ESCROW AGREEMENT
Exhibit
4.2
THIS
ESCROW AGREEMENT (this
“Agreement”)
is
made
and entered into as of April
19,
2007 by and between Mohen, Inc. d/b/a Spiral Frog (the “Company”),
the
Buyer(s) listed
on
the Purchase Agreement, dated the date hereof (also referred to as the
“Investor(s)”),
and
Gottbetter & Partners, LLP, as Escrow Agent hereunder (“Escrow
Agent”).
BACKGROUND
WHEREAS,
the
Company and the Investor(s) have entered into a Purchase Agreement (the
“Purchase
Agreement”), dated
as
of the date hereof, pursuant to which the Investors shall purchase
secured exchangeable Notes (the “Exchangeable
Notes”; the
“Offering”)
at
one or
more closings
(as described in the Purchase Agreement) which shall be exchangeable into the
Company’s
Class A Common Stock (the “Common
Stock”) for
the
Purchase Price, as that term is defined in the Purchase Agreement. The Purchase
Agreement provides that the Investor(s) shall
deposit the purchase amount in an escrow account to be held by Escrow Agent
in
order to effectuate a disbursement to the Company at a closing to be held as
set
forth in the Purchase Agreement (the “Closing”);
WHEREAS,
Escrow
Agent has agreed to accept, hold, and disburse the funds deposited with
it
in accordance with the terms of this Agreement; and
WHEREAS,
in
order
to establish the escrow of funds and to effect the provisions of the Purchase
Agreement, the parties hereto have entered into this Agreement;
NOW
THEREFORE, in
consideration of the foregoing, it is hereby agreed as follows:
1.
Definitions.
The
following terms shall have the following meanings when used
herein:
“Escrow
Funds” shall
mean the funds deposited with Escrow Agent pursuant to this Agreement.
“Joint
Written Direction” shall
mean a written direction executed by the Investor(s) and the
Company directing Escrow Agent to disburse all or a portion of the Escrow Funds,
to file the applicable
UCC-3 termination statements and UCC-1 financing statements or to take or
refrain from taking any action pursuant to this Agreement.
“Escrow
Period” shall
begin with the date hereof and shall terminate upon the earlier to occur
of
the following dates:
(i) The
date
upon which Escrow Agent confirms that it has received
in the Escrow Account proceeds of the sale of the Exchangeable
Notes;
1
(ii) The
expiration of five (5) business days from the date hereof
(unless extended by mutual written agreement between the Company and the
Investor(s) with a copy of such extension to Escrow Agent); or
(iii) The
date
upon which a determination is made by the Company and the Investor(s) to
terminate the Offering prior to the sale of all the Exchangeable
Notes.
During
the Escrow Period, the Company and the Investor(s) are aware that they are
not
entitled
to any funds received into escrow and no amounts deposited in the Escrow Account
shall become
the property of the Company or the Investor(s) or any other entity, or be
subject to the debts of the Company or the Investor(s) or any other
entity.
2. Appointment
of and Acceptance by Escrow Agent. The
Investor(s) and the Company
hereby appoint Escrow Agent to serve as escrow agent hereunder. Escrow Agent
hereby
accepts such appointment and, upon receipt by wire transfer of the Escrow Funds
in accordance with Section 3 below, agrees to hold, invest and disburse the
Escrow Funds in accordance with this Agreement.
3. Creation
of Escrow Funds. The
Investor(s) will wire funds to the account of
Escrow
Agent as follows:
| Bank: | Citibank, N.A | ||
| Routing #: | 000000000 | ||
| Account #: |
00000000
|
||
| Name on Account: | Gottbetter & Partners, LLP Trust Account | ||
| Reference: | Mohen, Inc. | ||
4. Deposits
into the Escrow Account. The
Investor(s) agree(s) that they shall promptly
deliver funds for the payment of the Exchangeable Notes to Escrow Agent for
deposit in
the
Escrow Account.
5. Disbursements
from the Escrow Account.
