EXHIBIT 10.1
EXECUTION COPY
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is dated as of August 31, 2005
(the "Effective Date"), by and between INTERLAND, INC., a Minnesota corporation,
(the "Seller"), Peer 1 Acquisition Corporation, a Delaware corporation (the
"Purchaser"), and SunTrust Bank, solely in its capacity as Escrow Agent as is
set forth herein (the "Escrow Agent"). Capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Asset Purchase
Agreement (defined below).
R E C I T A L S
A. WHEREAS, concurrently with the execution of this Agreement, the
Purchaser will acquire certain assets of the Seller pursuant to that certain
Asset Purchase Agreement (the "Asset Purchase Agreement") dated as of August 31,
2005 by and among the Seller and the Purchaser; and
B. WHEREAS, Section 1.3(a)(ii) of the Asset Purchase Agreement requires
that the Purchaser deposit with the Escrow Agent an amount equal to $2,800,000
(the "Escrow Fund"), to be held by Escrow Agent and distributed as provided in
this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises set forth above and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Purchaser, the Seller and the Escrow Agent agree as follows:
1. Appointment of Escrow Agent.
(a) The Escrow Agent is hereby appointed escrow agent in accordance with
the instructions set forth in this Agreement and hereby agrees to act as the
Escrow Agent under this Agreement. The Escrow Agent shall have no duty to
enforce any provision hereof requiring performance by any other party hereunder.
(b) Concurrently with the execution hereof, the Purchaser shall deposit
with the Escrow Agent an amount equal to the Escrow Fund in cash to be held and
distributed by Escrow Agent pursuant to the terms of this Agreement. The Escrow
Agent hereby acknowledges receipt of the Escrow Fund.
(c) The Escrow Agent shall not have any interest in the Escrow Fund, but
shall serve as escrow holder only and have only custody thereof. The Escrow Fund
shall be maintained separately by, and shall be under the exclusive dominion and
control of the Escrow Agent. The Escrow Agent expressly waives any right to set
off and appropriate any amounts in the Escrow Fund.
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2. Distribution of Escrow Fund.
(a) General. The Escrow Fund shall be held by the Escrow Agent as a
non-exclusive source of payment to the Purchaser for any amounts owed by the
Seller to Purchaser Indemnified Persons pursuant to Section 7.1 of the Asset
Purchase Agreement ("Section 7.1 Claim"). The Escrow Fund shall be the sole
source of payment for any such amounts owed until such time as the entire Escrow
Fund has been disbursed. Thereafter, claims may be made directly against the
Seller to the extent permitted by Article 7 of the Asset Purchase Agreement.
(b) Escrow Fund Payment Date. Within five (5) Business Days after the first
(1st) anniversary of the date hereof (the "Escrow Fund Payment Date"), the
Escrow Agent shall release to the Seller, the balance of the Escrow Fund, less
the aggregate amount of any claims to the Escrow Fund evidenced by pending
Purchaser Notices (defined below), if any. Following the Escrow Fund Payment
Date, within five (5) Business Days following Final Resolution (as defined
below) of any pending Purchaser Notice, the Escrow Agent shall release to the
Seller all amounts that are ultimately determined not to be payable to Purchaser
on behalf of any Purchaser Indemnified Persons in respect of such pending
Purchaser Notice.
(c) Claims/Disputes. Notices of claims, notices of disputes, and
disbursements from the Escrow Fund shall be effected as follows:
(i) Notice of Claim. If a Purchaser's Indemnified Person determines in
good faith that it is entitled to all or a portion of the Escrow Fund as a
result of one or more Section 7.1 Claims to which it is entitled to
indemnification under Article 7 of the Asset Purchase Agreement, the
Purchaser shall have the right to deliver with reasonable promptness a
written notice to the Escrow Agent and the Seller (the "Purchaser Notice")
stating that the Purchaser, on behalf of any Purchaser Indemnified Person
is entitled to all, or such portion of, the Escrow Fund, as the case may
be, setting forth the amount thereof and stating such claim with reasonable
particularity and with a statement in reasonable detail of the factual
basis therefor. Unless the Seller objects in writing to such disbursement
as provided below, which objection is received by the Escrow Agent within
the Objection Period (defined below), the Escrow Agent shall disburse to
the Purchaser an amount equal to (A) if the Escrow Agent does not receive
written objection within the Objection Period, the amount claimed in the
Purchaser Notice, (B) if the Escrow Agent receives written objection to a
portion of the amount claimed in the Purchaser Notice during the Objection
Period, the amount that is undisputed in the Purchaser Notice and the
amount determined when the dispute is resolved in the manner contemplated
in Section 9(i) hereof or (C) if the Escrow Agent receives written
objection to such disbursement during the Objection Period in full, then
the amount determined when the dispute is resolved in the manner
contemplated in Section 9(i) hereof.
