ESCROW AGREEMENT, dated as of November 30, 2006
(this "Agreement"), is made by and among SCIENTIFIC INDUSTRIES,
a Delaware corporation ("Buyer"), and the persons set forth on
Schedule I hereto (the "Sellers").
RECITALS
Buyer and the Sellers are parties to that certain Stock
Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement") providing for the acquisition by the Buyer and sale by the
Sellers of all the outstanding shares of capital stock of Altamira
Instruments, Inc., a Delaware corporation ("Altamira"). The Purchase
Agreement provides that 125,000 shares of Common Stock of the Buyer in
the aggregate be issued by it in the names of the Sellers and in the
respective amounts set forth on Schedule I as part of the acquisition
consideration (the "Escrowed Shares") and be held by the Buyer for
delivery pursuant to the terms of the Purchase Agreement and this
Agreement.
Capitalized terms not otherwise defined herein shall have
the meanings set forth in the Purchase Agreement.
NOW THEREFORE, it is agreed as follows:
1. Escrow Agent. Buyer agrees to serve as escrow agent in
accordance with, and pursuant to, this Agreement.
2. Delivery of Escrowed Shares. At the Closing, the Buyer
pursuant to the terms of the Purchase Agreement will issue the
Escrowed Shares in the respective names of the Sellers and
amounts set forth on Schedule I hereto and will hold the
Escrowed Shares and each Seller will deliver to the Buyer a
duly executed stock power with respect to the shares
registered in the Seller's name, to be held pursuant to the
terms of this Agreement until delivered as provided in
Sections 3 and 4 below. In the event the Buyer shall make
any distribution to its stockholders with respect to its
then outstanding shares, to the extent the distribution is paid
in additional shares of Common Stock of the Buyer with respect
to the Escrowed Shares, the distribution with respect to the
Escrowed Shares shall be held by the Buyer pursuant to this
Agreement and such additional shares also will be deemed
Escrowed Shares. To the extent the distribution consists
of cash paid with respect to the Escrowed Shares, the
Buyer shall deposit the cash portion of the distribution on
the Escrowed Shares (the "Escrowed Funds") in a bank account
selected by the Buyer (the "Escrowed Account"). The Buyer
shall notify the Seller Representative of the Escrow Account
number, the number of additional shares and amount of cash
received with respect to each Seller's portion of the Escrowed
Shares. The Escrowed Funds shall be invested at the joint
written direction of the Buyer and the Seller Representative in
money market funds rated AAA by Standard & Poor's that invest
in short term interest bearing or discount debt obligations
issued or guaranteed by the government of the United States.
The parties hereto acknowledge that the Buyer's tax
identification number shall be used to open the Escrow
Account. The parties hereto acknowledge that the Buyer shall
not be responsible for any diminution in the Escrowed Funds
due to losses resulting from investments made pursuant to this
Agreement. The Buyer may break or cancel any investment to the
extent necessary or appropriate to make any payment required
hereby, and shall not be responsible for any costs or penalties
associated therewith. The parties hereto agree that, for tax
and reporting purposes, all interest or other income earned from
the investment of the Escrowed Funds shall (a) to the extent such
interest or other income is distributed to any person or entity
pursuant to the terms of this Agreement during a tax year, be
reported as allocated to such person or entity for such tax year,
and (b) otherwise shall be reported as allocated to the Buyer.
Sellers and the Seller Representative shall each provide to the
Buyer a certified tax identification number by signing and
returning a Form W-9 (or Form W-8 BEN, in case of non-U.S.
persons) or any successor form thereto (and any other applicable
tax form) upon the execution of this Agreement. The parties
hereto understand that, in the event their tax identification
numbers are not certified to the Buyer, the Internal Revenue
Code, as amended from time to time, may require withholding or
a portion of any interest or other income earned on the
Escrowed Funds.
