EXHIBIT 10.5
EXHIBIT C
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FORM OF TAX ESCROW AGREEMENT
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AGREEMENT made as of ____________, 1998 by and among Monroe, Inc., a
Delaware corporation ("Buyer"), Xxxxxx X. Xxxxx, as Stockholders' Representative
(as defined in the Purchase Agreement (as defined below)), and _____________, as
escrow agent (the "Escrow Agent").
WHEREAS, Buyer, Xxxxxxx Enterprises, Inc., a Massachusetts corporation
("Xxxxxxx"), Xxxxxx X. Xxxxxxx and the Stockholders are parties to a Stock
Purchase Agreement dated as of May __, 1998 (the "Purchase Agreement");
WHEREAS, pursuant to Section 1.4 of the Purchase Agreement, Buyer has
agreed to deposit the sum of Fifteen Million Three Hundred Fifty Dollars
Thousand ($15,350,000) with the Escrow Agent to hold, invest and deliver
pursuant to this Agreement; and
WHEREAS, the Escrow Agent is willing to enter into this Agreement and
perform as required herein in consideration of the premises and the mutual
obligations and promises contained in this Agreement on the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows.
1. Appointment of the Escrow Agent. Buyer and the Stockholders'
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Representative hereby appoint and designate _______________ as Escrow Agent for
the property described herein. The Stockholders' Representative shall serve as
exclusive representative of the Stockholders with respect to the Escrow Fund and
this Agreement.
2. Escrow Fund; Amounts Earned on Escrow Fund. Buyer shall deposit with
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the Escrow Agent and the Escrow Agent agrees to accept Fifteen Million Three
Hundred Fifty Dollars Thousand ($15,350,000) to be held in a designated separate
account of the Escrow Agent (the "Escrow Account"). The consideration deposited
hereunder, inclusive of any earnings on the same, shall be referred to as the
"Escrow Fund." The Escrow Fund shall be invested from time to time in Eligible
Investments (as defined in Section 22) pursuant to (and as specified in) the
written direction of Buyer received by the Escrow Agent (which direction shall
include maturity terms selected by Buyer). The Escrow Agent shall be entitled
to presume that any maturity terms set forth in an investment instruction from
Buyer have been agreed to by Stockholders' Representative. The Escrow Agent is
authorized to liquidate any such investment at any time when necessary to pay
any amount hereunder. In no instance shall the Escrow Agent have any liability
for any loss on any such investment.
3. Amounts Earned on Escrow Fund; Tax Matters. All amounts earned, paid
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or distributed with respect to the Escrow Fund (whether interest, dividends or
otherwise) shall become a part of the Escrow Fund and shall be held hereunder
upon the same terms as the
original Escrow Fund. The parties agree that (i) for tax reporting purposes, and
for any tax year, all interest or other income earned from the investment of the
Escrow Fund shall be allocable to Buyer and (ii) to the extent permitted by
applicable law, including Section 468B(g) of the Internal Revenue Code of 1986,
as amended, Buyer will include all amounts earned on the Escrow Fund in its
gross incomes for federal, state and local income tax (collectively, "income
tax") purposes and pay any income tax resulting therefrom. Buyer and the
Stockholders also agree for income tax purposes to treat all amounts distributed
to the Stockholders from the Escrow Fund as increases in the cash portion of the
Total Consideration paid by Buyer to the Stockholders (subject to the
application of Section 483 and/or 1274 of the Internal Revenue Code of 1986, as
amended). Buyer agrees to provide the Escrow Agent with a certified tax
identification number by signing and returning a Form W-9 to the Escrow Agent
prior to the date on which interest or other income is first earned by the
Escrow Fund. The parties hereto understand that, in the event that such tax
identification numbers are not certified to the Escrow Agent prior to the date
on which any income is first earned on the Escrow Fund, the Internal Revenue
Code, as amended from time to time, may require withholding of a portion of any
interest or other income earned on the investment of the Escrow Fund.
4. Distribution of Escrow Fund. Distributions from the Escrow Fund shall
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be made as follows:
(a) Upon receipt by the Escrow Agent of joint written instructions
signed by both Buyer and the Stockholders' Representative, the
Escrow Agent shall make payments out of the Escrow Fund in
accordance with such instructions in immediately available funds
within five (5) business days after receipt of such instructions
or as soon as possible thereafter.
