ESCROW AGREEMENT
Exhibit
10.4
This
Escrow Agreement (the “Agreement”)
is
entered into as of [Closing Date], by and among Fortissimo Acquisition Corp.,
a
Delaware corporation (“Parent”),
Xxxxxx Xxxxx-Xxxxxxxx (the “Stockholders’
Representative”)
and
American Stock Transfer & Trust Company (the “Escrow
Agent”).
Capitalized terms used and not otherwise defined herein shall have the
respective meanings assigned to them in the Merger Agreement referred to
below.
WHEREAS,
Parent, FAC Acquisition Sub Corp., a New York corporation and a
wholly-owned subsidiary
of Parent (“Merger
Sub”),
Psyop, Inc., a New York corporation (the “Company”),
Psyop
Services, LLC, a New York limited liability company, Xxxxxx Xxxxx-Xxxxxxxx,
Hejung Xxxxx Xxxx, Xxxxxx Xxxx, Kylie Matulick, Xxxx Xxxxx, Xxxxxx Xxxx Xxxxxxx,
Xxxxxx Xxxxxxxx, Xxxxx Xxxxx and Xxxxxxxxxxx Xxxxxx (collectively, the
“Stockholders”)
and
the Stockholders’ Representative have entered into an Agreement and Plan of
Merger and Interests Purchase Agreement dated January 15, 2008 (the
“Merger
Agreement”);
WHEREAS,
the Merger Agreement provides that escrow accounts will be established to
secure
(i) the indemnification obligations of the Stockholders to Parent pursuant
to
Article IX of the Merger Agreement (the “Indemnification
Escrow”)
and
(ii) the Stock Contingent Consideration that will vest pursuant to the
provisions of Exhibit A of the Merger Agreement (the “Restricted
Stock Escrow”);
and
WHEREAS,
the parties hereto desire to establish the terms and conditions pursuant
to
which such escrow account will be established and maintained;
NOW,
THEREFORE, the parties hereto hereby agree as follows:
1. Agreement
of Company Stockholders.
The
Stockholders have, by virtue of their execution of the Merger Agreement,
agreed
to: (a) the establishment of the Indemnification Escrow and the Restricted
Stock Escrow, (b) the appointment of the Stockholders’ Representative as their
representative for purposes of this Agreement and as attorney-in-fact and
agent
for and on behalf of each Stockholder, and the taking by the Stockholders’
Representative of any and all actions and the making of any decisions required
or permitted to be taken or made by it under this Agreement and (c) all of
the other terms, conditions and limitations in this Agreement.
2. Escrow.
(a) Indemnification
Stock Escrow.
On
the
Closing Date, and simultaneously with
the
execution of this Agreement, Parent has deposited with the Escrow Agent,
on
behalf of the Stockholders, one or more certificates representing the Stock
Escrow Amount, issued in the name of a nominee appointed by the Stockholders’
Representative. The Escrow Agent hereby acknowledges receipt of such stock
certificate or certificates. The shares deposited with the Escrow Agent pursuant
to the first sentence of this Section 2(a) are referred to herein as the
“Indemnification
Escrow Shares.”
The
Escrow Agent agrees to hold the Indemnification Escrow Shares in an escrow
account (the “Indemnification
Escrow Account”),
subject to the terms and conditions of this Agreement. The nominee, if any,
appointed by the Stockholders’ Representative, shall deliver to the Escrow Agent
stock powers executed in blank for use, if necessary, with respect to the
Indemnification Escrow Shares and the Restricted Escrow Shares referred to
below.
(b) Indemnification
Escrow Fund.
On the
Closing Date, and simultaneously with the execution of this Agreement, Parent
has deposited with the Escrow Agent, on behalf of the Stockholders, by wire
transfer or delivery of a check of Parent payable to the Escrow Agent, the
Cash
Escrow Amount. The Cash Escrow Amount shall be $1,014,008. The Escrow Agent
hereby acknowledges receipt of such sum. Such sum, together with any interest
earned thereon, is referred to herein as the “Indemnification
Escrow Fund.”
The
Indemnification Escrow Fund shall be invested in accordance with Section
5
hereof. The Escrow Agent agrees to hold the Indemnification Escrow Fund in
the
Indemnification Escrow Account, subject to the terms and conditions of this
Agreement.
(c) Restricted
Stock Escrow.
On the
Closing Date, and simultaneously with the execution of this Agreement, Parent
has deposited with the Escrow Agent, on behalf of the Stockholders, one or
more
certificates representing the Maximum Revenue Contingent Stock and the Maximum
EBITDA Contingent Stock , issued in the name of a nominee appointed by the
Stockholders’ Representative. The Escrow Agent hereby acknowledges receipt of
such stock certificate or certificates. The shares deposited with the Escrow
Agent pursuant to the first sentence of this Section 2(c) are referred to
herein as the “Restricted
Escrow Shares,”
and
together with the Indemnification Escrow Shares, the “Escrow
Shares”.
