ESCROW AGREEMENT
Exhibit 10.2
This
Escrow Agreement (this
“Agreement”)
is made and entered into as of October 30, 2018 by and among RumbleOn, Inc., a Nevada corporation
located at 0000 Xxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, XX 00000
(“Buyer”),
Xxxxxx Xxxxxxxx, a Tennessee resident (“Representative”), as
representative of the Sellers under the Acquisition Agreements (as
defined below), and Continental Stock
Transfer & Trust Company, a New York corporation located at 0
Xxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the
“Escrow
Agent”). Each capitalized
term used but not otherwise defined herein shall have the meaning
ascribed to such term in the Merger Agreement (as defined
below).
Recitals
WHEREAS,
Buyer, Wholesale Holdings, Inc., a Tennessee corporation
(“Wholesale”),
Wholesale, LLC, a Tennessee corporation, Representative,
certain shareholders of Wholesale (the “Stockholders”), and
certain other parties named therein have entered into an Agreement
and Plan of Merger dated as of October
26, 2018 (the “Merger
Agreement”);
WHEREAS, Buyer, the members (individually, the
“Express
Sellers,” and together
with the Stockholders, the “Sellers”)
of Wholesale Express LLC, a Tennessee limited liability company
(individually, “Express”
and together with Wholesale, the “Companies”),
Representative, and certain other parties named therein have
entered into a Membership Interest Purchase Agreement dated as of the date hereof (individually, the
“MIPA,”
and together with the Merger Agreement, the
“Acquisition
Agreements”);
WHEREAS,
the Sellers have duly appointed Representative to act as their
representative under the Acquisition Agreements; and
WHEREAS,
the Acquisition Agreements contemplate placing in escrow certain
stock consideration to secure certain rights of Buyer and the other
Parent Indemnitees pursuant to the Acquisition
Agreements.
Agreement
NOW,
THEREFORE, in consideration of the premises and the mutual promises
herein made, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as
follows:
Section 1. Escrow.
1.1 Appointment; Cash and
Shares Placed in Escrow. Buyer and Representative hereby appoint the
Escrow Agent as their escrow agent for the purposes set forth
herein, and the Escrow Agent hereby accepts such appointment under
the terms and conditions set forth herein. Contemporaneously with
the execution and delivery of this Agreement, Buyer shall deliver or cause to be delivered to
the Escrow Agent one or more newly issued certificates representing
six hundred eighty-one thousand four hundred eighty-one (681,481)
shares of Buyer’s Series B Non-Voting Convertible Preferred
Stock or, following conversion, Conversion Shares (the
“Escrow
Shares”), registered in
the name of the Stockholders, to be held in escrow under this
Agreement.
1.2 Escrow
Fund; Escrow Accounts.
(a) The Escrow Shares
being held in escrow pursuant to this Agreement shall collectively
constitute an escrow fund (the “Escrow Fund”) securing
the indemnification, compensation and reimbursement rights of Buyer
and the other Parent Indemnitees under the Acquisition
Agreements.
(b) The
Escrow Shares shall be
deposited and held in a separate account (the “Escrow Account”),
subject to the terms and conditions of
this Agreement.
1.3 Voting of Escrow
Shares. The Representative (on
behalf of the Stockholders) shall be entitled to exercise all
voting rights with respect to such Escrow Shares. The Escrow Agent
is not obligated to distribute to the Representative or any other
person any proxy materials and other documents related to the
Escrow Shares received by the Escrow Agent from
Buyer.
1.4 Interest.
The Escrow Fund shall be held in the
escrow accounts uninvested and without interest accruing
thereon.
1.5 Dividends,
Etc. The Stockholders shall remain the beneficial
owners of the Escrow Shares unless any such Escrow Shares are
transferred to a Parent Indemnitee or Purchaser Indemnitee pursuant
to this Agreement and, until such time, the Stockholders shall
retain all rights and benefits of a holder of such Escrow Shares,
subject to the terms and limitations of this Agreement.