(a) Escrow
Agent will continue to hold such funds until the Investor(s) and Company
execute
a
Joint Written Direction directing Escrow Agent to disburse the Escrow Funds
pursuant to Joint Written Direction signed by the Company and the Investor(s).
In disbursing such funds, Escrow
Agent is authorized to rely upon such Joint Written Direction from the Company
and the Investor(s) and may accept any signatory from the Company listed on
the
signature page to this Agreement
and any signature from the Investor(s) that Escrow Agent already has on
file.
(b) In
the
event that at the expiration of the Escrow Period Escrow Agent has not
received
an amount of Escrow Funds from an Investor equal to the Purchase Price set
forth
opposite such Investor’s name in the Purchase Agreement, Escrow Agent shall
notify the Company
and the Investor(s). Following such notice, (i) upon receipt of payment
instructions from
the
Company, Escrow Agent shall refund to each Investor without interest the amount
received
from each Investor(s), without deduction, penalty, or expense to the Investor(s)
and (ii) upon
receipt of payment instructions from an Investor, Escrow Agent shall refund
to
such Investor
without interest the amount received from such Investor, without deduction,
penalty, or expense
to such Investor. The purchase money returned to each Investor shall be free
and
clear of
any
and all claims of the Company, the Investor(s) or any of their
creditors.
2
(c)
In
the event Escrow Agent does receive the amount of the Escrow Funds prior to
expiration of the Escrow Period, in no event will the Escrow Funds be released
to the Company until
such amount is received by Escrow Agent in collected funds. For purposes of
this
Agreement,
the term “collected funds” shall mean all funds received by Escrow Agent which
have
cleared normal banking channels and are in the form of cash.
6. Collection
Procedure. Escrow
Agent is hereby authorized to deposit the
proceeds
of each wire in the Escrow Account.
7. Suspension
of Performance: Disbursement Into Court.
(a)
If at
any time, there shall exist any dispute between the Company and the Investor(s)
with respect to holding or disposition of any portion of the Escrow Funds or
any
other obligations of Escrow Agent hereunder, or if at any time Escrow Agent
is
unable to determine, to Escrow
Agent’s sole satisfaction, the proper disposition of any portion of the Escrow
Funds or Escrow Agent’s proper actions with respect to its obligations
hereunder, or if the parties have not within
thirty (30) days of the furnishing by Escrow Agent of a notice of resignation
pursuant to Section
9
hereof, appointed a successor Escrow Agent to act hereunder, then Escrow Agent
may, in its sole discretion, take either or both of the following
actions:
(1) Suspend
the performance of any of its obligations (including without limitation
any disbursement obligations) under this Escrow Agreement until such dispute
or
uncertainty
shall be resolved to the sole satisfaction of Escrow Agent or until a successor
Escrow Agent
shall be appointed (as the case may be); provided
however, Escrow
Agent shall continue to
invest
the Escrow Funds in accordance with Section 8 hereof; and/or
(2) Petition
(by means of an interpleader action or any other appropriate method) any court
of competent jurisdiction in any venue convenient to Escrow Agent, for
instructions
with respect to such dispute or uncertainty, and to the extent required by
law,
pay into
such
court, for holding and disposition in accordance with the instructions of such
court, all funds
held by it in the Escrow Funds, after deduction and payment to Escrow Agent
of
all fees and
expenses (including court costs and attorneys’ fees) payable to, incurred by, or
expected to be
incurred by Escrow Agent in connection with performance of its duties and the
exercise of its rights
hereunder.
(b)
Escrow Agent shall have no liability to the Company, the Investor(s), or any
person
with respect to any such suspension of performance or disbursement into court,
specifically including any liability or claimed liability that may arise, or
be
alleged to have arisen,
out of or as a result of any delay in the disbursement of funds held in the
Escrow Funds or any
delay
in with respect to any other action required or requested of Escrow Agent except
in the case
of
the Escrow Agent’s willful misconduct or gross negligence.
