Exhibit 2iB1
ESCROW AGREEMENT
AGREEMENT made by and among Optelecom, Inc., a Delaware corporation
("Optelecom"), Paragon Audio Visual Limited, a United Kingdom company
("Paragon"), Xxxxx X. Xxxxx, Xxxx X. Xxxxx, Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx
(collectively, the "Browns"), Modeledge Limited, a United Kingdom company
("Modeledge"), and Xxxxxx Xxxxxxxxx as escrow agent ("Escrow Agent").
WHEREAS, the Browns and Modeledge are the sole beneficial owners of the
outstanding common shares of Paragon (the "Paragon Stockholders"), and Xxxxxx X.
Xxxxx, Xxxxxx X. Xxxxx and Adventatum Jersey Limited, a Jersey company
("Adventatum"), are the record holders of all the outstanding shares of Paragon
(the "Paragon Record Holders") with each such Paragon Record Holder having the
percentage ownership interest in Paragon specified in Schedule 1 hereto (a
"Percentage Interest");
WHEREAS, Optelecom and Paragon have entered into an Asset Acquisition
Agreement of even date herewith (the "Asset Agreement") pursuant to which
Optelecom has acquired certain assets of Paragon (the "Paragon Assets") and has
agreed to pay to Paragon an aggregate consideration therefor of US$2.625 million
(the "Asset Consideration"), which Asset Consideration shall consist of: (i)
shares of common stock of Optelecom having a value of US$1.625 million and (ii)
cash in the amount of US$1.0 million (the "Asset Cash Consideration");
WHEREAS, Optelecom, Paragon and the Paragon Stockholders have entered
into an agreement of even date herewith pursuant to which: (i) Paragon shall
distribute to the Paragon Record Holders an amount (the "Distribution Amount")
equal to the Asset Consideration less an amount sufficient to cover Paragon's
tax obligations with respect to its transfer of the Paragon Assets and receipt
of the Asset Consideration (the "Paragon Tax Obligations"); (ii) the amount to
be distributed to each Paragon Record Holder shall be determined by multiplying
the Distribution Amount by the Paragon Record Holder's Percentage Interest;
(iii) the amount of the Paragon Tax Obligations (the "Paragon Tax Obligation
Amount") shall be determined by the independent public accountants for Optelecom
(the "Accountants"); and (iv) the Paragon Tax Obligation Amount shall be
reserved from the Asset Cash Consideration and placed in escrow until used to
pay the Paragon Tax Obligations or until such obligations have otherwise been
paid in full; and
WHEREAS, the Accountants have determined that the "Paragon Tax
Obligation Amount" should not exceed UKL443,902 (the "Reserve Amount");
NOW, THEREFORE, in consideration of the premises and the covenants
herein, the parties agree as follows:
1. Escrow Agent. Optelecom, Paragon, and the Paragon Stockholders
appoint and designate Franklin National Bank as the Escrow Agent for the
purposes herein set forth.
2. Deposit of Reserve Amount. Optelecom shall deposit with the Escrow
Agent, from the Asset Cash Consideration, the Reserve Amount, to be held by
Escrow Agent in an interest-bearing
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account subject to the terms and conditions of this Escrow Agreement (the
Reserve Amount together with interest earned thereon shall be the "Escrow
Amount") by wire transfer to:
Account Name: Xxxxxx Xxxxxxxxx client account
Account Number: 00000000
Sort Code: 15-99-00
Name & Address: Messrs C Hoare & Co., 00 Xxxxx Xxxxxx
Xxxxxx XX0X 0XX
3. Disbursements from Escrow.
3.01 Written Instructions of Parties. The Escrow Agent shall
at all times have authority to pay over and disburse the Escrow Amount in
accordance with joint written instructions executed by Optelecom and by either
Xxxxx X. Xxxxx or Xxxxxx X. Xxxxx ("Written Instructions").
3.02 Payment of Paragon Tax Obligations. Upon receipt of
advice from the Accountants specifying the amount of a Paragon Tax Obligation,
Optelecom and either Xxxxx X. Xxxxx or Xxxxxx X. Xxxxx shall give Written
Instructions to the Escrow Agent directing that such amount be paid to the
appropriate taxing authority or to Paragon for reimbursement of its prior
payment of the Paragon Tax Obligation. The Escrow Agent shall make such payment
from the Escrow Amount as instructed.
