Exhibit 10.02
ESCROW AGREEMENT
AGREEMENT dated February 1, 1996 by and among PHOENIX COLOR CORP., a
New York corporation (the "Purchaser"), the persons and entities listed on
Schedule A annexed hereto (such persons and entities being referred to
collectively as the "Sellers" and singly as a "Seller"), and XXXXXX X. XXXXXXX,
as escrow agent (the "RBGB Escrow Agent"), and XXXXXXX X. XXXX, as escrow agent
(the "CHS Escrow Agent").
RECITALS
A. The Purchaser, the Sellers and certain other parties previously entered
into a Stock Purchase Agreement dated December 27, 1995 (the "Stock Purchase
Agreement"), pursuant to which the Purchaser agreed to purchase from the Sellers
and certain other parties all of the capital stock of New England Book Holding
Corporation ("NEBH"), and the closing for such purchase of capital stock is
being held on this date;
B. The parties to the Stock Purchase Agreement have agreed that, in order to
secure certain indemnification obligations of the Sellers to the Purchaser under
the Stock Purchase Agreement, the Sellers are agreeing to cause to be deposited
in escrow a fund in the original principal amount of $2,100,000, representing
10% of the purchase price payable to the Sellers under the Stock Purchase
Agreement;
C. The parties desire to appoint the RBGB Escrow Agent and the CHS Escrow
Agent (collectively, the "Escrow Agents"), who will be jointly responsible for
administering and disbursing the escrowed funds;
D. The parties desire to set forth the terms and conditions under which the
escrowed funds will be maintained and administered, and setting forth also the
rights and responsibilities of the Escrow Agents and the other parties to this
Agreement;
NOW, THEREFORE, for the sum of $10.00 (Ten Dollars) and other good and
valuable consideration, paid and given by each party to the other, receipt of
which is hereby acknowledged, THE PARTIES AGREE AS FOLLOWS:
I. DEPOSIT AND ESCROW FUND
1.1 Delivery of Funds in Escrow. Concurrently with the execution of this
Agreement, the sum of $2,100,000, representing 10% of the purchase price payable
to the Sellers under the Stock Purchase Agreement, shall be deposited and held
in escrow pursuant to the terms of this Agreement. Such amount and all accrued
interest, as they shall increase or decrease from time to time and in whatever
form the same maybe invested or maintained in accordance with the provisions of
this Agreement, are referred to herein as the "Escrow Fund."
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1.2 Escrow Period. The Escrow Fund shall be maintained and shall continue for
a period of four years through December 31, 1999 (the "Escrow Period"), unless
such Escrow Period is changed in accordance with the provisions of Sections 5.1
or 7.1.
1.3 Deposit and Investment of Escrow Fund. The Escrow Fund shall be deposited
at an established federally or state chartered commercial banking institution to
be selected by the RBGB Escrow Agent. Such deposit shall initially be made into
one or more interest-bearing checking or savings accounts maintained at such
institution, from which amounts shall be withdrawn from time to time for
investment in the interest-bearing instruments described below, and to which
funds will be returned when such instruments mature or are liquidated. The
Escrow Fund, except such amounts as are required to pay bank charges and similar
administrative expenses, shall be invested in short-term direct obligations of,
or obligations the timely payment of principal and interest on which are
unconditionally guaranteed by, the United States of America. Investment
decisions shall be made by the RBGB Escrow Agent, but the CHS Escrow Agent shall
have the right to reasonably approve the general character and maturity dates of
investments, which approval shall not be unreasonably withheld.
1.4 Signatures for Transfer/Withdrawal. Subject to the terms and conditions of
this Agreement, amounts comprising the Escrow Fund may be transferred between
accounts and among various investment instruments or forms, on the sole
signature of the RBGB Escrow Agent, subject to the reasonable approval of the
CSH Escrow Agent. However, no amounts may be withdrawn from
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the Escrow Fund or paid to the Purchaser, to any Seller or to any other person
without the joint signatures of the Escrow Agents.
1.5 Notification of Fund Status. The RBGB Escrow Agent shall notify the CHS
Escrow Agent of the status of the Escrow Fund by sending to the CHS Escrow Agent
duplicates or copies of all Escrow Fund bank statements and statements showing
investment of Escrow Fund assets. At least once each calendar quarter, the
Escrow Agents shall send notices to the Purchaser and the Sellers showing the
current status of the Escrow Fund, including information as to any claims then
pending against or which are being paid from the Escrow Fund.