The
Escrow Agent agrees to hold the Restricted Escrow Shares in an escrow account
(the “Restricted
Escrow Account”),
subject to the terms and conditions of this Agreement and of the Restricted
Stock Agreements.
(d) Dividends,
Etc.
Any
securities distributed in respect of or in exchange for any of the Escrow
Shares, whether by way of stock dividends, stock splits or otherwise, shall
be
issued in the name of the nominee appointed by the Stockholders’ Representative
pursuant to Section 2(a), and shall be delivered to the Escrow Agent, who
shall
hold such securities in the Indemnification Escrow Account or the Restricted
Escrow Account, as applicable. Such securities shall be considered Escrow
Shares
for purposes hereof. Any cash dividends or property (other than securities)
distributed in respect of the Escrow Shares shall promptly be distributed
by
Parent to the Stockholders.
(e) Voting
of Shares.
The
Escrow Agent shall not vote any of the Escrow Shares. The Stockholders’
Representative shall vote the Escrow Shares on behalf of the Stockholders,
in
accordance with instructions provided by the Stockholders to the Stockholders’
Representative.
(f) Transferability.
The
respective interests of the Stockholders in the Escrow Shares shall not be
assignable or transferable, other than by operation of law. Notice of any
such
assignment or transfer by operation of law shall be given to the Escrow Agent
and Parent, and no such assignment or transfer shall be valid until such
notice
is given.
3. Distribution
of Indemnification Escrow Shares and Indemnification Escrow Fund.
(a) If
Parent
or any member of the Parent Indemnified Group claims that he, she or it is
entitled to all or any portion of the Indemnification Escrow Shares or
Indemnification Escrow Fund resulting from any liabilities or amounts owed
to
Parent pursuant to Article IX of the Merger Agreement, Parent shall, prior
to
5:00 p.m. (New York time) on the business day before the Indemnification
Escrow
Shares Termination Date (defined below) or an Indemnification Escrow Fund
Distribution (defined below), give written notice of such claim (a “Claim
Notice”)
to the
Stockholders’ Representative with a copy to the Escrow Agent. Each Claim Notice
shall state the amount claimed to be owed to Parent or Damages claimed (the
“Claimed
Amount”)
and
the basis for such liability or claim. For purposes of this Agreement, Parent
shall represent the appropriate member of the Parent Indemnified Group, to
the
extent applicable. The Claim Notice shall also specify the number of
Indemnification Escrow Shares that Parent has calculated having a value equal
to
the full Claimed Amount (as computed pursuant to Section 3(m) below).
(b) Within
thirty (30) days of receipt by the Stockholders’ Representative of a Claim
Notice, the Stockholders’ Representative shall provide to the party providing
the Claim Notice (with a copy to the Escrow Agent) a written response (the
“Response
Notice”)
in
which the Stockholders’ Representative shall either: (i) agree that (1) the
number of Indemnification Escrow Shares stated by Parent in the Claim Notice
as
having a value equal to the full Claimed Amount or (2) a portion of the
Indemnification Escrow Fund equal to the full Claimed Amount, as applicable,
may
be released from escrow to Parent, (ii) agree that (1) the number of
Indemnification Escrow Shares stated by Parent in the Claim Notice as having
a
value equal to part, but not all, of the Claimed Amount, or (2) a portion
of the
Indemnification Escrow Fund equal to part, but not all, of the Claimed Amount,
may be released from escrow to Parent, or (iii) contest that any or all of
the
Indemnification Escrow Shares or Indemnification Escrow Fund, as applicable,
may
be released from the escrow to Parent. The Escrow Agent must receive the
Response Notice by 5:00 p.m. (New York time) on the thirtieth (30th)
day
after the Claim Notice had been received. The Escrow Agent shall not honor
the
notice after such time. If no Response Notice is delivered to, and received
by
the Escrow Agent within such thirty (30) day period, the Stockholders’
Representative shall be deemed to have agreed that (x) the Indemnification
Escrow Shares having a value equal to all of the Claimed Amount, and/or (y)
the
portion of the Indemnification Escrow Fund equal to all of the Claimed Amount,
may be released to Parent from escrow. Notwithstanding any terms of this
Agreement to the contrary, no Claim Notice or Response Notice shall be deemed
to
have been delivered to the Escrow Agent until it is actually received by
the
Escrow Agent at the address set forth in Section 11(e) hereof.