(b) Upon receipt by the Escrow Agent of a certificate (an "Interim
Distribution Certificate") signed by Buyer certifying that (i)
enclosed therewith is a true, accurate and complete copy of a
demand for payment (including any assessment or determination of
an amount due), relating to one or more Audits, from the Internal
Revenue Service (the "IRS") and/or the Massachusetts Department
of Revenue (the "DOR") or (ii) Buyer reasonably believes the
amount instructed to be paid therein is payable to the IRS and/or
the DOR, relating to one or more Audits, and instructing the
Escrow Agent to pay to the IRS and/or the DOR, as the case may
be, the amount set forth in such Interim Distribution
Certificate, which Interim Distribution Certificate shall be
accompanied by the demand for payment, if any, the Escrow Agent
shall make payments out of the Escrow Fund in accordance with
such Interim Distribution Certificate in immediately available
funds within five (5) business days after receipt of such Interim
Distribution Certificate or as soon as possible thereafter.
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(c) Upon receipt by the Escrow Agent of a certificate (a "Final
Distribution Certificate") signed by Buyer certifying that (i)
full and final settlements with the IRS and the DOR of all
matters relating to the Audits have been reached, and (ii) either
(A) enclosed therewith is a true, accurate and complete copy of a
demand for payment (including any assessment or determination of
an amount due) from the IRS and/or the DOR or (B) Buyer
reasonably believes the amount instructed to be paid therein to
the IRS and/or the DOR is payable to the IRS and/or the DOR, and
instructing the Escrow Agent to (x) pay to the IRS and/or the
DOR, as the case may be, the amount set forth in such Final
Distribution Certificate and (y) pay in accordance with such
Final Distribution Certificate the remaining balance, if any, of
the Escrow Fund, the Escrow Agent shall make payments out of the
Escrow Fund in accordance with such Final Distribution
Certificate in immediately available funds within five (5)
business days after receipt of such Final Distribution
Certificate or as soon as possible thereafter.
Prior to making any payments out of the Escrow Fund pursuant to subparagraph (c)
of this Section 4, the Escrow Agent shall provide written notice to the
Stockholders' Representative that it has received a Final Distribution
Certificate (a copy of which shall accompany such notice) from Buyer.
5. Disputed Claims. If a controversy arises between one or more of the
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parties hereto, as to whether or not or to whom the Escrow Agent shall deliver
the Escrow Fund or as to any other matter arising out of or relating to the
Escrow Fund or this Agreement, the Escrow Agent shall not be required to
determine the same and thereafter shall not make any delivery of the Escrow Fund
but shall retain it until the Escrow Agent shall have either (i) received
written instructions signed by both Buyer and the Stockholders' Representative
or (ii) been directed by an order of a court of competent jurisdiction as to the
respective rights of Buyer and the Stockholders' Representative with respect to
the Escrow Fund, in which case the Escrow Agent shall disburse the Escrow Fund
in accordance with such instructions or order within five (5) business days
after the receipt thereof, unless such instructions or order otherwise provide.
The Escrow Agent shall be entitled to assume that no such controversy has arisen
unless it has received a written notice that such a controversy has arisen which
refers specifically to this Agreement. If a controversy of the type referred to
in this Section 5 arises, the Escrow Agent may, in its sole discretion (but
shall not be obligated to), commence interpleader or similar actions or
proceedings for determination of the controversy pursuant to Section 9.
6. Termination. This Agreement shall terminate when all amounts of the
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Escrow Fund have been distributed.
7. Scope of Undertaking. The Escrow Agent shall have no responsibility
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or obligation of any kind in connection with this Agreement and the Escrow Fund,
and shall not
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be required to deliver the same or any part thereof or take any action with
respect to any matters that might arise in connection therewith, other than to
receive, hold, and make delivery of the Escrow Fund as herein expressly provided
or by reason of a judgment or order of a court of competent jurisdiction.
8. Knowledge and Sufficiency of Documents. The Escrow Agent shall not be
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bound by or have any responsibility with respect to compliance with any
agreement between any of the other parties hereto, irrespective of whether the
Escrow Agent has knowledge of the existence of any such agreement or terms and
provisions thereof, the Escrow Agent's only duty, liability, and responsibility
being to receive, hold and deliver the Escrow Fund as herein provided. The
Escrow Agent shall not be required in any way to determine the validity or
sufficiency, whether in form or in substance, of the Escrow Fund or the
validity, sufficiency, genuineness or accuracy of any instrument, document,
certificate, statement or notice referred to in this Agreement or contemplated
hereby (including, without limitation, wire transfer instructions, whether
incorporated herein or provided in a separate written instruction); or the
identity or authority of the persons executing the same, and it shall be
sufficient if any writing purporting to be such instrument, document,
certificate, statement or notice is delivered to the Escrow Agent and purports
on its face to be correct in form and signed or otherwise executed by the party
or parties required to sign or execute the same under this Agreement.