Buyer and Representative agree that any cash distributed in respect
of the Escrow Shares shall be distributed to the beneficial owners
of the Escrow Shares. Buyer and
Representative agree that any equity shares of Buyer
(“Buyer
Shares”) or other
property (excluding cash) distributable or issuable (whether by way
of dividend, stock split or otherwise) in respect of or in exchange
for any Escrow Shares (including pursuant to or as a part of a
merger, consolidation, acquisition of property or stock,
reorganization or liquidation involving Buyer) shall not be
distributed or issued to the beneficial owners of such Escrow
Shares, but rather shall be distributed or issued to and held by
the Escrow Agent in the Escrow Account as part of the Escrow Fund.
Any securities or other property (excluding cash distributed in
respect of the Escrow Shares) received by the Escrow Agent in
respect of any Escrow Shares held in escrow as a result of any
stock split or combination of Buyer Shares, payment of a stock
dividend or other stock distribution in or on Buyer Shares, or
change of Buyer Shares into any other securities pursuant to a
conversion or as a part of a merger, consolidation, acquisition of
property or stock, reorganization or liquidation involving Buyer,
or otherwise, shall be held by the Escrow Agent in the Escrow
Account as part of the Escrow Fund.
1.6 Trust
Fund. The Escrow Fund shall be held in trust and shall
not be subject to any lien, attachment, trustee process or any
other judicial process of any creditor of Buyer or Representative.
The Escrow Agent shall hold and safeguard the Escrow Fund until the
Termination Date (as defined in Section
5) or earlier distribution in
accordance with this Agreement.
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Section
2. Indemnification
Claims; Release of Escrow Fund.
2.1 Claims.
Buyer shall give Representative and the Escrow Agent written notice
of any indemnification claim made by any Parent Indemnitee or
Purchaser Indemnitee pursuant to the applicable Acquisition
Agreement setting forth the facts giving rise to such claim, the
provisions of the applicable Acquisition Agreement that were
breached by such facts and the amount of any Losses arising
therefrom (a “Claim
Notice”).
2.2 Disbursement. The
Escrow Agent shall make disbursements as provided in this
Section 2.2 from
the Escrow Account to satisfy the Sellers’ indemnification
obligations under the Acquisition Agreements.
(a) At any time prior
to the First Escrow Distribution Date or Second Escrow Distribution
Date (as such terms are defined below), as promptly as practicable,
but in any event within five (5) Business Days after receiving (i)
joint written instructions from Buyer and Representative, (ii)
written instruction from Buyer attaching a final non-appealable
court order from a court of competent jurisdiction setting forth
the amount of the Losses and relating to the release of any Escrow
Shares from the Escrow Account, or (iii) written instruction from
Representative pursuant to Section 7.6 of the Merger Agreement
attaching evidence of payment by Representative of cash in lieu of
Escrow Shares in final settlement of any Claim to Parent or Parent
Indemnitees pursuant to an Acquisition Agreement (each of the
forgoing, “Release
Instructions”), the Escrow Agent shall release or
cause to be released any such Escrow Shares in the amounts, to the
Persons, and in the manner set forth in such Release
Instructions.
(b) On March 31, 2019
(the “First Escrow
Distribution Date”), the Escrow Agent shall release
from the Escrow Account twenty-five percent (25%) of the Escrow
Shares then remaining in the Escrow Account to the Representative
for further distribution to the Stockholders, less the amount in
number of Escrow Shares (valued at the Per Share Valuation Amount)
equal to the Losses claimed in any Pending Claims (as defined
below) that were made prior to the First Escrow Distribution Date.
A “Pending
Claim” means any (A) claim asserted in good faith
pursuant to a Claim Notice in accordance with this Agreement and
the appropriate Acquisition Agreement by any Parent Indemnitee for
indemnification for Losses that are pending before a court of
competent jurisdiction or otherwise remains unresolved or (B) any
portion of the Escrow Fund due and owing to Buyer or the other
Parent Indemnitees pursuant to Release Instructions but not yet
paid. Following the First Escrow Distribution Date, upon resolution
of any Pending Claim, the Escrow Agent shall, within two (2)
Business Days after receiving Release Instructions release to the
Representative for further distribution to the Stockholders from
the Escrow Account such number of Escrow Shares equal to the
portion of such Pending Claim resolved that is not required to pay
the Losses pursuant to such Pending Claim.