(c) If
the
Stockholders’ Representative agrees (or is deemed to have agreed) that (i) the
number of Indemnification Escrow Shares stated by Parent in the Claim Notice
as
having a value equal to all of the Claimed Amount or (ii) a portion of the
Indemnification Escrow Fund equal to all of the Claimed Amount, as applicable,
may be released from escrow to Parent, the Escrow Agent shall promptly
thereafter distribute to Parent such number of Indemnification Escrow Shares
having a value equal to the Claimed Amount (or such lesser number of
Indemnification Escrow Shares as are then held in escrow) or the portion
of the
Indemnification Escrow Fund having a value equal to the Claimed Amount (or
such
lesser amount of the Indemnification Escrow Fund then held in escrow), in
each
case as applicable. Escrow Agent shall not be responsible for calculating
any
such amounts and shall be entitled to rely on written instructions by Parent,
a
copy of which shall be provided to the Stockholders’
Representative.
(d) If
the
Stockholders’ Representative agrees that (i) the number of Indemnification
Escrow Shares stated by Parent in the Claim Notice as having a value equal
to
part, but not all, of the Claimed Amount or (ii) a portion of the
Indemnification Escrow Fund equal to part, but not all, of the Claimed Amount,
as applicable (the “Partial
Agreed Amounts”)
may be
released from the escrow to Parent, the Escrow Agent promptly shall distribute
to Parent such number of Indemnification Escrow Shares (or such lesser number
of
Indemnification Escrow Shares as is then held in escrow) or the portion of
the
Indemnification Escrow Fund having a value equal to the sum of all Partial
Agreed Amounts (or such lesser amount of the Indemnification Escrow Fund
then
held in escrow), as applicable, per a written instruction signed by Parent
pursuant to Section 3(e), with a copy delivered to the Stockholders’
Representative.
(e) If
the
Stockholders’ Representative contests the release of (i) the Indemnification
Escrow Shares having a value equal to all or part of the Claimed Amount or
(ii)
the portion of the Indemnification Escrow Fund equal to all or part of the
Claimed Amount (the “Contested
Amount”),
the
Stockholders’ Representative and Parent shall attempt promptly and in good faith
to agree upon the rights of the parties with respect to the Contested Amount.
If
the parties should so agree, a memorandum setting forth such agreement shall
be
prepared and signed by both parties and delivered to the Escrow Agent and,
if
such agreement provides that all or a portion of the Contested Amount is
to be
paid to a member of the Parent Indemnified Group, the Escrow Agent shall
promptly distribute to Parent from the escrow (i) an amount of Indemnification
Escrow Shares having a value equal to the amount so agreed or (ii) a portion
of
the Indemnification Escrow Fund equal to the amount so agreed. If no such
agreement can be reached within 15 days, the matter shall be settled by binding
arbitration in New York City, New York. Notwithstanding the foregoing, the
parties may defer arbitration to a mutually agreeable later date. All claims
shall be settled by a single arbitrator mutually agreeable to Parent and
the
Stockholders’ Representative, or if they cannot agree on a single arbitrator in
20 days, by three arbitrators, in accordance with the Commercial Arbitration
Rules then in effect of the American Arbitration Association. One of such
arbitrators shall be chosen by Parent, one shall be chosen by the Stockholders’
Representative and the third shall be chosen by the first two arbitrators
selected pursuant to this sentence. The Party against whom an award is entered
shall pay the costs of arbitration and the other Party’s reasonable out of
pocket costs and expenses, including without limitation, reasonable attorney’s
fees. The arbitrator’s decision shall relate solely to whether Parent is
entitled to receive the Contested Amount (or a portion thereof) pursuant
to the
applicable terms of the Merger Agreement and this Agreement. The final decision
of the arbitrator, or a majority of the arbitrators in the case of three
arbitrators, shall be furnished to the Stockholders’ Representative and Parent
in writing and shall constitute a conclusive determination of the issue in
question, binding upon the Stockholders, the Parent and the Parent Indemnified
Group, and shall not be contested by any of them. Such decision may be used
in a
court of law only for the purpose of seeking enforcement of the arbitrator’s
award. Either the Stockholders’ Representative or the Parent may deliver a
memorandum to the Escrow Agent setting forth such arbitrator’s decision in
accordance with the second sentence of this paragraph. The parties hereto
agree
that all arbitration proceedings conducted pursuant to this Agreement shall
be
held confidential. In no event shall the Escrow Agent be a party to any
arbitration proceeding.