(ii) Notice of Dispute. If the Seller's written objection (the
"Objection Notice") to the disbursement of any portion of the Escrow Fund
is received by the Escrow Agent within fifteen (15) days from the Escrow
Agent's receipt of the Purchaser Notice (the "Objection Period"), then
there shall be no disbursement from the Escrow Fund with respect to
disputed amounts until the Escrow Agent receives (i) either a final
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nonappealable order of a court of competent jurisdiction directing delivery
of the amount of the Escrow Fund in dispute or the written arbitration
award rendered as provided in Section 9.9 of the Asset Purchase Agreement
directing delivery of the amount of the Escrow Fund in dispute or (ii)
written instructions jointly executed by the Seller and the Purchaser
directing delivery of the amount of the Escrow Fund in dispute ("Final
Resolution"), in which event the Escrow Agent shall deliver the amount of
the Escrow Fund in dispute in accordance with such order or instructions.
Any court order referred to in clause (i) above shall be accompanied by a
legal opinion by counsel for the presenting party reasonably satisfactory
to the Escrow Agent to the effect that said order or determination is final
and nonappealable. The Escrow Agent shall rely conclusively and without
inquiry and act on such court order and legal opinion without further
questions and shall have no duty to determine whether any arbitration award
or court order is authentic or conforms to the requirements of the Asset
Purchase Agreement. The Objection Notice shall set forth in reasonable
detail the amount disputed in the Purchaser Notice and the Seller's basis
therefor.
(d) Disbursement Notices. The Escrow Agent shall promptly notify the Seller
and the Purchaser in writing of the occurrence and amount of each disbursement
of the Escrow Fund ("Disbursement Notice").
3. Administration of Escrow.
(a) So long as the Escrow Fund is held in escrow, it shall be invested and
reinvested by the Escrow Agent solely in Investments, pursuant to written
instructions signed by the Purchaser and the Seller. None of the Escrow Agent,
the Purchaser, or the Seller shall be liable or responsible for any loss
resulting from any investment or reinvestment made pursuant to this Section 3.
All investments of the Escrow Fund shall be held by, or registered in the name
of, the Escrow Agent or its nominee.
As used herein "Investments" means:
(i) direct obligations of, or obligations fully guaranteed by, the
United States of America or any agency thereof with any residual amount
being invested in the Federal Treasury Obligations Money Market Fund;
(ii) any publicly traded money market fund, such as the STI Classic
U.S. Treasury Securities Money Market Fund; or
(iii) certificates of deposit whether negotiable or nonnegotiable,
issued by any bank, trust company or national banking association,
including the Escrow Agent, provided that such certificates of deposit
shall be fully insured by the Federal Deposit Insurance Corporation.
Unless instructed otherwise in writing, the Escrow Agent shall invest all
funds in the Escrow Fund in the STI Classic U.S. Treasury Securities Money
Market Fund. Each of the Purchaser and Seller shall provide to the Escrow Agent
a completed form W-9. Notwithstanding anything to the contrary herein provided,
the Escrow Agent shall have no duty to prepare or file any Federal or state tax
report or return with respect to the Escrow Fund or any income earned thereon.
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(b) Maturities or unexpired terms of maturities of instruments in which the
Escrow Fund is invested shall not exceed sixty (60) days. The Escrow Agent is
authorized to sell any such Investments as may be required to make any payment
required to be made under this Agreement, and the Escrow Agent shall not be
liable for any loss due to early redemption.
