ESCROW AGREEMENT
THIS ESCROW AGREEMENT made as of this 4th day of May, 1998, by and
among Identity Group, Inc., a Tennessee corporation ("Identity"),
Geographics, Inc., a Wyoming corporation ("Geographics"), U.S. Bank National
Association, a national banking association (the "Bank") and Lawyers Title
Insurance Corporation, a Virginia corporation, as escrow agent (the "Escrow
Agent").
WITNESSETH
WHEREAS, Identity, Geographics and the Bank have entered into that
certain Amended and Restated Asset Purchase Agreement, dated as of May 4,
1998 (the "Agreement"); and
WHEREAS, pursuant to the Agreement, Identity has agreed to place
$200,000 in escrow, and Escrow Agent has agreed to accept, hold and disburse
such funds under the terms and conditions set forth herein;
WHEREAS, capitalized terms used herein but not otherwise defined,
shall have the meanings ascribed to such terms in the Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound, the parties
hereto agree as follows:
1. APPOINTMENT OF ESCROW AGENT AND ACCEPTANCE BY ESCROW AGENT.
Identity, the Bank and Geographics hereby appoint Escrow Agent to serve as
escrow agent for purposes of the Agreement and Escrow Agent hereby accepts
the appointment as escrow agent hereunder and agrees to act on the terms and
conditions hereinafter set forth.
2. ESCROW FUND. Identity shall deliver or cause to be delivered
to Escrow Agent $200,000 pursuant to and subject to the terms and conditions
of the Agreement, and upon receipt of such amounts Escrow Agent shall
acknowledge receipt of such amounts and agrees to hold and disburse said
amounts and interest and income earned thereon (collectively, the "Escrow
Fund") in accordance with the terms and conditions of this Escrow Agreement
and for the uses and purposes stated herein.
3. INVESTMENT. Escrow Agent shall, pending the disbursement of
the Escrow Fund pursuant to this Escrow Agreement, invest the Escrow Fund in
a money market account, unless and until otherwise instructed by Identity,
the Bank and Geographics.
4. RIGHTS AND RESPONSIBILITIES OF ESCROW AGENT. The acceptance
by the Escrow Agent of its duties hereunder is subject to the following terms
and conditions, which the parties to this Escrow Agreement hereby agree shall
govern and control with respect to the Escrow Agent's rights, duties,
liabilities and immunities.
(a) The Escrow Agent shall act hereunder as a depositary
only, and it shall not be responsible or liable in any manner whatever
for the sufficiency, correctness, genuineness or validity of any
document furnished to the Escrow Agent or any asset deposited with it.
(b) The Escrow Agent shall be protected in acting upon
written instructions from Identity, the Bank and Geographics if it, in
good faith,
believes such written instructions to be genuine and what they purport
to be.
(c) The Escrow Agent shall not be liable for any error of
judgment or for any action taken or omitted by it in good faith, or
for any mistake of fact or law, or for anything which it may do or
refrain from doing in connection herewith, except its own gross
negligence or willful misconduct.
(d) The Escrow Agent may confer with legal counsel, including
its own in-house counsel, in the event of any dispute or question as
to the construction of any of the provisions hereof, or its legal
duties hereunder, and Escrow Agent shall incur no liability and it
shall be fully protected in acting in accordance with the written
opinions of such counsel.
(e) Identity, the Bank and Geographics agree to indemnify the
Escrow Agent and hold it harmless from and against any loss,
liability, expenses (including, without limitation, reasonable
attorneys' fees and expenses), claim or demand arising out of or in
connection with the performance of its obligations in accordance with
the provisions of this Escrow Agreement, except for the gross
negligence or willful misconduct of the Escrow Agent (provided that if
either Identity, the Bank or Geographics pay more than one-third of
the total amount of the foregoing, the party paying in excess of
one-third shall have a right of contribution from the other two
parties such that the parties each pay one-third of such amount).
