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EXHIBIT 10.1
ESCROW AGREEMENT
This Escrow Agreement, dated as of January __, 1998, is among Xxxxxx
International Inc., a Delaware corporation ("Buyer"), Directional Wireline
Services, Inc., a Louisiana corporation ("DWS"), DAMCO Services, Inc., a
Louisiana corporation ("DSI"), DAMCO Tong Services, Inc., a Louisiana
corporation ("DTSI", and collectively with DWS and DSI, the "Companies"), Xxxxx
X. X. Xxxxxxxxx and Xxxxxxx X. Xxxxxxx, Xx. in their capacity as
representatives of the shareholders of the Companies (the "Shareholder
Representatives" and each a "Shareholder Representative"), the shareholders
listed on the signature pages hereto (the "Shareholders") and U.S. Trust
Company of Texas, N.A. (the "Escrow Agent");
W I T N E S S E T H :
WHEREAS, Buyer, the Companies and the shareholders of the Companies
have entered into an Asset Purchase Agreement dated effective as of November
30, 1997 (the "Purchase Agreement"), which provides, among other things, for
the purchase (the "Purchase") of substantially all of the assets of the
Companies by Buyer; and
WHEREAS, the parties hereto desire, pursuant to Section 1.3 of the
Purchase Agreement, to set aside a portion of the consideration to be paid to
the Companies in connection with the Purchase, subject to the terms and
conditions set forth herein; and
WHEREAS, the parties hereto have agreed upon and wish to set forth
herein the terms and conditions relating to the escrow of the portion of the
consideration for the Purchase to be so delivered to and held by the Escrow
Agent; and
WHEREAS, pursuant to Section 9.7 of the Purchase Agreement, the
Shareholder Representatives have been appointed to act as the representatives
and attorneys-in-fact for the shareholders of the Companies with respect to the
Escrow Fund (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, the parties hereto hereby agree as follows:
1. Definitions. Except as otherwise defined herein, capitalized
terms used in this Escrow Agreement will have the meanings set forth in the
Purchase Agreement.
2. Appointment of Escrow Agent. U.S. Trust Company of Texas,
N.A. is hereby appointed as Escrow Agent for the purposes set forth herein and
the Escrow Agent hereby accepts such appointment on the terms herein provided.
3. Deposit of Escrow Fund for Claims and Classification of Funds.
For the purposes herein set forth, Buyer, together with the delivery of this
Escrow Agreement, deposits with the Escrow Agent the sum of $6,000,000 in cash.
The sum so deposited with the Escrow Agent, together with all income earned
thereon pursuant to Section 8 hereof, less payments made for costs and expenses
(including taxes) in connection with this Escrow Agreement pursuant to Sections
8 and 11 hereof, is herein called the
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"Escrow Fund". The Escrow Fund will be held, invested, reinvested and
disbursed by the Escrow Agent in accordance with the terms hereof.