(c) At the prior written request of either the Purchaser or the Seller at
any time, the Escrow Agent shall deliver to the Purchaser and the Seller such
information as shall be reasonably requested with respect to the Escrow Fund and
any interest earned thereon or payments made therefrom.
(d) Subject to Section 5 hereof, net profits resulting from, and interest
and income produced by investments of, the Escrow Fund ("Earnings") shall be
deemed a part of the Escrow Fund and reinvested by the Escrow Agent.
4. Indemnity. The Purchaser and the Seller jointly and severally agree to
indemnify and hold harmless the Escrow Agent and each of the Escrow Agent's
officers, directors, agents and employees (the "Indemnified Parties") from and
against any and all losses, liabilities, claims, damages, expenses and costs
(including attorneys' fees) of every nature whatsoever which any such
Indemnified Party may incur arising directly or indirectly from this Agreement
or arising directly or indirectly by virtue of the Escrow Agent's undertaking to
serve as Escrow Agent hereunder; provided, however, that no Indemnified Party
shall be entitled to indemnity in case of such Indemnified Party's gross
negligence or willful misconduct. The provisions of this section shall survive
the termination of this Agreement and any resignation or removal of the Escrow
Agent. Solely as between the Purchaser and the Seller, all amounts payable to
the Escrow Agent pursuant to this Section 4 shall be apportioned equally between
them.
5. Fees and Expenses. The Escrow Agent shall be entitled to compensation
for its services as stated in the schedule attached as Annex I, which
compensation shall be offset against the Earnings, and any excess of such
compensation over Earnings shall be paid one-half by the Purchaser and one-half
by the Seller. The fee agreed upon for the services rendered hereunder is
intended as full compensation for the Escrow Agent's services as contemplated by
this Agreement.
6. The Escrow Agent.
(a) The Escrow Agent shall not be bound in any way by, or be deemed to have
knowledge of, or any duty under, the Asset Purchase Agreement or any other
agreement between or among the parties hereto, other than this Agreement. The
Escrow Agent shall have no duties other than those expressly imposed on it
herein and shall not be liable with respect to any action taken by it, or any
failure on its part to act, except to the extent that such actions constitute a
breach of this Agreement, bad faith, fraud, gross negligence or willful
misconduct. In no event shall the Escrow Agent be liable for incidental,
indirect, special, consequential or punitive damages. The Escrow Agent shall
have no liability with respect to the transfer or distribution of any funds
effected by the Escrow Agent pursuant to wiring or transfer instructions
provided to the Escrow Agent by any party to this Agreement. The Escrow Agent
shall not be obligated to take any legal action or to commence any proceedings
in connection with this Agreement, or to appear in, prosecute or defend in any
such legal action or proceedings.
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(b) The Escrow Agent makes no representations and has no responsibility as
to the validity, genuineness or sufficiency of any of the documents or
instruments delivered to it hereunder. The Escrow Agent (i) shall be entitled to
rely upon any order, judgment, certification, demand, notice, instrument or
other writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety or
validity of the service thereof and (ii) may act in reliance upon any instrument
or signature reasonably believed by it to be genuine and may assume that any
person purporting to give notice, receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so. The Escrow Agent may act in reliance upon the advice of
counsel satisfactory to it in reference to any matter in connection with this
Agreement and shall not incur any liability for any action taken in good faith
in accordance with such advice.
(c) In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the Escrow
Fund, or in the event that the Escrow Agent in good faith is in doubt as to what
action it should take hereunder, the Escrow Agent shall be entitled to refrain
from acting until the Escrow Agent shall have received (i) a final nonappealable
order of a court of competent jurisdiction directing delivery of the amount of
the Escrow Fund in dispute or (ii) written instructions jointly executed by the
Seller and the Purchaser directing delivery of the amount of the Escrow Fund in
dispute, in which event the Escrow Agent shall deliver the amount of the Escrow
Fund in dispute in accordance with such order or instructions. Any court order
referred to in clause (i) above shall be accompanied by a legal opinion by
counsel for the presenting party reasonably satisfactory to the Escrow Agent to
the effect that said order or determination is final and nonappealable. The
Escrow Agent shall act on such court order and legal opinion without further
questions. In addition, in the event of any dispute or disagreement relating to
this Agreement or concerning the duties of the Escrow Agent hereunder, the
Escrow Agent shall have the right to deposit all property held under this
Agreement into the registry of any court of competent jurisdiction and notify
the parties hereto of such deposit, and thereupon the Escrow Agent shall be
discharged from all further duties and responsibilities as Escrow Agent under
this Agreement.
