx,
XX 00000
Attn:
Chairman
If
to a
Stockholder, to his address set forth in Exhibit A.
and
if to
the Escrow Agent, to:
Continental
Stock Transfer & Trust Company
00
Xxxxxxx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
President
A
copy of
any notice sent hereunder shall be sent to:
Squire,
Xxxxxxx & Xxxxxxx L.L.P.
0000
Xxxxxx Xxxxxxxx Xxxxx, 00xx
Xxxxxx
Xxxxxx, XX 00000
Attn:
Xxxxx X. Xxxxxxx, Esq.
and:
Sunrise
Securities Corp.
000
Xxxxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxx
Low, President
and:
Xxxxx
Xxxxx Xxxx Xxxxxx Xxxxxxx and Xxxxx, P.C.
000
Xxxxx
Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxxx
X. Xxxx, Esq.
The
parties may change the persons and addresses to which the notices or other
communications are to be sent by giving written notice to any such change in
the
manner provided herein for giving notice.
6.7
Liquidation of Company.
The
Company shall give the Escrow Agent written notification of the liquidation
and
dissolution of the Company in the event that the Company fails to consummate
a
Business combination within the time period(s) specified in the
Prospectus.
WITNESS
the execution of this Agreement as of the date first above written.
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By:
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C.
Xxxxxx XxXxxxxx, Chairman
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INITIAL
STOCKHOLDERS:
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WASHINGTON
CAPITAL ADVISORS, LLC
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By:
C. Xxxxxx XxXxxxxx
Title:
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Xxxxxx
X. Xxxxx
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Xxxxx
X. Xxxxxxxx
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________________________________________________
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Xxx
Xxxxxxxxxx
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________________________________________________
Xxxxxx
X. Xxxxxxx
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PALADIN
HOMELAND SECURITY FUND, L.P.
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By:
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PALADIN
HOMELAND SECURITY HOLDINGS, LLC, its General
Partner
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By:
Xxxxxxx
X. Xxxxx, Authorized Signatory
PALADIN
HOMELAND SECURITY FUND (NY CITY), L.P.
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By:
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PALADIN
HOMELAND SECURITY HOLDINGS, LLC, its General
Partner
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By:
Xxxxxxx
X. Xxxxx, Authorized Signatory
PALADIN
HOMELAND SECURITY FUND (CA), L.P.
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By:
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PALADIN
HOMELAND SECURITY HOLDINGS, LLC, its General
Partner
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By:
Xxxxxxx
X. Xxxxx, Authorized Signatory
PALADIN
HOMELAND SECURITY FUND (CAYMAN ISLANDS), L.P.
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By:
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PALADIN
HOMELAND SECURITY HOLDINGS (CAYMAN ISLANDS), LTD., its General
Partner
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By:
Xxxxxxx
X. Xxxxx, Authorized Signatory
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CONTINENTAL
STOCK TRANSFER
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& TRUST COMPANY
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By:
_____________________________________
Name:
Title:
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EXHIBIT
A
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Name
and Address of
Initial
Stockholder
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Number
of
Shares
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Stock
Certificate
Number
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Date
of
Insider
Letter
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Washington
Capital Advisors, LLC
[Address]
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575,000
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Xxxxxx
X. Xxxxx
[Address]
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575,000
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Xxxxx
X. Xxxxxxxx
[Address]
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150,000
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Xxxxxx
X. Xxxxxxx
[Address]
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200,000
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Xxx
Xxxxxxxxx
[Address]
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200,000
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Paladin
Homeland Security Fund, L.P.
[Address]
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24,765
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Paladin
Homeland Security Fund (NY City), L.P.
[Address]
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15,926
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Paladin
Homeland Security Fund (CA), L.P.
[Address]
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5,553
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Paladin
Homeland Security Fund (Cayman Islands), L.P.
[Address]
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3,756
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