4. Satisfaction of Claims with Escrow Fund. The Escrow Fund will
be retained by the Escrow Agent and shall be distributed at any time, or from
time to time, for the purpose of paying Claims as follows:
a. If Buyer has made a Claim with respect to which funds
from the Escrow Fund may be applied pursuant to the Purchase
Agreement, Buyer may advise the Shareholder Representatives in writing
of such Claim (an "Asserted Claim"), describing such Asserted Claim
(to the extent known) in reasonable detail and shall transmit a copy
of such notice to the Escrow Agent, and in the event such Claim is a
Third Party Claim, such notice shall comply with the provisions of
Section 9.5(a) of the Purchase Agreement relating to Third Party
Claims, provided however, that failure to provide such notice within
an applicable time period shall not affect the Buyer's right to
payment hereunder except to the extent the Companies have been
materially prejudiced as a result of such failure to provide timely
notice;
b. The amount of any Asserted Claim (the "Asserted
Amount") and the amount of Escrow Funds, if any, requested to be
delivered to Buyer pursuant to Section 4.d hereof shall be
simultaneously certified in the notice to be provided in Section 4.a
above to the Escrow Agent and the Shareholder Representatives in
writing by Buyer;
c. In connection with any Asserted Claim, Buyer will
make available to the Shareholder Representatives, counsel thereto and
accountants therefor such records pertaining to the Asserted Claim (to
the extent such Asserted Claim is a Third Party Claim) in accordance
with Section 9.5(a) of the Purchase Agreement, provided however, that
failure to provide such records within an applicable time period shall
not affect the Buyer's right to payment hereunder except to the extent
the Companies have been materially prejudiced as a result of such
failure to timely provide such records;
d. On the 31st day following receipt of the
certification pursuant to the provisions of Section 4.b hereof (or
pursuant to Section 6 hereof as to the certification of a final
Asserted Claim on account of a Third Party Claim) of the Asserted
Amount of any Asserted Claim, subject to Sections 4.e and 4.f hereof,
such Asserted Amount shall be distributed to Buyer in respect of such
Asserted Claim pursuant to Section 4(e) hereof and the other terms of
this Escrow Agreement; provided, however, that, if within 30 days
following receipt of such certification, the Shareholder
Representatives deliver a statement of specific objections thereto to
Buyer and the Escrow Agent (which written notification shall be
received by the Escrow Agent within such 30-day period following the
receipt by them of the above-referenced certification by Buyer) that
they intend to challenge
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Buyer's certification of its Asserted Claim or a specified part
thereof (the "Contested Amount"), then the Contested Amount shall,
notwithstanding the provisions of this Section 4, remain in escrow
with the Escrow Agent until a final resolution (by a written agreement
of Buyer and the Shareholder Representatives or pursuant to the
arbitration provisions hereof, or to the extent applicable, the
determination of a court of competent jurisdiction to the extent the
Claim arises from a Third Party Claim subject to such court's
jurisdiction) of the dispute as to such matters (the amount, if any,
so resolved is herein called the "Resolved Amount");
e. Upon the 31st day following such receipt of a
certificate in accordance with Section 4.b hereof (or upon resolution
of a Contested Amount as provided herein if such a certification shall
be challenged), subject to Section 4.f hereof, the Escrow Agent shall
pay to Buyer the lesser of (i) the Asserted Amount less the Contested
Amount with respect to that Asserted Claim, if such certification
shall have been challenged and such challenge shall not have been
resolved, or the Resolved Amount, if any, if such certification is
challenged and resolved and (ii) the amount then held in the Escrow
Fund.
f. At any time following the notice of challenge to an
Asserted Claim (other than with respect to Sections 5.5 of the
Purchase Agreement) as provided for by Section 4.d hereof, either
Buyer or the Shareholder Representatives may refer the matter to final
and binding arbitration in accordance with the applicable provisions
of the Purchase Agreement. The arbitration shall be conducted before
a single arbitrator in Houston, Texas to be appointed (in the absence
of agreement by the parties as to such appointment) by the American
Arbitration Association ("AAA") and shall be conducted in accordance
with the Commercial Arbitration Rules of the AAA. Such arbitrator
shall, upon completion of such arbitration proceedings, certify the
results of the arbitration to the Escrow Agent, including his decision
with respect to the existence of a Claim and the Resolved Amount
thereof, if any, and the Escrow Agent shall be entitled to rely and
act accordingly with respect to payments to Buyer hereunder, if any,
on the basis of the decision of such arbitrator as so certified. This
arbitration provision is expressly made pursuant to and shall be
governed by the Federal Arbitration Act, 9 U.S.C. Sections 1 - 14 (the
"Arbitration Act"). The parties hereto agree that pursuant to Section
9 of the Arbitration Act that a judgment of the United States District
Court for the Southern District of Texas shall be entered upon the
award made pursuant to the arbitration. The fees, costs and expenses
of the arbitrator shall be borne by the parties in inverse proportion
as they may prevail on the matters resolved by the arbitrator, which
proportionate allocation shall be determined by the arbitrator at the
time the determination is rendered by the arbitrator on the merits of
the matters submitted. All fees, costs and expenses of the arbitrator
borne on behalf of the shareholders of the Companies or any of them,
as
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determined by the arbitrator, shall be subject to payment from the
Escrow Fund if not promptly paid by the Companies or their affected
shareholders. If the arbitrator decides in Buyer's favor with respect
to any Asserted Claim, Buyer's reasonable legal fees and related
expenses in connection with such arbitration (as determined by the
arbitrator) shall be included in the Resolved Amount.
