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EXHIBIT 3.1
ESCROW AGREEMENT
ESCROW AGREEMENT dated October 2, 1996, among VSI Enterprises, Inc., a
Delaware corporation ("VSI"), Xxxx X. Xxxxx, an individual resident of the State
of Rhode Island, and Xxxxx X. Xxxxx, an individual resident of the State of
Rhode Island (Xxxx X. Xxxxx and Xxxxx X. Xxxxx are hereinafter collectively
referred to as the "Shareholders"), and Reliance Trust Company, a Georgia trust
company (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, VSI, Shareholders, ETI Acquisition Co., a Delaware
corporation wholly owned by VSI (the "Subsidiary"), and Eastern Telecom, Inc., a
Rhode Island corporation ("ETI"), have heretobefore entered into that certain
Agreement and Plan of Merger and Reorganization, dated as of October 1, 1996
(the "Merger Agreement"), pursuant to which ETI will be merged with and into the
Subsidiary, with the Subsidiary being the surviving corporation of the merger
(the "Merger"); and
WHEREAS, the Merger Agreement provides that 200,000 shares of $.00025
par value common stock of VSI ("VSI Common Stock") to be issued as a portion of
the Merger Consideration (the "Escrow Shares") be placed in escrow until
resolution of certain contingencies as described therein;
WHEREAS, the parties hereto desire that the Escrow Agent be appointed
as escrow agent to act in accordance with the terms and conditions hereof;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Appointment of Escrow Agent.
The Shareholders and VSI and hereby irrevocably appoint
Reliance Trust Company as escrow agent, to receive, hold, and deliver the Escrow
Shares pursuant to this Escrow Agreement as described more particularly on
Exhibit A hereto in accordance with this Escrow Agreement, and Reliance Trust
Company hereby accepts such appointment, all subject to and upon the terms and
conditions hereinafter set forth.
2. Deposit of Escrow Shares.
(a) Shareholders hereby agree to deliver the Escrow Shares to
the Escrow Agent, accompanied by an executed stock power or powers endorsed in
blank. The Escrow Agent hereby agrees to hold the Escrow Shares upon receipt in
accordance with this Escrow Agreement. The Escrow Agent has no obligation to
collect the Escrow Shares and shall incur no obligations under this Escrow
Agreement until the Escrow Shares are received by the Escrow Agent.
(b) The Escrow Shares shall be held by the Escrow Agent in
trust for the purposes, on the terms and subject to the conditions of this
Agreement. The Escrow Shares shall not be subject to lien or attachment by any
creditor of any party hereto and shall be used solely for the purpose set forth
in
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this Agreement. The Escrow Agent shall not be responsible for maintaining the
Escrow Shares free of liens or attachments. The Escrow Shares shall not be
available to, and shall not be used by, the Escrow Agent to set off any
obligation of either VSI or Shareholders owing to the Escrow Agent in any
capacity.
(c) The Escrow Shares shall be used by the Escrow Agent solely
for the purposes of (i) satisfying the obligation, if any, of Shareholders to
make the post-Closing adjustment of the Merger Consideration pursuant to Section
1.9 of the Merger Agreement; and (ii) satisfying the indemnity obligations of
Shareholders to VSI under Section 9.2 of the Merger Agreement.
3. Cash Dividends and Voting Rights.
Until the Escrow Shares are delivered by the Escrow Agent in
accordance with the terms hereof, Shareholders are entitled to exercise all
voting rights with respect to the Escrow Shares and to receive for their own use
cash and other dividends and distributions on the Escrow Shares.
4. Release of Escrow Shares.
(a) As soon as practicable after receipt of written
instructions from the Shareholders (which instructions shall specify the number
of Escrow Shares to be distributed) to distribute all or any portion of the
Escrow Shares to VSI as a result of a post-Closing adjustment to the Merger
Consideration in accordance with Section 1.9 of the Merger Agreement, the Escrow
Agent shall distribute to VSI that number of Escrow Shares having a value, as
determined in accordance with Section 4(c) hereof, equal to the amount of the
post-closing adjustment to the Merger Consideration.
