ESCROW AGREEMENT
This
Escrow Agreement ("Agreement")
is
made as of this ___ day of ____________, 2006 by and between Science
Dynamics Corporation, a Delaware corporation (“Purchaser”), Xxxxxxxxx
Technologies, Inc., a Virginia corporation (“Company”),
and the
individuals listed on Schedule 1 hereto (“Owners”),
and
Shaiman,
Drucker, Beckman, Xxxxx & Xxxxxxx, LLP, as escrow agent (the "Escrow
Agent").
All
capitalized terms used in this Agreement shall, unless otherwise defined herein,
shall have the same meanings ascribed to such terms in the Stock Purchase
Agreement (as defined below).
WITNESSETH:
WHEREAS,
Purchaser,
Owners, Company and Owner Representative have executed a Stock Purchase
Agreement dated as of ___________, 2006 (“Stock
Purchase Agreement”);
and
WHEREAS,
in accordance with Section 3.4 of the Stock Purchase Agreement, the parties
are delivering to Escrow Agent an amount equal to Three Hundred and Fifty
Thousand Dollars ($350,000) in cash (the "Escrow
Cash")
and
certificates representing 5,833,333 shares of Purchaser's common stock (the
"Escrow
Shares"
and
collectively with the Escrow Cash, the "Escrow
Deposit"),
to
secure indemnification obligations of the Owners, in accordance with the terms
and conditions of the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
1.
Acceptance
by Escrow Agent.
The
Escrow Agent hereby accepts the appointment as escrow agent hereunder and agrees
to act on the terms and conditions hereinafter set forth.
2. Escrow
Fund.
Purchaser shall send to the Escrow Agent (i) the Escrow Cash, by wire transfer
to: Account: Shaiman, Drucker, Beckman, Xxxxx & Xxxxxxx, LLP Escrow Account;
Account number: 8615759167; PNC Bank, NA; ABA Number: 000000000;Contact:
Xxxxxxxx Xxxxx, PNC Bank, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000, (000)
000-0000; and (ii) the Escrow Shares. The Escrow Agent will deliver notice
to
the Owner Representative upon the Escrow Agent’s receipt of the Escrow
Deposit.
(a) The
Escrow Agent shall maintain a record of the Escrow Deposit and each payment
made
pursuant to the terms of this Agreement. Each payment by the Escrow Agent in
response to a Draw-Down Request (as defined below) in accordance with
Section 4
of this
Agreement shall reduce the Escrow Balance (as defined below).
(b) The
Escrow Agent shall establish and maintain a segregated account (the
“Escrow
Fund”)
into
which it shall deposit the Escrow Deposit and all proceeds received thereon
and
from which it shall make payments or other distributions in accordance with
the
terms of this Agreement and the Stock Purchase Agreement. “Escrow
Balance”
shall
mean the balance of the Escrow Fund on any given date, as increased by accrued
interest or decreased by a payment in response to a Draw-Down Request or other
release, all as set forth herein. The Cash Escrow shall be kept in an interest
bearing account or such other money market account as approved in writing by
Purchaser and Owner Representative.
All
income earned on the Escrow Fund shall be for the account of the
Owners.
3.
Rights
and Responsibilities of Escrow Agent.
The
acceptance by the Escrow Agent of its duties hereunder is subject to the
following terms and conditions, which the parties to this Agreement hereby
agree
shall govern and control with respect to the Escrow Agent's rights, duties,
liabilities and immunities:
a.
The
Escrow Agent shall act hereunder as a depository only, and it shall not be
responsible or liable in any manner whatever for the sufficiency, correctness,
genuineness or validity of any document furnished to the Escrow Agent or any
asset deposited with it.
b.
The
Escrow Agent shall be protected in acting upon written instructions issued
pursuant to this Escrow Agreement if Escrow Agent, in good faith, believes
such
written instructions to be genuine and what it purports to be.
c.
The
Escrow Agent shall not be liable for any error of judgment or for any action
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 herewith except
its
own gross negligence or willful misconduct.
d. Purchaser,
Company and Owners jointly and severally agree to indemnify the Escrow Agent
and
hold it harmless from and against any loss, liability, expenses (including
reasonable attorneys' fees, costs and expenses), claim or demand arising out
of
or in connection with the performance of its obligations in accordance with
the
provisions of this Escrow Agreement, except for the gross negligence or willful
misconduct of the Escrow Agent. These indemnities shall survive the resignation
of the Escrow Agent or the termination of this Escrow Agreement.
e.
