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Exhibit 10.41
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "ESCROW AGREEMENT") is made and entered into
as of November 29, 2000 by and among XXxxx.xxx, Inc., a Delaware corporation
("XXXXX.XXX"), Xxxx Xxxxxxx ("SELLER"), as sole shareholder of Integrated Media,
Inc., a New York corporation ("INTEGRATED MEDIA"), and Xxxxx Fargo Bank West, NA
as escrow agent (the "ESCROW AGENT").
RECITALS
A. Simultaneously herewith, XXxxx.xxx, Seller and Integrated Media are
entering into that certain Stock Purchase Agreement dated as of November 29,
2000 (the "PURCHASE AGREEMENT"), pursuant to which XXxxx.xxx is purchasing and
Seller is selling (the "PURCHASE") all of the issued and outstanding capital
stock of Integrated Media, all of which capital stock is owned by Seller (the
"SHARES"). Unless otherwise indicated, capitalized terms used but not defined
herein will have the meanings ascribed to them in the Purchase Agreement.
B. Simultaneously herewith, Seller and XXxxx.xxx are entering into that
certain Employment Agreement dated as of November 29, 2000 (the "EMPLOYMENT
AGREEMENT").
C. One of the conditions to the closing of the Purchase, as set forth in
the Purchase Agreement, is the execution and delivery of this Escrow Agreement.
D. Pursuant to Section 1.2 of the Purchase Agreement, XXxxx.xxx is
depositing with the Escrow Agent ONE MILLION DOLLARS (U.S.$1,000,000) in
immediately available funds (the "ESCROW AMOUNT") into an escrow account (the
"ESCROW ACCOUNT"). This Escrow Amount represents one third of the total
consideration to be paid by XXxxx.xxx to Seller for the Shares pursuant to
Section 1.2 of the Purchase Agreement and, subject to the satisfaction of any
potential indemnification obligations of the Seller to any Indemnified Person
for Losses under Article VI of the Purchase Agreement, will be distributed in
two installments as follows: (a) $500,000 to be paid to the Seller in cash six
(6) months after the date of this Escrow Agreement; and (b) the balance in the
Escrow Account to be paid to the Seller in cash one (1) year after the date of
this Escrow Agreement.
E. This Escrow Agreement sets forth the basis on which the Escrow Agent
will receive and hold, and make distributions and disbursements from, the Escrow
Account and the duties for which the Escrow Agent will be responsible.
NOW, THEREFORE, as an inducement to XXxxx.xxx to acquire the Shares, and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. APPOINTMENT. XXxxx.xxx and Seller hereby appoint Escrow Agent as escrow
agent to serve in such capacity in accordance with the terms and conditions set
forth in this Escrow Agreement. Escrow Agent hereby accepts such appointment.
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2. PURCHASE AGREEMENT AND EMPLOYMENT AGREEMENT. The Escrow Agent
acknowledges receipt of a copy of each of the Purchase Agreement and the
Employment Agreement; however, except for reference thereto for definitions of
certain words or terms not defined herein, the Escrow Agent is not charged with
any duties or responsibilities with respect to the Purchase Agreement or the
Employment Agreement notwithstanding any provision therein to the contrary.
3. ESCROW AMOUNT. Simultaneously with the
execution of the Purchase Agreement, XXxxx.xxx will deposit the Escrow Amount
directly with the Escrow Agent by wire transfer of immediately available funds,
the receipt of which will be acknowledged to XXxxx.xxx and Seller, and the
Escrow Amount will be accepted by the Escrow Agent as escrow agent hereunder.
The Escrow Account, as such term is used herein, will include the Escrow Amount
deposited pursuant to this Section 3 and any interest earned thereon, less any
payments or distributions made hereunder.