(f) After
delivery of a Response Notice that a portion of the Claimed Amount is contested
by the Stockholders’ Representative, the Escrow Agent shall continue to hold in
escrow either (x) an amount of Indemnification Escrow Shares having a value
sufficient to cover the Contested Amount (up to the amount of Indemnification
Escrow Shares then available in escrow) or (y) a portion of the Indemnification
Escrow Fund equal to the Contested Amount (up to the amount of Indemnification
Escrow Fund then available in escrow) notwithstanding the occurrence of the
Indemnification Escrow Shares Termination Date or an Indemnification Escrow
Fund
Distribution, until (i) delivery of a copy of a settlement agreement executed
by
a Parent and the Stockholders’ Representative setting forth instructions to the
Escrow Agent as to the release of Indemnification Escrow Shares or portion
of
the Indemnification Escrow Fund, as applicable, that shall be made with respect
to the Contested Amount or (ii) delivery of a copy of the final award of
the
arbitrator, or a majority of the arbitrators in the case of three arbitrators,
and the memo referenced in the last sentence of the preceding paragraph setting
forth instructions to the Escrow Agent as to the release of the Indemnification
Escrow Shares or portion of the Indemnification Escrow Fund, as applicable,
that
shall be made with respect to the Contested Amount. The Escrow Agent shall
thereupon release the Indemnification Escrow Shares or portion of the
Indemnification Escrow Fund from escrow (up to the amount of Indemnification
Escrow Shares or Indemnification Escrow Fund then available in escrow) in
accordance with such agreement or instructions.
(g) Notwithstanding
the foregoing, if on the Indemnification Escrow Shares Termination Date or
an
Indemnification Escrow Fund Distribution, Parent has previously given any
Claim
Notices that have not then been resolved, the Escrow Agent shall retain in
escrow either (i) an amount of Indemnification Escrow Shares having a value
equal to the aggregate Claimed Amount covered by all such Claim Notices that
have not then been resolved and/or (ii) a portion of the Indemnification
Escrow
Fund equal to the aggregate Claimed Amount covered by all such Claim Notices
that have not then been resolved, as applicable. Any Indemnification Escrow
Shares or portion of the Indemnification Escrow Fund retained in escrow pursuant
to this Section 3(g) shall be disbursed to the relevant Stockholders in
accordance with the terms of the resolution of any claims relating to any
of the
Indemnification Escrow Shares or portion of the Indemnification Escrow Fund
retained hereunder.
(h) Escrow
Agent shall also be allowed to disburse Indemnification Escrow Funds or
Indemnification Escrow Shares upon any joint written instructions signed
by the
Stockholders’ Representative and Parent.
(i) Distribution
Following Indemnification Escrow Shares Termination Date.
Subject
to the provisions of Section 3(f) above,
on the
one year anniversary of the Closing Date (the “Indemnification
Escrow Shares Termination Date”),
the
Escrow Agent shall distribute to the Stockholders’ Representative, on behalf of
the Stockholders, all of the Indemnification Escrow Shares then held in escrow
pursuant to Section 3(k) pursuant to written instruction by Parent and the
Stockholders’ Representative which clearly states how many shares to send to the
Stockholders’ Representative. Escrow Agent shall have no duty to determine the
distribution on the Escrow Termination Date and shall be entitled to rely
upon
any calculations set forth in written instruction by Parent and the
Stockholders’ Representative. The Stockholders’ Representative shall distribute
any Escrow Shares delivered to him in accordance with the provisions of Section
3(k) below.
(j) Disbursements
from Escrow Fund.
Except
for any disbursements pursuant to the preceding provisions of this Section
3,
subject to the provisions of Section 3(f) above, Parent and the Stockholders’
Representative shall jointly instruct the Escrow Agent to disburse amounts
from
the Indemnification Escrow Fund (an “Indemnification
Escrow Fund Distribution”)
within
five business days after the one year anniversary of the Closing Date (the
“Termination
Date”).
(k) Method
of Indemnification Escrow Share Distribution.
Any
distribution of all or a portion of the Indemnification Escrow Shares to
the
Stockholders’ Representative, on behalf of the Stockholders, shall be made by
delivery to the Stockholders’ Representative of stock certificates issued in the
name of the Stockholders covering such percentage of the Indemnification
Escrow
Shares being distributed as is calculated in accordance with the percentages
set
forth opposite such Stockholders’ respective names on Attachment A
hereto.
The Escrow Agent shall have no responsibility for the shares when the
Indemnification Escrow Shares are no longer in the Escrow Agent’s possession in
accordance with this Agreement. Distributions to the Stockholders shall be
made
by
the
Escrow Agent to the Stockholders’
Representative pursuant to a written instruction by Parent and Stockholders’
Representative, following which the Stockholders’ Representative shall
distribute stock certificates to the Stockholders at their respective addresses
shown on Attachment A
(or such
other address as may be provided in writing to the Escrow Agent by any such
Stockholder). No fractional Indemnification Escrow Shares shall be distributed
to Stockholders pursuant to this Agreement. Instead, the number of shares
that
each Stockholder shall receive shall be rounded up or down to the nearest
whole
number (provided that the Stockholders’ Representative shall have the authority
to effect such rounding in such a manner that the total number of whole
Indemnification Escrow Shares to be distributed equals the number of
Indemnification Escrow Shares then being distributed).