These indemnities shall survive the resignation of the Escrow Agent or
the termination of this Escrow Agreement.
(f) The Escrow Agent shall have no duties except those
specifically set forth in this Escrow Agreement. This Escrow
Agreement represents the entire understanding of the parties hereto
with respect to the subject matter contained herein and supersedes any
and all other and prior agreements between them.
(g) The Escrow Agent shall have the right at any time it
deems appropriate to seek an adjudication in a court of competent
jurisdiction as to the respective rights of the parties hereto and
shall not be held liable by any party hereto for any delay or the
consequences of any delay occasioned by such resort to court.
(h) The fee of the Escrow Agent for its services hereunder
shall be paid equally by Identity and the Bank in accordance with the
standard schedule of charges in effect when services are rendered.
Such schedule will be furnished upon request.
(i) In addition to the fee described in paragraph 4(h), the
Escrow Agent shall be entitled to reimbursement for all reasonable
expenses, disbursements or advances made by it in the performance of
its duties hereunder, including reasonable counsel and court costs,
pursuant to paragraph 4(d). Identity and the Bank shall each pay
one-half of such expenses.
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5. CLAIMS. The Escrow Fund will be held in escrow by the Escrow
Agent until the satisfaction of Sections 5 and 6.
(a) Identity may make one or more claims against the Escrow
Fund following the Closing under the following circumstances and in
accordance with the procedures outlined on Schedule 8.16 to the Agreement
(each, a "Claim"):
(i) for the amount of any liabilities of Geographics
which Identity has been required to pay after the Closing and which
were not assumed by Identity pursuant to the Agreement;
(ii) for the amount of all costs, liabilities and
expenses associated with any customer returns of goods shipped prior
to the Closing and not reimbursed by Geographics to Identity;
(iii) for the amount of any damages incurred by Identity
(net of insurance proceeds received by Identity) as a result of any
breach by Geographics of its covenants in the Agreement;
(iv) for the amount of any damages incurred by Identity
as a result of Geographics' failure to comply with any applicable bulk
sales law;
(v) for the amount of any customer rebates earned
prior to the Closing and charged to Identity; and
(vi) for the amount of any customer credits awarded by
Geographics prior to the Closing;
provided, however, that (x) Escrow Agent need not inquire into or consider
whether a claim complies with the requirements of the Agreement, and (y) any
Claims pursuant to clauses (i), (iii) and (iv) above shall be subject to the
$25,000 deductible amount referred to in Section 8.1(a) of the Agreement.
Notwithstanding anything contained herein, under no circumstances will
returns of SKUs added to plan-o-grams of major customers since October 1997
be deducted from the Escrow Fund.
(b) Upon the termination of this Escrow Agreement any amounts
due to Identity for any customer orders which are received by Geographics
electronically or otherwise prior to the conversion of customer orders as
contemplated in Section 8.14 of the Agreement and which have not been paid to
Identity shall be paid to Identity from the Escrow Fund. Identity shall
reimburse Geographics for any returns or credits with respect to such orders
that occur after the termination of this Escrow Agreement and for the amount
of any customer payments subsequently received by Identity which relate to
orders for which Identity has been paid from the Escrow Fund.
(c) Notwithstanding anything to the contrary contained
herein, Identity and Geographics shall comply with the additional procedures
and plans of action specified on Schedule 8.16 to the Agreement in connection
with the treatment of transactions occurring subsequent to April 27, 1998 and
to the extent that the terms of this Escrow Agreement conflict with such
Schedule 8.16, Schedule 8.16 shall control.