(c) On the first
anniversary of the date of this Agreement (the “Second Escrow Distribution
Date”), the Escrow Agent shall release from the Escrow
Account the balance of the Escrow Shares then remaining in the
Escrow Account to the Representative for further distribution to
the Stockholders, less the amount in number of Escrow Shares
(valued at the Per Share Valuation Amount) equal to the Losses
claimed in any Pending Claims. Following the Second Escrow
Distribution Date, upon resolution of any Pending Claim, the Escrow
Agent shall, within two (2) Business Days after receiving Release
Instructions release to the Representative for further distribution
to the Stockholders from the Escrow Account such number of Escrow
Shares equal to the portion of such Pending Claim resolved that is
not required to pay the Losses pursuant to such Pending
Claim.
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(d) The parties to this
Agreement acknowledge and agree that the Escrow Shares shall be
deemed to have a value of $6.75 per share (the “Per Share Valuation
Amount”) for all purposes when calculating any claim
against, or release from, the Escrow Account. If at any time while
the Escrow Shares are held pursuant to this Agreement, there is any
stock dividend, combination, subdivision, split or the like with
respect to the Escrow Shares, (any such event, a
“Stock
Event”), then the Per Share Valuation Amount shall be
equitably adjusted to take into account the effect of the Stock
Event as reasonably agreed to by Representative and Buyer acting in
good faith.
Section 3. Fees
and Expenses. The
Escrow Agent shall be entitled to receive, from time to time, fees
in accordance with Schedule 1, which fees shall be
paid by Buyer. In accordance with Schedule 1, the Escrow Agent
will also be entitled to reimbursement for reasonable and
documented out-of-pocket expenses incurred by the Escrow Agent in
the performance of its duties hereunder and the execution and
delivery of this Agreement, which fees shall be paid by
Buyer.
Section 4. Limitation of Escrow
Agent’s Liability.
4.1 The
Escrow Agent undertakes to perform such duties as are specifically
set forth in this Agreement only and shall have no duty under any
other agreement or document, and no implied covenants or
obligations shall be read into this Agreement against the Escrow
Agent. The Escrow Agent shall incur no liability with respect to
any action taken by it or for any inaction on its part in reliance
upon any notice, direction, instruction, consent, statement or
other document believed by it in good faith to be genuine and duly
authorized, nor for any other action or inaction except for its own
gross negligence or willful misconduct. In all questions arising
under this Agreement and/or its interpretation hereof in
conjunction with the Acquisition Agreements, the Escrow Agent may
rely on the advice of counsel, and for anything done, omitted or
suffered in good faith by the Escrow Agent based upon such advice
the Escrow Agent shall not be liable to anyone. In no event shall
the Escrow Agent be liable for incidental, punitive or
consequential damages.
4.2 Buyer
and Representative hereby agree to jointly and severally indemnify
the Escrow Agent and its officers, directors, employees and agents
for, and hold it and them harmless against, any loss, liability or
expense (including attorney fees) incurred without gross negligence
or willful misconduct on the part of the Escrow Agent, arising out
of or in connection with the Escrow Agent’s carrying out its
duties hereunder. This right of indemnification shall survive the
termination of this Agreement and the resignation of the Escrow
Agent.
Section 5. Termination.
This Agreement shall terminate upon
the release by the Escrow Agent of the final amounts held in the
Escrow Accounts in accordance with Section 1
(the date of such release being
referred to as the “Termination
Date”).
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Section 6. Successor
Escrow Agent.
In the event the Escrow Agent becomes
unavailable or unwilling to continue as escrow agent under this
Agreement, the Escrow Agent may resign and be discharged from its
duties and obligations hereunder by giving its written resignation
to the parties to this Agreement. Such resignation shall take
effect not less than 30 days after it is given to all the other
parties hereto. In such event, Buyer may appoint a successor Escrow
Agent (acceptable to Representative, acting reasonably). If Buyer
fails to appoint a successor Escrow Agent within 15 days after
receiving the Escrow Agent’s written resignation, the Escrow
Agent shall have the right to apply to a court of competent
jurisdiction for the appointment of a successor Escrow Agent. The
successor Escrow Agent shall execute and deliver to the Escrow
Agent an instrument accepting such appointment, and the successor
Escrow Agent shall, without further acts, be vested with all the
estates, property rights, powers and duties of the predecessor
Escrow Agent as if originally named as Escrow Agent herein. The
Escrow Agent shall act in accordance with written instructions from
Buyer and Representative as to the transfer of the Escrow Fund to a
successor Escrow Agent.