4. INVESTMENT.
(a) The Escrow Amount placed in the Escrow Account, together with all
interest accruing thereon, will be invested by the Escrow Agent, without
distinction as to principal and income, upon receipt of written instructions
from Seller and any one of the officers of Xxxxx.xxx set forth on Schedule A, in
one or more of the following investments: (i) interest bearing open-ended or
time deposits of any domestic bank with assets in excess of U.S.$500,000,000
(including deposit in the Escrow Agent's bank money market deposit accounts),
including one or more accounts maintained in the commercial banking department
(if any) of the Escrow Agent; provided, however, that any amount not invested in
the Escrow Agent's bank money market deposit accounts will be invested, to the
extent reasonably possible, in accounts that are insured by the Federal Deposit
Insurance Corporation; or (ii) short-term U.S. Department of Treasury bills, or
any short-term AAA-rated government obligation money market fund that includes
similar investments; provided that in the absence of such written instructions
the Escrow Agent shall invest the Escrow Amount in one of the investments
described above in this Section 4. Notwithstanding the foregoing, the Escrow
Agent will have the power to sell or liquidate the foregoing investments
whenever the Escrow Agent will be required to release all or any portion of the
Escrow Account pursuant to Section 7 hereof. The Escrow Agent will not be liable
for any loss resulting from any investment made pursuant to this Escrow
Agreement other than those losses resulting from its gross negligence or willful
misconduct or bad faith.
(b) The parties acknowledge and agree that payment of any interest
earned on the funds invested in this escrow will be subject to (i) backup
withholding penalties unless either a properly completed Internal Revenue
Service Form W8 or W9 certification is submitted to Escrow Agent at the time of
execution of this Agreement; and (ii) Section 11 below.
5. XXXXX.XXX. XXxxx.xxx represents and warrants that it is authorized to
enter into this Escrow Agreement with full power and authority to act hereunder
in accordance with the terms hereof.
6. SELLER. The Seller represents and warrants that he is authorized to
enter into this Escrow Agreement with full power and authority to act hereunder
in accordance with the terms hereof. No bond will be required of the Seller.
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7. CLAIMS UPON ESCROW ACCOUNT.
(a) If XXxxx.xxx delivers a written notice to Seller and the Escrow
Agent (a "XXXXX.XXX CLAIM NOTICE") (1) stating that XXxxx.xxx is entitled to a
disbursement out of the Escrow Account based on any of the following: (x) a Loss
for which XXxxx.xxx is entitled to indemnification pursuant to the Purchase
Agreement, specifying the amount of such claimed Loss and, in reasonable detail,
the date such Loss was paid or incurred or otherwise arose and the nature of the
misrepresentation or breach to which such Loss is related, (y) termination of
Seller's employment with XXxxx.xxx for Cause (as defined in the Employment
Agreement); or (z) Seller's voluntary termination of his employment with
XXxxx.xxx without Good Reason (as defined in the Employment Agreement); and (2)
specifying the delivery instructions to be followed by Escrow Agent in paying
out such claim (including without limitation any applicable wire transfer
instructions of the payee or address to where a check should be sent), and
within 30 days after delivery of the XXxxx.xxx Claim Notice to the Escrow Agent,
the Escrow Agent does not receive a written notice (a "SELLER OBJECTION NOTICE")
from Seller challenging XXxxx.xxx's entitlement to the XXxxx.xxx Disbursement
Amount (as defined below), the Escrow Agent shall deliver to XXxxx.xxx from the
Escrow Account, an amount equal to the XXxxx.xxx Disbursement Amount. In the
event that a Seller Objection Notice is delivered within such 30 day period, the
provisions of Section 7(c) of this Agreement shall apply. "XXXXX.XXX
DISBURSEMENT AMOUNT" shall mean either (A) if the Xxxxx.xxx Claim Notice is
delivered pursuant to clause (1)(x) of this subsection 7(a), the lesser of the
amount of the Loss specified therein or the Escrow Amount then remaining in the
Escrow Account, or (B) otherwise, the Escrow Amount then remaining in the Escrow
Account, in each case plus all interest earned thereon.
