ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made and entered into as of this
5th day of October, 1997, by and among SC Acquisition #1, Inc., an Illinois
corporation ("Purchaser"), Xxxx Xxxxxxxx ("Xxxxxxxx"), Computer Dynamics, Inc.,
a South Carolina corporation ("CDI"), and American National Bank and Trust
Company of Chicago, as escrow agent ("Escrow Agent").
R E C I T A L S:
A. Pursuant to an Asset Purchase Agreement (the "Purchase Agreement")
dated as of the date hereof among Total Control Products, Inc. ("TCP"),
Purchaser, Xxxxxxxx, CDI and various other entities, (a) Purchaser agreed to
purchase substantially all of the assets of the Selling Entities (the
"Transaction"); (b) as consideration for the Transaction, the Selling Entities
received $511,815 in cash and 932,039 shares of common stock, no par value per
share, of TCP ("TCP Common Stock"); and (c) Xxxx Xxxxxxxx and certain related
trusts received an aggregate of $12,000,000 in cash as consideration for the
termination of certain royalty payments owed by the Selling Entities to
Xxxxxxxx. All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
B. The Purchase Agreement provides for Purchaser, for and on behalf of
CDI, to deposit 116,505 shares of TCP Common Stock otherwise to be issued to CDI
in an escrow account as security for the performance of the obligations of
Sellers thereunder, to be held, invested, administered and distributed by Escrow
Agent in accordance with the terms of this Agreement.
C. Escrow Agent is willing to hold, invest, administer and distribute
such shares of TCP Common Stock in accordance with the terms of this Agreement.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
Article I
ESCROW FUND
1.1 RECEIPT OF ESCROW FUND. Escrow Agent hereby acknowledges the receipt
of 116,505 shares of TCP Common Stock for and on behalf of CDI. Such shares of
TCP Common Stock shall be considered to have been deposited herein by CDI and
such shares of TCP Common Stock, including all dividends and distributions made
thereon and all interest earned thereon, is hereinafter called the "Escrow
Fund".
1.2 INVESTMENT OF ESCROW FUND. Subject to the terms and conditions
hereof, Escrow Agent shall retain the Escrow Fund and, if and to the extent that
the Escrow Fund consists of assets other than shares of TCP Common Stock, is
empowered and directed to invest the cash portion of the Escrow Fund in a money
market account which invests in obligations issued by or guaranteed by the
United States of America or any agency or instrumentality thereof.
1.3 INCOME EARNED ON ESCROW FUND. Income earned, if any, on the Escrow
Fund shall be attributed for purposes of taxation to CDI. CDI shall be
responsible for filing all necessary tax returns with respect to any interest
paid or attributed to it hereunder and shall pay any taxes thereon. The Escrow
Agent agrees to provide, within sixty (60) days following the end of each
calendar year, the appropriate reports or forms identifying the amount of income
earned, if any, on the Escrow Fund and attributed to Purchaser and CDI during
such calendar year.
Article II
COLLATERAL SECURITY; DISBURSEMENT OF COLLATERAL;
RELEASE OF ESCROW
2.1 COLLATERAL SECURITY. Sellers have agreed in (i) Article III of the
Purchase Agreement to an adjustment to the Cash Portion; and (ii) Article VIII
of the Purchase Agreement to certain indemnification obligations. The Escrow
Fund shall be held as security for the payment of these obligations of Sellers,
subject to the limitations, and in the manner provided, in this Agreement and
the Purchase Agreement.
2.2 PURCHASER'S CLAIMS.
(a) At any time (or from time to time), Purchaser may give written
notice (a "Claim Notice") to CDI and the Escrow Agent that Purchaser claims all
or any part of the Escrow Fund (each a "Claim") in satisfaction of (i) any
adjustment to the Cash Portion pursuant to Article III of the Purchase
Agreement; or (ii) any claim for indemnification made by Purchaser pursuant to
Article VIII of the Purchase Agreement. The Claim Notice shall set forth in
reasonable detail (A) the nature of the Claim; and (B) if ascertainable, the
amount of the Claim (hereinafter referred to as the "Claim Amount").
(b) Upon receipt of a Claim Notice, CDI shall have ten (10) days to
dispute the Claim by delivering written notice to Purchaser and Escrow Agent
specifying in reasonable detail the basis for the dispute (a "Dispute Notice").
(c) If (i) CDI approves all or any part of the Claim Amount, or (ii)
upon the expiration of the ten (10) day period referred to in Section 2.2(b), a
Dispute Notice has not been delivered, the Escrow Agent shall distribute, on the
next business day, to Purchaser from the Escrow Fund an amount equal to the
Claim Amount (or such part thereof which is
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approved by CDI and not disputed) in cash, to the extent available, and then, to
the extent cash is not available, in shares of TCP Common Stock.
