DRAFT
4/3/98
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") dated June __, 1998 is entered
into by and among ATC Communications Group, Inc., a Delaware corporation
("Buyer"), _______________ (the "Representative"), as representative of the
shareholders ("Shareholders") of IQI, Inc. (the "Company") and Xxxxxx Trust
and Savings Bank as escrow agent hereunder (the "Escrow Agent").
RECITALS:
Pursuant to that certain Agreement and Plan of Merger dated as of April
__, 1998 by and among Buyer, the Company and ATC Merger Sub, Inc. (the
"Merger Agreement"), the Company is merging with ATC Merger Sub, Inc. and
becoming a wholly-owned subsidiary of Buyer, and in connection with the
merger, the Shareholders are receiving common stock of the Company.
The Merger Agreement provides that an escrow fund comprised of shares of
Buyer Common Stock to be issued to the Shareholders in the merger shall be
established to secure the Shareholders' obligation to indemnify Buyer (and
its officers, directors, employees and agents) against certain Damages under
ARTICLE X of the Merger Agreement. For purposes of this Agreement, Buyer and
such other parties entitled to indemnification under ARTICLE X are
collectively referred to as "Buyer."
Accordingly, Buyer, Shareholders and the Escrow Agent have agreed to
enter into this Agreement relating to the Escrowed Shares (as defined below).
For convenience, the Shareholders have named the Representative as their
representative and have given the Representative the authority to take
certain actions on their behalf with respect to the Escrowed Shares and the
matters referred to in this Agreement.
NOW, THEREFORE, for good, valid and binding consideration, the receipt
and adequacy of which is hereby acknowledged, the parties hereto, intending
to be legally bound, hereby, agree as follows:
1. Except as otherwise defined herein, the capitalized terms used in
this Agreement shall have the meanings ascribed to them in the Merger
Agreement.
2. Pursuant to the terms and conditions of the Merger Agreement,
__________ shares of Buyer Common Stock issued in the name of the Escrow
Agent have been delivered to the Escrow Agent to secure the Shareholders'
indemnification obligations under ARTICLE X of the Merger Agreement (the
"Escrowed Shares"). The Escrowed Shares shall be held by the Escrow Agent
upon the terms and conditions contained herein and shall be released by the
Escrow Agent in
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accordance with this Agreement. The Escrow Agent agrees that it does not and
shall not have any right of set-off or other rights or claims with respect to
the Escrowed Shares, except as set forth specifically in this Agreement.
3. (a) The Escrow Agent, upon receipt of a certificate from Buyer in
substantially the form of EXHIBIT I attached hereto (a "Certificate of
Instruction"), shall, not later than the business day next following its
receipt of such Certificate of Instruction, give written notice to the
Representative of its receipt, together with a copy, of such Certificate of
Instruction. Concurrent with the delivery of the Certificate of Instruction
to the Escrow Agent, Buyer shall deliver to the Representative written notice
setting forth in reasonable detail the facts giving rise to the claim
contained in the Certificate of Instruction.
(b) If the Escrow Agent (i) shall not, within twenty (20) days after it
shall have given such notice to the Representative, have received from the
Representative a certificate in substantially the form of EXHIBIT II attached
hereto (an "Objection Certificate") in respect of the Certificate of
Instruction to which such notice relates or (ii) shall have received such an
Objection Certificate within such twenty (20) days and shall thereafter have
received a copy of a joint notice signed by the Representative, and by Buyer,
or an award of an arbitrator pursuant to SECTION 3(c) of this Agreement to
the effect that the Owed Amount (as defined in the Certificate of
Instruction) referred to in such Certificate of Instruction or a specified
portion thereof, constitutes Damages against which Buyer may apply all or a
portion of the Escrowed Shares (valued, for this purpose, at $_____ per share
(the "Share Price")), then the Escrow Agent shall, on the business day next
following the expiration of such twenty (20) days or the receipt by the
Escrow Agent of such award, as applicable, release to Buyer from the Escrowed
Shares a number of shares of Buyer Common Stock equal to the applicable Owed
Amount (or portion thereof) divided by the Share Price.