(b) If Seller (or, if applicable, Seller's estate or representative)
delivers a written notice to XXxxx.xxx and the Escrow Agent (a "SELLER CLAIM
NOTICE") (1) stating that Seller is entitled to a disbursement of the Escrow
Amount because Seller's employment with XXxxx.xxx has been terminated (x) by
XXxxx.xxx without Cause, (y) by Seller for Good Reason (as defined in the
Employment Agreement), specifying in reasonable detail the nature of the Good
Reason, or (z) due to Seller's death or Disability (as defined in the Employment
Agreement); (2) specifying the date the termination occurred; and (3) the
delivery instructions to be followed by the Escrow Agent in paying out such
claim (including without limitation any applicable wire transfer instructions of
the payee or address to where a check should be sent), and within 30 days after
delivery of the Seller Claim Notice to the Escrow Agent, the Escrow Agent does
not receive a written notice (an "XXXXX.XXX OBJECTION NOTICE") from XXxxx.xxx
challenging Seller's entitlement to disbursement pursuant to the Seller Claim
Notice, the Escrow Agent shall deliver to Seller from the Escrow Account an
amount equal to (x) the Escrow Amount then remaining in the Escrow Account minus
(y) the amount of any Pending Claims (as defined below), plus all interest
earned thereon, subject to Section 11 below (such amount being the "SELLER
DISBURSEMENT AMOUNT"). In the event that a XXxxx.xxx Objection Notice is
delivered within such 30 day period, the provisions of Section 7(c) of this
Agreement shall apply.
(c) In the event of a dispute between Seller and XXxxx.xxx over either
XXxxx.xxx's entitlement to any Xxxxx.xxx Disbursement Amount or Seller's
entitlement to any Seller Disbursement Amount, then the Escrow Agent shall
continue to hold such disputed amount (or if the balance of Escrow Account
remaining is less than such amount, shall continue to hold the balance of
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the Escrow Account then remaining) until the Escrow Agent is otherwise directed
by (i) joint written instructions from Seller and XXxxx.xxx, (ii) the written
decision of the arbitrators pursuant to either Section 7.11 of the Purchase
Agreement or Section 13 of the Employment Agreement delivered to the Escrow
Agent or (iii) a final nonappealable order of a court delivered to the Escrow
Agent, upon which the Escrow Agent will be entitled to act.
(d) Promptly after its receipt, the Escrow Agent shall deliver a copy
of any XXxxx.xxx Claim Notice or XXxxx.xxx Objection Notice to Seller.
(e) Promptly after its receipt, the Escrow Agent shall deliver a copy
of any Seller Claim Notice or Seller Objection Notice to XXxxx.xxx.
8. DISTRIBUTIONS OF ESCROW AMOUNT.
(a) If, as of the date that is six months following the date of this
Escrow Agreement (the "FIRST ESCROW RELEASE DATE"), (1) no XXxxx.xxx Claim
Notice has been submitted to the Escrow Agent pursuant to Section 7, (2)
XXxxx.xxx has submitted an XXxxx.xxx Claim Notice and no such XXxxx.xxx Claim
Notice remains unpaid, or (3) there is one or more unpaid XXxxx.xxx Claim
Notices (each a "PENDING CLAIM") that in the aggregate seek damages of less than
$500,000, whether (x) Seller has consented to the Pending Claim and the
XXxxx.xxx Disbursement Amount has not been paid or (y) Seller has filed a Seller
Objection Notice and the dispute has not been resolved, then the Escrow Agent
will pay from the Escrow Account to the Seller within five business days after
the First Escrow Release Date, the lesser of $500,000 or the Escrow Amount then
remaining in the Escrow Account, in each case together with interest earned on
the amount, subject to Section 11 below (the "FIRST ESCROW AMOUNT"). The Escrow
Agent will pay the First Escrow Amount to Seller by certified or bank cashier's
check to the address provided herein or by wire transfer of immediately
available federal funds as directed in a written notice delivered by Seller to
the Escrow Agent no less than five business days prior to the First Escrow
Release Date.
