Exhibit 99.3
EXECUTION VERSION
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Escrow Agreement") is entered into as of
__________, 2007, by and among GoAmerica, Inc., a Delaware corporation
("Acquirer"), Bill M. McDonagh, as the agent of the stockholders of HOVRS (the
"Stockholders' Agent"), and American Stock Transfer & Trust Company, as the
escrow agent (the "Escrow Agent").
RECITALS
A. Reference is made to that certain Agreement and Plan of Merger dated as
of September 12, 2007 (the "Merger Agreement") by and among Acquirer, HOVRS
Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of
Acquirer ("HOVRS Merger Sub"), Hands On Video Relay Services, Inc., a Delaware
corporation ("HOVRS"), and the Stockholders' Agent, pursuant to which, and
subject to the terms and conditions whereof, (i) HOVRS Merger Sub will merge
with and into HOVRS and the separate corporate existence of HOVRS Merger Sub
will cease, (ii) each share of HOVRS Common Stock will be converted into the
right to receive Common Merger Consideration, and (iii) each share of HOVRS
Preferred Stock will be converted into the right to receive Preferred Merger
Consideration (such transaction is referred to herein as the "Merger").
Capitalized terms used herein without being defined have the same meanings that
they are given in the Merger Agreement;
B. The Merger Agreement provides that a portion of the Merger
Consideration equal to Five Million Dollars ($5,000,000) in cash (the "Escrow
Cash") will be placed in escrow to secure the indemnification obligations of the
former HOVRS Stockholders to Acquirer;
C. The Stockholders' Agent has been appointed to represent the former
HOVRS Stockholders pursuant to Section 9.8 of the Merger Agreement; and
D. The parties desire to confirm the terms and conditions pursuant to
which the Escrow Cash will be deposited and held in and disbursed from escrow.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and intending to be legally bound, the parties hereto agree as follows:
1. Appointment of Agents.
(a) Pursuant to Section 9.8 of the Merger Agreement, Bill M.
McDonagh has been appointed to act as the Stockholders' Agent hereunder, and
Bill M. McDonagh hereby accepts such appointment for the purpose of representing
the interests of the Stockholders of HOVRS, all in accordance with the terms and
conditions set forth herein.
(b) The parties hereto hereby appoint American Stock Transfer &
Trust Company to act as Escrow Agent hereunder, and American Stock Transfer &
Trust Company hereby accepts such appointment for the purpose of receiving and
disbursing the Escrow Cash, plus all plus all interest earned thereon (the
"Escrow Fund"), to be held in escrow pursuant to this
Escrow Agreement, all in accordance with the terms and conditions set forth
herein.
2. Escrow Fund; Investment.
(a) As of the Closing, pursuant to and in accordance with Sections
2.8(g) and 9.1 of the Merger Agreement, Acquirer shall cause to be delivered to
the Escrow Agent cash in the aggregate amount of Five Million Dollars
($5,000,000) as the Escrow Cash. The Escrow Agent shall make distributions from
the Escrow Fund in accordance with the terms of this Escrow Agreement.
(b) Pending disbursement of the Escrow Funds, the Escrow Agent shall
invest the Escrow Funds in one or more money market accounts or other interest
bearing investment account, as directed by the Stockholders' Agent. Neither the
Escrow Agent, the Acquirer nor the Stockholders' Agent will be liable for any
loss of principal or income resulting from any deposit made pursuant to this
Section 2(b).
3. Indemnification; Incorporation of Section 9 of Merger Agreement. Each
of the provisions of Section 9 of the Merger Agreement, which describes the
indemnification obligations of the various parties, is incorporated herein by
reference as if expressly stated herein. In the event of any inconsistency
between the provisions of this Escrow Agreement and the provisions of Section 9
of the Merger Agreement, the provisions of Section 9 of the Merger Agreement
shall govern; provided, however, that the provisions of Section 6 hereof shall
not be superseded by any provision in the Merger Agreement.
4. Procedure for Acquirer to Make Claims on the Escrow Fund.
(a) If, prior to the Termination Date, Acquirer delivers to the
Escrow Agent and the Stockholders' Agent an Officer's Certificate in accordance
with Section 9 of the Merger Agreement, for a period of thirty (30) days after
such delivery, the Escrow Agent shall make no delivery of any property in the
Escrow Fund unless the Escrow Agent shall have received written authorization
from the Stockholders' Agent to make such delivery.
(b) The Stockholders' Agent may object to the claim made in the
Officer's Certificate by delivery of a written statement of objection (an
"Objection Notice") to Acquirer and the Escrow Agent prior to the expiration of
such 30-day period. If the Escrow Agent has not received an Objection Notice
during such 30-day period, the Escrow Agent shall, promptly after the expiration
of such 30-day period, deliver cash in the amount of Damages claimed in the
Officer's Certificate from the Escrow Fund to Acquirer in order to compensate
Acquirer for such Damages, in accordance with Section 9.4 of the Merger
Agreement.