The
Escrow Agent shall have no duties except those specifically set forth in this
Agreement. This Agreement represents the entire understanding of the parties
hereto with respect to the subject matter contained herein and supersedes any
and all other prior agreements between them.
f.
The
Escrow Agent shall have the right at any time it deems appropriate to seek
an
adjudication in a court of competent jurisdiction as to the respective rights
of
the parties hereto and shall not be held liable by any party hereto for any
delay or the consequences of any delay occasioned by such resort to
court.
4.
Notice
to Escrow Agent and Release of Escrow.
(a) Draw-Downs.
(1) On
each
occasion on which Purchaser determines in good faith that it is entitled to
payment of a claim for indemnification against the Owners pursuant to
Article
10
of the
Stock Purchase Agreement, Purchaser may deliver to Owner Representative and
Escrow Agent a written request (a “Draw-Down
Request”)
for
the payment of such amount to Purchaser.
2
(2) Each
Draw-Down Request shall set forth (i) the amount requested (which may be a
good
faith estimate of Indemnifiable Losses), and, (ii) in reasonable detail, the
specific basis for the determination of the amount of the claim and the reason
Purchaser is entitled to the payment of such amount.
(3) Within
thirty (30) days after receipt by Escrow Agent and Owner Representative of
a
Draw-Down Request, Owner Representative may deliver to Purchaser and the Escrow
Agent a written objection to all or any part of the Draw-Down Request (an
“Objection”).
(4) If
in
connection with a Draw-Down Request, Owner Representative fails to deliver
an
Objection for receipt by Escrow Agent and Owner Representative by the end of
the
thirtieth (30th)
day
following the receipt by Escrow Agent and Owner Representative of such Draw-Down
Request, Escrow Agent shall pay to Purchaser out of the Escrow Fund an amount
equal to the amount requested in the Draw-Down Request. Any such payment shall
be made on or before the fifth (5th)
Business Day following the expiration of such thirty (30) day period. Escrow
Agent shall continue to hold any amounts remaining in the Escrow Fund following
the payment of any Draw-Down Request in accordance with the terms of this
Agreement.
(5) If
Owner
Representative delivers a timely Objection with respect to all or any portion
of
a Draw-Down Request, Escrow Agent shall not disburse, and shall continue to
hold
in the Escrow Fund, the amount requested in the Draw-Down Request or the
disputed portion thereof, as the case may be, pending receipt of either
(i) written payment instructions signed by Purchaser and Owner
Representative, specifying the agreement of the parties as to the action to
be
taken by the Escrow Agent in respect of such Draw-Down Request (the
“Payment
Instructions”)
or
(ii) a notice from either Purchaser or Owner Representative stating that
such Draw-Down Request has been submitted to a court of competent jurisdiction
for judgment and that a judgment with respect to such matters has been rendered
(a “Judgment
Notice”)
which
is accompanied by a certified copy of a final, non-appealable order of such
court (an “Order”),
pursuant to which such court has determined whether and to what extent Purchaser
is entitled to the amount requested in the Draw-Down Request. Upon receipt
of
Payment Instructions or a Judgment Notice and Order, as applicable, Escrow
Agent
shall thereafter act in accordance with Section 4(a)(6)
or
4(a)(7)
below,
as applicable.
(6) Upon
receipt by Escrow Agent of Payment Instructions, if such Payment Instructions
indicate that Purchaser is entitled to payment in respect of all or any portion
of the Draw-Down Request, then Escrow Agent shall release from the Escrow Fund
and pay to Purchaser the amount indicated in such Payment Instructions. Such
payment shall be made on or before the fifth (5th)
Business Day following the date on which such Payment Instructions are received
by Escrow Agent. If such Payment Instructions indicate that Purchaser is not
entitled to all or any portion of the amount claimed in such Draw-Down Request
(a “Discharge
Notice”),
then
Escrow Agent shall (i) pay to Purchaser that portion, if any, of the amount
claimed in the Draw-Down Request to which Purchaser is entitled pursuant to
such
Payment Instructions, and (ii) continue to hold the remaining amount in the
Escrow Fund in accordance with the terms of this Agreement.