(b) If on the First Escrow Release Date, there are one or more Pending
Claim(s) which in the aggregate seek damages of more than $500,000, whether (i)
Seller has consented to the Pending Claim and the XXxxx.xxx Disbursement Amount
has not been paid or (ii) Seller has filed a Seller Objection Notice and the
dispute has not been resolved, then the Escrow Agent will pay from the Escrow
Account to the Seller the difference calculated by subtracting (x) the amount of
all such Pending Claims from (y) the lesser of $1,000,000 or the Escrow Amount
then remaining in the Escrow Account, in each case together with all interest
earned on the such amount, subject to Section 11 below (the "ADJUSTED FIRST
ESCROW AMOUNT"). The Adjusted First Escrow Amount shall be paid in accordance
with Section 8(a).
(c) If as of the date that is one year following the date of this
Escrow Agreement (the "SECOND ESCROW RELEASE DATE"), there are no Pending
Claims, the Escrow Agent will pay to the Seller all remaining funds in the
Escrow Account, together with all interest earned thereon (subject to Section 11
below) within five business days after the Second Escrow Release Date. The
Escrow Agent will pay the Second Escrow Amount to Seller by certified or bank
cashier's check to the address provided herein or by wire transfer of
immediately available federal funds as directed in a
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written notice delivered by Seller to the Escrow Agent no less than five
business days prior to the Second Escrow Release Date.
(d) If on the Second Escrow Release Date, there are one of more Pending
Claim(s) which in the aggregate seek damages of less than the Escrow Amount at
that time, whether (i) Seller has consented to the Pending Claim and the
XXxxx.xxx Disbursement Amount has not been paid or (ii) Seller has filed a
Seller Objection Notice and the dispute has not been resolved, then the Escrow
Agent shall pay to Seller the difference calculated by subtracting (x) the
aggregate amount of the Pending Claims from (y) the amount of funds in the
Escrow Account on the Second Escrow Release Date (the "ADJUSTED SECOND ESCROW
AMOUNT"). The Adjusted Second Escrow Amount shall be paid in accordance with
Section 8(c).
(e) If after the Second Escrow Release Date, there are funds available
in the Escrow Account that remain in dispute, such funds shall be distributed to
the appropriate party only pursuant to terms for disbursing disputed amounts in
Section 7(c).
9. ESCROW PROVISIONS.
(a) The Escrow Agent may rely and will be protected in acting or
refraining from acting upon any written notice, request, waiver, consent,
receipt or other paper or document from any duly authorized officer or agent of
XXxxx.xxx or from the Seller, not only as to its due execution and the validity
and effectiveness of its provisions, but also as to the truth of any information
therein contained that the Escrow Agent in good faith believes to be genuine and
as to which the Escrow Agent will have no actual notice of invalidity, lack of
authority or other deficiency. XXxxx.xxx and Seller will notify the Escrow Agent
in writing of the final resolution of all Pending Claims.
(b) The Escrow Agent will not be liable for any error of judgment, or
for any act done or step taken or omitted by it in good faith, or for any
mistake of fact or law, or for anything which it may do or refrain from doing in
connection therewith, except for any liability arising from its own gross
negligence, willful misconduct or bad faith.
(c) The Escrow Agent will be entitled to consult with competent and
responsible counsel of its choice with respect to the interpretation of the
provisions hereof, and any other legal matters relating hereto, and will be
fully protected in taking any action or omitting to take any action in good
faith in accordance with the advice of such counsel.
(d) Except as provided in Section 9(f) below, XXxxx.xxx and the Seller
jointly and severally agree to indemnify and hold the Escrow Agent harmless for
any and all claims, liabilities, costs, payments and expenses of Escrow Agent in
connection with its performance of its duties hereunder, including without
limitation, fees and expenses of counsel (who may be selected by the Escrow
Agent) for court actions, or for anything done or omitted by it in the
performance of this Escrow Agreement, except as a result of the Escrow Agent's
own gross negligence, willful misconduct or bad faith.