3
8. Investment
of Escrow Funds. Escrow
Agent shall deposit the Escrow Funds in
a
non-interest bearing account.
If
Escrow
Agent has not received a Joint Written Direction at any time that an investment
decision
must be made, Escrow Agent shall maintain the Escrow Funds, or such portion
thereof, as to which no Joint Written Direction has been received, in a
non-interest bearing account.
9. Resignation
and Removal of Escrow Agent. Escrow
Agent may resign from
the
performance of its duties hereunder at any time by giving thirty (30) days
prior
written notice
to
the parties or may be removed, with or without cause, by the parties, acting
jointly, by furnishing
a Joint Written Direction to Escrow Agent, at any time by the giving of ten
(10)
days prior written notice to Escrow Agent as provided herein below. Upon any
such notice of resignation
or removal, the representative of the Company identified in Section 1 3b(iv),
below, shall
appoint a successor Escrow Agent hereunder, which shall be a commercial bank,
trust company
or other financial institution with a combined capital and surplus in excess
of
$10 million.
Upon the acceptance in writing of any appointment of Escrow Agent hereunder
by a
successor
Escrow Agent, such successor Escrow Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Escrow
Agent, and the retiring Escrow Agent shall be discharged from its duties and
obligations under this Escrow Agreement, but shall not be discharged from any
liability for actions taken as Escrow Agent hereunder
prior to such succession. After any retiring Escrow Agent’s resignation or
removal, the
provisions of this Escrow Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Escrow Agent under this Escrow
Agreement. The retiring Escrow Agent shall transmit all records pertaining
to
the Escrow Funds and shall pay all funds held
by
it in the Escrow Funds to the successor Escrow Agent, after making copies of
such records
as the retiring Escrow Agent deems advisable and after deduction and payment
to
the retiring
Escrow Agent of all fees and expenses (including court costs and attorneys’
fees) payable
to, incurred by, or expected to be incurred by the retiring Escrow Agent in
connection with the performance of its duties and the exercise of its rights
hereunder.
10.Liability
of Escrow Agent.
Escrow
Agent shall have no liability or obligation with respect to the Escrow Funds
except for Escrow
Agent’s willful misconduct or gross negligence. Escrow Agent’s sole
responsibility shall
be
for the safekeeping, investment, and disbursement of the Escrow Funds in
accordance with
the
terms of this Agreement. Escrow Agent shall have no implied duties or
obligations and shall
not
be charged with knowledge or notice or any fact or circumstance not specifically
set forth
herein. Escrow Agent may rely upon any instrument, not only as to its due
execution, validity
and effectiveness, but also as to the truth and accuracy of any information
contained herein,
which Escrow Agent shall in good faith believe to be genuine, to have been
signed or presented by the person or parties purporting to sign the same and
conform to the provisions of this Agreement. In no event shall Escrow Agent
be
liable for incidental, indirect, special, and consequential or punitive damages.
Escrow Agent shall not be obligated to take any legal action or commence any
proceeding in connection with the Escrow Funds, any account in which Escrow
Funds are deposited, this Agreement or the Purchase Agreement, or to appear
in,
prosecute or defend any such legal action or proceeding. Escrow Agent may
consult legal counsel
selected by it in any event of any dispute or question as to construction of
any
of the provisions
hereof or of any other agreement or its duties hereunder, or relating to any
dispute involving
any party hereto, and shall incur no liability and shall be fully indemnified
from any liability
whatsoever in acting in accordance with the opinion or instructions of such
counsel. The Company
and the Investor(s) jointly and severally shall promptly pay, upon demand,
the
reasonable fees and expenses of any such counsel.