3. Disbursement of Escrowed Shares and Escrowed Funds.
(a) No later than three Business days following the receipt of a
joint written notice from the Buyer and the Seller Representative (the
"Indemnification Notice") that the Buyer and the Seller Representative
agree that indemnification by a Seller or Sellers in the amount or
amounts set forth in such notice is to be made to the Buyer from the
Seller's portion of the Escrowed Shares and Escrowed Funds with
respect to a notice of claim delivered by the Buyer pursuant to
Section 8.02 of the Purchase Agreement, the Buyer shall withdraw
from the Escrowed Funds the designated amount and in the event the
designated amount exceeds the portion of the Escrowed
Funds of a Seller, the Buyer shall withdraw for cancellation such
number of the Seller's Escrowed Shares equal in value as determined
pursuant to the Purchase Agreement to the balance of the Seller's
portion of the indemnification amount; provided, however, the amount
or amounts to be withdrawn and cancelled shall not in the aggregate
exceed the balance of the sum of the Seller's portion of the
Escrowed Funds, plus interest accrued but unpaid on the balance
of Seller's portion of the Escrowed Funds not withdrawn and the
balance of Seller's portion of the Escrowed Shares not
cancelled as valued pursuant to the Purchase Agreement.
(b) If on the date that is eighteen (18) months following the
Closing Date, there remains a balance of Escrowed Funds or Escrowed
Shares and there is no outstanding claim for indemnification made
against the Sellers by the Buyer pursuant to the Purchase Agreement
or the amount of the outstanding Indemnification Claims aggregate
less than such balance, the Buyer shall disburse from the Escrowed
Shares and Escrowed Funds to each Seller such Seller's portion of
the amount of the Escrowed Funds (together with accrued income
thereon) which exceeds the aggregate of the outstanding
Indemnification Claims, if any, with respect to such Seller.
(c) The distribution, cancellation or withdrawal of all the
Escrowed Shares and Escrowed Funds shall not foreclose the
prosecution by the Buyer against a Seller of a claim or claims
for indemnification pursuant to Section 8.02(a) of the Purchase
Agreement, subject to the limitations set forth
in Sections 8.01 and 8.04 of the Purchase Agreement.
(d) To the extent there remain Escrowed Shares and Escrowed
Funds which have not been withdrawn, disbursed or cancelled as a
result of a dispute between the Buyer and the Seller Representative,
the Buyer and the Seller Representative shall use their reasonable
best efforts to resolve such dispute by negotiation and the Buyer
shall disburse, withdraw or cancel such balance in accordance with
Section 6(b)(ix) of this Agreement.
4. Escrowed Funds Interest. All disbursements or withdrawals of
Escrowed Funds from the Escrowed Account shall include income
accrued in the Escrowed Account on the amount being disbursed
before such income accrual.
5. Disbursement. All disbursements to Sellers of Escrowed
Funds made hereunder shall be made promptly by bank or
cashier's check.
6. Buyer's Responsibilities With Respect to Escrowed Shares
and Escrowed Funds.
(a) It is further agreed that:
(i) The Buyer shall not be under any duty to give the
Escrowed Shares and Escrowed Funds held by it hereunder any greater
degree of care than it gives its own similar property.
(ii) This Agreement expressly sets forth all the Buyer's
duties with respect to any and all matters pertinent hereto. No
implied duties or obligations shall be read into this Agreement
against Buyer. The Buyer shall not be bound by the provisions of
any agreement among the other parties hereto, except the Purchase
Agreement and this Agreement.
(iii) The Buyer shall not be liable with respect to the
Escrowed Shares and Escrowed Funds, except for its own
negligence or willful misconduct, and, except with respect to
claims based upon such negligence or willful misconduct that are
successfully asserted against the Buyer. With respect to a
successor Escrow Agent, the Buyer and the Sellers shall jointly
and severally indemnify and hold harmless the 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. In no event shall the Buyer and
the Sellers be liable for consequential, indirect or punitive
damages. This paragraph shall survive termination of this
Agreement.
(iv) The Buyer as 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. The
Buyer may act in reliance upon any instrument or signature
believed by it in good faith to be genuine and may assume, if in
good faith, that any person purporting to give notice or receipt
or advice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized
to do so.
(v) The Buyer as 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
in good faith and in accordance with such advice.
(vi) Any payments of income, if any, from the Escrow
Account shall be subject to withholding regulations then in force
with respect to United States taxes.
