EXHIBIT 2
ESCROW AGREEMENT (this "Agreement") dated as of February --,
1997, by and among Refrigeration Technology Inc., a Delaware corporation
("RefTech"), Quality Air, Inc., a New Mexico corporation ("QAI"), Xxxxxx X.
Xxxxxxx, Xxxxxx Xxxxxxx, Xxxx X. Xxxxxxx, Xxxxxxx X. Xxxxxxx, Xxx Xxxxxxx and
Xxxx Xxxxxxx (each a "Principal" and collectively, the "Principals"), and the
Escrow Agent named herein.
Recitals
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RefTech, QAI and the Principals have entered into an
Acquisition Agreement, dated as of the date hereof (the "Acquisition
Agreement"), which provides for the acquisition by RefTech of the
business and substantially all of the assets of QAI. Capitalized terms
used in this Agreement, and not otherwise defined herein, have the
meanings defined in the Acquisition Agreement. It is the intention of
the parties that if the Closing does not take place, this Agreement,
and all obligations and rights of each party hereunder, shall
immediately terminate as if this Agreement had never been entered into.
The Acquisition Agreement provides that (i) 50,000 shares of
Common Stock, which are part of the Exchange Consideration, be
deposited in escrow at the Closing under this Agreement, and (ii) any
Earn-Out Shares subsequently delivered by RefTech after the Closing, if
delivered prior to the time that this Agreement has been terminated in
accordance with its terms, likewise be deposited in escrow under this
Agreement (all such shares so deposited being the "Escrow Shares"), to
secure certain obligations of QAI and the Principals under the
Acquisition Agreement, on the terms and conditions set forth therein
and herein. The Escrow Shares, together with all stock powers related
thereto, are collectively the "Escrow Deposit".
The Acquisition Agreement provides for the complete
liquidation of QAI and the distribution of its assets, including its
interest in the Escrow Shares, to certain or all of the Principals (the
"Liquidation").
The parties desire to establish the terms and conditions
pursuant to which the Escrow Deposit will be held and disbursed by the
Escrow Agent.
NOW, THEREFORE, in consideration of the premises and in
reliance upon the mutual representations, warranties, covenants and agreements
hereinafter set forth, the parties agree as follows:
1. ADMINISTRATION. For the purposes of this Agreement, the
Principals have agreed that the Notice Agent shall represent them and QAI, and
that they and QAI shall be irrevocably bound by any action of, or notice given
by, the Notice Agent. QAI and the Principals hereby initially designate Xxxx X.
Xxxxxxx as the "Notice Agent". The Notice Agent shall have the right to appoint
a substitute Notice Agent, on notice to each of the other parties to this
Agreement. The Principals shall have the right to replace the Notice Agent by
giving like notice signed by all of the Principals.
2. ESCROW.
2.1 ESCROW. The Escrow Deposit will be held in escrow by
Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxxxxxx & Kuh, LLP (the "Escrow Agent"), with an
office at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as collateral for the
obligations of QAI and the Principals under Article X of the Acquisition
Agreement, subject only to release pursuant to the terms of this Agreement. The
Escrow
Agent agrees to accept delivery of the Escrow Deposit, and to hold the Escrow
Deposit in escrow subject to the terms and conditions of this Agreement.
2.2 DELIVERY AT THE CLOSING. At the Closing, the Escrow Shares
being delivered at the Closing will be delivered by QAI to the Escrow Agent,
together with a stock power duly executed in blank by QAI, sufficient in form to
permit the transfer of the Escrow Shares upon delivery.
