ESCROW AGREEMENT
EXHIBIT
10.6
This
Escrow Agreement (this “Agreement”), entered
into as of April ___, 2008, is by and among between American Business
Holdings, Inc., a Delaware corporation (the “Company”), certain
officers of the Company who are a signatory hereto (“Management”) and
Xxxxx Rozynko, LLP (hereinafter referred to as the “Escrow
Agent”).
BACKGROUND
This
Agreement is made pursuant to the Securities Purchase Agreement, dated as of the
date hereof, between the Company and each Purchaser (the “Purchase
Agreement”). All capitalized terms used but not defined herein
shall have the meanings assigned them in the Purchase Agreement.
Pursuant
to the Purchase Agreement, each Purchaser has agreed to purchase from the
Company, and the Company has agreed to sell to each Purchaser, Company’s Common
Stock and Warrants. Under the terms of the Purchase Agreement,
Management is required to deposit shares of Common Stock into
escrow. The Company, Management and the Purchasers have agreed to
establish an escrow on the terms and conditions set forth in this
Agreement. The Escrow Agent has agreed to act as escrow agent
pursuant to the terms and conditions of this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the promises of the parties and the terms and
conditions hereof, the parties hereby agree as follows:
1. Appointment of Escrow
Agent. The Company and
Management hereby appoint the Escrow Agent as escrow agent to act in accordance
with the Purchase Agreement and the terms and conditions set forth in this
Agreement, and the Escrow Agent hereby accepts such appointment and agrees to
act in accordance with such terms and conditions.
2. Establishment of
Escrow. On or before the
date of this Agreement, Management shall deposit an aggregate of 2,000,000
shares of Common Stock (the “Shares”) with the
Escrow Agent. All certificates for Shares to be provided to the
Escrow Agent shall be deposited with the Escrow Agent. The Escrow
Agent will be deemed the record holder of the Shares until disbursement and will
be entitled to receive dividends and other distributions thereon and will be
entitled to vote the Shares in accordance with the Purchasers’
instructions. Escrow Agent is under no obligation to invest any such
dividends or other distributions.
3. Segregation. The Shares shall
be segregated from the assets of the Escrow Agent and held in trust for the
benefit of Management and the Purchasers in accordance herewith.
4. Receipt. Subject to
Section 7(c) hereof, the Escrow Agent shall have no liability for any loss
resulting from the deposit of the Shares.
5. Disbursement of the
Shares.
(a) Definitions. In
addition to the terms defined elsewhere in this Agreement the following terms
have the meanings set forth in this Section 5(a):
“Fiscal Year 2008 Performance
Threshold” means the target amounts of (a) $4.5 million for the Company’s
audited Net Income for the fiscal year ended May 31, 2008 and (b) $0.26 per
share for the Company’s audited Net Income per share, calculated by using 17
million shares outstanding, which should be constant and fixed regardless of the
actual number of shares outstanding.
“Fiscal Year 2009 Performance
Threshold” means the target amounts of (a) $6.0 million for the Company’s
audited Net Income for the fiscal year ended May 31, 2009 and (b) $0.30 per
share for the Company’s audited Net Income per share, calculated by using 20
million shares outstanding, which should be constant and fixed regardless of the
actual number of shares outstanding.
(b) Within
90 days of the end of the fiscal years ending May 31, 2008 and 2009,
respectively, the Company shall provide a written report of its audited Net
Income amount and per share Net Income amounts to the Purchasers and Escrow
Agent. If the Company does not achieve at least 100% of either amount
set forth in the Fiscal Year 2008 Performance Threshold, or the Fiscal Year 2009
Performance Threshold, as the case may be, the Company’s notice required under
this Section 5(b) shall set forth the percentage amount by which the Company
failed to achieve such amounts (the percentage amount of the deficit for such
fiscal year is referred to as the “Shortfall”).
(c) If
the Company does not achieve at least 54% of either amount set forth in the
Fiscal Year 2008 Performance Threshold, then the Escrow Agent shall disburse the
100% of the Shares to the Purchasers pro rata based on the number of shares of
Common Stock purchased by Purchaser under the Purchase Agreement and still
beneficially owned by such Purchaser at such date.