4
Escrow
Agent is hereby authorized, in its sole discretion, to comply with orders issued
or process entered
by any court with respect to the Escrow Funds, without determination by Escrow
Agent of
such
court’s jurisdiction in the matter. If any portion of the Escrow Funds is at any
time attached, garnished or levied upon under any court order, or in case the
payment, assignment, transfer,
conveyance or delivery of any such property shall be stayed or enjoined by
any
court order,
or
in any case any order judgment or decree shall be made or entered by any court
affecting
such property or any part thereof, then and in any such event, Escrow Agent
is
authorized,
in its sole discretion, to rely upon and comply with any such order, writ
judgment or decree
which it is advised by legal counsel selected by it, binding upon it, without
the need for appeal
or
other action; and if Escrow Agent complies with any such order, writ, judgment
or decree,
it shall not be liable to any of the parties hereto or to any other person
or
entity by reason of such compliance even though such order, writ judgment or
decree may be subsequently reversed, modified, annulled, set aside or
vacated.
11.
Indemnification
of Escrow Agent. From
and
at all times after the date of this
Agreement, the parties jointly and severally, shall, to the fullest extent
permitted by law and to
the
extent provided herein, indemnify and hold harmless Escrow Agent and each
director, officer,
employee, attorney, agent and affiliate of Escrow Agent (collectively, the
“Indemnified
Parties”)
against
any and all actions, claims (whether or not valid), losses, damages,
liabilities, costs
and
expenses of any kind or nature whatsoever (including, without limitation,
reasonable attorneys’
fees, costs and expenses) incurred by or asserted against any of the Indemnified
Parties
from and after the date hereof, whether direct, indirect or consequential,
as a
result of or arising
from or in any way relating to any claim, demand, suit, action, or proceeding
(including any
inquiry or investigation) by any person, including, without limitation, the
parties to this Agreement, whether threatened or initiated, asserting a claim
for any legal or equitable remedy against any person under any statute or
regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in
connection with the negotiation, preparation, execution, performance or failure
of performance of
this
Agreement or any transaction contemplated herein, whether or not any such
Indemnified Party
is
a party to any such action or proceeding, suit or the target of any such inquiry
or investigation;
provided,
however, that
no
Indemnified Party shall have the right to be indemnified
hereunder for liability finally determined by a court of competent jurisdiction,
subject
to no further appeal, to have resulted from the gross negligence or willful
misconduct of such Indemnified Party. If any such action or claim shall be
brought or asserted against any Indemnified
Party, such Indemnified Party shall promptly notify the Company and the
Investor(s)
hereunder in writing, and the Investor(s) and the Company shall assume the
defense thereof,
including the employment of counsel and the payment of all expenses. Such
Indemnified
Party shall, in its sole discretion, have the right to employ separate counsel
(who may
be
selected by such Indemnified Party in its sole discretion) in any such action
and to participate
in the defense thereof, and the fees and expenses of such counsel shall be
paid
by such
Indemnified Party, except that the Investor(s) and/or the Company shall be
required to pay such fees and expense of one counsel for the Indemnified Parties
if (a) the Investor(s) or the Company
agree to pay such fees and expenses, or (b) the Investor(s) and/or the Company
shall fail
to
assume the defense of such action or proceeding or shall fail, in the sole
discretion of such Indemnified
Party, to employ counsel reasonably satisfactory to the Indemnified Party in
any
such action or proceeding, (c) the Investor(s) and the Company are the plaintiff
in any such action
or
proceeding or (d) the named or potential parties to any such action or
proceeding (including any potentially impleaded parties) include both the
Indemnified Party, the Company and/or
the Investor(s) and the Indemnified Party shall have been advised by counsel
that there may
be
one or more legal defenses available to it which are different from or
additional to those available
to the Company or the Investor(s). The Investor(s) and the Company shall be
jointly and severally liable to pay fees and expenses of counsel pursuant to
the
preceding sentence, except
that any obligation to pay under clause (a) shall apply only to the party so
agreeing. All such
fees
and expenses payable by the Company and/or the Investor(s) pursuant to the
foregoing sentence
shall be paid from time to time as incurred, both in advance of and after the
final disposition
of such action or claim. The obligations of the parties under this section
shall
survive any
termination of this Agreement, and resignation or removal of Escrow Agent and
shall be independent
of any obligation of Escrow Agent.