9. Right of Interpleader. Should any controversy arise between Buyer, on
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one hand, and the Stockholders' Representative, on the other, or any other
person, firm or entity, with respect to this Agreement, the Escrow Fund, or any
part thereof, or the right of any party or other person to receive the Escrow
Fund, or should such parties fail to designate another Escrow Agent as provided
in Section 17 hereof, or if the Escrow Agent should be in doubt as to what
action to take, the Escrow Agent shall have the right (but not the obligation)
to (i) withhold delivery of the Escrow Fund until the controversy is resolved as
provided in Section 5 hereof, the conflicting demands are withdrawn or its doubt
is resolved as provided in Section 5 hereof, or (ii) institute a xxxx of
interpleader in any court of competent jurisdiction to determine the rights of
the parties hereto (the right of the Escrow Agent to institute such xxxx of
interpleader, however, shall not be deemed to modify the manner in which the
Escrow Agent is entitled to make disbursements of the Escrow Fund as hereinabove
set forth, other than to tender the Escrow Fund into the registry of such
court). Should a xxxx of interpleader be instituted, or should the Escrow Agent
be threatened with litigation or become involved in litigation in any manner
whatsoever on account of this Agreement or the Escrow Fund, then as between
themselves and the Escrow Agent, Buyer and the Stockholders, jointly and
severally, hereby bind and obligate themselves, their successors, heirs,
executors and assigns to pay the Escrow Agent its reasonable attorneys' fees and
any and all other disbursements, expenses, losses, costs and damages of the
Escrow Agent in connection with or resulting from such threatened or actual
litigation. Notwithstanding the foregoing, as between themselves, Buyer and the
Stockholders shall each pay one-half of all amounts payable to the Escrow Agent
pursuant to this paragraph.
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10. Scope of Duties and Errors in Judgment. It is expressly understood
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and agreed that the Escrow Agent shall be under no duty or obligation to give
any notice, or to do or to omit the doing of any action or anything with respect
to the Escrow Fund, except to hold the same (and any earnings thereon, pursuant
to the terms hereof) in the Escrow Account and to make disbursements in
accordance with the terms of this Agreement. Without limiting the generality of
the foregoing, it is acknowledged and agreed that (i) no implied duties shall be
read into this Agreement on the part of the Escrow Agent, and (ii) the Escrow
Agent shall not be obligated to take any legal or remedial action which might in
its judgment involve it in any expense or liability for which it has not been
furnished acceptable indemnification. The Escrow Agent, its directors, officers
and employees shall not be liable for any error in judgment or any act or steps
taken or permitted to be taken in good faith, or for any mistake of law or fact,
or for anything it may do or refrain from doing in connection herewith, except
for its own willful misconduct or gross negligence.
11. Indemnity. As between themselves and the Escrow Agent, Buyer and the
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Stockholders, jointly and severally, agree to indemnify the Escrow Agent against
and hold the Escrow Agent harmless from any and all losses, costs, damages,
expenses, claims, and attorney's fees and expenses suffered or incurred by the
Escrow Agent as a result of, in connection with or arising from or out of the
acts or omissions of the Escrow Agent in performance of or pursuant to this
Agreement, except such acts or omissions as may result from the Escrow Agent's
willful misconduct or gross negligence. In no event shall the Escrow Agent be
liable for indirect, punitive, special or consequential damages.
Buyer and the Stockholders, jointly and severally, agree to indemnify and
hold the Escrow Agent harmless from and against any taxes, additions for late
payment, interest, penalties and other expenses, that may be assessed against
the Escrow Agent with respect to any payment of Escrow Funds or other activities
under this Agreement. Buyer and Stockholders' Representative undertake to
instruct the Escrow Agent in writing with respect to the Escrow Agent's
responsibility for withholding and other taxes, assessments, or other
governmental charges, certifications and governmental reporting in connection
with its acting as Escrow Agent under this Agreement. Buyer and the
Stockholders, jointly and severally, agree to indemnify and hold the Escrow
Agent harmless from any liability on account of taxes, assessments or other
governmental charges, including, without limitation, the withholding or
deduction or the failure to withhold or deduct the same, and any liability for
failure to obtain proper certifications or to properly report to governmental
authorities, to which the Escrow Agent may be or become subject in connection
with or which arises out of this Agreement, including costs and expenses
(including reasonable legal fees and expenses), interest and penalties.
Notwithstanding the foregoing, as between themselves, Buyer and the Stockholders
shall each pay one-half of all amounts payable to the Escrow Agent pursuant to
this paragraph. Notwithstanding any term hereof to the contrary, the terms of
this Section 11 shall survive the termination of this Agreement.