(d) If, within the ten (10) day period referred to in Section 2.2(b),
CDI shall, in good faith, deliver a Dispute Notice to Purchaser and the Escrow
Agent, Purchaser and CDI shall undertake to obtain as promptly as possible a
final resolution of such Claim. If Purchaser and CDI are unable to resolve a
dispute within ten (10) days after the delivery to Purchaser and the Escrow
Agent of a Dispute Notice, then Purchaser and CDI shall jointly submit their
dispute to a panel of three Arbitrators (the "Arbitrators") for resolution in
accordance with the procedures set forth in Section 2.4 hereof.
(e) Upon the delivery of any of the following to the Escrow Agent,
the Escrow Agent shall promptly distribute to Purchaser from the Escrow Fund the
following amount in cash, to the extent available, and then, to the extent cash
is not available, in shares of TCP Common Stock:
(i) a joint direction executed by CDI and Purchaser directing
the Escrow Agent to pay a specified amount to Purchaser; or
(ii) a direction letter executed by the Arbitrators directing
the Escrow Agent to pay a specified amount to Purchaser.
(f) Each share of TCP Common Stock that is distributed to Purchaser
pursuant to the terms of this Agreement shall by valued based upon the closing
price of a share of TCP Common Stock on the day immediately preceding the date
of distribution from the Escrow Fund, as quoted on the Nasdaq National Market
System and as certified in writing to the Escrow Agent by an officer of
Purchaser. In lieu of distributing shares of TCP Common Stock from the Escrow
Fund to satisfy a Claim, Purchaser may direct the Escrow Agent in the Claim
Notice to sell a sufficient number of shares of TCP Common Stock, for and on
behalf of CDI, to satisfy the payment of such Claim. Upon the receipt of such
Claim Notice by the Escrow Agent, the Escrow Agent shall (i) take all actions
reasonably necessary to sell such number of shares of TCP Common Stock, for and
on behalf of CDI; and (ii) satisfy the payment of such Claim with the net cash
proceeds received by the Escrow Agent from the sale of such shares. CDI and
Xxxxxxxx agree to take all actions reasonably requested by the Escrow Agent to
allow the Escrow Agent to sell such shares of TCP Common Stock. All costs and
expenses incurred by the Escrow Agent in connection with the sale of such shares
of TCP Common Stock shall be paid by CDI and Xxxxxxxx and, to the extent
available, shall be deducted by the Escrow Agent from the Escrow Fund.
Notwithstanding anything to the contrary contained herein, the value of the
shares of TCP Common Stock delivered to Purchaser pursuant to the terms of this
Agreement shall be deemed to be net of any reasonable costs, including brokerage
commissions, incurred by Purchaser to dispose of such shares, if any.
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2.3 RELEASE AND TRANSFER OF ESCROW FUND.
(a) The Escrow Agent is hereby authorized and directed to release to
CDI on October 5, 2000 all amounts remaining in the Escrow Fund after the
satisfaction of Purchaser's Claims pursuant to Section 2.2 hereof less the
aggregate of: (i) that portion of the Escrow Fund as shall be required to
satisfy the sum of all Claims then pending, whether or not payment of such
Claims is being disputed by CDI; and (ii) that portion of any unpaid fees or
expenses of the Escrow Agent and/or any Arbitrator which CDI or Xxxxxxxx was
obligated to pay pursuant to the terms of this Agreement.
(b) The Escrow Agent shall release to CDI that portion of the Escrow
Fund which was withheld by the Escrow Agent pursuant to Section 2.3(a) promptly
upon the delivery to the Escrow Agent of a joint written direction to that
effect from Purchaser and CDI.
(c) Promptly upon final resolution and payment of all Claims
outstanding, the balance of the Escrow Fund then remaining, if any, shall be
released to CDI.
(d) At any time after the date hereof, CDI may deliver to the
Escrow Agent (i) written notice of its desire to replace the remaining shares of
TCP Common Stock held in Escrow with cash, together with an amount in cash equal
to $12.875 multiplied by the number of shares of TCP Common Stock remaining in
escrow. Upon the receipt of such notice and such funds, the Escrow Agent shall
deliver the shares of TCP Common Stock remaining in Escrow to CDI and
thereafter, the Escrow Agent shall hold such cash in escrow pursuant to the
terms of this Agreement.