(l) Method
of Indemnification Escrow Fund Disbursement.
Any
disbursement of all or a portion of the Indemnification Escrow Fund to the
Stockholders shall be made in accordance with the percentages set forth opposite
such holders’ respective names on Attachment A
hereto.
Disbursements to the Stockholders shall be made by the Escrow Agent to the
Stockholders’ Representative for distribution to the Stockholders at their
respective addresses shown on Attachment A
(or such
other address as may be provided in writing to the Escrow Agent by any
such
holder).
(m) Valuation
of Indemnification Escrow Shares.
For
purposes of this Agreement, the “value” of any Indemnification Escrow Shares
shall be deemed to have a value equal to the average of the closing stock
price
of a share of Parent Common Stock on the OTC Bulletin Board as reported by
Bloomberg L.P., Reuters Group plc, The Thomson Corporation or a similar stock
market reporting service as may reasonably be selected by the Parent, for
the
thirty trading days preceding the date that is two business days prior to
the
Closing Date (subject to equitable adjustment in the event of any stock split,
stock dividend, reverse stock split or similar event affecting the common
stock
of Parent since the Closing), multiplied by the number of such Indemnification
Escrow Shares.
(n) Failure
to Execute Instruction.
Any
dispute arising from the failure or refusal of a party to execute a joint
instruction or notice required to be executed by such party pursuant to this
Agreement for delivery to the Escrow Agent shall be resolved by arbitration
in
accordance with the provisions of Section 3(e).
4. Investment
of Indemnification Escrow Fund.
(a) Permitted
Investments.
Any
monies held in the Indemnification Escrow Fund shall be invested by the Escrow
Agent, to the extent permitted by law and as directed by the Stockholders’
Representative, in (i) obligations issued or guaranteed by the United
States of America or any agency or instrumentality thereof,
(ii) obligations (including certificates of deposit and bankers’
acceptances) of domestic commercial banks which at the date of their last
public
reporting had total assets in excess of $500,000,000, (iii) commercial
paper rated at least A-1 or P-1 or, if not rated, issued by companies having
outstanding debt rated at least AA or Aa and (iv) money market mutual funds
invested exclusively in some or all of the securities described in the foregoing
clauses (i), (ii) and (iii). Absent receipt of specific written investment
instructions from the Stockholders’ Representative, the Escrow Agent shall have
no obligation or duty to invest (or otherwise pay interest on) the
Indemnification Escrow Fund. The Escrow Agent shall have no liability for
any
investment losses, including without limitation any market loss on any
investment liquidated prior to maturity in order to make a payment required
hereunder.
(b) Tax
Reporting.
Unless,
until and to the extent distributed to the Stockholders or to Parent in
accordance with this Agreement, (i) the amounts in the Indemnification Escrow
Fund and all interest and other income thereon at all times are and shall
be the
exclusive property of the Stockholders and shall be reported as such for
all tax
reporting purposes and (ii) the Escrow Shares shall be the exclusive property
of
the Stockholders and shall be reported as such for all tax reporting purposes.
Escrow Agent has no ownership interest in the Indemnification Escrow Fund
or the
Escrow Shares but is serving as escrow holder having only possession thereof.
Any payments from the escrow shall be subject to withholding laws and
regulations then in force with respect to United States taxes. The parties
hereto will provide the Escrow Agent with appropriate W-9 or W-8 forms or
other
appropriate tax certifications, as necessary, including that the Stockholders’
Representative will provide such appropriate forms from the Stockholders.
This
Section 4(b) shall survive notwithstanding any termination of this Agreement
or
the resignation of Escrow Agent.
5. Distribution
of Restricted Escrow Shares.
(a) The
Escrow Agent shall distribute to the Stockholders’ Representative on behalf of
and for the account of the Stockholders the shares of Maximum Revenue Contingent
Stock and the Maximum EBITDA Contingent Stock that have vested for the
applicable Annual Contingent Consideration Period on the applicable Contingent
Consideration Payment Date.
(b) Any
distribution of such shares of Maximum Revenue Contingent Stock and Maximum
EBITDA Contingent Stock to the Stockholders’ Representative, on behalf of the
Stockholders, shall be made by delivery of a stock certificates issued in
the
name of each of the Stockholders covering the number of shares of Parent
Common
Stock equal to each Stockholder’s shares of Maximum Revenue Contingent Stock and
Maximum EBITDA Contingent Stock that have vested for the applicable Annual
Contingent Consideration Period. The Escrow Agent shall have no responsibility
for the shares when the Restricted Escrow Shares are no longer in the Escrow
Agent’s possession. Distributions to the Stockholders shall be made by the
Escrow Agent to the Stockholders’ Representative pursuant to a written
instruction by Parent and Stockholders’ Representative, following which the
Stockholders’ Representative shall distribute stock certificates to the
Stockholders at their respective addresses shown on Attachment A
(or such
other address as may be provided in writing to the Escrow Agent by any such
Stockholder). No fractional Restricted Escrow Shares shall be distributed
to
Stockholders pursuant to this Agreement. Instead, the number of shares that
each
Stockholder shall receive shall be rounded up or down to the nearest whole
number (provided that the Stockholders’ Representative shall have the authority
to effect such rounding in such a manner that the total number of whole
Restricted Escrow Shares to be distributed equals the number of Restricted
Escrow Shares then being distributed).