5. Procedures for Application of Escrow Funds.
a. On April 30, 1998 (the "Interim Date"), the Escrow
Agent shall distribute to the Companies, to be allocated to each of the
Companies as directed by the Shareholder Representatives, an aggregate of
$3,000,000 less (i) all amounts paid to Buyer as of such date with respect to
Asserted Claims (excluding amounts paid pursuant to Section 9.2(d) of the
Purchase Agreement) and (ii) the amount of all Contested Claims or unpaid
Asserted Claims then existing (excluding any Contested Claims or unpaid
Asserted Claims arising under Section 9.2(d)).
b. On April 30, 1999 (the "Final Expiration Date"), if,
in Buyer's sole determination, there no longer exists any potential liability
or other cost or expense to a Buyer Indemnitee arising from or relating to the
matters addressed in Section 9.2(d) of the Purchase Agreement, the remaining
funds in the Escrow Fund (less the amount of Asserted Claims then unpaid or
unresolved) shall be distributed to the Companies as provided in Section 7
hereof. However, if, on April 30, 1999, in Buyer's sole determination, there
exists any potential liability or other cost or expense to a Buyer Indemnitee
arising from or relating to the matters addressed in Section 9.2(d) of the
Purchase Agreement, the Companies shall be entitled to receive a distribution
of an amount equal to the remaining funds in the Escrow Fund (less the amount
of any Asserted claims then unpaid or unresolved) less $1,000,000 (net of
amounts theretofore paid pursuant to Section 9.2(d) of the Purchase Agreement).
Any amounts remaining in the Escrow Fund following April 30, 1999 shall be
distributed to the Companies on the earlier to occur of (i) Buyer determining
in its sole discretion that there exists no potential liability or other cost
or expense to a Buyer Indemnitee arising from or relating to the matters
addressed in Section 9.2(d) of the Purchase Agreement for which such Buyer
Indemnitee has not been indemnified pursuant to the Purchase Agreement or (ii)
any claims for matters addressed in Section 9.2(d) of the Purchase Agreement
shall be time-barred by the applicable statute of limitations. Any amount so
distributed on the Final Expiration Date to the Companies shall be reduced by
the aggregate amount of all fees and expenses incurred or reasonably expected
to be incurred pursuant to Section 4.f (which fees and expenses shall be paid
from the Escrow Fund upon the direction of the Shareholder Representatives and
Buyer) and that have not been paid.
c. As to any amounts held under the Escrow Agreement
after the Final Expiration Date on account of the existence of unresolved or
unpaid Asserted Claims on the Final Expiration Date, such amounts shall be
distributed from time to time to Buyer or to the Companies in accordance with
Section 7 hereof, as such Asserted Claims are resolved; provided, however, that
the amount distributable to the Companies shall be reduced by all fees and
expenses incurred or reasonably expected
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to be incurred by the Shareholder Representatives that have not been paid
pursuant to Section 4.f (which fees and expenses shall be paid from the Escrow
Fund only following the resolution and payment of all Claims and upon the
direction of the Shareholder Representatives and Buyer).
6. Special procedures with respect to claims made against the
Buyer as to which liability, and amount thereof is uncertain. If a Third Party
Claim is made against the Buyer that Buyer believes constitutes, or may (upon
final resolution) constitute, a Claim hereunder, then Buyer shall certify such
matter to the Escrow Agent and the Shareholder Representatives as an Asserted
Claim in accordance with Section 4.b hereof even though such claim against the
Buyer or the Company is at the time uncertain or unresolved and even though the
exact amount of any loss, liability, cost or expense on account thereof may be
unknown at the time of such certification and, therefore, even though it is
unknown whether such matter may (upon final resolution) constitute a Claim
hereunder. In making such certification, Buyer may make a good faith estimate
of the maximum amount of exposure with respect thereto and such estimated
amount shall constitute a Contested Amount for purposes of Section 4.d hereof.
