EXHIBIT 10.1
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement"), dated as of September 8, 2004 (the
"Effective Date"), is by and among XXXXXX INTERACTIVE INC., a Delaware
corporation ("Xxxxxx"), MANUFACTURERS AND TRADERS TRUST COMPANY, a New York
banking corporation ("Escrow Agent"), and all of the stockholders of XXXXXXXX
WORLDWIDE, INC., a California corporation ("Xxxxxxxx"), shown on the signature
pages to this Agreement ("Stockholders").
WHEREAS, Stockholders own all of the issued and outstanding shares of
Xxxxxxxx common stock, par value $1.00 (the "Xxxxxxxx Shares");
WHEREAS, concurrently with the execution and delivery of this Agreement,
Xxxxxx will acquire all of the Xxxxxxxx Shares from Stockholders, pursuant to
the terms of that certain Agreement and Plan of Merger, dated as of the date
hereof, by and among Xxxxxx, Capitol Merger Sub, LLC, a Delaware limited
liability company of which Xxxxxx is the sole member, Xxxxxxxx, and Stockholders
(the "Merger Agreement"); and
WHEREAS, the execution and delivery of this Agreement concurrently with
the Merger Agreement is required by Sections 3.3.1(c) and 3.3.2(a) of the Merger
Agreement.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Xxxxxx, Stockholders and Escrow Agent hereby agree as
follows:
SECTION 1. - DEFINITIONS
1.1 The following terms shall have the following meanings when used in
this Agreement. Capitalized terms not expressly defined in this Agreement shall
have the meanings ascribed to them in the Merger Agreement.
1.1.1. "2005 Financial Statements" means Xxxxxx' audited financial
statements for the fiscal year ended June 30, 2005.
1.1.2. "2006 Financial Statements" means Xxxxxx' audited financial
statements for the fiscal year ended June 30, 2006.
1.1.3. "Agreement" has the meaning given to it in the first
paragraph of this Agreement.
1.1.4. "Claim" has the meaning given to it in Section 4.
1.1.5. "Counter Notice" has the meaning given to it in Section 5.1.
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1.1.6. "Counter Notice Period" has the meaning given to it in
Section 5.1.
1.1.7. "Effective Date" has the meaning given to it in the first
paragraph of this Agreement.
1.1.8. "Escrow Agent" has the meaning given to it in the first
paragraph of this Agreement and shall include all successor escrow agents
appointed in accordance with Section 6.8.
1.1.9. "Escrow Fund" has the meaning given to it in Section 2.1.
1.1.10. "First Release Date" means the earlier of (a) ninety (90)
days after the first anniversary of the Effective Date, or (b) the date that the
2005 Financial Statements are delivered to Xxxxxx by Xxxxxx' independent
auditors.
1.1.11. "Xxxxxx" has the meaning given to it in the first paragraph
of this Agreement.
1.1.12. "Merger Agreement" has the meaning given to it in the second
whereas clause of this Agreement.
1.1.13. "Notice" has the meaning given to it in Section 4.
1.1.14. "Party" means any of Xxxxxx, Escrow Agent or any of
Stockholders and "Parties" means all of Xxxxxx, Escrow Agent and Stockholders.
1.1.15. "Second Release Date" means the earlier of (a) ninety (90)
days after the second anniversary of the Effective Date, or (b) the date that
the 2006 Financial Statements are delivered to Xxxxxx by Xxxxxx' independent
auditors.
1.1.16. "Stockholders" has the meaning given to it in the first
paragraph of this Agreement.
1.1.17. "Stockholder Representative" means Xxxxxxx X. Xxxxxxxx, or
Xxx Xxxxxx has been appointed as successor Stockholder Representative as
provided under the terms of the Merger Agreement but only after written notice
of such succession has been provided either by Xxxxxx or the Stockholders to the
Escrow Agent.
1.1.18. "Unrestricted Escrow Fund" has the meaning given to it in
Section 5.3.
1.1.19. "Xxxxxxxx" has the meaning given to it in the first
paragraph of this Agreement.
1.1.20. "Xxxxxxxx Shares" has the meaning given to it in the first
whereas clause of this Agreement.