(c) Forfeiture
Following Annual Contingent Consideration Periods.
Pursuant
to Exhibit A of the Merger Agreement and Section 2 of the Restricted Stock
Agreements, dated as of ______, 2008, between Parent and each of the
Stockholders (the “Restricted
Stock Agreements”),
the
shares of Maximum Revenue Contingent Stock and the Maximum EBITDA Contingent
Stock that have not vested pursuant to the Merger Agreement for an Annual
Contingent Consideration Period shall be forfeited automatically and immediately
to Parent on the applicable Contingent Consideration Payment Date without
the
payment of any consideration to the Stockholders. The Escrow Agent shall
distribute to Parent such unvested shares of Maximum Revenue Contingent Stock
and Maximum EBITDA Contingent Stock on the applicable Contingent Consideration
Payment Date.
(d) Forfeiture
Following Termination of Employment.
In the
event that a Stockholder ceases to be employed by Fortissimo at any time
prior
to the last day of the applicable Annual Contingent Consideration Period
for a
reason that requires forfeiture of shares of Maximum Revenue Contingent Stock
and Maximum EBITDA Contingent Stock pursuant to such Stockholder’s Restricted
Stock Agreement and Exhibit A of the Merger Agreement, all shares of Maximum
Revenue Contingent Stock and Maximum EBITDA Contingent Stock issued to the
Stockholder and not vested pursuant to the Merger Agreement shall be forfeited
automatically and immediately and shall be reallocated among the remaining
Stockholders in accordance with Section 2(b) of Exhibit A to the Merger
Agreement. Any such reallocated shares of Maximum Revenue Contingent Stock
and
the Maximum EBITDA Contingent Stock that vest with respect to an Annual
Contingent Consideration Period occurring after such reallocation, shall
be
distributed by the Escrow Agent to the Stockholders’ Representative on behalf of
and for the account of the Stockholders in accordance with Sections 2(a)
and
2(b) above as soon as practicable after the applicable Contingent Consideration
Payment Date, as set forth in a joint written instruction executed by the
Parent
and the Stockholders’ Representative. Any dispute arising from the failure or
refusal of a party to execute such joint instruction shall be resolved by
arbitration in accordance with the provisions of Section 3(e).
6. Fees
and Expenses of Escrow Agent.
Parent,
on the one hand, and the Stockholders, on the other hand, shall each (a)
pay
one-half of the fees of the Escrow Agent for the services to be rendered
by the
Escrow Agent hereunder, which are set forth on Attachment
B
hereto,
and (b) reimburse the Escrow Agent for one-half of its reasonable expenses
(including reasonable attorney’s fees and expenses) incurred in connection with
the performance of its duties under this Agreement.
7. Limitation
of Escrow Agent’s Liability.
(a) Limitation
on Liability.
The
Escrow Agent undertakes to perform only such duties as expressly set forth
herein and no duties shall be implied. The Escrow Agent shall incur no liability
with respect to any action taken or suffered by it in reliance upon any notice,
direction, instruction, consent, statement or other documents believed by
it to
be genuine and duly authorized, nor for other action or inaction except its
own
willful misconduct or gross negligence. The Escrow Agent shall not be
responsible for the validity or sufficiency of this Agreement or any other
agreement referred to herein. In all questions arising under the Agreement,
the
Escrow Agent may rely on the advice of counsel, and the Escrow Agent shall
not
be liable to anyone for anything done, omitted or suffered in good faith
by the
Escrow Agent based on such advice. The Escrow Agent shall not be required
to
take any action hereunder involving any expense unless the payment of such
expense is made or provided for in a manner reasonably satisfactory to it.
In no
event shall the Escrow Agent be liable for indirect, punitive, special or
consequential damages.
(b) Indemnification.
Parent
and the Stockholders jointly and severally, each agree to indemnify the Escrow
Agent and its directors, officers, agents and employees (the “Indemnitees”), and
hold it harmless against, any loss, liability or expense (including the fees
and
expenses of in-house or outside counsel) arising out of or in connection
with
(i) the Escrow Agent’s execution and performance of this Agreement, except in
the case of any Indemnitee to the extent that such loss, liability or expense
is
due to gross negligence or willful misconduct on the part of Escrow Agent,
arising out of or in connection with its carrying out of its duties hereunder.