1.6 Appointment of Disbursing Agent. The Sellers hereby appoint Xxxxxx, Xxxx &
Xxxxxxx to act as a disbursing agent (the "Disbursing Agent"), authorized to
receive distributions of amounts payable to the Sellers from the Escrow Fund and
to forward such distributions, and any notices intended for the Sellers from the
Escrow Agents, to the Sellers. The Escrow Agents are hereby authorized to
communicate with the Sellers through the Disbursing Agent, and need not
recognize any communications or directions from any Seller unless the same is
transmitted through the Disbursing Agent.
II. CLAIMS AGAINST AND PAYMENT FROM ESCROW FUND
2.1 Confirmation of Purchaser's Right to Indemnification. The parties
acknowledge and confirm that the Purchaser (including, for purposes hereof
certain Purchaser Indemnitees) is entitled
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to indemnification against certain "Losses" as set forth in Article VIII of the
Stock Purchase Agreement, including, without limitation, Section 8.1 thereof.
2.2 Payment of Losses. In the event that any indemnifiable Losses (as defined
in the Stock Purchase Agreement) are incurred by Purchaser (including, in the
definition of Purchaser for this purpose, any "Purchaser Indemnitee" as defined
in Section 8.1 of the Stock Purchase Agreement), and all or any portion of such
Losses are not promptly reimbursed by Sellers, the Purchaser shall be entitled
to immediate reimbursement of such Losses from the Escrow Fund. (For purposes
hereof, the cost of any bond necessary to stay any action against Purchaser,
pending an appeal of any suit or action in respect of any Losses, shall be
deemed included in Losses and paid from the Escrow Fund.) Upon notice from the
Purchaser given to the Escrow Agents, stating the amount and nature of the
Losses and indicating the inability, failure or refusal of the Sellers to
reimburse the Purchaser, the Escrow Agents shall, within fifteen days after such
notice, issue a check drawn on the Escrow Fund for the full amount claimed;
provided, however, that in the event a dispute arises regarding the payment of
any Losses or regarding the payment of any Annual Distribution (as defined in
Section 3.1 below), either or both of the Escrow Agents may refuse to take any
action otherwise provided for herein and may in lieu thereof submit such dispute
for resolution as provided in Section 6.1 hereof.
2.3 Notice to Sellers of Payment of Claims. Whenever any claims are paid from
the Escrow Fund as aforesaid, the Escrow Agents shall so notify the Sellers,
indicating the amount and nature of the claim, the amount paid, and the
remaining balance in Escrow Fund after such payment.
III. ESCROW FUND DISTRIBUTIONS TO SELLERS
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3.1 Annual Distributions. Subject to adjustment as set forth in Section 3.2
below, the Sellers shall be entitled, at the end of each calendar year during
the Escrow Fund, to the distribution and return of (i) the sum of $525,000, (ii)
all interest accrued on the Escrow Fund during such year and available for
distribution at year-end, and (iii) any amounts in the Escrow Fund which were
distributable to the Sellers in any preceding year under the terms of this
Agreement but which were not so disbursed (all of the foregoing amounts being
referred to collectively as the "Annual Distribution"). On or before December 15
in each year during the Escrow Period, the Escrow Agents shall confer and shall
determine the amount of accrued and available interest for the year and the
appropriate Annual Distribution. On or prior to December 31 in each year during
the Escrow Period, the Escrow Agents shall cause a check payable to the
Disbursing Agent in the amount of the Annual Distribution to be issued, along
with an accompanying notification to the Sellers.
3.2 Adjustment of Annual Distribution. The amount of the Annual Distribution
for any calendar year shall be reduced by (i) the aggregate amount of any Losses
paid from the Escrow Fund during such calendar year and (ii) any pending claims
under Section 8.1 of the Stock Purchase Agreement. If the amount of such Losses
and claims exceeds the Annual Distribution in any calendar year, such excess
("Excess Losses") will reduce each Annual Distribution to be paid in any
succeeding year of the Escrow Period. By way of illustration, if, in the first
year of the Escrow Period, the Escrow Fund pays Losses of $100,000 and there are
other claims aggregating $100,000 under Section 8.1 of the Stock Purchase
Agreement, there will be an Annual Distribution of $325,000 ($525,000 - $200,000
= $325,000) plus accrued interest. If, in the second year of the Escrow Period
there are Losses paid of $500,000 and claims of $300,000 (including the
preceding year's $100,000
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in claims) with accrued and available Escrow Fund interest of $80,000, there
will be no Annual Distribution in such year, and there will be Excess Losses of
$95,000 ($800,000 [Losses and old and new claims] - $625,000 [$525,000 +
$100,000 not distributed in the first year because of pending claims] + $80,000
in interest = $95,000), which Excess Losses will be carried over and applied to
reduce the Annual Distribution in the succeeding year.