No portion of the Escrow Fund shall be available to any Indemnifying Party to
defray any of the costs and expenses incurred by such Indemnifying Party to
participate in the defense, negotiation and/or settlement of a Third Party
Claim as contemplated by Section 9.5(c) of the Purchase Agreement.
The provisions hereof with respect to arbitration shall,
notwithstanding any other provision hereof, be held in abeyance until such time
as Buyer certifies to the Shareholder Representatives and the Escrow Agent that
the uncertainties as to such Third Party Claim have been resolved or developed
in such manner that Buyer believes a Claim exists on account thereof and thus
that it is certifying a final Asserted Claim with respect thereto. The amount
of such final Asserted Claim shall thereafter constitute the Contested Amount
for purposes of Section 4.d hereof. If there is a disagreement between the
parties with respect thereto, then the procedure for arbitration provided for
by Section 4 hereof shall be followed.
7. Matters Pertaining to Distributions to the Companies. Amounts
to be distributed to the Companies shall be allocated among the Companies in
accordance with written instructions of the Shareholder Representatives. The
right of the Companies to receive any amounts under this Section 7 may not be
transferred or otherwise assigned by any of the Companies to any party other
than their respective shareholders. From time to time the Escrow Agent shall
provide Buyer and the Shareholder Representatives with any changes of address
or similar changes that it may receive with respect to the Companies. In
connection with any distribution to be made to the Companies, Buyer and the
Shareholder Representatives shall provide a schedule to the Escrow Agent
setting forth the names, addresses and the tax identification numbers of the
Companies and the amounts to which each of the Companies is entitled under this
Section 7. The Escrow Agent shall distribute such amounts in accordance with
such instructions as promptly as practicable after its receipt of such
instructions. After 120 days following the furnishing of such instructions,
the Shareholder Representatives shall be entitled to require the Escrow Agent
to deliver to them any funds (including any interest received with respect
thereto) that the Escrow Agent is unable to, or does not, disburse to the
Companies
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pursuant to this Section 7, and thereafter the Companies shall be entitled to
look to the Shareholder Representatives (subject to abandoned property, escheat
or other similar laws) only as a general creditor thereof with respect to the
cash payable to the Companies pursuant to this Escrow Agreement.
8. Investment of Cash Portion of Escrow Fund. The Escrow Agent
will invest the Escrow Fund in readily marketable securities of the United
States Government or its lawful agencies or in securities guaranteed by the
full faith and credit of the United States, which securities, in either case,
shall have maturities of less than one year, or in shares of investment
companies that, by their charter, invest solely in such securities. In
investing and reinvesting the Escrow Fund, the Escrow Agent will seek to obtain
the best yield consistent with safety of principal, ready marketability and
liquidity that may be necessary to pay Asserted Claims and to make
distributions hereunder. The Escrow Agent will have the authority to sell
investments that it has made from time to time as it deems appropriate. All
income earned on the cash portion of the Escrow Fund, after payment of expenses
incurred in connection therewith, will be held, invested, reinvested and
released with, and shall be deemed to be a part of, the Escrow Fund. All
income earned on the cash portion of the Escrow Fund, after payment of expenses
incurred in connection therewith, will be held, invested, reinvested and
released with, and shall be deemed to be a part of, the Escrow Fund. Neither
the Companies, the Buyer, the Shareholder Representatives, nor the Escrow Agent
shall be liable or responsible for any loss resulting from any investment or
reinvestment made pursuant to this Section 8. The Escrow Fund created by this
Escrow Agreement shall constitute a trust taxable pursuant to Subchapter J of
the Internal Revenue Code of 1986, as amended, and applicable state tax law.