8. Liability
and Authority of Stockholders’ Representative; Successors and
Assignees.
(a) Limitation
on Liability.
The
Stockholders’ Representative shall incur no liability to the Stockholders with
respect to any action taken or suffered by it in reliance upon any notice,
direction, instruction, consent, statement or other documents believed by
them
to be genuinely and duly authorized, nor for other action or inaction except
its
own willful misconduct or gross negligence. The Stockholders’ Representative
may, in all questions arising under the Agreement, rely on the advice of
counsel
and the Stockholders’ Representative shall not be liable to the Stockholders for
anything done, omitted or suffered in good faith by the Stockholders’
Representative based on such advice.
(b) Successor
Stockholders’ Representative.
In the
event of the death or permanent disability of the Stockholders’ Representative,
or his or her resignation or removal as an Stockholders’ Representative, a
successor Stockholders’ Representative shall be elected by a majority vote of
the Stockholders, with each such Stockholder (or his, her or its successors
or
assigns) to be given a vote equal to the number of votes represented by the
shares of stock of the Company held by such Stockholder immediately prior
to the
effective time of the Subsidiary Merger. The successor Stockholders’
Representative shall have all of the power, authority, rights and privileges
conferred by this Agreement upon the original Stockholders’ Representative, and
the term “Stockholders’ Representative” as used herein shall be deemed to
include successor Stockholders’ Representative.
(c) Power
and Authority.
The
Stockholders’ Representative shall have full power and authority to represent
the Stockholders, and its successors, with respect to all matters arising
under
this Agreement and all actions taken by the Stockholders’ Representative
hereunder shall be binding upon the Stockholders, and its successors, as
if
expressly confirmed and ratified in writing by each of them. Without limiting
the generality of the foregoing, the Stockholders’ Representative, acting by a
majority thereof, shall have full power and authority to interpret all of
the
terms and provisions of this Agreement, to compromise any claims asserted
hereunder and to authorize any release of the Escrow Shares to be made with
respect thereto, on behalf of the Stockholders and their successors. All
actions
to be taken by the Stockholders’ Representative hereunder shall be evidenced by,
and taken upon, the written direction of a majority thereof.
(d) Reliance
by Escrow Agent.
The
Escrow Agent may rely on the Stockholders’ Representative as the exclusive agent
of the Stockholders under this Agreement and shall incur no liability to
any
party with respect to any action taken or suffered by it in reliance
thereon.
9. Termination.
This
Agreement shall terminate upon the distribution by the Escrow Agent of all
of
the Escrow Shares and the Indemnification Escrow Fund in accordance with
this
Agreement; provided that the provisions of Sections 7 and 8 shall survive
such termination.
10. Successor
Escrow Agent.
In the
event the Escrow Agent becomes unavailable or unwilling to continue in its
capacity herewith, the Escrow Agent may resign and be discharged from its
duties
or obligations hereunder by delivering a resignation to the parties to this
Escrow Agreement, not less than 60 days prior to the date when such
resignation shall take effect. Parent may appoint a successor Escrow Agent
without the consent of the Stockholders’ Representative so long as such
successor is a bank with assets of at least $500 million, and may appoint
any
other successor Escrow Agent with the consent of the Stockholders’
Representative, which shall not be unreasonably withheld. If, within such
notice
period, Parent provides to the Escrow Agent written instructions with respect
to
the appointment of a successor Escrow Agent and directions for the transfer
of
any Escrow Shares then held by the Escrow Agent to such successor, the Escrow
Agent shall act in accordance with such instructions and promptly transfer
such
Escrow Shares to such designated successor. If no successor Escrow Agent
is
named as provided in this Section 10 prior to the date on which the resignation
of the Escrow Agent is to properly take effect, the Escrow Agent may apply
to a
court of competent jurisdiction for appointment of a successor Escrow
Agent.
11. General.
(a) Entire
Agreement.
Except
for those provisions of the Merger Agreement and the Restricted Stock Agreements
referenced herein, this Agreement constitutes the entire agreement among
the
parties and supersedes any prior understandings, agreements or representations
by or among the parties, written or oral, with respect to the subject matter
hereof.
(b) Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the parties named
herein and their respective successors and permitted assigns.
(c) Counterparts
and Facsimile Signature.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which together shall constitute one and the
same
instrument. This Agreement may be executed by facsimile signature.
(d) Headings.
The
section headings contained in this Agreement are inserted for convenience
only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(e) Notices.
All
notices, instructions and other communications hereunder shall be in writing.
