EXECUTION COPY
ESCROW AND PAYMENT AGREEMENT
----------------------------
ESCROW AND PAYMENT AGREEMENT dated as of October 19, 2000 (this
"Agreement"), by and among XXX.xxx, Inc., a Delaware corporation ("MCY"),
Applied Digital Solutions, Inc., a Missouri corporation ("ADSX"), and Xxxxxx
Xxxxxx LLP, a New York limited liability partnership, as escrow agent (the
"Escrow Agent").
RECITALS
WHEREAS, concurrently with the execution and delivery of this
Agreement, MCY and ADSX are entering into the MCY Agreement dated as of even
date herewith (the "MCY Agreement") pursuant to which (i) MCY has agreed to
cause the MCY License (as such term is defined in the MCY Agreement) and the MCY
Technology (as such term is defined in the MCY Agreement) and (ii) ADSX has
agreed to cause the ADSX Shares (as such term is defined in the MCY Agreement)
to be deposited into escrow with the Escrow Agent pursuant to this Agreement;
and
WHEREAS, each of MCY and ADSX have agreed that the MCY License, the MCY
Technology, the MCY Shares and the ADS Shares shall be held, and ultimately
released, by the Escrow Agent, in accordance with and subject to the terms and
provisions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and legal
sufficiency of which is hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Definitions. Capitalized terms used in this Agreement which are not
defined herein shall have the same meanings in this Agreement as are ascribed to
such terms in the MCY Agreement.
2. Creation of Escrow.
(a) At the request of MCY and ADSX, the Escrow Agent agrees to
serve as the Escrow Agent hereunder pursuant to the terms and provisions of this
Agreement.
(b) Promptly after the date hereof and in no event later than
October 25, 2000, (i) MCY shall cause the MCY License, the MCY Technology and
(ii) ADSX shall cause the ADSX Shares (collectively, the "Escrow"), to be
deposited with the Escrow Agent pursuant to the terms and provisions of this
Agreement.
3. Release of the Escrow. The Escrow Agent shall release from the
escrow account and disburse the Escrow, as follows:
(a) Upon receipt of joint written instructions from MCY and ADSX that
the Release Date (as such term is hereinafter defined) has occurred, the Escrow
Agent shall release the ADSX Shares to MCY and the MCY License and the MCY
Technology to ADSX. For the purposes of this Agreement, the term "Release Date"
shall mean the date on which: (i) the conditions specified in Section 4.1(h) and
4.2(h) of the MCY Agreement have been satisfied; and (ii) MCY shall have
received from ADSX a copy of the confirmation from the Securities and Exchange
Commission ("Commission") specified in Section 4.2(e) of the MCY Agreement.
(b) To a court of competent jurisdiction in accordance with Section 9
hereof.
(c) As instructed, upon receipt of a final non-appealable order or
judgment of a court of competent jurisdiction, directing the disbursement of all
or any portion of the Escrow.
(d) As provided in Section 4 hereof.
4. Early Termination of Escrow. If the Escrow Agent has not received
the joint written instructions contemplated by Section 3(b) hereof by the
Registration Right Termination date (as such term is defined in the MCY
Agreement), upon receipt of a written notice from MCY (a copy of which shall be
furnished to ADSX), the Escrow shall terminate and the Escrow Agent shall
furnish the MCY License and the MCY Technology to MCY (ADSX having no right,
title or interest therein). Upon delivery of such notice by MCY, ADSX shall be
obligated to return the MCY Shares to MCY and MCY shall return the ADSX Shares
to ADSX whereupon the MCY Receivable shall be deemed to have been paid in full.
5. Written Instructions/Dispute; etc.
(a) To the extent all or any portion of the Escrow is to be
delivered to ADSX pursuant to Section 3(a), ADSX shall deliver written
instructions to the Escrow Agent and to MCY requesting such disbursement in
accordance with the written instructions. If MCY does not notify the Escrow
Agent in writing within five (5) days of its receipt of such written
instructions that it objects to such disbursement in accordance with such
instructions (a "Dispute"), the Escrow Agent shall make such disbursement in
accordance with such instructions.
(b) To the extent all or any portion of the Escrow is to be
delivered to MCY pursuant to Section 3(a), MCY shall deliver written
instructions to the Escrow Agent and to ADSX requesting such disbursement in
accordance with the written instructions. If ADSX does not notify the Escrow
Agent in writing within five (5) days of its receipt of such written instruction
that there is a Dispute with respect to requested disbursement, the Escrow Agent
shall make such disbursement in accordance with such instructions.