5
The
parties agree that neither payment by the Company or the Investor(s) of any
claim by Escrow
Agent for indemnification hereunder shall impair, limit, modify, or affect,
as
between the Investor(s)
and the Company, the respective rights and obligations of Investor(s), on the
one hand,
and
the Company, on the other hand.
12. Expenses
of Escrow Agent. Except
as
set forth in Section 11, Company and the
Buyers shall each reimburse Escrow Agent for half of its reasonable
out-of-pocket expenses, including
attorneys fees, travel expenses, telephone and facsimile transmission costs,
postage (including
express mail and overnight delivery charges), copying charges and the like
as
set forth in
the
Joint Written Instructions.
13. Warranties.
(a)The
Investor(s) makes the following representations and warranties to Escrow
Agent:
(i) The
Investor(s) has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder.
(ii) This
Agreement has been duly approved by all necessary action of the
Investor(s), including any necessary approval of the limited partner of the
Investor(s)
or necessary corporate approval, as applicable, has been executed by
duly
authorized officers of the Investor(s), enforceable in accordance with its
terms.
6
(iii) The
execution, delivery, and performance of the Investor(s) of this Agreement
will not violate, conflict with, or cause a default under any agreement
of
limited partnership of Investor(s) or the articles of incorporation or bylaws
of
the
Investor(s) (as applicable), any applicable law or regulation, any court order
or administrative
ruling or degree to which the Investor(s) is a party or any of its property
is
subject, or any agreement, contract, indenture, or other binding
arrangement.
(iv) No
party
other than the parties hereto and the Investor(s) has/have, or shall have,
any
lien, claim or security interest in the Escrow Funds or any part thereof. No
financing statement under the Uniform Commercial Code is on file in any
jurisdiction claiming a security interest in or describing (whether specifically
or
generally) the Escrow Funds or any part thereof.
(v)
All of the
representations and warranties of the Investor(s) contained
herein are true and complete as of the date hereof and will be true and complete
at the time of any disbursement from the Escrow Funds.
(b)The
Company makes the following representations and warranties to Escrow Agent:
(i) The
Company is a corporation duly organized, validly existing, and
in
good standing under the laws of the State of Delaware and has full power
and
authority to execute and deliver this Agreement and to perform its obligations
hereunder.
(ii) This
Agreement has been duly approved by all necessary corporate action
of
the Company, including any necessary shareholder approval, has been executed
by
duly authorized officers of the Company, enforceable in accordance with its
terms.
(iii) The
execution, delivery, and performance by the Company of this Agreement
is in accordance with the Purchase Agreement and will not violate, conflict
with, or cause a default under the articles of incorporation or bylaws of
the
Company, any applicable law or regulation, any court order or administrative
ruling
or
decree to which the Company is a party or any of its property is subject,
or
any
agreement, contract, indenture, or other binding arrangement, including without
limitation the Purchase Agreement, to which the Company is a party.
7
(iv) Xxx
Xxxxx
has been duly appointed to act as the representative of the
Company hereunder and has full power and authority to execute, deliver, and
perform
this Agreement, to execute and deliver any Joint Written Direction, to amend,
modify or waive any provision of this Agreement and to take all other
actions
as the Company’s representative under this Agreement, all without further
consent
or direction from, or notice to, the Company or any other party.
(v) No
party
other than the parties hereto and the Investor(s) have, or
shall
have, any lien, claim or security interest in the Escrow Funds or any part
thereof.
No financing statement under the Uniform Commercial Code is on file in
any
jurisdiction claiming a security interest in or describing (whether specifically
or generally) the Escrow Funds or any part thereof.
(vi)
All
of
the representations and warranties of the Company contained
herein are true and complete as of the date hereof.