3.03 Distribution of Balance. Upon receipt of advice from the
Accountants that the Paragon Tax Obligations have been paid in full, whether by
means of the disbursements provided for in Section 3.02 hereof or otherwise,
Optelecom and either Xxxxx X. Xxxxx or Xxxxxx X. Xxxxx shall give Written
Instructions to the Escrow Agent to disburse an aggregate amount equal to the
excess, if any, of the Escrow Amount over the Paragon Tax Obligations to the
Paragon Record Holders pro rata in accordance with the respective Percentage
Interest of each (or with respect to each Paragon Record Holder, to such other
person designated in the Written Instructions) and the balance, if any, of the
Escrow Amount to Optelecom.
4. The Escrow Agent.
4.01 Scope of Responsibilities. Notwithstanding any provisions
contained herein to the contrary, the Escrow Agent, including its officers,
directors, employees and agents, shall:
(a) not be liable for any action taken or omitted under this
Escrow Agreement so long as it shall have acted in good faith and without gross
negligence; and shall have no responsibility to inquire into or determine the
genuineness, authenticity, or sufficiency of any securities, checks, or other
documents or instruments submitted to it in connection with its duties
hereunder;
(b) in the absence of knowledge to the contrary, be entitled
to deem the signatories of any documents or instruments submitted to it
hereunder as being those purported to be authorized to sign such documents or
instruments on behalf of the parties hereto, and shall be entitled to rely upon
the genuineness of the signatures of such signatories without inquiry and
without requiring substantiating evidence of any kind;
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(c) be entitled to refrain from taking any action contemplated
by this Escrow Agreement in the event that it becomes aware of any disagreement
between the parties hereto as to any facts or as to the happening of any
contemplated event precedent to such action;
(d) be entitled to compensation for its services hereunder and
for reimbursement of its out-of-pocket expenses including, but not by way of
limitation, the fees and costs of attorneys or agents which it may find
necessary to engage in performance of its duties hereunder, all to be paid by
Paragon;
(e) be, and hereby is, jointly and severally indemnified and
saved harmless by the parties hereto from all losses, costs, and expenses,
including attorney fees, which may be incurred by it as a result of its
acceptance of the Reserve Amount or arising from the performance of its duties
hereunder, unless the Escrow Agent shall have been adjudged to have acted in bad
faith or to have been grossly negligent, and such indemnification shall survive
its resignation or removal, or the termination of this Escrow Agreement until
extinguished by any applicable statute of limitations;
(f) in the event any dispute shall arise between the parties
with respect to the disposition or disbursement of any of the assets held
hereunder, be permitted to interplead all of the assets held hereunder into a
court of competent jurisdiction, and thereafter be fully relieved from any and
all liability or obligation with respect to such interpleaded assets. The
parties further agree to pursue any redress or occurrence in connection with
such dispute, without making the Escrow Agent a party to same;
(g) only have those duties as specifically provided herein,
which shall be deemed purely ministerial in nature, and shall under no
circumstances be deemed a fiduciary for any of the parties to this Escrow
Agreement. The Escrow Agent shall neither be responsible for, nor chargeable
with, knowledge of the terms and conditions of any other agreement, instrument,
or document between the other parties hereto in connection herewith. This Escrow
Agreement sets forth all matters pertinent to the escrow contemplated hereunder,
and no additional obligations of the Escrow Agent shall be inferred from the
terms of this Escrow Agreement or any other agreement. In no event shall the
Escrow Agent be liable, directly or indirectly, for any (i) damages or expenses
arising out of the services provided hereunder, other than damages which result
from the Escrow Agent's failure to act in accordance with the reasonable
commercial standards of the banking business, or (ii) special or consequential
damages, even if the Escrow Agent has been advised of the possibility of such
damages;
(h) have the right, but not the obligation, to consult with
counsel of its choice and shall not be liable for action taken or omitted to be
taken by Escrow Agent in good faith either in accordance with the advice of such
counsel or in accordance with any opinion of counsel to Optelecom addressed and
delivered to the Escrow Agent; and
(i) shall not be required by any provision of this Agreement
to expand or risk its own funds in the performance of its duties if it shall
have reasonable grounds for believing that repayment of such funds is not
reasonably assured to it.