(c) Notwithstanding anything to the contrary contained in this
Agreement, in the event of a Dispute the portion of the Escrow subject to such
Dispute shall not be disbursed and shall remain in the escrow account pending
final adjudication by a court of competent jurisdiction (from which no appeal
may be taken) or final settlement by ADSX and MCY with respect to such Dispute.
-2-
6. Settlement of Disputes. All controversies and matters in question
between any of the parties hereto arising out of or relating to any provision of
this Agreement (or of the MCY Agreement or the ADSX Agreement, as the case may
be, as it relates to this Agreement) (including, without limitation, any
Disputes) shall be decided as provided in Section 16 hereof.
7. Termination of Escrow. This Agreement shall terminate, except for
the provisions contained in Sections 8, 10, 11, 12, 13 and 14 of this Agreement
which provisions shall survive any termination hereof, upon the disbursement by
the Escrow Agent of any remaining portion of the Escrow in accordance with this
Agreement. Notwithstanding anything to the contrary herein, this term of this
Agreement shall terminate by no later than sixty (60) days from the date hereof
unless extended by written consent of each of ADSX and MCY.
8. Further Assurances. Each of ADSX and MCY agree to do such further
acts and to execute and deliver such statements, assignments, agreements,
instruments and other documents as the Escrow Agent, from time to time, may
reasonably request in connection with the administration, maintenance,
enforcement of this Agreement in order (a) to better enable the Escrow Agent to
exercise any such right, power, privilege, remedy or interest, or (b) to
otherwise effectuate the purpose and the terms and provisions of this Agreement,
each in such form and substance as may be reasonably acceptable to the Escrow
Agent.
9. Conflicting Demands. Notwithstanding anything else set forth in this
Agreement, if conflicting or adverse claims or demands are made or notices
served upon the Escrow Agent with respect to the Escrow or any action to be
taken by the Escrow Agent hereunder, each of ADSX and MCY agrees that the Escrow
Agent shall be entitled to refuse to comply with any request relating to such
claim or demand and withhold and stop all or any further performance of the
Escrow Agent's duties hereunder. In so doing, the Escrow Agent shall not be or
become liable for damages, losses, costs, expenses or interest to ADSX or MCY or
any other person for Escrow Agent's failure to comply with such conflicting or
adverse demands. The Escrow Agent shall be entitled to continue to so refrain
and refuse to so act until such conflicting claims or demands shall have been
finally determined by a court of competent jurisdiction (by a final judgment or
determination from which no appeal may be taken) or shall have been settled by
agreement of ADSX and MCY, in which case the Escrow Agent shall be notified
thereof by a written notice signed by ADSX and MCY. The Escrow Agent may also
elect to commence an interpleader or other action in any court of competent
jurisdiction for declaratory judgment or other similar relief for the purpose of
having the respective rights of the claimants adjudicated, and may deposit with
such court the Escrow held hereunder; and if the Escrow Agent so commences
interpleader action and deposits the Escrow, the Escrow Agent shall be relieved
and discharged from any further duties and obligations under this Agreement.
10. Expenses of the Escrow Agent. ADSX and MCY shall each pay fifty
percent (50%) of all out-of-pocket costs and expenses incurred by the Escrow
Agent in connection with the performance of its services hereunder, including,
without limitation, all waivers, releases, discharges, satisfactions,
modifications and amendments of this Agreement and the enforcement, protection
and adjudication of the Escrow Agent's rights hereunder by the Escrow Agent
(including, without limitation, the out-of-pocket disbursements of the Escrow
Agent itself (if the Escrow Agent acts as its own counsel) and expenses and
costs of attorneys it retains as legal counsel.
-3-
11. Reliance on Documents and Experts. The Escrow Agent shall be
entitled to rely upon any notice, consent, certificate, affidavit, statement,
paper, document, writing or communication reasonably believed by it to be
genuine and to have been signed, sent or made by the proper person or persons,
and upon opinions and advice of legal counsel (including, without limitation,
itself or counsel for any party hereto), independent public accountants and
other experts selected by the Escrow Agent.