7. Resignation; Removal.
(a) The Escrow Agent may resign upon sixty (60) days advance written notice
to the parties. Upon receipt of such notice of resignation from the Escrow
Agent, the Purchaser and the Seller shall use their commercially reasonable
efforts jointly to appoint a successor escrow agent. The Escrow Agent shall
deposit all of the Escrow Fund with the successor escrow agent appointed in
writing by the Purchaser and the Seller. If a successor escrow agent is not
appointed by the mutual agreement of the Purchaser and the Seller within the
sixty (60) day period following such notice, the Escrow Agent may tender into
the registry or custody of any court of competent jurisdiction any part or all
of the Escrow Fund and then shall be discharged from all further duties and
responsibilities as Escrow Agent under this Agreement.
(b) The Escrow Agent shall be entitled to its compensation earned prior to
its resignation hereunder.
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(c) The Purchaser and the Seller may, at any time substitute a new escrow
agent by giving thirty (30) days joint written notice thereof to the existing
Escrow Agent and paying all fees and expenses of such Escrow Agent incurred to
the date of the substitution. Upon the effective date of the substitution of a
successor escrow agent, the Escrow Agent shall promptly account for and deposit
all of the Escrow Fund with such successor.
8. Miscellaneous Provisions.
(a) Severability. If any provision of this Agreement is prohibited by the
laws of any jurisdiction as those laws apply to this Agreement, that provision
shall be ineffective to the extent of such prohibition and/or shall be modified
to conform with such laws, without invalidating the remaining provisions hereof.
(b) Modification and Waiver. This Agreement may not be changed or modified
except in writing specifically referring to this Agreement and signed by the
Purchaser, the Seller and the Escrow Agent. No attempted waiver of any provision
hereof shall be binding on the other parties unless reduced to writing and
signed by the waiving party. Unless specifically provided otherwise herein or
agreed to by the Purchaser, the Seller and the Escrow Agent in writing, no
modification, waiver, termination, rescission, discharge or cancellation of this
Agreement shall affect the right of the parties hereto to enforce any claim,
whether or not liquidated, which accrued prior to the date of such modification,
waiver, termination, rescission, discharge, or cancellation of this Agreement,
and no waiver of any provision or of any default under this Agreement shall
affect the right of any party to enforce such provision or to exercise any right
or remedy in the event of any other default, whether or not similar.
(c) Assignment. This Agreement may not be assigned by any party hereto
without the prior written consent of the other parties; provided, however, that
the Purchaser may assign without the consent of the Seller, but with not less
than ten Business Days advance notice to the Seller and the Escrow Agent, its
rights hereunder to any Affiliate of which the Purchaser owns at least 80% of
the issued and outstanding equity thereof; in which event all references herein
to the Purchaser shall be deemed references to such assignee, except that all
representations and warranties made herein with respect to the Purchaser as of
the date of this Agreement shall be deemed representations and warranties also
to be made with respect to such assignee to the extent applicable as of the date
of such designation. No such assignment shall relieve the Purchaser of any
obligation hereunder. Any purported assignment in violation of this Agreement
will be void ab initio. Subject to the preceding sentence, each term and
provision of this Agreement shall be binding upon and enforceable against and
inure to the benefit of any successors or assigns of the Purchaser and any
successors or assigns of the Seller. Nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the parties and their
respective successors and assigns any rights or remedies under or by reason of
this Agreement. In the event of any such proposed assignment, an amendment to
this Agreement, in form and substance reasonably acceptable to the Escrow Agent,
shall be executed and delivered in the event the Escrow Agent deems such an
amendment to be necessary or desirable.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, with the same effect as
if the signatures thereto were in the same instrument. This Agreement shall be
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effective and binding on all parties when all parties have executed and
delivered a counterpart of this Agreement.
(e) Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to the Purchaser, to:
Peer 1 Acquisition Corporation
x/x Xxxx 0 Xxxxxxx Xxxxxxxxxxx, Xxx.