(c) Upon receipt of an Objection Certificate, the Escrow Agent shall,
not later than the business day next following receipt thereof, give written
notice to Buyer of its receipt together with a copy of said Objection
Certificate. In the event that the Representative and Buyer are unable to
informally resolve any dispute with respect to all or a specified portion of
an Owed Amount through discussion and negotiation within thirty (30) days
after the date of the Objection Certificate, such dispute for all or a
specified portion, as applicable, of an Owed Amount shall be referred by
Buyer to binding arbitration in accordance with SECTION 11.08 of the Merger
Agreement. All of Escrow Agent's reasonable fees and expenses incurred in
connection with any such dispute resolution process or arbitration shall be
paid by the parties in the same manner as the arbitrator's fees and expenses
as set forth in SECTION 11.08 of the Merger Agreement.
(d) Upon receipt by the Escrow Agent of a copy of a joint notice from
Buyer and the Representative, or an award of an arbitrator to the effect that
the Owed Amount (or a specified portion thereof) referred to in a Certificate
of Instruction in respect of which the Escrow Agent had received an Objection
Certificate is not an amount properly payable as Damages against which the
Escrowed Shares may be applied, such Certificate of Instruction (or such
specified portion of the
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Owed Amount set forth therein) shall be deemed canceled. Escrow Agent shall
have no duty to determine if the arbitrator's award is final or binding, but
may act in accordance therewith.
(e) Upon determining that it has no claim or has released its claim
with respect to an Owed Amount referred to in a Certificate of Instruction or
a specified portion of the Owed Amount set forth therein, Buyer shall
promptly give notice in writing to the Escrow Agent to cancel such
Certificate of Instruction (or such specified portion).
4. As soon as practicable after the 60th day following delivery of the
audit opinion and audited consolidated financial statements of Buyer and the
Company for the fiscal year ending December 31, 1998, the Escrow Agent shall
release to Shareholders any remaining Escrowed Shares in accordance with the
written instruction of the Representative; PROVIDED, HOWEVER, that if Buyer
has notified the Representative on or prior to the Expiration Date of Damages
sustained or the assertion of any claim or the commencement of any action or
proceeding with respect to which Damages are expected to occur, Buyer and the
Representative shall notify the Escrow Agent with a Certificate of Claim (in
substantially the same form as EXHIBIT III attached hereto), and the Escrow
Agent shall retain a number of Escrowed Shares that, based on the good faith
estimate of the Representative and Buyer of the maximum amount that is
reasonably likely to become such Damages, would be adequate to recompense
Buyer if such Damages were incurred, all as set forth in the Certificate of
Claim (which Certificate of Claim shall not constitute an acknowledgment of
the Representative that the amount set forth therein represents Damages
actually incurred by Buyer). Any dispute regarding the amount necessary to
recompense Buyer shall be resolved as set forth in SECTION 3(c) hereof. When
the amount of such Damages is paid, payment is provided for or the claim is
otherwise resolved and the Escrow Agent has been given notice thereof, any
remaining Escrowed Shares still held in escrow in respect of such Damages
shall be released promptly to Shareholders in accordance with the written
instructions of the Representative. Upon the release by the Escrow Agent to
Shareholders of the balance remaining of the Escrowed Shares, this Agreement
shall automatically terminate, except for the provisions of the Agreement
affecting the reimbursement of expenses, indemnity and fees of Escrow Agent.
Cash dividends distributable in respect of the escrowed shares, if any, shall
be promptly distributed by the Escrow Agent to Shareholders in accordance
with the written restrictions of the Representative.