Any notice, instruction or other communication hereunder shall be deemed
duly
delivered four business days after it is sent by registered or certified
mail,
return receipt requested, postage prepaid, or one business day after it is
sent
for next business day delivery via a reputable nationwide overnight courier
service, in each case to the intended recipient as set forth below:
If
to
Parent, to:
00
Xxxxxxxxx Xxxxxx
Xxxx
Afek
XX Xxx 00000
Xxxx
Xxxxxx 00000 XXXXXX
Attention:
Xxxx X. Xxxxxxx
Telephone:
000-000-0-000-0000
|
Facsimile:
011-972-3-915-7411
|
E-mail:
xxxx@xxxxxxxxx.xxx
with
a
copy (which shall not constitute notice) to:
Xxxxxx
Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxx X. Xxxxxxxx, Esq.
|
Telephone:
(000) 000-0000
|
|
Facsimile:
(000) 000-0000
|
E-mail:
xxxxx.xxxxxxxx@xxxxxxxxxx.xxx
If
to the
Stockholders’ Representative:
Xxxxxx
Xxxxx-Xxxxxxxx
000
Xxxxxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
E-mail:
xxxxxx@xxxxx.xx
If
to the
Escrow Agent:
American
Stock Transfer & Trust Company
00
Xxxxxx
Xxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxxx
|
Telephone:
(000) 000-0000
|
|
Facsimile:
(000) 000-0000
|
E-mail:
xxxxxxx@xxxxxxx.xxx
Any
party
may give any notice, instruction or other communication hereunder using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice,
instruction or other communication shall be deemed to have been duly given
unless and until it actually is received by the party to whom it is intended.
Any party may change the address to which notices, instructions, or other
communications hereunder are to be delivered by giving the other parties
notice
in the manner set forth in this Section.
(f) Governing
Law.
This
Agreement shall be governed by, and construed and enforced in accordance
with,
the laws of the State of New York without giving effect to any conflicts
of laws
principles thereof directing the application of any law other than that of
the
State of New York.
(g) Amendments
and Waivers.
This
Agreement may be amended only with the written consent of Parent, the Escrow
Agent and the Stockholders’ Representative. No waiver of any right or remedy
hereunder shall be valid unless the same shall be in writing and signed by
the
party giving such waiver. No waiver by any party with respect to any condition,
default or breach of covenant hereunder shall be deemed to extend to any
prior
or subsequent condition, default or breach of covenant hereunder or affect
in
any way any rights arising by virtue of any prior or subsequent such
occurrence.
(h) Submission
to Jurisdiction.
Subject
to the provisions of Section 3, courts within the State of New York, County
of
New York or the United States District Court for the Southern District of
New
York will have jurisdiction over all disputes between the parties hereto
arising
out of or relating to this agreement and the agreements, instruments and
documents contemplated hereby. The parties hereby consent to and agree to
submit
to the jurisdiction of such courts. Each of the parties hereto waives, and
agrees not to assert in any such dispute, to the fullest extent permitted
by
applicable law, any claim that (i) such party is not personally subject to
the jurisdiction of such courts, (ii) such party and such party’s property
is immune from any legal process issued by such courts or (iii) any
litigation commenced in such courts is brought in an inconvenient
forum.
(i) Waiver
of Jury Trial.
Each
party hereto hereby irrevocably waives all right to trial by jury in any
proceeding (whether based on contract, tort or otherwise) arising out of
or
relating to this Agreement or any transaction or agreement contemplated hereby
or the actions of any party hereto in the negotiation, administration,
performance or enforcement hereof.
(j) Security
Procedures.
In the
event funds transfer instructions are given, whether in writing, by facsimile
or
otherwise, the Escrow Agent is authorized to seek confirmation of such
instructions by telephone call-back to the person or persons designated on
Schedule 1 hereto, and the Escrow Agent may rely upon the confirmation of
anyone
purporting to be the person or persons so designated. The persons and telephone
numbers for call-backs may be changed only in a writing actually received
and
acknowledged by the Escrow Agent. The Escrow Agent and the beneficiary’s bank in
any funds transfer may rely solely upon any account numbers or similar
identifying numbers provided by the Stockholders’ Representative or Parent to
identify (i) the beneficiary, (ii) the beneficiary’s bank, or (iii) an
intermediary bank. The Escrow Agent may apply any of the escrowed funds for
any
payment order it executes using any such identifying number, even when its
use
may result in a person other than the beneficiary being paid, or the transfer
of
funds to a bank other than the beneficiary’s bank or an intermediary bank
designated. The parties to this Escrow Agreement acknowledge that these security
procedures are commercially reasonable.
[Remainder
of this page intentionally blank]
IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and
year first above written.
By:
_______________________________________
__________________________________________
Xxxxxx
Xxxxx-Xxxxxxxx
AMERICAN
STOCK TRANSFER & TRUST COMPANY
By:
________________________________________