(e) All evidence of investment of funds in the Escrow Account
(including, but not limited to, savings account passbooks, certificates, notes
and other similar items) will be kept in
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safekeeping by the Escrow Agent. The Escrow Agent will keep accurate accounts of
all income and interest earned by the funds in the Escrow Account. Within 30
days after the close of each calendar quarter, Escrow Agent will provide
XXxxx.xxx and the Seller a full written accounting of the principal and interest
in the Escrow Account.
(f) All fees and related expenses of the Escrow Agent for its services
hereunder (including fees and expenses of its legal counsel) will be paid by the
Seller. Such fees and expenses will be determined in accordance with the fee
schedule attached hereto as Schedule B or as otherwise provided to the Seller.
(g) None of the provisions contained in this Escrow Agreement will
cause the Escrow Agent to advance or risk its own funds in the performance of
its duties herein described other than with respect to actions in the ordinary
course of business.
10. SUCCESSOR ESCROW AGENT. The Escrow Agent, or any successor, may resign
at any time upon giving written notice to each of XXxxx.xxx and Seller 30 days
before such resignation will take effect. In addition, XXxxx.xxx and the Seller
may terminate the Escrow Agent's appointment as escrow agent upon giving written
notice (jointly signed by XXxxx.xxx and the Seller) to the Escrow Agent thirty
(30) days before such termination will take effect. If the Escrow Agent shall
resign, be terminated or be unable to serve, then it will be succeeded by such
bank or trust company jointly named by XXxxx.xxx and the Seller in such thirty
(30) day period, or if no such appointment is made by that time, then by a bank
or trust company appointed by a court of competent jurisdiction upon petition by
any of the Escrow Agent, XXxxx.xxx or the Seller (in which action the other
party or parties will be afforded a reasonable opportunity to participate) to
appoint a successor escrow agent. The Escrow Agent will transfer the Escrow
Account and all books and records with respect thereto and to this Escrow
Agreement to its successor and will thereupon be discharged as escrow agent
hereunder, and the successor will thereupon succeed to all of the rights, powers
and duties and will assume all of the obligations of the Escrow Agent originally
named in this Escrow Agreement. If no successor escrow agent is appointed within
six (6) months of the giving of notice to resign by the Escrow Agent, Escrow
Account may transfer the Escrow Account into the law offices of Kronish, Lieb,
Weiner & Xxxxxxx LLP at New York, NY.
11. PAYMENT OF TAXES. XXxxx.xxx and Seller hereto agree that they intend
for (1) the Escrow Account to be treated for federal, state and local income tax
purposes as a "contingent at-closing escrow" within the meaning of Proposed
Treasury Regulation Section 1.468B-8(b), (2) the assets held in Escrow Account
to be treated for federal, state and local income tax purposes as owned by
XXxxx.xxx, and (3) XXxxx.xxx to take into account in determining its taxable
income all items of income, deduction, and credit realized on the investment of
the Escrow Account during the term hereof. XXxxx.xxx and Seller agree that they
will prepare all tax returns and report items of income, deduction and credit in
a manner consistent with such intent. Upon any disbursement from the Escrow
Account and upon termination (as set forth in Section 12 below), the Escrow
Agent shall, at the same time, make a distribution to XXxxx.xxx from the Escrow
Account in the amount of 30% of any interest included as part of such
disbursement from the Escrow Account, for the purposes of defraying any tax
liability (whether calculated under federal, state, local and other tax laws,
including but not limited to net worth, capital and other taxes) imposed as a
result of XXxxx.xxx's
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ownership of the Escrow Account. The Escrow Agent will furnish such information
to the other parties hereto as will be requested in writing for tax preparation
purposes by such parties.
12. TERMINATION. Upon the release from escrow of the entire Escrow Amount,
this Agreement and all duties and obligations of the Escrow Agent
hereunder shall be terminated.