6. DISBURSEMENTS. (a) Notwithstanding anything contained in
Section 5, the Escrow Fund will be immediately paid to Identity by the Escrow
Agent in the event that the Closing does not occur due to a breach by the
Bank and/or Geographics of its respective covenants or agreements under the
Agreement or under the Core Business Collateral Surrender and Foreclosure
Agreement dated May 4, 1998 by and between the Bank and Geographics (the
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"Collateral Surrender Agreement") or a failure of the Bank or Geographics to
satisfy any conditions precedent to Identity's obligation to consummate the
transactions contemplated under the Agreement. Additionally, the Escrow Fund
will be immediately paid to the Bank by the Escrow Agent in the event that
the Closing does not occur due to a breach by Identity of its covenants or
agreements under the Agreement or a failure of Identity to satisfy any
conditions precedent to Geographics' or the Bank's obligation to consummate
the transactions contemplated under the Agreement which is not cured within a
reasonable time.
(b) From time to time on or before a date which is 90 days
after the Closing, Identity may give a notice (a "Notice") to the Bank,
Geographics and Escrow Agent specifying in reasonable detail the nature and
dollar amount of any Claim it may have under the Agreement. If Geographics
or the Bank gives a notice to Identity and Escrow Agent disputing any Claim
(a "Counter Notice") within 10 days following receipt by Escrow Agent of the
Notice regarding such Claim, Escrow Agent shall proceed as provided in
Section 6(c) below. If no Counter Notice is received by Escrow Agent within
such 10-day period with respect to a Claim, then the dollar amount of
Identity's Claim as set forth in its Notice shall be deemed established for
purposes of this Escrow Agreement and the Agreement and, at the end of such
10-day period, Escrow Agent shall pay to Identity the dollar amount claimed
in the Notice from (and only to the extent of) such Escrow Fund.
(c) If a Counter Notice is given with respect to a Claim,
Escrow Agent shall make payment with respect thereto only in accordance with
(i) joint written instructions of Identity, the Bank and Geographics, (ii) a
final non-appealable order of a court of competent jurisdiction, or (iii) an
arbitrator's decision. Any court order shall be accompanied by a legal
opinion by counsel for the presenting party satisfactory to Escrow Agent to
the effect that the order is final and non-appealable. Escrow Agent shall
act on such court order and legal opinion without further question.
(d) Unless sooner terminated by distribution of the entire
Escrow Fund, on the earlier of (i) the date that is 90 days after the Closing
Date or (ii) termination of the Agreement pursuant to Section 10 thereof, the
Escrow Agent shall pay and distribute the then amount of the Escrow Fund to
the Bank (including any interest earned thereon) unless the Closing has
occurred and any Claims are then pending, in which case an amount equal to
the aggregate dollar amount of such Claims (as shown in the Notices of such
Claims) shall be retained by Escrow Agent in the Escrow Fund (and the balance
paid to the Bank) until it receives joint written instructions of Identity,
the Bank and Geographics, a final non-appealable order of a court of
competent jurisdiction or an arbitrator's decision. If the Agreement is
terminated pursuant to Section 12 thereof, except termination due to a
material breach by Identity, the entire Escrow Fund (including interest
earned thereon) will be promptly returned to Identity by the Escrow Agent.
7. DISPUTE. In the event that there shall be any disagreement
between Identity, the Bank and Geographics or between them or any of them and
any other person, resulting in adverse claims or demands being made in
connection with this Escrow Agreement, or in the event that Escrow Agent, in
good faith, shall be in doubt as to what action it should take hereunder,
Escrow Agent may, at its option, refuse to comply with any claims or demands
on it or refuse to take any other action hereunder, so long as such
disagreement continues or such doubt exists; and in any such event, Escrow
Agent shall not be or become liable in any way or to any person for its
failure or refusal to act, and Escrow Agent shall be entitled to continue to
so refrain from acting until Escrow Agent has received a non-appealable court
order from a court of competent jurisdiction or a final decision by an
arbitrator directing the disposition of such property, or until it has
received appropriate written instructions signed by Identity, the Bank and
Geographics. Any dispute arising between Identity, the Bank and Geographics
in connection
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with the terms of this Escrow Agreement shall be subject to arbitration in
accordance with Section 11.14 of the Agreement.