2.3 LIQUIDATION OF QAI. The Notice Agent shall give prompt
notice of the Liquidation to RefTech and the Escrow Agent, as provided for in
Section 4.6 of the Acquisition Agreement (the "Liquidation Notice"). The copy of
the Liquidation Notice sent to the Escrow Agent shall be accompanied by separate
stock powers, duly executed in blank by each Principal being distributed Escrow
Shares by QAI, sufficient in form to permit the transfer of the Escrow Shares
upon delivery. Such stock powers shall be part of the Escrow Deposit. Upon
receipt of the Liquidation Notice, the Escrow Agent shall deliver the stock
certificate evidencing the Escrow Shares deposited under this Agreement to
RefTech, for the sole purpose of reflecting the change in record ownership of
such Escrow Shares. RTI, by its execution of this Agreement, agrees to issue
certificates to each of the Principals as provided in the Liquidation Notice and
to deliver such reissued certificates to the Escrow Agent.
2.4 CLAIMS. In the event that RefTech or RTI believes that it
may be entitled to indemnification as provided in Article X of the Acquisition
Agreement, notice thereof may be given to the Escrow Agent (a "Pending Claim
Notice", provided evidence is delivered to the Escrow Agent that a copy thereof
has been delivered to the Notice Agent). In the event that RefTech or RTI
becomes entitled to indemnification as provided in such Article X, then upon
determination thereof (a "Claim Amount"), RefTech and/or RTI, as is applicable,
shall give the Notice Agent and the Escrow Agent notice thereof (a "Notice of
Claim"). Unless RefTech or RTI, as the case may be, shall have received payment
in the full amount of the Claim Amount within thirty (30) days of its giving
such Notice of Claim, it shall give further notice to the Escrow Agent (with
evidence that such notice has been delivered to the Notice Agent) that it is
entitled to indemnification, in which event fifteen (15) days thereafter the
Escrow Agent shall cause to be delivered to RefTech or to RTI, out of the Escrow
Deposit, such number of Escrow Shares as when multiplied by their market value
per share, as herein determined, equals the Claim Amount. For the purposes of
this Section, "market value" means the average closing price of the Common Stock
as quoted on NASDAQ or any national securities exchange on which the Common
Stock may then be traded during the thirty (30) day period immediately prior to
delivery of such Notice of Claim to the Escrow Agent, and if at such time the
Common Stock is not so traded then at the most recent ask price as quoted by the
National Quotation Bureau, Inc., (or successor organization performing a similar
reporting function).
2.5 PENDING CLAIM NOTICE. Each Pending Claim Notice shall
contain the following information, to the extent it is reasonably available to
RefTech or RTI: (i) RefTech's or RTI's good faith estimate of the reasonably
foreseeable maximum amount of the Claim Amount; and (ii) a brief description in
reasonable detail of the facts, circumstances or events giving rise to the Claim
Amount.
2.6 NOTICE OF CLAIM. Each Notice of Claim shall contain the
following information: (i) the Claim Amount; and (ii) a brief description of the
facts, circumstances or events giving rise to the Claim Amount.
2.7 TERMINATION OF ESCROW. Within thirty (30) days after
receiving notice from the Notice Agent (with evidence that a copy thereof has
been delivered to RefTech and RTI), given on or after the second anniversary of
the date hereof, the Escrow Agent shall deliver to the Notice Agent any Escrow
Shares then held by it (other than any Escrow Shares the Escrow Agent reasonably
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believes [which belief may be based solely upon a written statement of RefTech
or RTI, a copy of which has been delivered to the Notice Agent] may be needed to
satisfy a then outstanding Claim Amount which has not yet been fully satisfied
and any pending Claim Amount referred to in a then outstanding Pending Claim
Notice); provided that the Escrow Agent shall deliver any remaining Escrow
Shares then held by it six (6) months thereafter, unless there is then pending
an arbitration with respect thereto under Section 12.5 of the Acquisition
Agreement, or a dispute under Section 3, in which event the Escrow Agent may
continue to hold such Escrow Shares until conclusion of such arbitration. In all
other cases, the Escrow Agent shall deliver to RefTech, QAI and/or the
Principals, as the case may be, the certificates (and the related executed stock
powers) representing the Escrow Deposit as set forth in joint instructions, or
separate instructions of like effect, signed and delivered by RefTech and the
Notice Agent.