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4.02 Succession. Any banking association or corporation into
which the Escrow Agent (or substantially all of its corporate trust business)
may be merged, converted or with which the Escrow Agent may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Escrow Agent shall be a party, shall succeed to all the Escrow Agent's
rights, obligations and immunities hereunder without the execution or filing of
any paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
4.03 Resignation. The Escrow Agent may resign as such
following the giving of thirty (30) days prior written notice to the other
parties hereto. Similarly, the Escrow Agent may be removed and replaced
following the giving of thirty (30) days prior written notice to the Escrow
Agent by Optelecom and by either Xxxxx X. Xxxxx or Xxxxxx X. Xxxxx. In either
event, the duties of the Escrow Agent shall terminate thirty (30) days after
receipt of such notice (or as of such earlier date as may be mutually
agreeable); and the Escrow Agent shall then deliver the deposits then in its
possession to a successor escrow agent as shall be appointed by Optelecom and by
either Xxxxx X. Xxxxx or Xxxxxx X. Xxxxx as evidenced by a written notice filed
with the Escrow Agent.
If the other parties hereto are unable to agree upon a
successor, or shall have failed to appoint a successor prior to the expiration
of thirty (30) days following receipt of the notice of resignation or removal,
the Escrow Agent may petition any court of competent jurisdiction for the
appointment of a successor escrow agent or for other appropriate relief, and any
such resulting appointment shall be binding upon all the parties hereto.
5. Notices. Any notice, consent or request to be given in connection
with any of the terms or provisions of this Escrow Agreement shall be in writing
and be given in person, by facsimile transmission or courier delivery service or
by mail, and shall become effective (a) on delivery if given in person, (b) on
the date of delivery if sent by facsimile with receipt confirmed by telephone or
by courier delivery service, or (c) four business days after being deposited in
the mails, with proper postage prepaid for first-class registered or certified
mail.
Notices shall be addressed as follows:
(i) If to Optelecom: Optelecom, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
X.X.X.
Attention: Xxxxxx X. Xxxxxx
Telephone: 000-000-0000
Fax: 000-000-0000
with a copy to: Xxxx X. Xxxxxx
Xxxxx & Xxxxxx L.L.P.
0000 Xxxxxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000X
Xxxxxxxxxx, X.X. 00000
Telephone: 000-000-0000
Fax: 000-000-0000
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(ii) If to Paragon or the Paragon Paragon Audio Visual Limited
Stockholders: Xxxxx 0 xxx 00
Xxxxxxx Xxxxxxxx Xxxxx
Xxxxxx Xxx
Xxxxxx, Xxxxxxx
Xxxxxxxxx XX00 0XX
Xxxxxx Xxxxxxx
Attention: Xxxxx X. Xxxxx
Telephone: 00-0000-000000
Fax: 00-0000-000000
with a copy to: Xxxxx Xxxxxx
Xxxxxx Xxxxxxxxx
00 Xxxxx Xxxxxx
Xxxxxx
Xxxxxx Xxxxxxx
Telephone: 000-00-000-000-0000
Fax: 000-00-000-000-0000
(iii) If to the Escrow Agent: Xxxxxx Xxxxxxxxx
00 Xxxxx Xxxxxx
Xxxxxx
Xxxxxx Xxxxxxx
Telephone: 000-00-000-000-0000
Fax: 000-00-000-000-0000
6. Miscellaneous.
6.01 Binding Effect. This Agreement shall inure to the benefit
of and be binding upon the parties and their respective successors, assigns and
legal representatives.
6.02 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.03 Amendment. This Agreement may be amended only by a
written instrument executed by all of the parties hereto affected thereby.
6.04 Applicable Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Maryland, without reference
to the principles of conflict or choice of law thereof.
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IN WITNESS WHEREOF, the Paragon Stockholders have executed this
Agreement, and Optelecom, Paragon and Escrow Agent have caused this Agreement to
be executed by their respective duly authorized officers, as of December 12,
1997.
OPTELECOM, INC.
By /s/ Xxxxxx X. Xxxxxx
-------------------------
Xxxxxx X. Xxxxxx
President
PARAGON AUDIO VISUAL LIMITED
By /s/ Xxxxx X. Xxxxx
-------------------------
Xxxxx X. Xxxxx
Chairman
FRANKLIN NATIONAL BANK
By
-------------------------
THE PARAGON STOCKHOLDERS
/s/ Xxxxx X. Xxxxx /s/ Xxxxxx X. Xxxxx
------------------------ ------------------------------
Xxxxx X. Xxxxx Xxxxxx X. Xxxxx
/s/ Xxxx X. Xxxxx Modeledge Limited
------------------------
Xxxx X. Xxxxx
By /s/ Xxxxx X. Xxxxxx
-------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxx
------------------------
Xxxxxx X. Xxxxx
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Schedule 1
Percentage Interests of the
Paragon Record Holders
---------------------------
Xxxxxx X. Xxxxx 23.75%
Xxxxxx X. Xxxxx 23.75%
Adventatum Jersey Limited 52.50%