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SECTION 2. - ESTABLISHMENT OF ESCROW
2.1 Xxxxxx is depositing with Escrow Agent an amount equal to Five Million
Dollars ($5,000,000) in the form of $3,500,000 of cash and $1,500,000 of short
term Treasury Notes, which amount shall be increased by any earnings thereon and
reduced by any losses thereon, disbursements thereof, and amounts withdrawn
therefrom under Section 5 (the "Escrow Fund"). Escrow Agent acknowledges receipt
of the Escrow Fund.
2.2 Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
SECTION 3. - INVESTMENT OF FUNDS
The Escrow Fund shall be held in the form in which it was initially
deposited (provided that upon maturity of the Treasury Notes initially
deposited, such amount shall thereafter be held in cash) until disbursement of
the entire Escrow Fund in accordance with the terms of this Agreement; provided,
however, that Xxxxxx and the Stockholder Representative may from time to time
jointly instruct Escrow Agent in writing to invest amounts in the Escrow Fund as
so directed by them, but further provided that all such investments must be in
deposits, instruments, funds, or other form acceptable to the Escrow Agent in
its sole discretion. Escrow Agent is authorized to liquidate, in accordance with
its customary procedures, any portion of the Escrow Fund consisting of
investments to provide for payments required to be made under this Agreement.
SECTION 4. - CLAIMS
From time to time on or before the Second Release Date, Xxxxxx may assert
a claim that Xxxxxx may have under Section 8 of the Merger Agreement (a
"Claim"), in which case Xxxxxx shall give concurrent notice of such Claim
assertion (a "Notice") to the Stockholder Representative and the Escrow Agent
specifying in reasonable detail the specific provisions of the Merger Agreement,
and if applicable related agreement, so applicable, and the nature and dollar
amount of such Claim. Xxxxxx may make more than one Claim with respect to any
underlying state of facts to the extent permitted pursuant to the Merger
Agreement. Escrow Agent shall not inquire into or consider whether a Claim
complies with the requirements of the Merger Agreement.
SECTION 5. - RELEASE OF ESCROW FUNDS
5.1 If the Stockholder Representative gives notice to Xxxxxx and Escrow
Agent that Stockholder Representative disputes any Claim (a "Counter Notice")
within thirty (30) days following receipt by Stockholder Representative and
Escrow Agent of the Notice regarding such Claim (the "Counter Notice Period"),
then Escrow Agent shall pay the amount of the disputed Claim from (and only to
the extent of) the then existing amount of the Escrow Fund only upon the receipt
of, and in accordance with (a) the joint written instructions of Xxxxxx and the
Stockholder Representative, or (b) the final, nonappealable order of a court of
competent jurisdiction that is accompanied by a legal opinion by counsel for
Xxxxxx to the effect that the order is final and nonappealable. Escrow Agent
shall act on such court order and legal opinion without further question.
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5.2 If no Counter Notice is received by Escrow Agent within the Counter
Notice Period, then the dollar amount of a Claim, as set forth in a Notice,
shall be deemed established for purposes of this Agreement and the Merger
Agreement and, at the end of the Counter Notice Period, Escrow Agent shall pay
to Xxxxxx the dollar amount of such Claim from (and only to the extent of) the
then existing amount of the Escrow Fund.
5.3 Escrow Agent shall pay and distribute fifty percent (50%) of the then
existing principal amount of the Escrow Fund less the amount of any Claims that
are then pending (the "Unrestricted Escrow Fund") to the Stockholder
Representative on the First Release Date. Escrow Agent shall pay and distribute
the remainder of the Unrestricted Escrow Fund to the Stockholder Representative
on the Second Release Date.
5.4 Escrow Agent shall pay and distribute all earnings and income from the
Escrow Fund to the Stockholder Representative on the last day of each calendar
quarter, commencing on December 31, 2004.
5.5 Any amounts payable to Stockholders under this Agreement, including
amounts payable under this Section 5, shall be paid to the Stockholder
Representative.
SECTION 6. - DUTIES OF ESCROW AGENT
6.1 Escrow Agent shall not be under any duty to give the Escrow Fund any
greater degree of care than it gives its own similar property and shall not be
required to invest the Escrow Fund except as directed in this Agreement.