2.8 DIVIDENDS AND VOTING. Until termination of escrow, all
dividends on the Escrow Shares shall be retained by the Escrow Agent as part of
the Escrow Deposit. Until the Escrow Deposit is released from escrow, QAI, and
upon the Liquidation the Principals, shall be entitled to vote the Escrow
Shares.
2.9 STOCK POWERS. QAI and each of the Principals shall, from
time to time, at the request of RefTech, furnish the Escrow Agent with stock
powers in blank that will allow the Escrow Agent to perform its obligations
hereunder. QAI and each of the Principals hereby appoints RefTech as its
attorney-in-fact to execute appropriate stock powers on its behalf in the event
that they, or any one of them, does not comply with RefTech's reasonable request
to furnish stock powers to the Escrow Agent. Such power of attorney may not be
revoked as long as this Agreement remains in effect. All such stock powers shall
be part of the Escrow Deposit.
2.10 NO ENCUMBRANCE. No interest in the Escrow Deposit, or any
beneficial interest therein, may be pledged, sold, assigned or transferred,
other than by operation of law, by any party hereto or their respective
successors and permitted assigns, or be taken or reached by any legal or
equitable process in satisfaction of any debt or other liability of any such
person, as long as this Agreement remains in effect.
3. RESOLUTION OF DISPUTES. In the event of any dispute
concerning or arising out of this Agreement, the parties in good faith shall
attempt to resolve the same. In the event that the parties, despite their good
faith efforts cannot resolve the dispute, then any of such parties may demand
arbitration of the dispute as provided in Section 12.5 of the Acquisition
Agreement, unless the Claim Amount is at issue in pending or threatened
litigation with a third party, in which event arbitration with respect thereto
may not be commenced until such amount is ascertained or both RefTech and the
Notice Agent agree to arbitration. The non-prevailing parties to an arbitration
hereunder shall pay their own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration Association and the expenses
(including, without limitation, attorneys' fees and costs) incurred by the other
parties to the arbitration. Unless the Escrow Agent is determined to be at fault
by the arbitration, the Escrow Agent shall have a claim against the Escrow
Deposit for all of its expenses therein or arising in connection therewith.
4. LIMITATION OF ESCROW AGENT'S LIABILITY.
4.1 LIMITATION. The Escrow Agent will incur no liability with
respect to any action taken or suffered by it in reliance upon any notice,
direction, instruction, consent, statement or other document believed by it to
be genuine and duly authorized, nor for any other action or inaction, except its
own willful misconduct or gross negligence. The Escrow Agent will not be
responsible for the validity or sufficiency of this Agreement or any agreement
amendatory or supplemental hereto. In all questions arising under this
Agreement, the Escrow Agent may rely on the advice or opinion of legal counsel,
and for anything done, omitted or suffered in good faith by the
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Escrow Agent based on such advice or opinion, the Escrow Agent will not be
liable to anyone. The Escrow Agent will not be required to take any action
hereunder involving any expense unless the payment of such expense is made or
provided for in a manner satisfactory to it.
4.2 CONFLICTING DEMANDS. In the event that conflicting demands
are made upon, or conflicting notices are received by, the Escrow Agent, the
Escrow Agent will have the absolute right, at the Escrow Agent's election, to do
either or both of the following: (i) resign so that a successor can be appointed
pursuant to Section 8, or (ii) file a suit in interpleader and obtain an order
from a court of competent jurisdiction requiring the parties to interplead and
litigate their several claims and rights among themselves. In the event that
such an interpleader suit is brought, the Escrow Agent will thereby be fully
released and discharged from all further obligations imposed upon it under this
Agreement, the Escrow Agent will have a priority claim against the Escrow
Deposit for all costs, expenses and reasonable attorneys' fees and expenses
expended or incurred by the Escrow Agent under this Agreement and pursuant to
the exercise of the Escrow Agent's rights under this Section, and the other
parties to this Agreement, jointly and severally, shall be personally
responsible for payment of all such costs, expenses and fees.