(b) If, at any time, VSI believes it is entitled to receive a
full or partial distribution of the Escrow Shares to satisfy the indemnity
obligations of Shareholders to VSI under Section 9.2 of the Merger Agreement,
VSI shall give the Escrow Agent written notice of same (the "Claims Notice"),
which Claims Notice shall specify the number of Escrow Shares to be distributed,
determined in accordance with Section 4(c) hereof. Upon receipt of any Claims
Notice, the Escrow Agent shall promptly forward a copy of such notice to
Shareholders. If Shareholders object to the distribution proposed in the Claims
Notice, Shareholders shall give written notice of such objection to the Escrow
Agent within 30 days following receipt of the Claims Notice (the "Objection
Notice"). If the Escrow Agent does not receive an Objection Notice within such
30 day period, the Escrow Agent shall distribute to VSI Escrow Shares having a
value, as determined in accordance with Section 4(c) hereof, equal to the amount
specified in the Claims Notice. If the Escrow Agent receives an Objection Notice
within such 30 day period, the Escrow Agent shall continue to hold the Escrow
Shares pursuant to the terms of this Agreement, subject to the Claims Notice
until the Escrow Agent receives (i) a joint instruction from VSI and the
Shareholders regarding disposition of the Escrow Shares subject to the Claims
Notice and Objection Notice, or (ii) a certified copy of a final, non-appealable
decision of a court of competent jurisdiction regarding disposition of the
Escrow Shares subject to the Claims Notice and Objection Notice.
(c) For purposes of distribution by Escrow Agent of all or any
portion of the Escrow Shares pursuant to paragraph (a) or (b) of this Section 4,
the number of Escrow Shares to be delivered shall be determined by the average
of the closing bid price of VSI Common Stock as reported by NASDAQ for the ten
trading days immediately preceding the date of distribution. No fractional
shares shall be distributed. Any calculation of the number of shares to be
delivered which results in a fraction shall be rounded up to the next whole
number of shares.
(d) On July 1, 1997, the Escrow Agent shall deliver to the
Shareholders the remaining Escrow Shares, unless the Escrow Agent shall have
been notified in writing by VSI or the Shareholders
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that a Claims Notice is pending and has not been resolved as described in
paragraph (b)(i) or (ii) of this Section 4. If the Escrow Agent has been
advised that a Claims Notice is pending on July 1, 1997 and has not been
resolved as aforesaid, the Escrow Agent shall deliver the remaining Escrow
Shares to the parties in accordance with the resolution of the Claims Notice,
as provided in Section 4(b).
(e) Except as herein provided, the Escrow Agent will not
release any Escrow Shares.
5. Concerning the Escrow Agent.
The Escrow Agent has been induced to accept its obligations
under this Escrow Agreement by the following terms and conditions:
(a) The Escrow Agent shall not be liable, 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
Escrow Agent, VSI and Shareholders jointly and severally shall indemnify and
hold harmless the Escrow Agent (and any successor escrow agent) from and against
any and all claims, liabilities, losses, damages, costs, reasonable attorneys'
fees and other expenses whatsoever arising directly or indirectly out of or in
connection with Escrow Agent's service as Escrow Agent under this Escrow
Agreement or otherwise by virtue of this Escrow Agreement.
(b) In the event of any disagreement among the parties to this
Escrow Agreement, or among them or any one of them and any other person,
resulting in adverse or conflicting claims or demands being made in connection
with all or any part of the Escrow Shares, or in the event that the Escrow Agent
is in doubt as to what action it should take hereunder, the Escrow Agent may, at
its option, refuse to comply with any claims or demands on it (but nothing
herein shall obligate the Escrow Agent so to do) until (i) the Escrow Agent
shall have received an order of a court of competent jurisdiction directing
delivery of all or any part of the Escrow Shares or otherwise directing the
Escrow Agent to take action pursuant to this Agreement, or (ii) all differences
shall have been adjusted and all doubt resolved by written agreement executed by
the parties to such disagreement.
(c) The Escrow Agent shall not be required to construe or
interpret the Merger Agreement or any related documents. The Escrow Agent shall
be entitled to rely upon any judgment, certification, demand, notice, instrument
or other writing delivered to it hereunder without being required to determine
the authenticity or correctness of any fact stated therein or the propriety or
validity of the service thereof and may act in reliance upon any instrument or
signature believed by it to be genuine and may assume that any person purporting
to give any 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.
(d) This Escrow Agreement expressly sets forth all the duties
of the Escrow Agent with respect to any and all matters pertinent hereto, and
the Escrow Agent undertakes to perform only those duties and obligations which
are set forth herein.
(e) The Escrow Agent shall be entitled to the advice of
counsel concerning all matters and duties hereunder. The Escrow Agent shall not
be responsible for any loss or damage resulting from any action taken or omitted
to be taken in good faith in reliance upon that opinion or advice.
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6. Successor Escrow Agent.
The Escrow Agent (and any successor escrow agent) may at any
time resign as such by delivering the Escrow Shares to any successor escrow
agent mutually designated by VSI and Shareholders in writing, or by filing an
action by interpleader or otherwise or tendering the Escrow Shares to any court
of competent jurisdiction, whereupon the Escrow Agent shall be discharged of and
from any and all further obligations arising in connection with this Escrow
Agreement.