Xxxxx 0000
555 West Hastings Street
Vancouver, British Columbia
Canada V6B 4NS
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxx & Xxxxxxx LLP
000 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to the Seller, to:
Interland, Inc.
000 Xxxxxxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Chief Executive Officer, and with a copy to
General Counsel
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxx Xxxxxxx, LLP
000 00xx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to the Escrow Agent, to:
SunTrust Bank
Corporate Trust Department
00 Xxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx
Facsimile: 000-000-0000
Telephone: 000-000-0000
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon acknowledgement of receipt by the
recipient by other than automatic means, and (iii) if delivered by mail in the
manner described above to the address as provided in this Section, be deemed
given upon receipt (in each case regardless of whether such notice, request or
other communication is received by any other Person to whom a copy of such
notice, request or other communication is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
(f) Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes any and all other prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, is not intended to confer upon any person other than
the Purchaser and the Seller any rights or remedies hereunder.
(g) Construction. Within this Agreement the singular shall include the
plural and the plural shall include the singular and any gender shall include
all other genders, all as the meaning and context of this Agreement shall
require. In connection with any action or event which by the terms hereof
requires consent of a party hereto, such consent shall not be unreasonably
withheld or delayed. The section headings as herein used are for convenience
only and shall not be deemed to vary the content of this Agreement or limit the
scope of any provision hereof. Unless otherwise specified, a reference herein to
a schedule, an annex or an exhibit refers to a schedule, annex or exhibit
hereof.
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(h) Choice of Law. This Agreement and all documents executed in connection
herewith shall be governed by, and construed in accordance with, the laws of the
State of Georgia, regardless of the laws that might otherwise govern under
applicable principles of conflict of laws thereof.
(i) Dispute Resolution. Solely as between Purchaser and Seller, all
disputes, controversies or claims arising out of or relating to distribution of
the Escrow Fund shall be resolved pursuant to Section 9.9 of the Asset Purchase
Agreement.
(j) Expenses. All legal and other costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs and expenses.
9. Termination. This Agreement may only be terminated by written consent
signed by all parties or upon the earliest to occur of: (a) disbursement or
release of the entire Escrow Fund by the Escrow Agent in accordance with this
Agreement, or (b) a Final Resolution with respect to the entire Escrow Fund.
IN WITNESS WHEREOF, the Seller, the Purchaser, and the Escrow Agent have
executed and delivered this Agreement as of the date first written above.
SELLER:
INTERLAND, INC.
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Xxxxx X. Xxxxxxx
Its: President
Federal Tax ID Number: 00-0000000
PURCHASER:
PEER 1 ACQUISITION CORPORATION
By: /s/ X.X. Xxxxxxx
------------------------------------
Its: President
------------------------------------
Federal Tax ID Number: ________________
(Escrow Agreement)
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ESCROW AGENT:
SUNTRUST BANK
By: /s/ Xxxx X. Xxxxxx
-----------------------------------
Xxxx X. Xxxxxx
Its: First Vice President
-----------------------------------
(Escrow Agreement)
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ANNEX I
ESCROW AGENT FEE SCHEDULE
The annual administration fee of $2,500.00 for administering this Escrow
Agreement is payable in advance at the time of closing and, if applicable, will
be invoiced each year to the appropriate party(ies) on the anniversary date of
the closing of the Escrow Agreement. Also, a one-time legal review fee of
$500.00 is payable in advance at the time of closing.
Out of pocket expenses such as, but not limited to, postage, courier, overnight
mail, insurance, money wire transfer, long distance telephone charges,
facsimile, stationery, travel, legal or accounting, etc., will be billed at
cost.
These fees do not include extraordinary services which will be priced according
to time and scope of duties. The fees shall be deemed earned in full upon
receipt by the Escrow Agent, and no portion shall be refundable for any reason,
including without limitation, termination of the Escrow Agreement.
It is acknowledged that the schedule of fees shown above is acceptable for the
services mutually agreed upon.
Note: This fee schedule is based on the assumption that the escrowed funds will
be invested in SunTrust's cash sweep account, STI Classic U.S. Treasury
Securities Money Market Fund.