(d)
If the Company achieves between 54% and 95% of either amount set forth in the
Fiscal Year 2008 Performance Threshold, then the Escrow Agent shall disburse an
amount of the Shares to the Purchasers equal to the product obtained by
multiplying (i) the Shortfall by (ii) 2, such Shares will be disbursed pro rata
based on the number of shares of Common Stock purchased under the Purchase
Agreement by Purchaser and still beneficially owned by such Purchaser at such
date. For example, if the Company achieves 80% of one of the amounts
set forth in the Fiscal Year 2008 Performance Threshold and achieves 100% of the
other amount and thus reports a 15% Shortfall, then the Escrow Agent shall
disburse 30% of the Shares to Purchasers.
(e) If
any escrow Shares are delivered to Purchasers pursuant to Sections 5 (c) or (d),
Management shall within 5 business days of the Company report delivered pursuant
to Section 5(b), replenish the escrow account with an equal number of shares of
Common Stock so that the escrow will continue to hold a number of shares of
Common Stock equal to one hundred (100%) percent of the shares purchased by the
Purchasers under the Purchase Agreement. Such additional shares of
Common Stock together with the original Shares, if any, remaining in the escrow
will be deemed to be “Shares” for purposes of this Agreement.
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(f) If
the Company does not achieve at least 54% of either amount set forth in the
Fiscal Year 2009 Performance Threshold, then the Escrow Agent shall disburse the
100% of the Shares to the Purchasers pro rata based on the number of shares of
Common Stock purchased under the Purchase Agreement and still beneficially owned
by such Purchaser at such date.
(g) If
the Company achieves between 54% and 95% of either amount set forth in the
Fiscal Year 2009 Performance Threshold, then the Escrow Agent shall disburse an
amount of the Shares to the Purchasers equal to the product obtained by
multiplying (i) the Shortfall by (ii) 2, such Shares will be disbursed pro rata
based on the number of shares of Common Stock purchased under the Purchase
Agreement and still beneficially owned by such Purchaser at such
date. For example, if the Company achieves 80% of one of the amounts
set forth in the Fiscal Year 2009 Performance Threshold and achieves 100% of the
other amount and thus reports a 15% Shortfall, then the Escrow Agent shall
disburse 30% of the Shares to Purchasers.
(h) Escrow
Agent shall disburse the Shares to Purchasers within 5 business days of the
receipt of such Shares from the Transfer Agent following the receipt of written
instructions from each Purchaser specifying the amount of Shares to be delivered
to such Purchaser pursuant to the report delivered pursuant to Section
5(b). Any Shares remaining in the escrow after the distribution, if
any, to Purchasers following the delivery of the report pursuant to Section 5(b)
for Fiscal Year ending May 31, 2009, will be returned to Management pro rata to
amount delivered into escrow. The Escrow Agent will not be
responsible for calculating the number of Shares to be delivered to Purchasers
and Management and will rely on the written instructions from the Purchasers and
Management.
(i) This
Escrow Agreement shall terminate and be of no further force or effect on the
earlier of (i) disbursement of all Shares and (ii) the third year anniversary of
the Closing Date.
6. Interpleader. Should any
controversy arise among the parties hereto with respect to this Agreement or
with respect to the right to receive the Shares, the Escrow Agent shall have the
right to consult counsel and/or to institute an appropriate interpleader action
to determine the rights of the parties. The Escrow Agent is also
hereby authorized to institute an appropriate interpleader action upon receipt
of a written letter of direction executed by the parties so directing the Escrow
Agent. If the Escrow Agent is directed to institute an appropriate
interpleader action, it shall institute such action not prior to thirty (30)
days after receipt of such letter of direction and not later than sixty (60)
days after such date. Any interpleader action instituted in
accordance with this Section 6 shall be filed in any court of competent
jurisdiction in New York, New York, and the portion of the Shares in dispute
shall be deposited with the court and in such event the Escrow Agent shall be
relieved of and discharged from any and all obligations and liabilities under
and pursuant to this Agreement with respect to that portion of the
Shares.
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7. Exculpation and
Indemnification of Escrow Agent.