5. The duties and obligations of the Escrow Agent shall be determined
solely by the provisions of this Agreement, and the Escrow Agent shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement and there are no implied duties
herein. In furtherance and not in limitation of the foregoing:
(i) the Escrow Agent shall be fully protected in relying in good
faith upon any written certification, notice, direction, request, waiver,
consent, receipt or other document that the Escrow Agent believes to be
genuine and duly authorized, executed and delivered;
(ii) the Escrow Agent shall not be liable for any error of judgment,
or for any act done or omitted by it, or for any mistake in fact or law, or
for anything that it may do or refrain from doing in connection therewith,
including its own mere negligence; PROVIDED,
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HOWEVER, that notwithstanding any other provision of this Agreement, the
Escrow Agent shall be liable for its willful misconduct, recklessness or
gross negligence; Shareholders, and Buyer, jointly and severally agree to
indemnify Escrow Agent for, and to hold it harmless against, any damages,
liability or expense (including, without limitation, reasonable attorneys'
fees) incurred by it without gross negligence, recklessness or willful
misconduct on its part arising out of or in connection with its entering
into this Agreement and the carrying out of its duties hereunder, including
the costs and expenses of defending itself against any claim of liability
arising out of this Agreement, it being the express intent to indemnify and
hold the Escrow Agent harmless against its own mere negligence. The costs
and expenses of enforcing the right of indemnification shall also be paid
by Buyer and Shareholders, jointly and severally. This right of
indemnification shall survive the termination of this Escrow Agreement, and
the removal or resignation of the Escrow Agent;
(iii) the Escrow Agent may seek the advice of legal counsel in the
event of any dispute or question as to the construction of any of the
provisions of this Agreement or its duties hereunder, and it shall incur no
liability and shall be fully protected in respect of any action taken,
omitted or suffered by it in good faith in accordance with the opinion of
such counsel;
(iv) in the event that the Escrow Agent shall in any instance in good
faith be uncertain as to its duties or rights hereunder, it shall be
entitled to refrain from taking any action in that instance and its sole
obligation, subject to those of its duties hereunder as to which there is
no such uncertainty, shall be to keep safely all property held in escrow
until it shall be directed otherwise in writing by the Representative and
Buyer or by a final order or judgment of a court of competent jurisdiction
which shall be accompanied by a legal opinion of the presenting party
satisfactory to the Escrow Agent to the effect that such opinion or
judgment is final and enforceable and is not subject to further appeal;
(v) the Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to initiate or defend any
legal proceedings which may be instituted against it in respect of the
subject matter of these instructions; PROVIDED, HOWEVER, in the event of
any conflicting or inconsistent claims or demands being made in connection
with the subject matter of this Agreement, or in the event that Escrow
Agent is in doubt as to what action it should take hereunder, Escrow Agent
is hereby authorized to petition any court of competent jurisdiction for
instructions or to interplead the funds or assets so held into such court.
The parties agree to the jurisdiction of such court over their persons as
well as the Escrowed Shares, waive personal service of process, and agree
that service of process by certified or registered mail, return receipt
requested, to the business addresses set forth in this Agreement shall
constitute adequate service. Shareholders, on the one hand, and Buyer, on
the other hand, jointly and severally agree to indemnify and hold Escrow
Agent harmless from any liability or damages occasioned thereby and to pay
any and all of its cost, expenses, and reasonable attorneys' fees incurred
in any such action and agree that, upon the filing of such petition or
interpleader action, Escrow Agent, its servants, agents, employees or
officers will be relieved of further liability; and
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(vi) it is strictly understood that Escrow Agent has no duty to
disburse any Escrowed Shares to any person until such Escrowed Shares have
been received by Escrow Agent and those Escrowed Shares are available for
disbursement. All parties acknowledge and agree that Escrow Agent is
acting solely and exclusively as a custodian hereunder.
6. Escrow Agent is entitled to its reasonable fees and costs,
including reasonable attorneys' fees, as set forth in ATTACHMENT A. Fees are
payable in advance as compensation for the ordinary administrative services
to be rendered hereunder and the Buyer and Shareholders agree to pay all fees
and expenses, jointly and severally. To the extent such fees and expenses
are not paid by the undersigned, the Buyer and Representative will jointly
instruct the Escrow Agent to sell a portion of the Escrowed Shares at their
fair market value in an amount sufficient to pay any such fees or expenses.
The Escrow Agent shall provide written notice to Buyer and the Representative
of any such sale.
7. The Representative and Buyer severally agree to provide to the
Escrow Agent all instruments and documents within their respective powers to
provide which may be necessary for the Escrow Agent to perform its duties and
responsibilities hereunder.
8. Any notices or other communication required or permitted under this
Agreement shall be in writing and shall be delivered personally, sent by
facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Notices shall not be deemed to be given until actually
received.
(a) If to Buyer to:
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with a copy to:
Xxxxxx & Xxxx, L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
(000) 000-0000 (telephone)
(000) 000-0000 (telecopy)
Attention: Xxxxxxx X. Xxxxxx
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(b) If to the Representative as follows:
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with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
Twenty-Third Floor
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
(c) If to Escrow Agent to:
Xxxxxx Trust and Savings Bank
000 Xxxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
(000) 000-0000 (telephone)
(000) 000-0000 (telecopy)
Attention: Escrow Division/[Xxxxxxxx Xxxxxxxxx]
Any party may by notice given in accordance with this SECTION 8 to the other
parties designate another address or person for receipt of notices hereunder.