12. Notices. Any notice or other communication required or permitted
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hereunder shall be in writing and shall be sent by registered or certified mail
and shall be deemed to have
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been given three (3) days after deposit in the U.S. mails, return receipt
requested, postage prepaid, addressed as follows (or to such other address as
any such party may hereafter designate by written notice to the other parties):
TO BUYER: Monroe, Inc.
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0 Xxxxx Xxxxxx, Xxxxx 00X
Xxxxxx, XX 00000
Attn: President
With a copy to: Xxxxxxx, Procter & Xxxx LLP
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Xx., Esq.
TO STOCKHOLDERS: Xxxxxx X. Xxxxx
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0 Xxxxxxxxx Xxxx
Xxxxxxxxx Xxxxx, XX 00000
With a copy to: Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
TO ESCROW AGENT: [_________________]
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With a copy to: [_________________]
13. Consultation with Legal Counsel. The Escrow Agent may consult with
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its in-house counsel or other counsel satisfactory to it in respect to questions
relating to its duties or responsibilities hereunder or otherwise in connection
herewith and shall not be liable for any action taken, suffered, or omitted by
the Escrow Agent in good faith upon the advice of such counsel. The Escrow
Agent may act through its officers, employees, agents and attorneys.
14. Choice of Laws; Cumulative Rights. This Agreement and the disposition
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hereunder shall be construed and regulated under and their validity and effect
shall be determined by the Commonwealth of Massachusetts. All of the Escrow
Agent's rights hereunder are cumulative of any other rights it may have by law
or otherwise.
15. Reimbursement of Expenses. The Escrow Agent shall be entitled to
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reimbursement from Buyer and the Stockholders of all its reasonable costs and
expenses, including reasonable fees and expenses of legal counsel incurred by it
in connection with the preparation, operating, administration and enforcement of
this Agreement. The Escrow Agent
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shall be entitled to reimbursement on demand for all expenses incurred in
connection with the administration of this Agreement or the escrow created
hereby which are in excess of its compensation for normal services hereunder,
including, without limitation, payment of any legal fees and expenses incurred
by the Escrow Agent in connection with resolution of any claim by any party
hereunder. Notwithstanding the foregoing, as between themselves, Buyer and the
Stockholders shall each pay one-half of all amounts payable to the Escrow Agent
pursuant to this paragraph.
16. Entire Agreement. This Agreement evidences the entire agreement among
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Buyer, the Stockholders, the Stockholders' Representative and the Escrow Agent
in connection with the Escrow Fund and no other agreement entered into between
the parties or any of them shall be considered or adopted or binding, in whole
or in part, by or upon the Escrow Agent, notwithstanding that any other such
agreement may be deposited herewith or the Escrow Agent may have knowledge
thereof. This Agreement may be amended only in writing signed by all of the
parties hereto.
17. Resignation. The Escrow Agent may resign upon 10 days' prior written
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notice to Buyer and the Stockholders' Representative, and upon the written
instruction of Buyer and the Stockholders' Representative, the Escrow Agent
shall deliver the Escrow Fund to any designated substitute Escrow Agent mutually
agreeable to such parties. If Buyer and the Stockholders' Representative fail
to designate a substitute Escrow Agent within 10 days, the Escrow Agent, in its
sole discretion and its sole option, either may (i) continue to hold the Escrow
Fund, or (ii) institute a xxxx of interpleader as contemplated by Section 9
hereof.
18. Captions. Section headings and captions have been inserted for
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convenience only and do not in any way limit the provisions set out in the
various sections hereof.
19. Severability. If one or more of the provisions contained herein for
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any reason shall be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
20. Compensation. Buyer and the Stockholders covenant and agree, jointly
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and severally, to pay to the Escrow Agent the fee determined by the Escrow
Agent, from time to time, to be applicable to this escrow and bear all costs and
expenses incurred by the Escrow Agent in connection therewith. The Escrow
Agent's fees, as in effect on the date hereof, are attached hereto as Schedule
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A. Without altering or limiting the joint and several liability of Buyer and
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the Stockholders hereunder, as between themselves, Buyer and the Stockholders
shall each pay one-half of all amounts payable to the Escrow Agent pursuant to
this Section 20.
21. Collected Funds; Collection of Items. No monies shall be required to
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be disbursed by the Escrow Agent until and unless it has collected funds. The
Escrow Agent may
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pay out monies held in escrow due to any party by its check. The Escrow Agent
shall not be obligated to take any legal action to enforce payment of any item
deposited with it in escrow.