(a) The
Escrow Agent is not a party to, and is not bound by or charged with notice of
any agreement out of which this escrow may arise. The Escrow Agent
acts under this Agreement as a depositary only and is not responsible or liable
in any manner whatsoever for the sufficiency, correctness, genuineness or
validity of the subject matter of the escrow, or any part thereof, or for the
form or execution of any notice given by any other party hereunder, or for the
identity or authority of any person executing any such notice or depositing the
Shares. The Escrow Agent will have no duties or responsibilities
other than those expressly set forth herein. The Escrow Agent will be
under no liability to anyone by reason of any failure on the part of any party
hereto (other than the Escrow Agent) or any maker, endorser or other signatory
of any document to perform such person’s or entity’s obligations hereunder or
under any such document. Except for this Agreement and instructions
to the Escrow Agent pursuant to the terms of this Agreement, the Escrow Agent
will not be obligated to recognize any agreement between or among any or all of
the persons or entities referred to herein, notwithstanding its knowledge
thereof.
(b) The
Escrow Agent will not be liable for any action taken or omitted by it, or any
action suffered by it to be taken or omitted, in good faith and in the exercise
of its own best judgment, and may rely conclusively on, and will be protected in
acting upon, any order, notice, demand, certificate, or opinion or advice of
counsel (including counsel chosen by the Escrow Agent), statement, instrument,
report or other paper or document (not only as to its due execution and the
validity and effectiveness of its provisions, but also as to the truth and
acceptability of any information therein contained) which is reasonably believed
by the Escrow Agent to be genuine and to be signed or presented by the proper
person or persons. The duties and responsibilities of the Escrow
Agent hereunder shall be determined solely by the express provisions of this
Agreement and no other or further duties or responsibilities shall be implied,
including, but not limited to, any obligation under or imposed by any laws of
the State of New York upon fiduciaries.
(c) The
Escrow Agent will be indemnified and held harmless by the Company and Management
jointly and severally from and against any expenses, including reasonable
attorneys’ fees and disbursements, damages or losses suffered by the Escrow
Agent in connection with any claim or demand, which, in any way, directly or
indirectly, arises out of or relates to this Agreement or the services of the
Escrow Agent hereunder; except, to the extent that the Escrow Agent is guilty of
willful misconduct, fraud or gross negligence under this
Agreement. For this purpose, the term “attorneys' fees” includes fees
payable to any counsel retained by the Escrow Agent in connection with its
services under this Agreement and, with respect to any matter arising under this
Agreement as to which the Escrow Agent performs legal services, its standard
hourly rates and charges then in effect. Promptly after the receipt
by the Escrow Agent of notice of any such demand or claim or the commencement of
any action, suit or proceeding relating to such demand or claim, the Escrow
Agent will notify the other parties hereto in writing. For the
purposes hereof, the terms “expense” and “loss” will include
all amounts paid or payable to satisfy any such claim or demand, or in
settlement of any such claim, demand, action, suit or proceeding settled with
the express written consent of the parties hereto, and all costs and expenses,
including, but not limited to, reasonable attorneys’ fees and disbursements,
paid or incurred in investigating or defending against any such claim, demand,
action, suit or proceeding. The provisions of this Section 7 shall
survive the termination of this Agreement.
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8. Resignation of Escrow
Agent. At any time, upon
ten (10) days’ written notice to the parties hereto, the Escrow Agent may resign
and be discharged from its duties as Escrow Agent hereunder. As soon
as practicable after its resignation, the Escrow Agent will promptly turn over
to a successor escrow agent appointed by the parties hereto all monies and
property held hereunder upon presentation of a document appointing the new
escrow agent and evidencing its acceptance thereof. If, by the end of
the 10-day period following the giving of notice of resignation by the Escrow
Agent, the parties hereto shall have failed to appoint a successor escrow agent,
the Escrow Agent may interplead the Shares into the registry of any court having
jurisdiction.