8. INCOME. All income, including interest, earned on the Escrow
Fund deposited hereunder (hereinafter called the "Income") shall be added to
and held in the escrow account created hereunder.
9. TAX IDENTIFICATION NUMBER. All interest accrued in the Escrow
Fund shall be for the account of the Bank unless required to satisfy Claims.
10. INDEMNIFICATION AS TO TAXES, PENALTIES AND INTEREST. Identity
shall indemnify and hold harmless the Escrow Agent against and in respect of
any liability for taxes and for any penalties or interest in respect of taxes
attributable to the investment of funds held in escrow by the Escrow Agent
pursuant to this Escrow Agreement (provided, that if Identity pays any such
taxes, penalties or interest to Escrow Agent, Geographics and the Bank shall
reimburse Identity for one-third of such amounts, respectively).
11. AMENDMENT. This Escrow Agreement may not be amended or
supplemented and no provision hereof may be modified or waived, except by an
instrument in writing, signed by all of the parties hereto.
12. TERMINATION. The purpose of this Escrow Agreement and the
terms hereof shall terminate on the earlier of (a) the proper disbursement or
release of the entire Escrow Fund by the Escrow Agent in accordance with the
terms hereof, (b) receipt by the Escrow Agent of written unanimous consent
signed by Identity, the Bank and Geographics hereto or (c) receipt by Escrow
Agent of a non-appealable court order from a court of competent jurisdiction
in accordance with Section 7 hereof. Upon the termination of this Escrow
Agreement and upon the delivery of all or any portion of the Escrow Funds by
the Escrow Agent, in accordance with the terms hereof, the Escrow Agent shall
be relieved of any and all further obligations hereunder.
13. EXECUTION IN COUNTERPARTS AND BY FACSIMILE. This Escrow
Agreement may be executed in several counterparts and by facsimile, each of
which counterparts and facsimiles shall be deemed an original, but such
counterparts together shall constitute one and the same instrument.
14. MISCELLANEOUS. All covenants and agreements contained in this
Escrow Agreement by or on behalf of the parties hereto shall bind and inure
to the benefit of such parties and their respective heirs, administrators,
legal representatives, successors and assigns, as the case may be, and all
references to such parties herein shall be deemed to also refer to any
successors, assigns, heirs, administrators and legal representatives of said
parties, as the case may be. The headings in this Escrow Agreement are for
convenience of reference only and shall neither be considered as part of this
Escrow Agreement, or limit or otherwise affect the meaning hereof. This
Escrow Agreement shall be construed and enforced in accordance with the laws
of the State of Tennessee.
15. NOTICES. All instructions, notices and other communications
hereunder must be in writing and shall be deemed to have been duly given if
(i) delivered by hand or (ii) delivered by facsimile (confirmed in writing)
or (iii) mailed by recognized domestic and international courier express
service, in each case with charges and postage prepaid and addressed as
follows (or such other address provided pursuant to a valid notice hereunder):
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(a) If to Identity:
Identity Group, Inc.
0000 Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Phone: 000-000-0000
Facsimile: 000-000-0000
(b) If to Geographics:
Geographics, Inc.
0000 Xxxxx Xxxx
X.X. Xxx 0000
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Phone: 000-000-0000
Facsimile: 360-332-6352
(c) If to the Bank:
U.S. Bank National Association
Attention: Xxxxx Xxxxxxx
Special Assets Group
U.S. Bank National Association
000 Xxxxxxxxx 0xx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
(d) If to the Escrow Agent:
Lawyers Title Insurance Corporation
Xxxxx Xxxxxxxx
Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxx, Xx., Esquire
Phone: 000-000-0000
Facsimile: 000-000-0000
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Escrow Agreement as of the date first above written.
IDENTITY GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx
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Title: President/CEO
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GEOGRAPHICS, INC.
By:
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Title:
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U.S. BANK NATIONAL ASSOCIATION
By:
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Title:
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LAWYERS TITLE INSURANCE
CORPORATION, as Escrow Agent
By:
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Title:
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