6.2 Escrow Agent shall not be liable for actions or omissions hereunder,
except for its own gross negligence or willful misconduct and, except with
respect to claims based upon such gross negligence or willful misconduct that
are successfully asserted against Escrow Agent, Xxxxxx and Stockholders shall
jointly and severally indemnify and hold harmless Escrow Agent (and any
successor escrow agent) from and against any and all losses, liabilities,
claims, actions, damages and expenses (including reasonable attorneys' fees and
disbursements) arising out of and in connection with this Agreement. Without
limiting the foregoing, Escrow Agent shall in no event be liable in connection
with its investment or reinvestment of the Escrow Fund by Escrow Agent made in
good faith and in accordance with the terms hereof, including, without
limitation, any liability for delays (not resulting from Escrow Agent's gross
negligence or willful misconduct) in the investment or reinvestment of the
Escrow Fund or any loss of interest incident to any such delays.
6.3 Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of the
service thereof (so long as such order is accompanied by a legal opinion as may
be required pursuant to Section 5.1 hereof). Escrow Agent may act in reliance
upon any instrument or signature believed by it to be genuine and may assume
that the person purporting to give receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so. Escrow Agent may conclusively presume that the undersigned
representative of Xxxxxx and the Stockholder Representative have full power
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and authority to instruct Escrow Agent on behalf of Xxxxxx and Stockholders,
respectively, unless written notice to the contrary is delivered to Escrow Agent
by Xxxxxx and the Stockholder Representative, respectively.
6.4 Escrow Agent may act pursuant to the advice of counsel with respect to
any matter relating to this Agreement and shall not be liable for any action
taken or omitted by it in good faith in accordance with such advice.
6.5 Escrow Agent does not have any interest in the Escrow Fund, but is
serving as escrow holder only and has only possession thereof. Any payments of
income from the Escrow Fund shall be subject to withholding regulations then in
force with respect to United States taxes. Stockholders and Xxxxxx will provide
Escrow Agent with appropriate IRS Forms W-9 for tax identification number
certification and/or nonresident alien certifications. This Section 6.5 and
Section 6.2 shall survive any termination of this Agreement or the resignation
of Escrow Agent.
6.6 Escrow Agent makes no representation as to the validity, value,
genuineness or collectibility of any security or other document or instrument
held by or delivered to it.
6.7 Escrow Agent shall not be called upon to advise any Party as to the
wisdom in selling or retaining or taking or refraining from any action with
respect to any securities or other property deposited hereunder.
6.8 Escrow Agent (and any successor escrow agent) may at any time resign
as such by delivering the Escrow Fund to any successor escrow agent jointly
designated by the Stockholder Representative and Xxxxxx in writing, or to any
court of competent jurisdiction, whereupon Escrow Agent shall be discharged of
and from any and all further obligations arising in connection with this
Agreement. The resignation of Escrow Agent will take effect on the earlier of
(a) the appointment of a successor (including a court of competent
jurisdiction), or (b) the day which is thirty (30) days after the date of
delivery of Escrow Agent's written notice of resignation to the Stockholder
Representative and Xxxxxx. If, after such 30-day period, Escrow Agent has not
received a designation of a successor Escrow Agent, Escrow Agent's sole
responsibility after that time shall be to retain and safeguard the Escrow Fund
until receipt of a designation of successor Escrow Agent or a joint written
disposition instruction by the Stockholder Representative and Xxxxxx or a final,
nonappealable order of a court of competent jurisdiction.
6.9 Xxxxxx shall pay Escrow Agent compensation (as payment in full) for
the services to be rendered by Escrow Agent hereunder in the amount of (i)
$2,750 at the time of execution of this Agreement, (ii) .05% of the principal
amount remaining in the Escrow Fund principal on September 9, 2005, and (iii)
for the period after September 9, 2006, .05% per annum of the average principal
amount remaining in the Escrow Fund on a monthly basis as billed to Xxxxxx by
the Escrow Agent. Each of Xxxxxx and the Stockholders agree to pay one-half of
all reasonable out-of-pocket expenses, disbursements and advances incurred or
made by Escrow Agent, if any, in performance of its duties hereunder (including
reasonable fees, expenses and disbursements of its counsel).