4.3 INDEMNIFICATION IN FAVOR OF ESCROW AGENT. In consideration
of the Escrow Agent's acceptance of its appointment as escrow agent hereunder,
the other parties hereto, jointly and severally, agree to (i) indemnify the
Escrow Agent, and hold the Escrow Agent harmless from, any liability incurred by
it to any person, firm or corporation by reason of its having accepted its
appointment and in carrying out any of the terms of this Agreement, and (ii)
reimburse the Escrow Agent for all its costs and expenses, including, but not
limited to, reasonable attorneys' fees and expenses, incurred by reason of any
matter as to which an indemnity is paid; provided that no indemnity shall be
paid by reason of the Escrow Agent's gross negligence or willful misconduct.
4.4 ESCROW AGENT'S RESPONSIBILITIES
4.4.1 The Escrow Agent shall be under no obligation to
deliver any instrument or documents to a court or arbitrator or to take any
legal action in connection with this Agreement or towards its enforcement, or to
appear in, prosecute or defend any action or proceeding which, in the Escrow
Agent's opinion, would or might involve it in any cost, expense, loss or
liability unless, as often as the Escrow Agent may require, the Escrow Agent is
furnished with security and indemnity reasonably satisfactory to it against all
such costs, expenses, losses or liability.
4.4.2 The Escrow Agent's obligations hereunder shall be
as a depository only, and the Escrow Agent shall not be responsible or liable in
any manner whatever for the sufficiency, correctness, genuineness or validity of
any notice, written instructions or other instrument furnished to it or
deposited with it, or for the form of execution of any thereof, or for the
identity, authority or rights of any person executing, furnishing or depositing
the same, except to the extent of its gross negligence or willful misconduct.
4.4.3 The Escrow Agent shall not have any duties or
responsibilities except those set forth in this Agreement, and shall not incur
any liability in acting upon any signature, notice, request, waiver, consent,
receipt or other paper or document reasonably believed by it to be genuine, and
the Escrow Agent may presume that any person purporting to give any notice or
advice on behalf of any party in accordance with the provisions hereof has been
duly authorized to do so.
4.4.4 The Escrow Agent shall be entitled to consult
with counsel in connection with its duties hereunder.
4.4.5 The Escrow Agent has executed this Agreement
solely to confirm that Escrow Agent will hold the Escrow Deposit in escrow
pursuant to the provisions of this Agreement.
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4.4.6 QAI and the Principals acknowledge that the
Escrow Agent has been, and may continue to be, counsel to RefTech and RTI. QAI
and the Principals waive any objections to the Escrow Agent serving in the
capacity of escrow agent hereunder and waive any objection to the Escrow Agent
continuing to serve as counsel to RefTech and RTI, and their respective
affiliates, including with respect to a dispute with QAI and/or the Principals;
provided that such dispute does not involve this Agreement (unless prior to such
representation the Escrow Agent resigns from acting as escrow agent under this
Agreement).
5. NOTICES. For the purposes of this Agreement, notices and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given and duly received on the earlier of (i)
when actually received or when receipt is refused, or (ii) five days after being
mailed by United States first class, registered or certified mail, return
receipt requested, postage prepaid, addressed to the party at the following
addresses or to such other address as any party shall hereafter specify by
notice to the other parties; provided that notices and other communications to
the Escrow Agent, and notices of change of address, shall be deemed to have been
duly given and duly received only upon actual receipt:
If to RefTech, to: RTI Inc.
c/o Xx. Xxxx X. Xxxxxx
00 Xxxxx Xxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
with a copy to: Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxxxxxx & Kuh, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
If to QAI or the Principals, to: Xxxx X. Xxxxxxx
Quality Air, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxx Xxxxxx 00000
If to the Escrow Agent, to: Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxxxxxx & Kuh, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
6. GENERAL.
6.1 FURTHER ASSURANCES. The parties shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.2 SURVIVAL OF REPRESENTATIONS AND COVENANTS. The
representations, warranties, covenants and agreements contained in this
Agreement or in any instrument or document delivered or to be delivered pursuant
to this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby, notwithstanding any investigation at any time
made by or on behalf of any party or parties hereto.