22. Investment. Subject to Section 2(a) of this Agreement, the available
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uninvested portion of the Escrow Fund shall be invested (and reinvested, as the
case may be) from time to time by the Escrow Agent in any of the following
investments (collectively, "Eligible Investments"):
(i) Short term obligations issued or guaranteed by The United
States of America or any agency or instrumentality thereof;
(ii) Certificates of deposit of or interest bearing accounts with
national banks or corporations endowed with trust powers, including the Escrow
Agent, having capital and surplus in excess of $100,000,000;
(iii) Insured Money Market Account short term investments with
national banks or corporations endowed with trust powers, including the Escrow
Agent, having capital and surplus in excess of $100,000,000; or
(iv) Corporate bond funds with a rating of at least A+ or the
equivalent thereof by Standard & Poor's Corporation, at least A+ or the
equivalent thereof by Xxxxx'x Investors Service, Inc. or an equivalent rating by
another nationally recognized rating agency.
Investments pursuant to such investment instructions described above shall
in all instances be subject to availability (including any time-of-day
requirements). In no instance shall Escrow Agent have any obligation to provide
investment advice of any kind. The Escrow Agent shall not be required to invest
any funds held hereunder except as expressly provided in written instructions
received from Buyer pursuant to Section 2 hereof, and shall not be obligated to
pay interest on uninvested funds. All amounts received by the Escrow Agent (and
any credits to the Escrow Account) shall be conditional upon collection (and
actual receipt by the Escrow Agent of final payment). In no event shall the
Escrow Agent have any obligation to advance funds.
The Escrow Agent may be authorized at all times and from time to time to
liquidate any investment of the Escrow Fund as may be necessary to provide
available cash to make any release, disbursement or payment called for under the
terms of this Agreement. The Escrow Agent shall have no responsibility or
liability for any losses resulting from liquidation of the Escrow Fund (such as
liquidation prior to maturity).
23. Security Interest. The parties grant to the Escrow Agent a lien upon
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and security interest in the Escrow Fund, to secure payment of the parties'
obligations and liabilities, both joint and several hereunder.
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24. Execution in Counterparts. For the convenience of the parties and to
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facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document and such counterparts may be delivered by
facsimile.
25. Consent to Jurisdiction and Service. Buyer, each Stockholder and the
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Stockholders' Representative hereby absolutely and irrevocably consents and
submits to the jurisdiction of the courts in the Commonwealth of Massachusetts
and of any Federal court located in said Commonwealth in connection with any
actions or proceedings brought against Buyer, the Stockholders and/or the
Stockholders' Representative arising out of or relating to this Escrow
Agreement. In any such action or process, Buyer, each Stockholder and the
Stockholders' Representative hereby absolutely and irrevocably waive personal
service of any summons, complaint, declaration or other process and hereby
absolutely and irrevocably agree that the service thereof may be made by
certified or registered first-class mail directed to Buyer and the Stockholders'
Representative, as the case may be, at their respective addresses in accordance
with Section 12 hereof.
26. Force Majeure. Neither Buyer, any Stockholder, nor the Stockholders'
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Representative nor the Escrow Agent shall be responsible for delays or failures
in performance resulting from acts beyond control. Such acts shall include but
not be limited to acts of God, strikes, lockouts, riots, acts of war, epidemics,
governmental regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other disasters.
27. Binding Effect. This Agreement shall be binding upon the respective
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parties hereto and their heirs, executors, successors and assigns.
28. Modifications. This Agreement may not be altered or modified without
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the express written consent of the parties hereto. No course of conduct shall
constitute a waiver of any of the terms and conditions of this Escrow Agreement,
unless such waiver is specified in writing, and then only to the extent so
specified. A waiver of any of the terms and conditions of this Escrow Agreement
on one occasion shall not constitute a waiver of the other terms of this Escrow
Agreement, or of such terms and conditions on any other occasion.
29. Reproduction of Documents. This Agreement and all documents relating
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hereto, including, without limitation, (a) consents, waivers and modifications
which may hereafter be executed, and (b) certificates and other information
previously or hereafter furnished, may be reproduced by any photographic,
photostatic, microfilm, optical disk, micro-card, miniature photographic or
other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
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reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
[End of Text]
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IN WITNESS WHEREOF, the parties have executed this Agreement in multiple
counterparts, each of which is and shall be considered an original for all
intents and purposes effective as of the date first written above.
MONROE, INC.
By:_________________________________
Xxxxx X. Xxxxxx
President
____________________________________
Xxxxxx X. Xxxxx, as Stockholders'
Representative
_________________, as Escrow Agent
By:_________________________________
Name:
Title:
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SCHEDULE A
ESCROW AGENT FEES
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