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6.10 No printed or other matter in any language (including, without
limitation, prospectuses, notices, reports and promotional material) that
mentions Escrow Agent's name or the rights, powers or duties of Escrow Agent
shall be issued by Xxxxxx or Stockholders unless Escrow Agent shall first have
given its specific written consent thereto.
6.11 Xxxxxx and Stockholders authorize Escrow Agent, for any securities
held hereunder, to use the services of any United States central securities
depository it reasonably deems appropriate, including, without limitation, the
Depository Trust Company and the Federal Reserve Book Entry System.
SECTION 7. - LIMITED RESPONSIBILITY
This Agreement expressly sets forth all the duties of Escrow Agent with
respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this Agreement against Escrow Agent. Escrow Agent
shall not be bound by the provisions of any agreement to which Xxxxxx and any of
Stockholders are Parties to except this Agreement.
SECTION 8. - OWNERSHIP FOR TAX PURPOSES
Stockholders agree that, for purposes of federal and other taxes based on
income, Stockholders will (a) be treated as the owners of the Escrow Fund, (b)
report all income, if any, that is earned on, or derived from, the Escrow Fund
as the income of Stockholders in the in the taxable year or years in which such
income is properly includible, and (c) pay any taxes attributable thereto.
SECTION 9. - NOTICES
9.1 Notices. All notices, consents, waivers, and other communications
required or permitted by this Agreement shall be in writing and shall be deemed
given to a Party when (a) delivered to the appropriate address by hand or by
nationally recognized overnight courier service (costs prepaid); (b) sent by
facsimile or e-mail with confirmation of transmission by the transmitting
equipment and confirmed by hard copy mailed by regular mail the same day; or (c)
received or rejected by the addressee, if sent by certified mail, return receipt
requested; in each case to the following addresses, facsimile numbers or e-mail
addresses and marked to the attention of the person (by name or title)
designated below (or to such other address, facsimile number, e-mail address or
person as a Party may designate by notice to the other Parties):
If to Stockholders and/or Stockholder Representative
Stockholder Representative: Attention: Xxxxxxx X. Xxxxxxxx
000 Xxxx Xxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxx Xxxxxx, Xxxx 00000
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with a copy to, which is required Xxxxxxx X. Xxxxxxxx, Esq.
for valid notice, but shall not Xxxxxx & Xxxxxxx
itself constitute notice 000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
hereunder: Xxx Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Email: Xxxxxxx.xxxxxxxx@xx.xxx
If to Escrow Agent: Manufacturers and Traders Trust Company
One M&T Plaza - 7th Floor
Buffalo, NY 14203
Attention: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
Email: xxxxxxxx@xxxxxxxxx.xxx
with a copy to, which is required Manufacturers and Traders Trust Company
for valid notice, but shall not One M&T Plaza - 7th Floor
itself constitute notice Xxxxxxx, XX 00000
hereunder: Attention: Xxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
Email: xxxxxxx@xxxxxxxxx.xxx
If to Xxxxxx: Xxxxxx Interactive Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
Email: xxxxxxx@xxxxxxxxxxxxxxxxx.xxx
with a copy to, which is required Xxxxxx Beach LLP
for valid notice, but shall not 00 Xxxxxxx Xxxx
itself constitute notice Xxxxxxxxx, Xxx Xxxx 00000
hereunder: Attention: Xxxx Xxx Xxxxxxx, Esq.
Facsimile: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxx.xxx
SECTION 10. - JURISDICTION; SERVICE OF PROCESS
Any proceeding arising out of or relating to this Agreement may be brought
in the courts of the State of New York, County of Monroe, or, if it has or can
acquire jurisdiction, in the United States District Court for the Western
District of New York, and each of the Parties irrevocably submits to the
exclusive jurisdiction of each such court in any such proceeding, waives any
objection it may now or hereafter have to venue or to convenience of forum,
agrees that all claims in respect of the proceeding shall be heard and
determined only in any such court, and agrees not to bring any proceeding
arising out of or relating to this Agreement in any other court. The Parties
agree that any of them may file a copy of this Section 10 with any court as
written evidence of the knowing, voluntary and bargained agreement between the
Parties irrevocably to waive any objections to venue or to convenience of forum.
Process on the Escrow
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Agent must be served at the address for notices to the Escrow Agent referenced
in Section 9.1 of this Agreement.