3.3 Final Distribution. The Sellers shall be entitled to receive, at the end
of the Escrow Period, a final Annual Distribution which will consists of the
remaining balance of the Escrow Fund, including any previously undistributed
accrued interest thereon, less any bank charges or similar fees required to be
paid. At the time of such final distribution, the Escrow Agents will close all
bank accounts and liquidate all Escrow Fund investments. The final annual
distribution will be accompanied by a statement showing the distribution of the
balance of the Escrow Fund.
IV. ESCROW AGENT FEES, OBLIGATIONS AND INDEMNIFICATION
4.1 Fees and Expenses. The fees, disbursements and expenses incurred by the
RBGB Escrow Agent in performing its duties under this Agreement shall be charged
to and paid by the Purchaser. The fees, disbursements and expenses incurred by
the CHS Escrow Agent in performing its duties under this Agreement shall be
charged to and paid by the Sellers, or may be paid out of the Escrow
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Fund by direction of the Sellers, after appropriate provision for the payment of
Losses and for reserves for pending claims.
4.2 Responsibility of Escrow Agents. Neither of the Escrow Agents shall be
obligated to undertake any responsibilities, actions or tasks not expressly
provided for in this Agreement, unless such responsibility, action or task is
specifically authorized by the consent of all of the parties to this Agreement.
4.3 Presumption of Authenticity. Neither of the Escrow Agents shall have any
responsibility to inquire into or determine the genuiness, authenticity or
sufficiency of any instruments, checks, agreements or other documents submitted
to it in connection with its duties hereunder, and may rely on such items which
it believes in good faith to be genuine, authentic and sufficient.
4.4 Indemnification of Escrow Agents.
(a) The Purchaser and the Sellers shall jointly and severally indemnify
the RBGB Escrow Agent and hold the RBGB Escrow Agent harmless against all loss,
liabilities, damage or expense, including any reasonable attorneys' fees
incurred in connection herewith, which may at any time be imposed upon or
incurred by or asserted against the RBGB Escrow Agent in any way relating to or
rising out of this Escrow Agreement or the duties undertaken by the RBGB Escrow
Agent
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thereunder, other than any loss, liability, damage or expense resulting solely
from the gross negligence or willful misconduct of the RBGB Escrow Agent.
(b) The Purchaser and the Sellers shall jointly and severally indemnify
the CHS Escrow Agent and hold the CHS Escrow Agent harmless against all loss,
liability, damage or expense, including any interest, penalties and reasonable
attorneys' fees incurred in connection therewith, which may at any time be
imposed upon or incurred by or asserted against the CHS Escrow Agent in any way
relating to or rising out of this Escrow Agreement or the duties undertaken by
the CHS Escrow Agent thereunder, other than any loss liability, damage or
expense resulting solely from the gross negligence or willful misconduct of the
CHS Escrow Agent.
V. TERMINATION OF ESCROW
5.1 Termination of Escrow. This Agreement and the Escrow Fund shall terminate
at the end of the Escrow Period, unless all of the parties to this Agreement
shall otherwise agree in writing. Upon such termination, and subject to the
distribution of any remaining balance of the Escrow Fund, each of the Escrow
Agents shall be fully discharged from any further obligations to any party under
this Agreement.
VI. DISPUTES
6.1 Disputes. Any disputes arising under or in connection with this Agreement
which cannot be resolved among the parties shall be subject to resolution solely
by a court of general jurisdiction
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located in the County and State of New York, and the parties hereby expressly
consent and waive any objection to the jurisdiction of such court.
6.2 No Conflict in Representation.
(a) The parties acknowledge and agree that Xxxxxx X. Xxxxxxx and a law
firm of which he is a member may continue to act as counsel to the Purchaser,
and neither the functions nor obligations as the RBGB Escrow Agent, nor any
actions taken by such person or firm under this Agreement, shall be deemed to
create any conflict of interest or require termination or limitation of the
representation of the Purchaser.
