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EXHIBIT 10.2
ASSUMPTION AND ESCROW AGREEMENT
AGREEMENT made this 16th day of February, 1999, by and among Star
Scientific, Inc., a Delaware corporation ("Seller"), EYETECH, LLC, a Minnesota
limited liability company ("Purchaser"), and Xxxxxx X. Xxxxxxxxxxx, an
individual residing in Minnesota ("Xxxxxxxxxxx").
WHEREAS, the Seller and Purchaser have entered into an Asset Purchase
Agreement dated as of December 30, 1998, (the "Purchase Agreement"), by which
the Seller is selling, the Purchaser is purchasing certain assets of Seller in
consideration of the assumption by Purchaser of certain liabilities of Seller,
and Purchaser's assumption covenants are to be secured by certain assets of
Xxxxxxxxxxx;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agrees as
follows:
1. Definitions. All capitalized terms used in this Agreement and not
otherwise defined herein shall have the same meaning as set forth in the
Purchase Agreement.
2. Assumption of Liabilities and Obligations. Purchaser hereby agrees
to assume and to pay or otherwise satisfy all of the Assumed
Liabilities/Obligations, and to hold Seller harmless from and to indemnify
Seller against, any and all claims, losses, damages, obligations and
liabilities, arising out of or resulting from any breach of Purchaser's covenant
herein to assume and to pay or otherwise satisfy any or all of the Assumed
Liabilities/Obligations.
3. Guaranty and Indemnification/Escrow. Xxxxxxxxxxx hereby guarantees
to Seller the full and prompt performance by Purchaser of each and all of its
obligations and liabilities under this Agreement, and further agrees to hold
Seller harmless from, and indemnify Seller against, any losses, claims, damages
and liabilities arising out of or resulting from any failure of Purchaser to so
perform under this Agreement. As security for Xxxxxxxxxxx' covenants and
obligations under this Agreement, he has simultaneously deposited with the
Escrow Agents (as hereinafter defined) certificates for 250,000 shares of Common
Stock of Seller (the "Shares"), together with duly executed stock powers
endorsed in blank. The Shares shall be held in escrow pursuant to the provisions
of Sections 5 and 6 of this Agreement.
4. Processing of Claims. All invoices, demands, claims and notices of
third parties, howsoever communicated, which may be received by Seller, and
constituting a claim for satisfaction of an obligation or liability of Seller
which is one of the Assumed Liabilities/Obligations (hereinafter a "Claim"),
shall be promptly forwarded to Purchaser. Purchaser shall, in turn, promptly
notify Seller if it does not intend to pay or otherwise satisfy a Claim, setting
forth in writing the reasons therefore (a "Contested Claim"). The absence of a
notification from Purchaser to Seller as described above shall be deemed to
constitute Purchaser's agreement that the subject claim is not contested by
Purchaser and will be paid or otherwise satisfied by Purchaser (an "Uncontested
Claim"). If at any time Purchaser acknowledges in writing to Seller that it no
longer desires to contest a Contested Claim, then such Claim shall be deemed to
be converted into an "Uncontested Claim."
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5. Delivery of Shares to Seller. If, with respect to any Contested
Claim, any of the following occur: (a) a judgement is entered in any court of
competent jurisdiction against either the Purchaser or Seller; (b) any lien,
attachment or other encumbrance is effected against any of the assets of Seller;
or (c) Purchaser is in default of a lawsuit against Purchaser; then Seller shall
have the right, to be exercised if at all by written notice to Purchaser that it
intends to pay the subject Contested Claim, to pay the Contested Claim ten (10)
days after its notice to Purchaser if Purchaser has not within that ten-day
period paid or otherwise satisfied the Contested Claim. If with respect to any
Uncontested Claim, Purchaser shall fail to pay or otherwise satisfy such
Uncontested Claim within thirty (30) days after Seller shall have given
Purchaser written notice that it intends to pay the Uncontested Claim, then
Seller may pay the Uncontested Claim. If Seller elects to pay any Claim in
accordance with the terms of this Section 5, then it shall have the right to
receive out of escrow an amount of Shares which is equal in Market Value to the
amount of money paid by Seller. "Market Value" of one Share shall mean the
closing highest bid price on the NASDAQ listing on which the Common Stock of
Seller is then traded or, if such stock is then traded on a national stock
exchange, the closing sales price on such exchange, in each case on the trading
day next preceding the date on which Seller made such payment. The Shares to be
released from escrow hereunder shall be released to Seller by the Escrow Agents
promptly upon receipt of a written notice from Seller and signed by one of its
executive officers certifying as to the right of Seller to receive Shares
hereunder and its compliance with the terms of this Section 5. The receipt of
Shares by Seller hereunder shall be deemed reimbursement to Seller for monies
paid with respect to the subject Claims and satisfaction by Purchaser and
Xxxxxxxxxxx of their respective indemnification covenants hereunder. The right
to receive Shares shall be deemed Seller's exclusive remedy so long as their are
a sufficient number of Shares in escrow for such purpose. If there are no longer
any Shares in escrow hereunder, then Seller may proceed directly against
Purchaser and/or Xxxxxxxxxxx with respect to any breach of their obligations
hereunder.