9. Records. The Escrow Agent
shall maintain accurate records of all transactions
hereunder. Promptly after the termination of this Agreement or as may
reasonably be requested by the parties hereto from time to time before such
termination, the Escrow Agent shall provide the parties hereto, as the case may
be, with a complete copy of such records, certified by the Escrow Agent to be a
complete and accurate account of all such transactions. The
authorized representatives of each of the parties hereto shall have access to
such books and records at all reasonable times during normal business hours upon
reasonable notice to the Escrow Agent.
10. Escrow Agent
Fees. The Company
agrees to pay the Escrow Agent a non-refundable fee of $2,500 per year for its
services under this Agreement, which fee is payable in advance. Any
out-of-pocket fees will be payable by the Company upon invoice.
11. Attorneys’ Fees. If any action at
law or in equity, including an action for declaratory relief, is brought to
enforce or interpret the provisions of this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys’ fees from the other party
(unless such other party is the Escrow Agent), which fees may be set by the
court in the trial of such action or may be enforced in a separate action
brought for that purpose, and which fees shall be in addition to any other
relief that may be awarded.
12. Notice. All notices,
requests, demands and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given (a) on the date of service
if served personally on the party to whom notice is to be given, (b) on the day
of transmission if sent by facsimile/email transmission to the facsimile
number/email address given below, and telephonic confirmation of receipt is
obtained promptly after completion of transmission, (c) on the day after
delivery to Federal Express or similar overnight courier or the Express Mail
service maintained by the United States Postal Service or (d) on the fifth day
after mailing, if mailed to the party to whom notice is to be given, by first
class mail, registered or certified, postage prepaid, and properly addressed,
return receipt requested, to the party as follows:
If
to the Escrow Agent:
|
Xxxxx
Rozynko, LLP
|
|
000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000
|
|
Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000
|
|
Attention: Xxxx
X. Xxxxx, Esq.
|
Facsimile: (000) 000-0000 |
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If to the
Company:
If to
Management:
or to
such other address and to the attention of such other person as any of the above
may have furnished to the other parties in writing and delivered in accordance
with the provisions set forth above.
13. Execution in Counterparts;
Facsimile Execution. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument. Facsimile execution and delivery of this Agreement is
legal, valid and binding for all purposes.
14. Assignment and
Modification. This Agreement
and the rights and obligations hereunder of any of the parties hereto may not be
assigned without the prior written consent of the other parties
hereto. Subject to the foregoing, this Agreement will be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors and permitted assigns. No other person will acquire or
have any rights under, or by virtue of, this Agreement. No portion of
the Shares shall be subject to interference or control by any creditor of any
party hereto, or be subject to being taken or reached by any legal or equitable
process in satisfaction of any debt or other liability of any such party hereto
prior to the disbursement thereof to such party hereto in accordance with the
provisions of this Agreement. This Agreement may be changed or
modified only in writing signed by all of the parties hereto.
15. APPLICABLE LAW. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, USA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
THEREIN. THE PARTIES EXPRESSLY WAIVE SUCH DUTIES AND LIABILITIES, IT
BEING THEIR INTENT TO CREATE SOLELY AN AGENCY RELATIONSHIP AND HOLD THE ESCROW
AGENT LIABLE ONLY IN THE EVENT OF ITS WILLFUL MISCONDUCT, FRAUD, OR GROSS
NEGLIGENCE. ANY LITIGATION CONCERNING THE SUBJECT MATTER OF THIS
AGREEMENT SHALL BE EXCLUSIVELY PROSECUTED IN THE COURTS OF NEW YORK COUNTY, NEW
YORK, USA, AND ALL PARTIES CONSENT TO THE EXCLUSIVE JURISDICTION AND VENUE OF
THOSE COURTS.
16. Headings. The headings
contained in this Agreement are for convenience of reference only and shall not
affect the construction of this Agreement.
[Signature Page
Follows]
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IN WITNESS WHEREOF, the parties have
duly executed this Agreement as of the date first above written.
The
Company: American
Business Holdings, Inc.
By________________________
Name:
Title: [President]
Management:
_______________________________
Name:
_______________________________
Name:
_______________________________
Name:
Escrow
Agent: XXXXX ROZYNKO,
LLP
By:
_______________________________
Name:
Xxxx X. Xxxxx
Title:
Partner