14. Consent
to Jurisdiction and Venue; Governing Law. This
Agreement shall be construed and interpreted in accordance with the internal
laws of the State of New York without
giving effect to the conflict of laws principles thereof. In the event that
any
party hereto commences
a lawsuit or other proceeding relating to or arising from this Agreement, the
parties hereto
agree that the United States District Court for the Southern District of New
York shall have
the
sole and exclusive jurisdiction over any such proceeding. If all such courts
lack federal subject
matter jurisdiction, the parties agree that the Supreme Court of State of New
York, of and for
the
County of New York shall have sole and exclusive jurisdiction. Any of these
courts shall be proper venue for any such lawsuit or judicial proceeding and
the
parties hereto waive any objection to such venue. The parties hereto consent
to
and agree to submit to the jurisdiction of any of the courts specified herein
and agree to accept the service of process to vest personal jurisdiction over
them in any of these courts.
15. Notice.
All
notices and other communications hereunder shall be in writing and
shall
be deemed to have been validly served, given or delivered: five (5) days after
deposit in the
United States mails, by certified mail with return receipt requested and postage
prepaid; when
delivered personally; one (1) day after being delivered to any overnight
courier; or when transmitted
by facsimile transmission and upon confirmation of receipt and addressed to
the
party
to
be notified as follows:
If
to
Investor(s), to its address for notices as set forth in the Purchase Agreement,
with a copy as set
forth
therein.
Gottbetter
& Partners, LLP
If
to
Escrow Agent, to:
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
Attention: Xxxxx
X.
Xxxxxxx, Esq.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Mohen,
Inc. d/b/a Spiral Frog
If
to the
Company, to:
00
Xxxxxx
Xxxxxx
Xxxxxx
Xx.
Xxx
Xxxx,
XX 00000
Attention:Xxx
Xxxxx
8
With
a
copy to:
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
Attention: D.
Xxxxxx
Xxxxxxx, Esq.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Or
to
such other address as each party may designate for itself by like
notice.
16. Amendments
or Waiver. This
Agreement may be changed, waived, discharged
or terminated only by a writing signed by the parties hereto. No delay or
omission by any
party
in exercising any right with respect hereto shall operate as waiver. A waiver
on
any one
occasion shall not be construed as a bar to, or waiver of, any right or remedy
on any future occasion.
17. Severability.
To
the
extent any provision of this Agreement is prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition,
or invalidity, without invalidating the remainder of such provision or the
remaining provisions
of this Agreement.
18. Entire
Agreement. This
Agreement constitutes the entire agreement between the
parties relating to the holding, investment, and disbursement of the Escrow
Funds and sets forth
in
their entirety the obligations and duties of Escrow Agent with respect to the
Escrow Funds.
19. Binding
Effect. All
of
the terms of this Agreement, as amended from time to time,
shall be binding upon, inure to the benefit of and be enforceable by the
respective heirs, successors and assigns of the Investor(s), the Company, or
Escrow Agent.
20. Execution
of Counterparts. This
Agreement and any Joint Written Direction
may be executed in counter parts, which when so executed shall constitute one
and same
agreement or direction.
21. Termination.
Upon
the
first to occur of the disbursement of all amounts in the
Escrow Funds pursuant to Joint Written Directions or the disbursement of all
amounts in the Escrow
Funds into court pursuant to Section 7 hereof, this Agreement shall terminate
and Escrow
Agent shall have no further obligation or liability whatsoever with respect
to
this Agreement or the Escrow Funds.
[
SIGNATURE PAGE FOLLOWS ]
9
IN
WITNESS WHEREOF the
parties have hereunto set their hands and seals the day and
year
above set forth.
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| By: | /s/ Xxxxxxx Xxxxxx | |
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Name: Xxxxxxx Xxxxxx |
||
| Title: Corporate Secretary | ||
|
BUYER
|
||
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|
Print name: |
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ESCROW
AGENT
|
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| Gottbetter & Partners, LLP | ||
| |
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| By: | /s/ Xxxx Xxxxxxxxxx | |
|
Name: Xxxx Xxxxxxxxxx |
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| Title | ||
10