SECTION 11. - WAIVER; REMDIES CUMULATIVE
Except as otherwise expressly provided herein, the rights and remedies of
the Parties are cumulative and not alternative. Neither any failure nor any
delay by any Party in exercising any right, power, or privilege under this
Agreement or any of the documents referred to in this Agreement will operate as
a waiver of such right, power, or privilege, and no single or partial exercise
of any such right, power, or privilege will preclude any other or further
exercise of such right, power, or privilege or the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable law: (a) no
claim or right arising out of this Agreement or any of the documents referred to
in this Agreement can be discharged by one Party, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by the
other Parties, provided, however, that as to matters for which this Agreement
specifies notice or action to, with, or by the Stockholder Representative, the
Stockholders shall be bound in the same manner as the Stockholder
Representative; (b) no waiver that may be given by a Party will be applicable
except in the specific instance for which it is given; and (c) no notice to or
demand on one Party will be deemed to be a waiver of any obligation of that
Party or of the right of the Party giving such notice or demand to take further
action without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
SECTION 12. - ENTIRE AGREEMENT AND MODIFICATION
This Agreement and the Merger Agreement constitute the complete and
exclusive statement of the terms of the agreement between the Parties with
respect to the subject matter hereof and supersede all prior agreements, whether
written or oral, between the Parties with respect to the subject matter hereof.
This Agreement may not be amended except by a written agreement executed by
Xxxxxx, the Stockholder Representative and Escrow Agent.
SECTION 13. - ASSIGNMENTS, SUCCESSORS, AND NO THIRD PARTY RIGHTS.
No Party may assign any of its rights or delegate any of its obligations
under this Agreement without the prior written consent of the other Parties,
except that (a) Xxxxxx may assign any of its rights and delegate any of its
obligations under this Agreement to any subsidiary of Xxxxxx, (b) Escrow Agent
may resign and designate a successor escrow agent under this Agreement pursuant
to, and in accordance with, Section 6.8, and (c) each Stockholder may assign
this Agreement, including all of its rights hereunder for estate planning
purposes and by the estate of each Stockholder upon the death of such
Stockholder (if applicable). Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the Parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the Parties
any legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement, except such rights as shall inure
to a successor or permitted assignee pursuant to this Section 13. No assignment
by operation of law due to a merger or consolidation, and no change of control,
shall be deemed to be an assignment hereunder.
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SECTION 14. - SEVERABILITY.
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
SECTION 15. - SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. Except only as
specifically provided herein, references to "Sections" refer to the
corresponding Sections of this Agreement. This Agreement has been prepared by
Xxxxxx, Escrow Agent and each of the Stockholders, and each acknowledge that:
(a) they have been represented by legal counsel in the negotiation and drafting
of this Agreement; (b) this Agreement has been drafted by mutual effort; and (c)
that no ambiguity in this Agreement shall be construed against any Party as
draftsperson.
SECTION 16. - GOVERNING LAW
This Agreement will be governed by and construed under the laws of the
State of New York without regard to conflicts of laws principles that would
require the application of any other law.
SECTION 17. - EXECUTION OF AGREEMENT
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement. The
exchange of copies of this Agreement and of signature pages by facsimile
transmission shall constitute effective execution and delivery of this Agreement
as to the Parties and may be used in lieu of the original Agreement for all
purposes. Signatures of the Parties transmitted by facsimile shall be deemed to
be their original signatures for all purposes.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
[SIGNATURE PAGE FOLLOWS]
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XXXXXX INTERACTIVE INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------
Its: Vice Chairman and CEO
-------------------------
Signature Page to Escrow Agreement dated 9/8/04
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MANUFACTURERS AND TRADERS
TRUST COMPANY
By: /s/ Xxx Xxxxx
----------------------------
Its: Vice President
----------------------------
Signature Page to Escrow Agreement dated 9/8/04
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This Escrow Agreement was signed by the following stockholders of
Xxxxxxxx Worldwide, Inc. (individual signature pages have been omitted):
Xxxxxxxx Family Trust
White Family Living Trust
Xxxxx Xxxxxxxxxx
Xxxxxxx Xxxxxxxx
Xxxx Xxxxxxx
Xxxxx Xxxxxxx
Hakan Atak
Xxx Xxxxxx
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