From time to time during the term of this Agreement, as reasonably directed by
Buyer and the Representatives, Ernst & Young LLP or such other accounting firm
as is mutually acceptable to the Buyer and the Representatives shall file all
required income tax returns for the Escrow Fund. The Escrow Agent is
authorized to provide such accounting firm with any records related to the
Escrow Fund necessary to prepare such returns and to disburse from the Escrow
Fund the amount of taxes shown on such returns to be due and payable. The
Escrow Agent shall not be responsible for any acts, omissions, verifications or
calculations conducted or performed by such accounting firm in the course of
its preparing and filing such income tax returns. Such accounting firm will be
employed by the Buyer and the Representatives, on behalf of the Escrow Fund,
and not by the Escrow Agent, and such accounting firm shall not be an agent of
the Escrow Agent. The fees for such accounting firm shall be paid from the
Escrow Fund.
9. Liability of Escrow Agent. The duties of the Escrow Agent
hereunder will be limited to the observance of the express provisions of this
Escrow Agreement. The Escrow Agent will not be subject to, or be obliged to
recognize, any other agreement between the parties hereto or directions or
instructions not specifically set forth as provided for herein. The Escrow
Agent will not make any payment or disbursement from or out of the Escrow Fund
that is not expressly authorized pursuant to this Escrow Agreement. The Escrow
Agent may rely upon and act upon any instrument received by it pursuant to the
provisions of this Escrow Agreement that it reasonably believes to be genuine
and in conformity with the requirements of this Escrow Agreement. The Escrow
Agent undertakes to use the same degree of care and skill in performing its
services hereunder as an ordinary prudent person would do or use under
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the circumstances in the conduct of his or her own affairs. The Escrow Agent
will not be liable for any error of judgment or any act done or any step taken
by it in good faith or for any mistake of fact or law or for anything that it
might do or refrain from doing in connection with this Escrow Agreement
(including its simple negligence), except to the extent such actions shall be
proved to constitute a material breach of the Escrow Agent's obligations
hereunder, gross negligence or willful misconduct on the part of the Escrow
Agent.
10. Indemnification of Escrow Agent. The Companies, together with
their respective shareholders as distributee hereunder, and Buyer will
severally, but not jointly, indemnify and hold the Escrow Agent harmless from
and against any and all losses, costs, damages or expenses (including, but not
limited to, reasonable attorneys' fees) it may sustain by reason of its service
as Escrow Agent hereunder but only to the extent such losses, costs, damages or
expenses exceed the amount of the funds available in the Escrow Fund, and
except such losses, costs, damages or expenses (including, but not limited to,
reasonable attorneys' fees) incurred by reason of such acts or omissions for
which the Escrow Agent is liable or responsible under the last sentence of
Section 9 hereof. The foregoing indemnification shall survive the resignation
of the Escrow Agent or the termination of this Escrow Agreement.
11. Fees and Expenses of the Escrow Agent. Except as provided in
Section 16 hereof, all fees of the Escrow Agent for its service hereunder,
together with any expenses reasonably incurred by the Escrow Agent in
connection with this Escrow Agreement, shall be paid from the income earned on
the amount deposited in the Escrow Fund, provided that if and to the extent
that such income is not sufficient to cover such fees and expenses of the
Escrow Agent, then the Buyer shall advance such funds as may be required to pay
such fees and expenses on a current basis, and the Buyer shall thereafter have
the right to recover any such advances out of income earned on the amount
deposited in the Escrow Fund. The fees and expenses for services hereunder
shall be calculated pursuant to the terms and conditions set forth in the
letter attached hereto as Exhibit A.
12. Designees for Instructions. Buyer, may, by notice to the
Escrow Agent, designate one or more persons who will execute notices and from
whom the Escrow Agent may take instructions hereunder. Such designations may
be changed from time to time upon notice to the Escrow Agent from Buyer. Until
further notice, Xx. Xxxxxxx X. Xxxxxx and Xxxxx X. Xxxxx are each designated as
the respective designees of Buyer to give notices and instructions to the
Escrow Agent. The Escrow Agent will be entitled to rely conclusively on any
notices or instructions from any person so designated by Buyer.