6.3 ENTIRE AGREEMENT. This Agreement, together with the
Acquisition Agreement, constitutes the entire agreement among the parties and
supersedes all prior agreements,
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understandings and arrangements, oral or written, among the parties with respect
to the subject matter hereof.
6.4 BINDING EFFECT; BENEFITS. This Agreement shall inure to
the benefit of and shall be binding upon the parties and their respective
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to or shall (i) confer on any person other than the
parties, and their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement, or
(ii) constitute the parties partners or participants in a joint venture.
6.5 ASSIGNMENT. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by any party without the prior written consent of all of the other
parties.
6.6 SECTION AND OTHER HEADINGS. The Section and other headings
contained in this Agreement are for reference purposes only and shall not be
deemed to be a part of this Agreement or to affect the meaning or interpretation
of this Agreement.
6.7 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
6.8 SEPARABILITY. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction.
6.9 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
contracts made and to be performed wholly therein.
6.10 WAIVERS. The observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
7. EXPENSES OF ESCROW AGENT. All fees and expenses of the
Escrow Agent incurred in the ordinary course of performing its responsibilities
hereunder will be paid by RefTech upon receipt of a written invoice by the
Escrow Agent. Any fees, including but not limited to, attorneys' fees (either
paid to retained attorneys or amounts representing the value of legal services
rendered to itself based upon its standard hourly rates) or expenses incurred by
the Escrow Agent in connection with a dispute over the distribution of the
Escrow Deposit or the validity of a Notice of Claim, will be a priority charge
upon the Escrow Deposit and will be the joint and several responsibility of the
other parties hereto, except as otherwise provided herein.
8. SUCCESSOR ESCROW AGENT. In the event that the Escrow Agent
becomes unavailable or unwilling to continue in its capacity hereunder, the
Escrow Agent may resign and shall be discharged from its duties and further
obligations hereunder by giving written notice of resignation to RefTech and the
Notice Agent, specifying the date, not less than thirty (30) days thereafter,
when such resignation will take effect; whereupon RefTech and the Notice Agent
shall attempt to agree on a successor escrow agent prior to the expiration of
such thirty (30) day period and shall give written notice to the Escrow Agent of
such designated successor. The Escrow Agent will promptly deliver the Escrow
Deposit at such time to such designated successor. In the event that no
successor escrow agent is appointed as provided in this Section, the Escrow
Agent may apply to a court of competent jurisdiction for the appointment of a
successor escrow agent.
9. AMENDMENT. This Agreement may be amended with the written
consent of RefTech, the Escrow Agent and the Notice Agent, provided that if the
Escrow Agent does not agree to such amendment, then RefTech and the Notice Agent
may appoint a successor escrow agent as provided in Section 8.
10. MISCELLANEOUS. The Escrow Agent may execute any of its
powers or responsibilities hereunder and exercise any rights hereunder either
directly or by or through its agents or attorneys.
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IN WITNESS WHEREOF, QAI and RefTech have caused this Agreement
to be signed in their respective names by an officer thereunto duly authorized
and each of the Principals have executed this Agreement as of the date first
above written.
QUALITY AIR, INC. REFRIGERATION TECHNOLOGY INC.
By:/s/ Xxxx X. Xxxxxxx By:/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxxx Xxxx X. Xxxxxx
President Sole Director
/s/ Xxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxx Xxxxxxx
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Xxxxxxx X. Xxxxxxx Xxxxxx Xxxxxxx
/s/ Xxx Xxxxxxx /s/ Xxxx Xxxxxxx
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Xxx Xxxxxxx Xxxx Xxxxxxx
Agreed to with respect to Section 2.3 only.
RTI INC.
By: /s/ Xxxx X. Xxxxxx,
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Xxxx X. Xxxxxx, President
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