3
(7) If
Escrow
Agent has received a Judgment Notice and an Order with respect to any Draw-Down
Request, then Escrow Agent shall release from the Escrow Fund and pay to
Purchaser an amount equal to the amount due to Purchaser, as indicated in such
Order up to a maximum of the amount of the Escrow Balance. Such payment will
be
made on or before the fifth (5th)
Business Day following the date on which Escrow Agent received such Judgment
Notice and Order. If such Order indicates that Purchaser is not entitled to
all
or any portion of the amount claimed in the Draw-Down Request (a “Determination
Discharge”),
then
Escrow Agent shall (i) pay to Purchaser that portion, if any, of the amount
claimed in the Draw-Down Request to which Purchaser is entitled in accordance
with the Judgment Notice and Order, and (ii) continue to hold the remaining
amount in the Escrow Fund in accordance with the terms of this
Agreement.
(b) Draw-Downs
Generally.
(1) As
promptly as practicable following the disbursement of any funds from the Escrow
Fund, Escrow Agent shall send a written statement to Owner Representative and
Purchaser stating the amount of the disbursement and the amounts remaining
in
the Escrow Fund.
(2) All
payments made pursuant to this Section
4
shall be
paid in a combination of Escrow Cash and Escrow Shares as follows: the first
half in Indemnifiable Losses shall be paid in the Escrow Shares valued at the
greater of (i) the closing market price and (ii) the volume-weighted
average price per share for the fifteen days prior to the indemnification event,
and the second half in Indemnifiable Losses shall be paid in Escrow Cash. With
regard to payments made from the Escrow Shares, the Escrow Agent shall submit
the applicable stock certificates representing the Escrow Shares to the
appropriate party and shall take such other actions as required in order for
a
stock certificate to be issued to Purchaser. Should such payment require that
only a portion of the Escrow Shares be transferred to Purchaser, the remaining
Escrow Shares shall be returned to the Escrow Fund.
(3) Any
disbursement of cash from the Escrow Fund to Purchaser shall be made by wire
transfer to such accounts designated in writing to the Escrow Agent by
Purchaser.
(c) Release
of Escrow Fund.
Within
thirty (30) days of the date that is eighteen (18) months following the Closing
Date (the “Release
Date”),
subject to the proviso below, Escrow Agent shall pay to the Owners, care of
the
Owner Representative, from the Escrow Fund an aggregate amount equal to the
balance of the Escrow Fund on the Release Date (the “Disbursement
Amount”),
such
that each Owner will receive an amount equal to the Escrow Balance, multiplied
by the applicable Payment Factor (as set forth in Schedule O to the Stock
Purchase Agreement). If, however, Escrow Agent shall have received on or before
the Release Date one or more Draw-Down Requests which have not been paid in
accordance with Section 4(a)(4)
above
as
of the Release Date and as to which, on the Release Date, Escrow Agent has
not
received and fully acted upon Payment Instructions or a Judgment Notice and
Order, nor received a Discharge Notice or a Determination Discharge and paid
the
amount due to Purchaser pursuant thereto (any such Draw-Down Request being
referred to as an “Outstanding
Claim”),
Escrow Agent shall retain and continue to hold in accordance with the terms
hereof an amount equal to the amount requested in all such Outstanding Claims
up
to a maximum of the amount of the Escrow Balance that is potentially liable
(based on the most recent Draw-Down Request for each Outstanding Claim) with
respect to an Outstanding Claim (the “Retained
Amount”)
but
shall pay to the Owners, care of the Owner Representative and as instructed
by
Owner Representative, an amount equal to the excess, if any, of the Disbursement
Amount less the Retained Amount; and thereafter Escrow Agent shall release
from
the Escrow Fund all or portions of the Retained Amount as and when it receives,
and pays in full any amount due to Purchaser pursuant to, Payment Instructions,
Orders, Discharge Notices or Determination Discharges, as applicable, related
to
the Outstanding Claims. Following the Release Date, in the event that the
Retained Amount at any time exceeds the maximum amount (based on the Draw-Down
Request for each Outstanding Claim) of all Outstanding Claims, Escrow Agent
shall pay from the Escrow Fund according to the instructions of Owner
Representative, within five (5) Business Days of Owner Representative's written
request for such payment, an amount equal to such excess.