(c) If the Stockholders' Agent objects to the claims set forth in
the Officer's Certificate by delivery of an Objection Notice as set forth in
Section 4(b) above, Acquirer shall have thirty (30) days from the Stockholders'
Agent's delivery of such Objection Notice to respond in a written statement to
the Stockholders' Agent objections. If after such 30-day period there remains a
dispute as to any claims contained in the Officer's Certificate, the
Stockholders' Agent and Acquirer shall attempt in good faith for sixty (60) days
from the Stockholders'
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Agent's delivery of the Objection Notice to agree upon the rights of the
respective parties with respect to each of such claims. If the Stockholders'
Agent and Acquirer should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and shall distribute property from the Escrow Fund in accordance with the terms
of such memorandum. If no agreement can be reached after good faith negotiation
between Acquirer and the Stockholders' Agent, either Acquirer or the
Stockholders' Agent may, by written notice to the other, demand arbitration of
the matter in accordance with the provisions of Section 9.7 of the Merger
Agreement.
(d) The maximum amount payable by the Escrow Agent to Acquirer
pursuant to this Section 4 shall be Five Million Dollars ($5,000,000).
5. Termination.
(a) Subject to the following requirements, the Escrow Fund shall be
in existence as of the Effective Time and shall terminate at 5:00 p.m., Pacific
Daylight Time on the Termination Date (the "Escrow Period"), and the Escrow
Agent shall release and distribute the Escrow Fund within three (3) Business
Days after the expiration of the Escrow Period to the HOVRS Stockholders on a
pro rata basis in accordance with the percentages set forth on Schedule I to the
Escrow Agreement; provided, however, that (i) 100% of the amount of any
unsatisfied claims for Damages (other than in connection with the FCC Subpoena)
specified in any Officer's Certificate delivered in good faith to the Escrow
Agent prior to the expiration of the Escrow Period with respect to claims
existing prior to the expiration of the Escrow Period (the "Unresolved Claim
Amount"), shall not be released until such claims are resolved in accordance
with Section 9.5 hereof, and (ii) subject to Section 5(b), the Reserved Escrow
Amount shall be retained in the Escrow Fund and shall not be released if the FCC
Investigation is not Terminated or if actual Damages have been incurred in
connection with the FCC Investigation but have not been resolved in accordance
with Section 9.5 hereof.
(b) The FCC Investigation shall be terminated or deemed terminated,
if (i) the FCC has issued a notice of termination of the FCC Investigation, (ii)
the FCC has not issued a notice of apparent liability or similar order seeking
forfeiture in connection with the FCC Investigation, or (iii) HOVRS has not
entered into a tolling agreement to extend the statute of limitations in
connection with the FCC Investigation ( these conditions being individually or
collectively referred to as "Terminated"). At the end of the Escrow Period, if
the FCC Investigation is Terminated, the Escrow Agent shall release and
distribute the Escrow Fund to the HOVRS Stockholders in accordance with Schedule
I of the Escrow Agreement. At the end of the Escrow Period, if the FCC
Investigation has not been Terminated, a portion of the Escrow Fund equal to the
lesser of Two Million Dollars ($2,000,000) or if determinable the amount of
potential Damages reasonably specified by Acquirer in consultation with the
Stockholders' Agent and agreed upon by the Stockholders' Agent as the potential
Damages in connection with the FCC Investigation (the "Reserved Escrow Amount")
shall remain in existence until and terminate on the earlier of (i) twenty-four
(24) months after the Closing Date, (ii) the date on which the FCC has issued a
notice of termination of the FCC Investigation, or (iii) the date on which all
actual Damages incurred in connection with the FCC Investigation and resolved in
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accordance with Section 9.5 have been paid in full (the "Reserved Escrow
Period"); provided, however, that in the event that prior to the end of the
Reserved Escrow Period the FCC has issued a notice of apparent liability or
similar order specifying alleged Damages, the amount of such specified Damages
shall remain in the Escrow Fund until a final order resolving such matter has
been issued and Acquirer has determined to pay any amount due. At the expiration
of the Reserved Escrow Period (or any other period during which funds remain in
the Escrow Fund pursuant to this Section 9.3(b)), the Escrow Agent shall
promptly (and in any event no later than three (3) Business Days following the
date of expiration) release all property remaining in the Escrow Fund to the
HOVRS Stockholders in accordance with Schedule I of the Escrow Agreement.