(vii) The Buyer at any time (A) may be discharged from its
duties and obligations hereunder by the delivery to it of
notice of termination signed by the Seller Representative and
the written designation by the Seller Representative and Buyer
of another person to act as an Escrow Agent (Successor
Designation) or, (B) at any time may resign by giving written
notice to such effect to the Seller Representative. Upon any
such termination or resignation, the Buyer shall deliver the
Escrowed Shares and Escrowed Funds to any successor, or to
any court of competent jurisdiction if no such successor is
agreed upon, whereupon the Buyer shall be discharged of and
from any and all further obligations arising in connection
with this Agreement. The termination or resignation of the
Buyer shall take effect on the earlier of (1) the appointment
of a successor by the Buyer and the Seller Representative or
a court of competent jurisdiction or (2) the twentieth day
after the date of delivery to the Seller Representative of
the Buyer's written notice of resignation. If at that time
the Buyer or a successor has not received a designation of
a successor escrow agent, the Escrow Agent's sole
responsibility after that time shall be to keep the Escrowed
Shares and Escrowed Funds safe until receipt of a designation
of successor escrow agent or a joint written disposition
instruction by the parties hereto or an enforceable order of
a court of competent jurisdiction. In the event Buyer or the
successor Escrow Agent shall merge or consolidate with another
entity or shall sell all or substantially all of its assets or
corporate trust business to another entity, the surviving
entity or transferee, as the case may be, shall be the successor
Escrow Agent without further act.
(viii) The Buyer or successor Escrow Agent shall have no
responsibility for the contents of any writing of any third
party contemplated herein as a means to resolve disputes and
may rely without any liability upon the contents thereof.
(ix) In the event of any dispute between the Sellers and the
Buyer hereto resulting in adverse claims or demands being made in
connection with the Escrowed Shares and Escrowed Funds or in
the event that the Buyer or successor Escrow Agent in good faith
is in doubt as to what action it should take hereunder, the Buyer
or, if it is replaced, the successor Escrow Agent shall retain the
Escrowed Shares and Escrowed Funds until it shall have received
(A) a final and non-appealable order of a court of competent
jurisdiction directing delivery of the Escrowed Shares and
Escrowed Funds or (B) a written agreement executed by the Buyer
and Seller Representative directing delivery of the Escrowed
Shares and Escrowed Funds, in which event the Buyer or the
successor Escrow Agent shall release and distribute the Escrowed
Shares and Escrowed Funds in accordance with such order or
agreement. The Buyer or successor Escrow Agent shall act on
such court order without further question.
(x) The parties hereto irrevocably (A) submit to the
jurisdiction of any state or federal court sitting in New York County,
New York in any action or proceeding arising out of, or relating to,
this Agreement, (B) agree that all claims with respect to such action
or proceeding shall be heard and determined in such state or federal
court, and (C) waive, to the fullest extent possible, the defense of
an inconvenient forum. The parties hereby consent to and grant any
such court jurisdiction over the persons of such parties and over the
subject matter of any such dispute and agree that delivery or mailing
of process or other papers in connection with any such action or
proceeding in the manner provided hereinabove, or in such other
manner as may be permitted by law, shall be valid and sufficient service
thereof.
(xi) Distribution, withdrawal and cancellation of all of the
Escrowed Shares and Escrowed Funds pursuant to this Agreement by the
Buyer or successor Escrow Agent shall operate to divest all right,
title, interest, claim and demand, either at law or in equity, of any
party to this
Agreement in and to the Escrowed Shares and Escrowed Funds not receiving
the benefit of such distribution, withdrawal and cancellation, and
shall be a perpetual bar both at law and in equity as against the
other parties hereto. The Buyer's or the successor Escrow Agent's
responsibilities and liabilities hereunder will terminate upon transfer,
withdrawal and cancellation of all the Escrowed Shares and Escrowed
Funds under this Agreement.
(xii) Irrespective of the forgoing, the Buyer will act on
instructions from Seller Representative to sell any of the Escrowed
Shares that become registered under the Securities Act of 1933, as
amended, for resale by the Seller; provided that the net proceeds
from such sale shall be deemed Escrowed Funds to be held in
accordance with the terms hereof until released in accordance with
the terms hereof.
7. Voting. As long as any Escrowed Shares remains subject to the
Agreement, the Seller in whose name such Escrowed Shares are registered
shall have the right to vote such shares on all matters submitted to the
stockholders of the Buyer and shall be entitled to receive all notices and
communication made to all stockholders of the Company.
8. Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be (a) delivered by
hand, (b) facsimile, or (c) overnight delivery with proper postage
prepaid, and addressed as follows:
(i) If to the Buyer:
Scientific Industries, Inc.
00 Xxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Chief Executive Officer
Facsimile Number: (000) 000-0000
With a copy to:
Reitler Xxxxx & Xxxxxxxxxx LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxxxxxxx, Esq.
Facsimile Number: (000) 000-0000
(ii) If to the Seller Representative:
Xx. Xxxxx Xxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
With a copy to:
Xxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP
0000 Xxxxx Xxxxxx Xxxxx
000 0xx Xxx.
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Except as
otherwise provided herein, no notice or communication shall be effective
until received.
9. Miscellaneous.
(a) Binding Effect. This Agreement shall be binding upon, and
inure solely to the benefit of, the parties hereto and their respective
successors and assigns, heirs and administrators and shall not be
enforceable by, or inure to the benefit of, any other third party,
except as provided in paragraph (vii) of Section 6(b) with respect to
the termination of, or resignation by, the Escrow Agent. No party
may assign any of its rights or obligations under this
Agreement without the written consent of the other parties.
(b) Choice of Law. This Agreement shall be construed in
accordance with, and governed by, the internal law of the State of
New York (without reference to its rules as to conflicts of law).
(c) Modification. This Agreement may only be modified by a
writing signed by the Buyer and the Sellers, or on behalf of the
Sellers, the Seller Representative.
(d) Headings. The section headings herein are for convenience
only and shall not affect the construction thereof. Unless otherwise
indicated, references to Sections and Articles are to Sections and
Articles, respectively, contained herein.
(e) Counterparts; Facsimile. This Agreement may be executed
in one or more counterparts (each of which may be transmitted via
facsimile) but all such separate counterparts shall constitute but
one and the same instrument; provided that, although executed in
counterparts, the executed signature pages of each such counterpart
may be affixed to a single copy of this Agreement which shall
constitute an original.
(f) Conflicting Language. In the event of a conflict between
Buyer and the Sellers relating to the language of this Agreement
and the language of the Purchase Agreement, as between the Buyer
and the Sellers, the language of the Purchase Agreement shall
control between them.
(g) Termination. The escrow created pursuant to this Escrow
Agreement shall terminate at the time that the full amount of
the Escrowed Shares and Escrowed Funds and the interest thereon
have been disbursed, withdrawn or cancelled in accordance herewith.
(h) Seller Representative. The Sellers represent and warrant to
the Buyer that Xxxxx Xxxxx, Seller Representative, has the power and
authority to enter into and perform her obligations under this
Agreement on behalf of each of the Sellers. Any actions by the
Seller Representative shall be binding upon all of the Sellers.
Unless and until notified in writing by a majority in interest of
the Sellers or by the Seller Representative herself that
she has resigned or been removed, the Buyer or successor Escrow
Agent may conclusively assume that the Seller Representative has
the power and authority to act on behalf of and bind the Sellers
with respect to matters hereunder, and the Buyer or successor
Escrow Agent may act upon the directions and notices from the
Seller Representative without inquiry.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
SCIENTIFIC INDUSTRIES, INC.
By: /s/Xxxxxx X. Xxxxxx
___________________________
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
SELLERS:
/s/ Xxxxx Xxxxx
________________
Xxxxx Xxxxx
/s/Xxxxxxx X. Xxxxxx
____________________
Xxxxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxxxx
_______________________
Xxxxxxx X. Xxxxxxxx
SCHEDULE I
TO
ESCROW AGREEMENT
Names Address Escrowed Portion
Shares
_____________ ________________ _________ ________
Xxxxx Xxxxx 000 Xxxxxxxxx Xxxxx 112,950 90.36%
Xxxxxxx, XX 00000
Xxxxxxx X. Xxxxxx 000 Xxxxxxx Xxx. 6,025 4.82%
Xxxxxxxxxx, XX
00000
Xxxxxxx X. Xxxxxxxx 000 Xxxxxxxxxx Xxx. 6,025 4.82%
#123
Xxxxxxx, XX 00000
-------- -------
Total: 125,000 100.0%