9. The Escrow Agent may at any time resign hereunder by giving written
notice of its resignation to the parties hereto at their addresses set forth
in this Agreement, at least 10 business days prior to the date specified for
such resignation to take effect. Upon the effective date of such
resignation, all property then held by the Escrow Agent hereunder shall be
delivered by it to such person as may be designated in writing by each of the
other parties hereto (and the parties shall use reasonable best efforts to
name a successor escrow agent prior to the date specified for the Escrow
Agent's resignation to take effect), whereupon all the Escrow Agent's
obligations hereunder shall, except as hereinafter provided, cease and
terminate. If no such person shall have been so designated by such date, all
obligations of the Escrow Agent hereunder shall nevertheless, except as
hereinafter provided, cease and terminate. The Escrow Agent's sole
responsibility thereafter shall be to keep safely all property then held by
it and to deliver the same to a person designated by each of the other
parties hereto or in accordance with the directions of a final order or
judgment or a court of competent jurisdiction. A termination under this
paragraph shall in no way discharge the provisions of this Agreement
affecting the reimbursement of expenses, indemnity and fees of Escrow Agent.
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10. The Representative shall have the right, in its sole discretion, on
behalf of, and as directed by, the Shareholders, to direct the Escrow Agent
in writing as to the exercise of any voting rights pertaining to the Escrowed
Shares, and the Escrow Agent shall comply with any such written instructions.
[(a) Except as expressly provided herein and to the extent created under
the Merger Agreement, neither Shareholders nor Buyer shall have any legal or
equitable right, title or interest, either actual or contingent, in or to the
Escrowed Shares, and the Escrowed Shares shall not constitute the legal or
equitable property of either Shareholders or Buyer. Neither Shareholders nor
Buyer shall have the right or ability to transfer, pledge, convey, hypothecate
or grant, either outright or as security, the Escrowed Shares except as
expressly provided herein. If either Shareholders or Buyer is determined to
have any right, title or interest in or to the Escrowed Shares, Shareholders' or
Buyer's, as applicable, right, title and interest shall be limited to, at most,
bare legal title to the Escrowed Shares; provided, further, that in the event of
the commencement of a bankruptcy case or cases wherein a Shareholder or Buyer is
the debtor, the applicable Escrowed Shares shall not constitute property of the
debtor's estate within the meaning of 11 U.S.C. Section 541. No creditor of
either Shareholders or Buyer shall have any right to have or to hold the
Escrowed Shares in satisfaction of any claim or as collateral for any
obligation, and shall not be able to obtain a security interest in the Escrowed
Shares.]
[(b) Solely in the event that Shareholders are deemed to have any right,
title or interest in or to the Escrowed Shares, Shareholders hereby grant to
Buyer a security interest in (i) Shareholders' right, title or interest in or to
the Escrowed Shares, and (ii) Shareholders' right, title or interest in or under
this Agreement. Solely in the event that Buyer is deemed to have any right,
title or interest in or to the Escrowed Shares, Buyer hereby grants to
Shareholders a security interest in (y) Buyer's right, title or interest in or
to the Escrowed Shares, and (z) Buyer's right, title or interest in or under
this Agreement. Buyer and Shareholders may perfect the security interest so
granted herein, and each shall cooperate with any reasonable request of the
other in connection therewith. Notwithstanding the foregoing, the Escrow Agent
shall not be obligated to agree to anything concerning perfection which modifies
this Agreement or increases its duties hereunder without its express written
consent.]
11. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE SUBSTANTIVE LAWS (BUT NOT THE CHOICE OF LAW PROVISIONS) OF THE STATE
OF NEW YORK.
12. The obligations of the parties hereto (including the Escrow Agent)
are unique in that time is of the essence, and any delay in performance
hereunder by any party will result in irreparable harm to the other parties
hereto. Accordingly, any party may seek specific performance and/or
injunctive relief before any court of competent jurisdiction in order to
enforce this Agreement or to prevent violations of the provisions hereof, and
no party shall object to specific performance or injunctive relief as an
appropriate remedy. The Escrow Agent acknowledges that its obligations, as
well as the obligations of the Representative and Buyer hereunder, are
subject to the equitable remedy of specific performance and/or injunctive
relief.