2.4 APPOINTMENT OF ARBITRATORS. Within twenty (20) days of CDI's and
Purchaser's failure to resolve a dispute pursuant to Section 2.2(d) hereof, each
of Purchaser and CDI shall appoint one person to serve as an Arbitrator pursuant
to the terms of this Agreement; provided, however, that neither Purchaser nor
CDI shall appoint any person that either Purchaser, CDI or their respective
affiliates has had any material business dealings with at any time during the
previous five year period from the date of appointment. The two Arbitrators so
appointed shall mutually select the third Arbitrator hereunder within ten (10)
days of their respective appointment. The three (3) Arbitrators shall jointly
resolve the dispute within thirty (30) days after the appointment of the third
Arbitrator. If either Purchaser or CDI has not properly appointed an Arbitrator
within the time period above who meets the criteria set forth above, the
Arbitrator properly appointed shall serve as the sole Arbitrator to resolve the
dispute pursuant to the terms of this Agreement. The proceeding before the
Arbitrators shall be conducted in accordance with the rules of the American
Arbitration Association. The Arbitrators' determination as to a dispute shall
be final and binding on the parties hereto. Purchaser and Xxxxxxxx shall each
pay the fees and expenses incurred by their respective Arbitrator and one-half
of the fees and expenses of the third Arbitrator.
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Article III
ESCROW AGENT
3.1 COMPENSATION. All fees of the Escrow Agent, which are $2,400 per
year, and all reasonable expenses, disbursements and advances incurred or paid
by the Escrow Agent (including, without limitation, reasonable attorneys' fees)
shall be equally paid by Purchaser and Sellers.
3.2 LEGAL COUNSEL. If the Escrow Agent is joined into any litigation
involving the Escrow Fund or this Agreement, the Escrow Agent shall have the
right to retain counsel and shall have a lien on the property deposited
hereunder for any and all costs, attorneys' and solicitors' fees, charges,
disbursements, and expenses incurred in connection with such litigation; and
shall be entitled to reimburse itself therefor out of the property deposited
hereunder, and if it shall be unable to reimburse itself from the property
deposited hereunder, Purchaser and Sellers agree to equally pay to the Escrow
Agent on demand, its reasonable charges, counsel and attorneys' fees,
disbursements, and expenses in connection with such litigation.
3.3 RESIGNATION. The Escrow Agent reserves the right to resign at any
time by giving written notice of resignation to Purchaser and Sellers,
specifying the effective date of such resignation. Within thirty (30) days
after receiving such notice, Purchaser and Sellers agree to appoint a successor
escrow agent to which the Escrow Agent will distribute the property then held
hereunder, less the Escrow Agent's fees, costs and expenses. If a successor
escrow agent has not been appointed and has not accepted such appointment by the
end of the thirty (30) day period, the Escrow Agent may apply to a court of
competent jurisdiction for the appointment of a successor Escrow Agent, and the
costs, expenses and reasonable attorneys' fees which are incurred in connection
with such a proceeding shall be equally paid by Purchaser and Sellers. The
Escrow Agent shall continue to serve as escrow agent hereunder until its
successor accepts the escrow and receives the Escrow Fund.
3.4 LIABILITY. The Escrow Agent undertakes to perform only such duties as
are specifically set forth herein. The Escrow Agent, if acting or refraining
from acting in good faith, shall not be liable for any mistake of fact or error
in judgment by it or for any acts or omissions by it of any kind unless caused
by its willful misconduct or gross negligence, and shall be entitled to rely
conclusively upon (i) any written notice, instrument or signature believed by it
to be genuine and to have been signed or presented by the proper party or
parties duly authorized to do so, and (ii) the advice of counsel retained by it.
Purchaser and Sellers shall equally indemnify the Escrow Agent for any damages
it incurs for its acting or refraining from acting in good faith hereunder,
which damages were not caused by its willful misconduct or gross negligence.
The Escrow Agent is not responsible for any of the terms and/or conditions of
the Purchase Agreement and may rely exclusively on the directions of the parties
as set forth in this Agreement to satisfy its role as Escrow Agent. Neither
Purchaser nor the
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Escrow Agent shall be liable to the Selling Entities for any portion of the
Escrow Fund properly distributed to Xxxxxxxx pursuant to the terms of this
Agreement and the Selling Entities shall look only to Xxxxxxxx for payment of
any portion of the Escrow Fund properly distributed to Xxxxxxxx.
3.5 CONTROVERSIES. If any controversy arises between Purchaser and
Sellers or with any third person with respect to the subject matter of this
Agreement, the Escrow Agent shall not be required to determine the same or take
any action with respect thereto, but may await the final resolution of any such
controversy, anything in the instructions delivered by the parties hereto to the
contrary notwithstanding, and in such event it shall not be liable for interest
or damage.