12. Status of the Escrow Agent; Waiver of Conflict. The Escrow Agent is
acting under this Agreement as a stakeholder only. No term or provision of this
Agreement is intended to create, nor shall any such term or provision be deemed
to have created, any joint venture, partnership or attorney-client relationship
between or among the Escrow Agent and ADSX and MCY, as the case may be. This
Agreement shall not be deemed to prohibit or in any way restrict the Escrow
Agent's representation, as legal counsel, of MCY who may be advised by the
Escrow Agent on any and all matters pertaining to this Agreement, the MCY
Agreement, the ADS Agreement or the transactions contemplated thereby. To the
extent MCY has been represented by the Escrow Agent, MCY hereby waives any
conflict of interest and irrevocably authorizes and directs the Escrow Agent to
carry out the terms and provisions of this Agreement fairly as to all parties,
without regard to any such representation and irrespective of the impact upon
MCY. The Escrow Agent's only duties are those expressly set forth in this
Agreement, and each of ADSX and MCY authorizes the Escrow Agent to perform those
duties in accordance with its usual practices in holding funds of its own or
those of other escrows. The Escrow Agent may exercise or otherwise enforce any
of its rights, powers, privileges, remedies and interests under this Agreement
and applicable law or perform any of its duties under this Agreement by or
through its partners, employees, attorneys, agents or designees.
13. Exculpation. The Escrow Agent and its designees, and their
respective directors, officers, members, managers, partners, employees,
attorneys and agents and the successors and assigns of each of them (each, an
"Exculpated Person"), shall not incur any liability whatsoever for the
investment or disposition of the Escrow or the taking of any other action in
accordance with the terms and provisions of this Agreement, for any mistake or
error in judgment, for compliance with any applicable law, regulation or any
attachment, order or other directive of any court or other authority
(irrespective of any conflicting term or provision of this Agreement), or for
any act or omission of any other person selected with reasonable care and
engaged by the Escrow Agent in connection with this Agreement (except such as
are occasioned by the Exculpated Person's own acts and omissions amounting to
willful misconduct as finally determined pursuant to applicable law by a final
judgment of a court of competent jurisdiction from which no appeal may be taken)
and each of the ADSX and MCY hereby waives any and all claims and actions
whatsoever against the Exculpated Persons arising out of or related directly or
indirectly to any and all of the foregoing acts, omissions and circumstances.
Furthermore, the Exculpated Persons shall not incur any liability (other than
for such Exculpated Person's own acts and omissions under this Agreement and
amounting to willful misconduct as finally determined pursuant to applicable law
by a final judgment of a court of competent jurisdiction from which no appeal
may be taken) for other acts and omissions arising out of or related directly or
indirectly to this Agreement or the performance by the Escrow Agent of its
services hereunder.
14. Indemnification. ADSX and MCY shall jointly and severally indemnify
the Escrow Agent and its designees, and their respective directors, officers,
members, managers,
-4-
partners, employees, attorneys and agents and the successors and assigns of each
of them (each, an "Indemnified Person") and shall hold each Indemnified Person
harmless from and against any and all claims, liabilities, damages, penalties,
losses, costs and expenses (including, without limitation, reasonable fees,
disbursements and expenses of attorneys and the reasonable fees, disbursements
and expenses of other experts) that may be imposed upon, incurred by, or
asserted against any Indemnified Person, arising out of or related to, directly
or indirectly, this Agreement or the performance by the Escrow Agent of its
services hereunder, except such as are occasioned by the Indemnified Person's
own acts and omissions amounting to willful misconduct as finally determined
pursuant to applicable law by a final judgment of a court of competent
jurisdiction from which no appeal may be taken.
15. Resignation of Escrow Agent; Appointment of Successor Escrow Agent.
The Escrow Agent may, at any time, at its option, elect to resign its duties as
Escrow Agent under this Agreement by providing written notice thereof to each of
ADSX and MCY. In such event, the Escrow Agent shall transfer the Escrow to a
successor independent escrow agent to be appointed by (a) ADSX and MCY within
thirty (30) days following the receipt of notice of resignation from the Escrow
Agent or (b) the Escrow Agent, if ADSX and MCY shall have not agreed on a
successor escrow agent within the aforesaid thirty (30) day period, as
designated by the Escrow Agent in each case upon such appointment and delivery
of the Escrow to the successor Escrow Agent, the Escrow Agent shall be released
of and from all liability under this Agreement; provided, however, that each of
the respective obligations of ADSX and MCY to pay expenses and to indemnify,
reimburse, hold harmless and/or defend the Escrow Agent under Sections 10 and 14
hereof shall continue in full force and effect with respect to any Escrow Agent
resigning pursuant to this Section 15.