Section 7. Representative.
Unless and until Buyer and the Escrow Agent shall have received
written notice of the appointment of a successor Representative,
each of Buyer and the Escrow Agent shall be entitled to rely on,
and shall be fully protected in relying on, the power and authority
of Representative to act on behalf of the
Sellers.
Section 8. Miscellaneous.
8.1 Notices.
All notices and other communications under this Agreement shall be
in writing and shall be given by personal delivery, nationally
recognized overnight courier or certified mail at the following
addresses (or to such other address as a Party may have specified
by notice given to the other Party pursuant to this
provision):
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If to Buyer:
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0000
Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX
00000
Attention: Xxxxxx
Xxxxxx, Corporate Secretary
Email:
xxx@xxxxxxxx.xxx
|
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With a copy, which shall not constitute notice, to:
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Akerman
LLP
000 X.
Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx
Xxxxxxx
Xxxxxxxxx
X. Xxxxx
Email:
xxxxxxx.xxxxxxx@xxxxxxx.xxx;
xxxxxxxxx.xxxxx@xxxxxxx.xxx
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If to Representative:
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Xxxxxx
Xxxxxxxx
000
Xxxxxxxxx Xx.
Xxxxxxxxxxxxxx, XX
00000
Email: xxxxx.xxxxxxxx@xxxxxxxxxxxxxxxxxx.xxx
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5
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With a copy, which shall not constitute notice, to:
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Bass,
Xxxxx & Xxxx PLC
000
Xxxxx Xxxxxx Xxxxx, Xxxxx 0000 Xxxxxxxxx, XX 00000
Attention:
Xxxxx Xxxxxx
Xxxxxx
Xxxxxx
Email:
xxxxxxx@xxxxxxxxx.xxx;
xxxxxxx@xxxxxxxxx.xxx
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Any
such notice or communication shall be deemed to have been received
(i) when delivered, if personally delivered, (ii) on the next
Business Day after dispatch, if sent postage pre-paid by nationally
recognized, overnight courier guaranteeing next Business Day
delivery, and (iii) on the fifth (5th) Business Day following the
date on which the piece of mail containing such communication is
posted, if sent by certified mail, postage prepaid, return receipt
requested.
Any party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein
set forth. Notwithstanding the foregoing, notices addressed to the
Escrow Agent shall be effective only upon receipt. If any notice or
other document is required to be delivered to the Escrow Agent and
any other Person, the Escrow Agent may assume without inquiry that
notice or other document was received by such other Person on the
date on which it was received by the Escrow Agent.
8.2 Headings.
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.3 Counterparts.
This Agreement may be executed in one or more counterparts
(including by means of electronic mail or facsimile), each of which
shall be deemed an original but all of which together will
constitute one and the same instrument.
8.4 Governing
Law.
This Agreement and any claim, controversy or dispute arising out of
or related to this Agreement, any of the transactions contemplated
hereby, the relationship of the parties, and/or the interpretation
and enforcement of the rights and duties of the parties, whether
arising in contract, tort, equity or otherwise, shall be governed
by and construed in accordance with the internal laws of the state
of New York (without giving effect to any choice or conflict of law
provision or rule (whether of the state of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the state of New York).
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8.5 Waiver of Jury
Trial. BUYER AND
REPRESENTATIVE EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OR
RELATED TO THIS AGREEMENT IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY
OTHER PARTY OR ANY AFFILIATE OF ANY OTHER SUCH PARTY, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THE PARTIES
AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART,
TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR
ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT.
8.6 Succession
and Assignment. This Agreement
shall be binding upon and shall inure to the benefit of each of the
parties hereto and each of their respective permitted successors
and assigns; provided, however, that neither Buyer nor
representative may assign its rights and/or obligations hereunder
without the consent of the other.