13. Resignation of Escrow Agent. The Escrow Agent may resign from
its duties hereunder by giving each of the Buyer and the Shareholder
Representatives written notice of the effective date of such resignation (which
effective date shall be at least 60 days after the date of such notice is
given). If on or before the effective date of such resignation, the Escrow
Agent has not received joint written instructions from Buyer and the
Shareholder Representatives regarding the transfer of the Escrow Fund, it will
thereupon deposit the Escrow Fund into the registry of a court of competent
jurisdiction. The parties hereto intend that a substitute Escrow Agent will be
appointed
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to fulfill the duties of the Escrow Agent hereunder for the remaining term of
this Escrow Agreement in the event of the Escrow Agent's resignation and agree
reasonably to cooperate to make such appointment.
14. Notices. All notices, requests, instructions and demands that
may be given by any party hereto to any other party in the course of the
transactions herein contemplated will be in writing and will be deemed given
when posted in the United States mail, certified return receipt requested,
addressed to the respective parties as follows, or when received, if earlier,
by other written or electronic communication as follows:
(a) If to Buyer:
Xxxxxx International Inc.
Xxx Xxxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Tel: 281/000-0000
Fax: 409/000-0000
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Xx. Xxxxxx X. Xxxx, Xx.
Tel: 713/000-0000
Fax: 713/000-0000
(b) If to the Escrow Agent:
U.S. Trust Company of Texas, N.A.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
ATTN: Corporate Trust
Tel: 214/000-0000
Fax: 214/000-0000
(c) If to the Shareholder Representatives:
Xxxxx X. X. Xxxxxxxxx
0000 Xxxx Xxxx Xxxxxx
Xxxxx, Xxxxxxxxx 00000
Tel: 504/000-0000
Fax: 504/000-0000
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and to:
Xxxxxxx X. Xxxxxxx, Xx.
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxx 00000-0000
Tel: 504/000-0000
Fax: 504/000-0000
15. Binding Effect. This Escrow Agreement will be binding upon
and inure to the benefit of the parties hereto and their permitted assigns.
16. Amendment and Termination. This Escrow Agreement may be
amended from time to time by and upon written notice to the Escrow Agent, given
jointly by Buyer, the Shareholder Representatives, and the Companies, but the
duties and responsibilities of the Escrow Agent may not be increased without
its written consent. This Escrow Agreement will terminate on the date on which
no amounts remain in the Escrow Fund; provided, however, that Buyer shall pay
the Escrow Agent all reasonable fees and expenses incurred by it and remaining
unpaid on the date of such termination; and provided further that this Escrow
Agreement shall not terminate until the final resolution of all Asserted
Claims.
17. Applicable Law. THIS ESCROW AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING
EFFECT TO CONFLICTS OF LAW PRINCIPLES.
18. Counterparts. This Escrow Agreement may be executed in one or
more counterparts, each of which will be deemed an original, but all of which
together will constitute but one and the same instrument.
19. Captions and Paragraph Headings. Captions and paragraph
headings used herein are for convenience only and are not part of this Escrow
Agreement and will not be used in construing it.
SIGNATURES BEGIN ON THE FOLLOWING PAGE
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written.
XXXXXX INTERNATIONAL INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx
Senior Vice President and
General Counsel
SHAREHOLDER REPRESENTATIVES,
Individually and as Attorneys-in-Fact
for Xxxxxx Xxxxxxxx, Xxxxx Xxxxxxxxx,
Xxxxx Xxxxxxx, Xxxxxx XxXxxx, Xxxxxx
Xxxxx Xxxxxx, Xxxxx Xxxxxxx and Xxx
Xxxxxxxx
/s/ Xxxxx X. X. Xxxxxxxxx
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Xxxxx X. X. Xxxxxxxxx
/s/ Xxxxxxx X. Xxxxxxx, Xx.
----------------------------------
Xxxxxxx X. Xxxxxxx, Xx.
U.S. TRUST COMPANY OF TEXAS, N.A.
By: /s/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
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Title: Vice President
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