6. Release of Shares to Xxxxxxxxxxx. On each of the first four
anniversary dates of the Closing Date, the Escrow Agents shall deliver to
Xxxxxxxxxxx, free and clear of any escrow, an amount of Shares equal to the
following: fifty thousand (50,000) less (a) the number of Shares which may have
been previously released to Seller pursuant to the terms of Section 5 and which
have not been previously calculated in the determination of a release of Shares
pursuant to this Section 6, and (b) a number of Shares which has on such
anniversary date a Market Value equal to the total of Claims for which Seller
has then given notice to Purchaser that Seller intends to pay, and which have
not been previously calculated in the determination of a release of Shares
pursuant to this Section 6. On the fifth anniversary date of the Closing Date,
all remaining Shares, less an amount which calculated pursuant to (b) above,
shall be released from escrow to Xxxxxxxxxxx. Any Shares retained in escrow
after the fifth anniversary date shall be held in escrow until final resolution
of any Claims which were the basis of retention of Shares.
7. Escrow Agents. Xxxxxxx Xxxx, Esq., and Xxxxxx X. Xxxxxxxx shall
initially be the Escrow Agents and all action to be taken by them shall require
their joint signatures. In the event of the resignation or death of Xxxxxxx
Xxxx, his successor shall be an attorney designated by Xxxxxxxxxxx. In the event
of the resignation or death of Xxxxxx X. Xxxxxxxx, his successor shall be an
attorney designated by Seller.
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8. Substitution of Money for Shares. Xxxxxxxxxxx shall have the right
at any time, and from time to time, to deposit money into escrow with the Escrow
Agents and to receive back, free and clear of escrow, an amount of Shares equal
to one-half of the money so deposited; e.g., if Xxxxxxxxxxx deposits $50,000, he
may receive out of escrow 25,000 Shares. Any money held in escrow hereunder
shall be subject to release pursuant to Section 5 as if the money were
equivalent to the Market Value of Shares, and shall be subject to release
pursuant to Section 6 on the basis of $2.00 per Share.
9. Limitation of Liability of Escrow Agents. The Escrow Agents shall
have no personal liability for acting in such capacity and shall be entitled to
rely upon such written communications which he or they believe in good faith to
be genuine and to be executed by the party purporting to send such
communications, and may refuse to take action until such time that he or they,
acting in good faith, receive such assurances and/or confirmations as he to they
deem appropriate in the circumstances. In no event shall any Escrow Agent be
liable for incidental or consequential damages of any kind or for any monetary
damages, except for the wrongful and intentional conversion for personal benefit
of any Shares or money held in escrow.
10. Term of Agreement. This agreement shall remain in effect until the
last to occur of (a) all Assumed Liabilities/Obligations have been paid in full
or (b) all Shares and money have been released from escrow pursuant to the terms
of this Agreement.
11. Additions to Escrow. If at any time any Shares are held in escrow
hereunder, any and all dividends and distributions payable with respect to any
such Shares, whether in cash, stock or other property of any kind, and any
payments, whether in cash, stock or other property of any kind, payable in
partial or total exchange of such Shares or otherwise in respect of such Shares,
shall be promptly deposited in escrow to be held in escrow pursuant to the terms
hereof. Equitable adjustments under this agreement for the calculation of the
number of Shares to be released hereunder shall be made in the event of a stock
dividend, stock split or reclassification with respect to the Shares.
12. Notices, etc. Any and all notices, demands, requests and other
communications to be given hereunder shall be deemed to be validly given if made
by actual hand delivery, or by recognized overnight delivery service such as
Federal Express or DHL, or by confirmed facsimile transmission, if given to the
party for which such notice, etc. is intended, to the following:
If to Seller: Star Scientific, Inc.
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Chief Financial Officer
Fax: 000-000-0000
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If to Purchaser Xxxxxx X. Xxxxxxxxxxx
and Xxxxxxxxxxx: EYETECH, LLC
0000 0xx Xxxxxx, X.
Xxxxx Xxxx
Xxxxxxx, XX 00000
If to Escrow Agents: Xxxxxxx Xxxx, Esq.
Xxxxxxxx & Xxxxxx
0000 Xxxxx Xxxxxx Towers
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Fax # 000-000-0000, and
Xxxxxx X. Xxxxxxxx
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax #000-000-0000
or to such other address as such party may designate by notice to all other
parties in the manner provided herein.
13. Miscellaneous.
(a) This Agreement shall be binding upon and shall inure to
the benefit of, the parties hereto and their respective successors, assigns,
heirs and representatives.
(b) This Agreement shall be governed in all respects under the
laws of the State of Delaware.
Executed on this the 16th day of February, 1999.
Seller: Star Scientific, Inc.
by:
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Purchaser:
by:
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Xxxxxxxxxxx:
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Xxxxxx X. Xxxxxxxxxxx
The undersigned hereby agree to the escrow provisions of the written
agreement, subject to the limitations set forth in Section 9.
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Xxxxxxx Xxxx
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Xxxxxx X. Xxxxxxxx
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