8.7 Amendments and
Waivers. No amendment of any
provision of this Agreement shall be valid unless the same shall be
in writing and signed by the Escrow Agent, Buyer and
Representative. No waiver by any party hereto of any provision of
this Agreement or any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall
be valid unless the same shall be in writing and signed by the
party making such waiver nor shall such waiver be deemed to extend
to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such
occurrence.
8.8 Severability.
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other
jurisdiction.
8.9 No
Third-Party Beneficiaries. Except as expressly provided herein, this
Agreement shall not confer any rights or remedies upon any Person
other than the parties hereto and their respective successors and
permitted assigns.
8.10 Entire
Agreement. This Agreement and the Acquisition Agreements set
forth the entire agreement among the parties hereto relating to the
subject matter hereof and supersede any prior
understandings, agreements, or representations by or among the
parties hereto, written or oral, to the extent they relate in any
way to the subject matter hereof.
8.11 Cooperation. Representative
and Buyer agree to cooperate fully with each other and the Escrow
Agent and to execute and deliver such further documents,
certificates, agreements, stock powers and instruments and to take
such other actions as may be reasonably requested by Buyer,
Representative or the Escrow Agent to carry out the intent and
purposes of this Agreement.
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8.12 Construction.
(a) For
purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neutral genders;
the feminine gender shall include the masculine and neutral
genders; and the neutral gender shall include masculine and
feminine genders.
(b) The
parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party
shall not be applied in the construction or interpretation of this
Agreement.
(c) As
used in this Agreement, the words “include” and
“including,” and variations thereof, shall not be
deemed to be terms of limitation, but rather shall be deemed to be
followed by the words “without
limitation.”
(d) Except
as otherwise indicated, all references in this Agreement to
“Sections” and “Schedules” are intended to
refer to Sections of this Agreement and Schedules to this
Agreement.
[Remainder of page intentionally left
blank]
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In
Witness Whereof, the parties hereto have duly caused this Agreement
to be executed as of the day and year first above
written.
BUYER:
RUMBLEON, INC.,
a Nevada
corporation
By:
/s/ Xxxxxxxx
Xxxxxxxx
Name:
Xxxxxxxx Xxxxxxxx
Title:
Chief Executive Officer
REPRESENTATIVE:
/s/
Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx
ESCROW AGENT:
CONTINENTAL STOCK
TRANSFER & TRUST COMPANY, a
New York corporation
By:
/s/ Xxxxxxx X.
Xxxx
Name:
Xxxxxxx X. Xxxx
Title:
Vice President
Schedule 1
Escrow Agent’s Fees
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Acceptance
fee
|
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Waived
|
|
Administration
fee, M&A stock escrow, annually
|
$6,250.00
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The
acceptance fee and administration fee covers all account set-up
services, the review, negotiation and execution of the escrow agent
agreement, KYC, OFAC and USA Patriot Act due diligence, comply with
investment instructions, claim instructions and release
instructions, coordinate with exchange agent for on-going account
maintenance and subsequent distributions or additional merger
consideration payments, compliance review, records retention,
escheat services The escrow agent acceptance fee and administration
fee is due and payable upon the effective date of appointment.
See assumptions for
duration.
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Claims
processing, each claim
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$750.00
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Out-of-pocket
expenses
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At
cost
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Out-of-pocket
expenses when applicable will be billed at cost at the sole
discretion of Continental Stock Transfer & Trust
Company.
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Extraordinary
services
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Market
rate
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Fees
for services not specifically covered in this schedule will be
billed in accordance with our prevailing rates for such
services.
These
costs may include, but are not limited to, review of IRS Form
W-8IMY for foreign holders, shareholder presentment status updates,
shareholder record adjustments, electronic copies of shareholder
presentments and non-standard shareholder records.
Assumptions
This
proposal is based upon the following assumptions with respect to
the role of escrow agent. Should any of the assumptions, duties or
responsibilities change, we reserve the right to affirm, modify or
rescind this proposal.
●
All escrow releases
are expected to be completed by April 2020. Beyond this duration,
fees of $450.00/month will be in effect.
●
All funds held by
Continental Stock Transfer & Trust Company will be
uninvested.
●
ALL FUNDS WILL BE
RECEIVED FROM OR DISTRIBUTED TO AN INDIVIDUAL OR A DOMESTIC OR AN
APPROVED FOREIGN ENTITY