3.6 DISCHARGE OF THE ESCROW AGENT. The Escrow Agent agrees that Purchaser
and Sellers may, by mutual agreement at any time, remove the Escrow Agent as
escrow agent hereunder, and substitute a bank or trust company therefor, in
which event, upon receipt of written notice thereof, equal payment by Purchaser
and Sellers of any accrued but unpaid fees due the Escrow Agent and
reimbursement of the Escrow Agent's other fees and expenses from the Escrow Fund
in accordance with Section 3.1 hereof, the Escrow Agent shall account for and
deliver to such substituted escrow agent the Escrow Fund held by it, and the
Escrow Agent shall thereafter be discharged from all liability hereunder.
3.7 COURT ORDERS. If the Escrow Fund shall be attached, garnished, or
levied upon pursuant to any court order, or the delivery of the Escrow Fund
shall be stayed or enjoined by any court order, or any court order shall be made
or entered into affecting the Escrow Fund, or any part thereof, the Escrow Agent
is hereby expressly authorized, in its sole direction, to obey and comply with
any court order so entered or issued, which it is advised by legal counsel of
its own choosing is binding upon it, whether with or without jurisdiction, and
in case the Escrow Agent obeys or complies with any court order, it shall not be
liable to any of the parties hereto or to any other person, firm or corporation,
by reason of such compliance notwithstanding such court order be subsequently
reversed, modified, annulled, set aside or vacated.
Article IV
MISCELLANEOUS
4.1 NOTICES. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed given when delivered in person, or on
the third business day after being deposited in the United States mail, postage
prepaid, registered or certified mail, addressed as follows:
If to any of the Sellers:
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c/o Xxxx Xxxxxxxx
000 Xxxxxxxxx Xxxx
Xxxxx, Xxxxx Xxxxxxxx 00000
with a copy to:
Xxxxxxxxxxx Xxxxxx Xxxx & Xxxx, P.C.
000 Xxxxxx Xxxxxx
Xxxx Xxxxxx Xxx 00
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Fax: 000-000-0000
Attn: Xxxxxxx X. Few, Jr.
If to Purchaser, addressed to:
SC Acquisition I, Inc.
c/o Total Control Products, Inc.
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attn: Nic Gihl, CEO
With a copy to:
X'Xxxxxx & Xxxxxx
00 Xxxxx XxXxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxx
If to Escrow Agent, addressed to:
American National Bank and Trust Company of Chicago
00 Xxxxx XxXxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: 000-000-0000
Attn: Xx. Xxxxx Xxxxxxxxxxx
and/or at such other addresses and/or addressees as may be designated by notice
given in accordance with the provisions of this Section 4.1.
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4.2 TERMINATION OF AGREEMENT. This Agreement shall continue in force
until the final distribution of all portions of the Escrow Fund held by the
Escrow Agent hereunder or until terminated by written notice signed by Purchaser
and Sellers.
4.3 EXPENSES. Except as otherwise provided herein, both Purchaser and
Sellers shall be responsible for their own costs and expenses with respect to
matters involving this Agreement.
4.4 HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All pronouns shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the persons,
firm or corporation may require in the context thereof.
4.5 SEVERABILITY. If any provision of this Agreement, or any covenant,
obligation or agreement contained herein is determined by a court to be invalid
or unenforceable, such determination shall not affect any other provision,
covenant, obligation or agreement, each of which shall be construed and enforced
as if such invalid or unenforceable portion were not contained herein. Such
invalidity or unenforceability shall not affect any valid and enforceable
application thereof, and each such provision, covenant, obligation or agreement,
shall be deemed to be effective, operative, made, entered into or taken in the
manner and to the full extent permitted by law.
4.6 CONSTRUCTION. This Agreement shall be construed, and the rights and
duties of the parties hereto determined, in accordance with the laws of the
State of Illinois.
4.7 LIMITATION OF REMEDY. Nothing contained in this Agreement shall
limit or impair, or be construed to limit or impair, any right or remedy to
which any party hereto may become entitled by virtue of any breach by any party
under the terms and provisions of the Purchase Agreement; PROVIDED, HOWEVER,
that such rights and remedies shall be limited as set forth in the Purchase
Agreement.
4.8 MULTIPLE COUNTERPARTS. 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 but one and the same instrument.
4.9 AMENDMENTS AND WAIVERS. No amendment, supplement, modification or
waiver of this Agreement shall be binding unless executed in writing by all the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
4.10 ASSIGNMENT, BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding
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sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective permitted successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first above written.
PURCHASER:
SC ACQUISITION I, INC.
By: /s/Nic Gihl
--------------------------
Nic Gihl, President
SELLERS:
/s/Xxxx Xxxxxxxx
-------------------------------
Xxxx Xxxxxxxx
COMPUTER DYNAMICS, INC.
By: /s/Xxxx Xxxxxxxx
--------------------------
Xxxx Xxxxxxxx, President
ESCROW AGENT:
AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO
By: /s/ Xxxxx X. Xxxxxxxxxxx
-----------------------------------
Its: Vice President
----------------------------------
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