(b) The parties acknowledge and agree that Xxxxxxx X. Xxxx and a law
firm of which he is a member may continue to act as counsel to the Sellers, or
any of them, and neither the functions nor obligations as the CHS Escrow Agent,
nor any actions taken by such person or firm under this Agreement, shall be
deemed to create any conflict of interest or require termination or limitation
of the representation of the Sellers.
VII. GENERAL PROVISIONS
7.1 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the Escrow Fund and supersedes all
prior agreements, discussions and proposals with respect thereto, whether
written or oral. This Agreement may be modified only by a written instrument
executed by the parties.
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7.2 No Assignment. Except as provided in Section 8.7 of the Stock Purchase
Agreement, neither Sellers nor Purchaser shall have the authority to assign any
of their respective interests in this Agreement without the prior written
consent of the other party; provided, however, that Purchaser may assign any of
its rights to be reimbursed hereunder for Losses which may be incurred from time
to time , without the prior written consent of Sellers, to a bank or other
financial institution providing financing to Purchaser as set forth in Section
6.2 of the Stock Purchase Agreement. Sellers shall execute, and shall cause NEBH
and NEBC to execute, any documents required in order to effect such assignment
of such right of Purchaser.
7.3 Benefits of Agreement. This Agreement shall be binding upon and, to the
extent permitted in this Agreement, shall inure to the benefit of Sellers and
Purchaser and their respective successors and assigns. However, it is the intent
of the parties hereto that no third-party beneficiary rights be created or
deemed to exist, and none shall so exist, in favor of any person not a party to
this Agreement, unless otherwise expressly agreed in writing by the parties.
7.4 Remedies Cumulative. Subject only to the express limitations set forth in
this Agreement, the rights and remedies provided herein shall be cumulative and
shall not preclude Sellers or Purchaser from asserting any other rights or
seeking any other remedies against the other to which it may otherwise be
entitled by law.
7.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflict of
law provisions.
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7.6 Notices. Any notice, request, instruction or other document required or
permitted to be given hereunder by a party shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, return
receipt requested, or by prepaid overnight delivery service, addressed as
follows:
If to Sellers: Xxxxxxx X. Xxxx, Esq.
Xxxxxx, Hall & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000-0000
with a copy to the CHS Escrow Agent
If to Purchaser: Phoenix Color Corp.
000 Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx XxXxxxx, President and Xxxxxx Xxxxxxxxx, Executive Vice
President
with a copy to the RBGB Escrow Agent
If to the CHS Escrow Agent: Xxxxxxx X. Xxxx, Esq.
Xxxxxx, Hall & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000-0000
If to the RBGB Escrow Agent: Xxxxxx X. Xxxxxxx, Esq.
Rosner, Bresler, Xxxxxxx & Xxxxxxx
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000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If mailed as aforesaid, the day of mailing shall
be deemed the date of delivery.
7.7 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be an original, but all of which shall constitute but one
agreement.
7.8 Severability. In case any one or more of the covenants, agreements,
provisions or terms contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity of the remaining covenants,
agreements, provisions or terms contained herein shall be in no way affected,
prejudiced or disturbed thereby.
7.9 Headings. The headings of the various Articles and Sections of this
Agreement, were employed, are for convenience of reference only and shall not be
deemed in any way to modify, interpret or construe the text of this Agreement or
the intent of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PHOENIX COLOR CORP.
By: /s/ Xx Xxxxxxxxx
--------------------------
Chief Financial Officer
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/s/ Xxxxxx X. Xxxxxxxx, Xx.
--------------------------
Xxxxxx X. Xxxxxxxx, Xx.
/s/ Xxxxx X. Xxxxxxxxx
--------------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxxx X. Xxxxxxxx
--------------------------
Xxxxxx X. Xxxxxxxx
CHEMICAL VENTURE CAPITAL ASSOCIATES
a California Limited Partnership
By: CHEMICAL VENTURE PARTNERS,
its General Partner
By:
--------------------------
a General Partner
/s/ Xxxxxx X. Xxxxxxx
---------------------------
Xxxxxx X. Xxxxxxx, as Escrow Agent
/s/ Xxxxxxx X. Xxxx
---------------------------
Xxxxxxx X. Xxxx, as Escrow Agent
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