4
(d) Notwithstanding
the foregoing, if at any time Escrow Agent shall receive joint written
instructions executed by Purchaser and Owner Representative (“Joint
Written Instructions”),
to
release all or a portion of the Escrow Fund, then within five (5) Business
Days
after receipt of such Joint Written Instructions, the Escrow Agent shall release
all or a portion of the Escrow Fund pursuant to such Joint Written
Instructions.
5.
Amendment.
This
Agreement may not be amended or supplemented and no provision hereof may be
modified or waived, except by an instrument in writing, signed by all of the
parties hereto.
6.
Termination.
This
Agreement will terminate when the entire Escrow Fund has been fully disbursed
in
accordance with this Agreement; provided that nothing in this Section will
relieve any party hereto from liability for breach of this Agreement prior
to
such termination.
7. Resignation.
Escrow
Agent, and any successor Escrow Agent, may resign at any time as Escrow Agent
hereunder by giving at least thirty (30) days prior notice to the parties.
Upon
such resignation and the appointment of a successor Escrow Agent, the resigning
Escrow Agent shall be absolved from any duties as Escrow Agent hereunder. Upon
their receipt of notice of resignation from the Escrow Agent, Purchaser and
Owner Representative shall use their reasonable best efforts jointly to
designate a successor Escrow Agent. If the parties do not agree upon a successor
Escrow Agent within thirty (30) days after the receipt by the parties of the
Escrow Agent’s resignation notice (or after receipt by the Escrow Agent of
notice of termination of appointment as provided in the following sentence),
Escrow Agent may tender into the custody of a court of competent jurisdiction
all assets then held by it hereunder and shall thereupon be relieved of all
further duties and obligations under this Agreement, or may petition any court
of competent jurisdiction for the appointment of a successor Escrow Agent or
other appropriate relief and any such resulting appointment shall be binding
upon all parties hereto. By mutual agreement, Purchaser and Owner Representative
shall have the right at any time upon not less than seven (7) Business Days
written notice to terminate their appointment of Escrow Agent, or any successor
Escrow Agent, as Escrow Agent hereunder. Escrow Agent shall have no
responsibility for the appointment of a successor Escrow Agent
hereunder.
5
8.
Execution.
This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, but such counterparts together shall constitute one and the same
instrument. Any signature page delivered by a facsimile machine shall be binding
to the same extent as an original signature page with regard to any agreement
subject to the terms hereof or any amendment thereto.
9. Miscellaneous.
All
covenants and agreements contained in this Agreement by or on behalf of the
parties hereto shall bind and inure to the benefit of such parties and their
respective heirs, administrators, legal representatives, successors and assigns,
as the case may be, and all references to such parties herein shall be deemed
to
also refer to any successors, assigns, heirs, administrators and legal
representatives of said parties, as the case may be. The headings in this
Agreement are for the convenience of reference only and shall neither be
considered as part of this Agreement, nor limit or otherwise affect the meaning
hereof. This Agreement shall be construed and enforced in accordance with the
laws of the State of New Jersey.
10. Notices.
All
instructions, notices and other communications hereunder must be in writing
and
shall be deemed to have been duly given if delivered by hand or mailed by first
class, registered mail, return receipt requested, postage prepaid, and addressed
as follows:
|
If
to the
Owner
Representative:
|
Mr.
Xxxxxxx Xxxxxxxxx
0000
Xxx Xxxxxxx Xxxx
Xxxxxxx,
XX 00000
|
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With
a copy to:
|
Holland
& Knight LLP
0000
Xxxxxx Xxxxxxxxx, Xxxxx 000
XxXxxx,
Xxxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxxx
(Fax)
703/000-0000
|
|||
|
If
to the Company (pre-Closing):
|
Xxxxxxxxx
Technologies, Inc.
0000
Xxxxx Xxxx
Xxxxxxxx,
XX 00000
Facsimile:
703/365-9818
|
|||
|
With
a copy to:
|
Holland
& Knight LLP
0000
Xxxxxx Xxxxxxxxx, Xxxxx 000
XxXxxx,
Xxxxxxxx 00000
Attention:
Xxxxxxx X. Xxxxxx
(Fax)
703/000-0000
|
6
|
If
to Purchaser:
|
Science
Dynamics Corporation.