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13. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
executed by the parties, or in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any such right, power or privilege, or any
single or partial exercise of any such right, power or privilege, preclude
any further exercise thereof or the exercise of any other such right, power,
or privilege. No waivers of or exceptions to any term, condition or provision
of this Agreement, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such term, condition or
provision.
14. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and permitted assigns and legal
representatives. Neither this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other parties. No person or entity shall be
deemed a third party beneficiary of this Agreement and the Escrow Agent shall
have no duties or obligations to any such person, and Escrow Agent may
disregard any instruction from such person.
15. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the
same instrument. Counterpart signature pages may be executed and delivered
pursuant to facsimile transmission.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
day and year first above written.
ATC COMMUNICATIONS GROUP, INC.
By:
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Its:
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[REPRESENTATIVE]
By:
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Its:
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[ESCROW AGENT]
By:
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Its:
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EXHIBIT I
CERTIFICATE OF INSTRUCTION
TO
________________________,
AS ESCROW AGENT
The undersigned, ATC Communications Group, Inc., a Delaware corporation
("Buyer"), pursuant to SECTION 3 of the Escrow Agreement dated as of June __,
1998 (the "Escrow Agreement"), by and among Buyer, the Representative and you
as the Escrow Agent (terms defined in the Escrow Agreement have the same
meanings when used herein), hereby:
(a) certifies that (i) $________ (the "Owed Amount") has been
incurred by Buyer as Damages against which Buyer may apply the Escrowed
Shares pursuant to the Escrow Agreement and (ii) Buyer has given the
Representative written notice thereof and its intent to apply the Escrowed
Shares against such Damages, which written notice sets forth in reasonable
detail the facts giving rise to the liability for such payment; and
(b) instructs you to release to Buyer from the Escrowed Shares a
number of Shares of Buyer Common Stock equal to the Owed Amount divided by
the Share Price as provided in Section 3 of the Escrow Agreement.
ATC COMMUNICATIONS GROUP, INC.
By:
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Its:
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Dated:
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EXHIBIT II
OBJECTION CERTIFICATE
TO
________________________,
AS ESCROW AGENT
The undersigned, [Representative], pursuant to SECTION 3 of the Escrow
Agreement dated as of June __, 1998 (the "Escrow Agreement"), by and among
ATC Communications Group, Inc., the Representative, and you as the Escrow
Agent (terms defined in the Escrow Agreement have the same meanings when used
herein), hereby:
(a) certifies that (i) the [Owed Amount/$_____ of the Owed Amount]
referred to in the certificate to you of Buyer dated ______________, 19___,
is not Damages against which Buyer may apply the Escrowed Shares in
accordance with the Escrow Agreement and (ii) the undersigned has delivered
to Buyer a written statement dated _____________, 19___, setting forth in
reasonable detail the facts supporting the statement contained in clause
(i) above; and
(b) object to your making payment to Buyer of the [Owed
Amount/$_______ of the Owed Amount] as provided in such certificate of
Buyer.
Dated:
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[REPRESENTATIVE]
By:
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Its:
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EXHIBIT III
CERTIFICATE OF CLAIM
TO
________________________,
AS ESCROW AGENT
Each of the undersigned, ATC Communications Group, Inc., a Delaware
corporation ("Buyer"), and the Representative, pursuant to the Escrow
Agreement dated as of June __, 1998 (the "Escrow Agreement"), by and among
the Representative, Buyer and you as the Escrow Agent (terms defined in the
Escrow Agreement have the same meanings when used herein) hereby:
(a) certifies that Buyer has given a written notice dated _____________,
19____, to the Representative setting forth in reasonable detail facts which
in Buyer's good faith judgment are reasonably likely to result in Buyer
incurring Damages against which Buyer may apply the Escrowed Shares in
accordance with the Escrow Agreement, and
(b) the Representative's and Buyer's good faith estimate of the maximum
amount that is reasonably likely to become such Damages as a result of the
foregoing claim is $__________.
[REPRESENTATIVE]
By:
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Its:
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ATC COMMUNICATIONS GROUP, INC.
By:
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Its:
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Dated:
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