13. NOTICES. All notices and other communications hereunder will be in
writing and will be deemed given or delivered if delivered personally or by
express courier, mailed by registered or certified mail (return receipt
requested) first class mail, postage prepaid or sent by telecopy, confirmation
received, to the parties at the following addresses and telecopy numbers (or at
such other address or number for a party as will be specified by like notice):
(a) If to XXxxx.xxx, to:
XXxxx.xxx
0000 X. Xxxxxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attn: Chief Financial Officer
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Fax: (000) 000-0000
Tel: (000) 000-0000
Attn: Xxxxxx Xxxxxxxxxxxx, Esq.
(b) If to the Seller:
Xxxx Xxxxxxx
00 Xxxx 00xx.
Xxx 0X
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
with a copy to:
Kronish, Lieb, Weiner & Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxxxxx, Esq.
(c) If to the Escrow Agent:
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Xxxxx Fargo Bank West, National Association
Corporate Trust and Escrow Services
0000 Xxxxxxxx
XXX X0000-000
Xxxxxx, Xxxxxxxx 00000
Tel: 303/000-0000
Fax: 303/000-0000
14. NONASSIGNABILITY. Notwithstanding anything to the contrary contained
herein, neither the Escrow Amount nor any beneficial interest therein may be
sold, assigned or otherwise transferred, including by operation of law, by
Seller or be taken or reached by any legal or equitable process in satisfaction
of any debt or other liability of Seller except that Seller's rights may be
assigned by will or laws of descent. The Escrow Amount shall not be reachable by
XXxxx.xxx creditors or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of XXxxx.xxx. Any such attempted
transfer in violation of this Section will be null and void.
15. SUCCESSORS AND ASSIGNS. Subject to Section 14, this Escrow Agreement
and all action taken hereunder in accordance with its terms will be binding upon
and inure to the benefit of XXxxx.xxx, its subsidiaries, and their respective
successors and assigns, the Escrow Agent and its successors and the Seller and
its respective successors, assigns, heirs, executors, administrators and legal
representatives.
16. ENTIRE AGREEMENT. This Escrow Agreement constitutes the entire
agreement among the parties with the Escrow Agent, and among the other parties
with respect to this particular escrow except as set forth under the Purchase
Agreement, and it supersedes all prior or concurrent arrangements or
understandings with respect thereto. The other parties hereby acknowledge and
agree that Escrow Agent's duties and obligations hereunder are limited, and that
Escrow Agent will have no duties or obligations except as clearly specified
herein, and no implied duties or obligations will be read into this Escrow
Agreement against the Escrow Agent, nor will Escrow Agent have any
responsibility for the enforcement of the obligations of any parties hereto.
17. WAIVERS. No waiver by any party hereto of any condition or of any
breach of any provision of this Escrow Agreement will be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, will be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
18. COUNTERPARTS. This Escrow Agreement may be executed in several
counterparts, each of which will be deemed an original, but such counterparts
will together constitute one and the same instrument.
19. GOVERNING LAW. This Escrow Agreement will be governed in all respects,
including validity, interpretation and effect, by the laws of the
State of New York (without giving effect to its choice of law provisions).
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20. CONSEQUENTIAL DAMAGES. In no event will the Escrow Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action except with respect to any liability arising from its own gross
negligence, willful misconduct or bad faith.
21. JURISDICTION. All parties hereto agree to submit to the jurisdiction of
the federal and state courts of the State of New York.
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IN WITNESS WHEREOF, the parties have executed or caused this Escrow
Agreement to be duly executed as of the day and year first above written.
XXxxx.xxx, Inc.
By:
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Name:
--------------------------------
Title:
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SELLER
By:
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Xxxx Xxxxxxx
Xxxxx Fargo Bank West, NA
By:
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Name:
--------------------------------
Title:
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[SIGNATURE PAGE TO ESCROW AGREEMENT]
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SCHEDULE A
XXXXX.XXX AUTHORIZED OFFICERS
NAME AND TITLE SIGNATURE
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Xxxxxx Xxxxxxx, Chief Executive Officer
and President --------------------------------------
Xxxx Xxxxxxxxx, Vice President
of Finance --------------------------------------
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SCHEDULE B
ESCROW AGENT FEE SCHEDULE