0000
X. Xxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx,
Xxx Xxxxxx 00000
Attention:
Mr. Xxxx Xxxxxxx
Facsimile:
__________________
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|||
|
With
a copy to:
|
Shaiman,
Drucker, Beckman, Xxxxx & Xxxxxxx LLP
0000
Xxxxxx Xxxxxx, 00xx
Xxxxx
Xxxxxxxxxxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esquire
Facsimile:
215/972-0048
|
{Signature
page follows.}
7
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
date first above written.
| Purchaser: | ||
| SCIENCE DYNAMICS CORPORATION | ||
| |
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| By: | ||
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Name:
Title:
|
Xxxx Xxxxxxx
_______________
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Company:
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| XXXXXXXXX TECHNOLOGIES, INC. | ||
| |
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| By: | ||
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Name:
Title:
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________________________________
________________________________
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Escrow
Agent:
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SHAIMAN,
DRUCKER, BECKMAN, XXXXX
&
XXXXXXX, LLP
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| By: | ||
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Xxxxxxx X.
Xxxxxxx
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Owners:
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Xxxxxxx
Xxxxxx
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Xxxxxx Xxxxxxxx |
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Xxxxxx Xxxxxxxx |
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Xxxxx Xxxxxxxxx |
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Xxxxxxx Xxxxxxxxx, as an Owner and as the Owner Representative |
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Xxxxxxx Xxxxxxxxx |
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Xxxxxx Xxxxx |
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Xxx
Xxxxx
|
Owners
|
Name
and Address of Owner
|
|
Xxxxxx
Xxxxxxxxxx
00000
Xxx Xxxxxx Xxx, Xxx. X
Xxxxxxx,
XX 00000
|
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Xxxxx
Xxxxxx
00000
Xxxxxxxx Xxxxx Xxxxxx
Xxxxxxx,
XX 00000
|
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Xxxxxxx
Xxxxxx
000
Xxxxxx Xxxxx, XX
Xxxxxx,
XX 00000-0000
|
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Xxxxxxxx
Blue
00000
Xxxxxxx Xxxxx
Xxxxx
Xxxxxxx, XX 00000
|
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Xxxxx
Xxxxx
00000
Xxxxxx Xxxx Xx.
Xxxxxxxxx,
XX 00000-0000
|
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Xxxxx
Xxxxxxx
0000
Xxxxxxx Xxxxxx Xxxx
Xxxxxxxxxx,
XX 00000
|
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Xxxxxxxxx
Devolite-Xxxxx
0000
Xxxxxxx Xx.
Xxxxxx,
Xx 00000
|
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Xxxxx
Xxxxx
000
Xxxxxx Xxxxx
Xx
Xxxxx, XX 00000
|
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Xxxxxx
Xxxxxxx
0000
Xxxxxxx Xxxxx
Xxxxxxx,
XX 00000
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Xxxxxx
Xxxxxx
0000
Xxxxxxxxx Xxxx Xxxxx
Xxxxxx,
XX 00000
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Schedule1
|
Xxxxxx
Xxxxxxxx
0000
Xxxxxxxxxx Xxxxx
Xxxxxxxxx,
XX 00000
|
|
Xxxxxx
Xxxxxxxx
0000
Xxx Xxxxxx Xxxxx
Xxxxxx,
XX 00000
|
|
Xxxxxxxx
Xxxxxxxxx
0000
Xxx Xxxxxxx Xxxx Xxxxxxx,
XX
00000-0000
|
|
Xxxx
Xxxxxxxxx
0000
Xxx Xxxxxxx Xxxx
Xxxxxxx,
XX 00000-0000
|
|
Xxxxx
Xxxxxxxxx
0000
Xxx Xxxxxxx Xxxx
Xxxxxxx,
XX 00000-0000
|
|
Xxxxxxx
Xxxxxxxxx
0000
Xxx Xxxxxxx Xxxx
Xxxxxxx,
XX 00000-0000
|
|
Xxxxxxx
Xxxxxxxxx
0000
Xxx Xxxxxxx Xxxx
Xxxxxxx,
XX 00000-0000
|
|
Xxxxxx
Xxxxx
00000
Xxxxxxx Xx
Xxxxxxxx,
XX 00000
|
|
Xxxxxx
Xxxxx
0000
Xxxx Xxxxxx Xxxxx,
XxXxxx,
XX 00000
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Schedule1