16. Payment of MCY Receivable. Each of MCY and ADSX have entered into
and delivered the ADSX Agreement (the "ADSX Agreement") pursuant to which MCY
has agreed to pay: (i) $9,000,000 (the "MCY Receivable") as invoiced by ADSX;
and (ii) to pay [615,976] shares of XXX.xxx, Inc. common stock (the "MCY
Shares") to ADSX in consideration of the ADSX License.
(a) Payment from Sale Proceeds. At any time after MCY receives
net proceeds from the sale of the ADSX Shares following the date that MCY shall
have previously received $2,000,000 of net proceeds from the sale of the ADSX
Shares (each a "Payment Event"), MCY shall pay the amount of the net proceeds so
received to ADSX the payment of which shall be applied against the payment of
the MCY Receivable. The amount due to ADSX in respect of each Payment Event
shall be aggregated and paid to ADSX on a monthly basis at the end of each month
in which the Payment Event occurs, if any.
(b) If by June 30, 2001, MCY has not realized at least
$11,000,000 in net proceeds from the sale of the ADSX Shares, then ADSX shall
have the right, at its option, to assist MCY in causing the sale of the ADSX
Shares; provided, that ADSX shall have received the written confirmation from
the Commission contemplated in Section 3(a) of this Agreement. If by September
30, 2001, MCY has not paid the MCY Receivable in full, MCY shall either (i) pay
the outstanding balance of the MCY Receivable in cash or (ii) tender to ADSX the
remaining ADSX Shares not previously sold; whereupon in each instance the MCY
Receivable shall be deemed to be paid in full. In addition, if MCY has not
received the net proceeds in the
-5-
aggregate amount of $11,000,000 from the sale of the ADSX Shares, then each of
the MCY License and the ADSX License shall terminate and be of no further force
and effect.
(c) In the event of any conflict between the terms of the ADSX
Agreement or any other documents contemplated thereby with respect to payment of
the MCY Receivable, the terms of this Section 16 shall control.
17. Notices. All notices, demands, certificates and other
communications to be given or delivered or permitted under or by reason of the
provisions of this Agreement shall be in writing and shall be deemed to be
delivered and received by the intended recipient as follows: (a) if personally
delivered, on the Business Day of such delivery (as evidenced by the receipt of
the personal delivery service), (b) if mailed certified or registered mail
return receipt requested (with all postage prepaid), four (4) Business Days
after the date set forth on the return receipt, (c) if delivered by overnight
courier service of recognized standing, on the Business Day of such delivery (as
evidenced by the receipt of the overnight courier service), or (d) if delivered
by facsimile transmission, on the Business Day of such delivery if sent by 6:00
p.m. in the time zone of the recipient, or if sent after that time, on the next
succeeding Business Day (as evidenced by the printed confirmation of delivery
generated by the sending party's telecopier machine). If any notice, demand,
certificate or other communication cannot be delivered because of a changed
address of which no notice was given (in accordance with this Section 17), or
the refusal to accept same, the notice, demand, certificate or other
communication shall be deemed received on the Business Day the notice is sent
(as evidenced by the affidavit of the sender). All such notices, demands,
certificates and other communications will be sent to the following addresses or
facsimile numbers as applicable:
(i) If to ADSX:
Applied Digital Solutions, Inc.
000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxx, General Counsel
with copies to:
Xxxxx Xxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Fax: 000-000-0000
Attention: Xxxxxx XxXxxxxxx, Esq.
Xxxxxx X. Xxxxxx, Esq.
(ii) If to MCY:
c/o MCY Music World, Inc.
1133 Avenue of the Americas, 00xx Xxxxx
-0-
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
with copies to:
MCY Music World, Inc.
1133 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: 000-000-0000
Facsimile: 212-944-6943
Attention: Xxxxxxxx Xxxxxxx, General Counsel
and to:
Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
(iii) If to the Escrow Agent:
Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
or to such other address or facsimile number as any party may specify by notice
given to the other party in accordance with this Section 17. For the purposes of
this Agreement, "Business Day" shall mean a day other than a Saturday, Sunday or
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close. For the purposes of this
Agreement, if a day referenced herein is not a Business Day or if a notice is
given or delivered on a day which is not a Business Day, such day shall be
deemed to occur or such notice shall be deemed to be given or delivered on the
next Business Day.