7. Notices.
Any notices, affidavits or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given only if and when (i) delivered by messenger and receipted for, or (ii)
when delivered and receipted for by an overnight mail service, or (iii) when
delivered and receipted for by U.S. certified mail, or (iv) by facsimile,
followed by written confirmation, addressed in each case as follows:
If to Buyer, to: VSI Enterprises, Inc.
0000 Xxxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx 00000
Attn: President
Fax: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxx, Esq.
Xxxxx, Xxxxxxxx & Xxxxxxx
0000 Xxxxxxxxx Xxxx, X.X., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Fax: (000) 000-0000
If to Shareholders, to: Xxxx X. Xxxxx
Xxxxx X. Xxxxx
00 Xxxx Xxxxx Xxxxx
Xxxxxxxxx, Xxxxx Xxxxxx 00000
Fax: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx & Xxxxxxx
000 Xxxxx Xxxx Xxxx.
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Fax: (000) 000-0000
If to the Escrow Agent: Reliance Trust Company
Atlanta Plaza, Suite 2840
000 Xxxx Xxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
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with a copy to: Xxxxxx Xxxxxxx, Esq.
The Xxxxxxx Law Firm
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxx 0000, Xxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Any address set forth above may be changed by notice given pursuant to this
Section 7.
8. Miscellaneous.
(a) Any provision of this Escrow Agreement which may be
determined by any court of competent authority to be prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. It is expressly understood, however, that the parties hereto
intend each and every provision of this Escrow Agreement to be valid and
enforceable and hereby knowingly waive all rights to object to any provision of
this Escrow Agreement.
(b) This Escrow Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective successors and
permitted assigns, and shall not be enforceable by or inure to the benefit of
any third party. No party may assign its rights or obligations under this Escrow
Agreement without the written consent of the other parties. Except as otherwise
set forth herein, in no event shall the Escrow Agent be required to act upon, or
be bound by, any notice, instruction, confirmation or other communication given
by a person other than, nor shall the Escrow Agent be required to deliver the
Escrow Shares to any person other than, VSI or Shareholders.
(c) This Escrow Agreement shall be construed in accordance
with and governed by the internal laws of the State of Georgia.
(d) The parties hereby irrevocably submit to the jurisdiction
of any state or federal court sitting in Atlanta, Georgia in any action or
proceeding arising out of or relating to this Escrow Agreement, and the parties
hereby irrevocably agree that all claims in respect of such action or proceeding
shall be heard and determined in such Georgia state or federal court. The
parties hereby consent to and grant to any such court jurisdiction over the
persons of the parties and over the subject matter of any such dispute and agree
that delivery or mailing of any process or other papers in connection with any
such action or proceeding in the manner provided in Section 7 hereof, or in such
other manner as may be permitted by law, shall be valid and sufficient service
thereof.
(e) This Escrow Agreement constitutes the entire understanding
among the parties with respect to the subject matter hereof. This Escrow
Agreement may only be modified or terminated by a writing signed by all of the
parties hereto, and no waiver hereunder shall be effective unless in writing
signed by the party to be charged.
(f) The fees of the Escrow Agent shall be as follows:
Acceptance Fee: $500.00
Administration Fee: $1,000.00
The foregoing fees of the Escrow Agent shall be payable in advance.
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All fees, costs and expenses directly or indirectly incurred by the Escrow Agent
in connection with this Agreement, including but not limited to reasonable
attorney's fees, shall be borne by VSI. The Escrow Agent shall be reimbursed for
any expenses incurred in connection with delivering notices or copies required
by this Escrow Agreement or delivering any shares out of the Escrow Shares. All
other expenses of the Escrow Agent incurred as a result of its service as Escrow
Agent in connection with any disagreement or question of interpretation or
interpleader action arising out of this Agreement shall be borne one half by the
VSI and one half by the Shareholders.
(g) This Escrow Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts of this Escrow Agreement taken
together shall constitute but one and the same instrument.
(h) The section headings used herein are for convenience of
reference only and shall not define or limit the provisions of this Escrow
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Escrow
Agreement on the date first above written.
VSI ENTERPRISES, INC.
By: /s/ B.R. Xxxxxx
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B.R. Xxxxxx, President and Chief Operating Officer
XXXX X. XXXXX
/s/ Xxxx X. Xxxxx (SEAL)
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XXXXX X. XXXXX
/s/ Xxxxx X. Xxxxx (SEAL)
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RELIANCE TRUST COMPANY
By: /s/ Xxxx Xxxxxx
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Title: Trust Officer
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EXHIBIT A
Escrow Shares
200,000 shares of $.00025 par value common stock of VSI Enterprises, Inc.,
represented by certificates no. 6672 and 6674.