18. Governing Law; No Jury Trial; Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THAT STATE, WITHOUT REGARD
TO ANY OF ITS PRINCIPLES OF CONFLICTS OF LAWS OR OTHER LAWS WHICH WOULD RESULT
IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. THIS AGREEMENT SHALL BE
CONSTRUED AND INTERPRETED WITHOUT REGARD TO ANY PRESUMPTION AGAINST THE PARTY
CAUSING THIS AGREEMENT TO BE DRAFTED. EACH OF THE PARTIES HEREBY UNCONDITIONALLY
AND IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR
-7-
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH OF THE PARTIES UNCONDITIONALLY AND IRREVOCABLY
CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE
AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF DELAWARE WITH RESPECT TO ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, AND EACH OF THE PARTIES HEREBY UNCONDITIONALLY
AND IRREVOCABLY WAIVES ANY OBJECTION TO VENUE IN ANY SUCH COURT, AND AGREES THAT
SERVICE OF ANY SUMMONS, COMPLAINT, NOTICE OR OTHER PROCESS RELATING TO SUCH
SUIT, ACTION OR OTHER PROCEEDING MAY BE EFFECTED IN THE MANNER PROVIDED IN
SECTION 17 HEREOF.
19. Binding Effect; Amendment. This Agreement and the rights and
obligations of the parties hereto shall be binding upon and shall inure to the
benefit of each of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be terminated, modified, amended,
altered, supplemented or waived, except by a written agreement executed by each
of the parties hereto.
20. Severability. Should any clause, section or part of this Agreement
be held or declared to be void or illegal for any reason, all other clauses,
sections or parts of this Agreement shall nevertheless continue in full force
and effect.
21. Assignability, etc. Except for the provisions relating to a
successor Escrow Agent, neither the rights nor the obligations of any party to
this Agreement may be transferred or assigned. Any purported assignment of this
Agreement or any of the rights and obligations hereunder shall be ab initio
null, void and of no force or effect. Except as provided in this Section 21
hereof, this Agreement shall not create any right or cause of action in any
person other than the parties hereto.
22. Waivers; Consents. Any waiver or consent respecting any
representation, warranty, covenant or other term or provision of this Agreement
shall be effective only in the specific instance and for the specific purpose
for which given and shall not be deemed, regardless of frequency given, to be a
further or continuing waiver or consent. The failure or delay of a party at any
time or times to require performance of, or to exercise its rights with respect
to, any representation, warranty, covenant or other term or provision of this
Agreement in no manner (except as otherwise expressly provided herein) shall
affect its right at a later time to enforce any such term or provision. No
notice to or demand on any party hereto in any case shall entitle such party to
any other or further notice or demand in the same, similar or other
circumstances.
23. Entire Agreement; Conflict. This Agreement, the MCY Agreement and
the ADSX Agreement (together with the exhibits and schedules attached thereto
and the MCY Transaction Documents and the ADSX Transaction Documents delivered
pursuant thereto) contain the entire understanding and agreement of the parties
with respect to
-8-
the subject matter hereof and thereof and they supersede all prior and/or
contemporaneous understandings and agreements of any kind and nature (whether
written or oral) between the parties with respect to such subject matter
including, without limitation, the this Agreement, all of which are merged
herein. Should there be any conflict between the terms and provisions of this
Agreement and those of the MCY Agreement and the ADSX Agreement, the terms and
provisions of this Agreement shall govern and control.
24. Headings. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning,
construction or interpretation of this Agreement.
25. Counterparts. This Agreement may be executed in two (2) or more
counterparts (including, by facsimile signature, which shall constitute an
original signature for purposes hereof), each of which when executed shall be
deemed to be an original, but all of which, when together, shall constitute one
and the same document.
[INTENTIONALLY LEFT BLANK]
-9-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first written above.
APPLIED DIGITAL SOLUTIONS, INC.
By:/s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: General Counsel
XXX.XXX, INC.
By:/s/ Xxxxxxxx Xxxxxxx
-------------------------------------------
Name: Xxxxxxxx Xxxxxxx
Title: Chairman and Chief Executive Officer
XXXXXX XXXXXX LLP, AS ESCROW AGENT
By:/s/ Xxxxxx Xxxx Xxxxxxxx
-------------------------------------------
Name: Xxxxxx Xxxx Xxxxxxxx
Title: Partner
-10-