6. Exculpation and Indemnification of the Escrow Agent. It is understood
and agreed that the Escrow Agent shall:
(a) be under no duty to accept information from any person other
than Acquirer or the Stockholders' Agent, and then only to the extent and in the
manner provided in this Escrow Agreement;
(b) be protected in acting upon any written notice, opinion,
request, certificate, consent or other document believed by it to be genuine and
to be signed by the proper party or parties;
(c) be deemed conclusively to have given and delivered any notice
required to be given or delivered hereunder if the same is in writing, signed by
any one of its authorized officers if such notice is delivered in accordance
with Section 8 of this Escrow Agreement;
(d) be indemnified and held harmless, jointly and severally by the
parties hereto against any claim made against it by reason of its acting or
failing to act in connection with any of the transactions contemplated hereby
and against any loss, liability or expense, including the cost of defending
itself against any claim of liability it may sustain in carrying out the terms
of this Escrow Agreement, except such claims which are occasioned by its bad
faith, gross negligence, willful misconduct or fraud, it being understood that
the Escrow Agent and each director, officer, employee, agent or affiliate of the
Escrow Agent shall be so indemnified;
(e) have no duty to inquire into the terms and conditions of any
agreements to which the Escrow Agent is not a party, its duties under this
Escrow Agreement being understood to be purely ministerial in nature;
(f) be permitted to consult with counsel of its choice, and shall
not be liable for any action taken, suffered or omitted by it in good faith in
accordance with the written advice of such counsel; provided, however, that
nothing contained in this Section 6(f), nor any action taken by the Escrow
Agent, or of any counsel, shall relieve the Escrow Agent from liability for all
claims that are occasioned by its bad faith, gross negligence, willful
misconduct or fraud, all as provided in Section 6(d) above;
(g) not be bound by any modification, amendment, termination,
cancellation,
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rescission or superseding of this Escrow Agreement, unless the same shall be in
writing and signed by all of the parties hereto;
(h) be entitled to refrain from taking any action other than to keep
all property held by it in escrow until it shall be directed otherwise in
writing in accordance with this Escrow Agreement, or by a final judgment of a
court of competent jurisdiction;
(i) have no liability for any act or omission done pursuant to the
instructions contained or expressly provided for herein;
(j) have the right, at any time, to resign hereunder by giving
written notice of its resignation to Acquirer and the Stockholders' Agent, in
accordance with Section 8 of this Escrow Agreement, at least thirty (30) days
prior to the date specified for such resignation to take effect, in which case,
upon the effective date of such resignation:
(i) property in the Escrow Fund shall be delivered to
such person as may be designated in writing by Acquirer and the
Stockholders' Agent; or
(ii) if no such person has been designated by such date,
the Escrow Agent's sole responsibility thereafter shall be to keep all
property then held by it in the Escrow Fund and to deliver the same to a
person designated in writing by Acquirer and the Stockholders' Agent or,
if no such person shall have been so designated, in accordance with the
directions of a final order or judgment of a court of competent
jurisdiction, and the provisions of Section 6(f), 6(j) and 6(k) of this
Escrow Agreement shall remain in effect; and
(k) be reimbursed upon its request for all reasonable expenses,
disbursements and advances incurred or made by it in accordance with any of the
provisions of this Escrow Agreement (which expenses, disbursements and advances
shall be shared equally between Acquirer on the one hand and the former HOVRS
Stockholders on the other hand, with the amount due from such stockholders to be
paid out of the Escrow Fund), except any expenses, disbursements or advances as
may be attributable to its bad faith, gross negligence, willful misconduct or
fraud.
7. Tax. For income tax purposes, all earnings on investment of the Escrow
Cash shall be reported by Acquirer. The parties hereto acknowledge and agree
that upon the release of the Escrow Fund in accordance with this Escrow
Agreement, a portion of the payment will be treated as a payment of interest to
the HOVRS Stockholders, and the Acquirer will be permitted a corresponding
interest deduction, determined by treating the entire payment under the rules
set forth in Section 1.1275-4(c)(4) of the Treasury Regulations. The Escrow
Agent shall make a distribution within (30) thirty days following the end of
each calendar year of all interest and other amounts earned with respect to the
Escrow Cash to the HOVRS Stockholders in accordance with their pro rata portion
of the Escrow Cash, as set forth on Schedule I attached to the Escrow Agreement.
8. Notices. All notices, requests, demands and other communications under
this
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Agreement shall be in writing and shall be deemed to have been duly given (a) on
the day of service if served personally on the party to whom notice is to be
given, (b) on the day of transmission if sent via telecopy transmission to the
facsimile number given below, (c) on the day after the day of delivery to an
overnight courier service, or (d) on the fifth day after mailing, if mailed to
the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid and properly addressed, to the party as follows:
(a) If to the Escrow Agent:
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
Attention: _________________________________
Fax: _________________________________
Tel: _________________________________
(b) If to Acquirer:
GoAmerica, Inc.
433 Hackensack Avenue
Hackensack, NJ 07601
Attention: Daniel R. Luis
Fax: (201) 996-1772
Tel: (201) 996-1717
with a copy to:
Chadbourne & Parke LLP
1200 New Hampshire Avenue, N.W.
Washington, DC 20036
Attention: Dana Frix
Fax: (973) 974-679
Tel: (202) 974-5691
(c) if to the Stockholders' Agent:
23 Park Ridge Road
San Rafael, CA 94903
Attention: William M. McDonagh
Fax: (415) 391-7262
Tel: (415) 273-4287
with a copy to:
Orrick, Herrington & Sutcliffe LLP
405 Howard Street
San Francisco, CA 94105
Attention: Richard Smith
Fax: (415) 773-5759
Tel: (415) 773-5830
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9. Section Headings. The headings of the sections of this Escrow Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Escrow Agreement.
10. Successors and Assigns. This Escrow Agreement shall inure to the
benefit of and be binding upon the parties and their respective successors and
assigns.
11. Governing Law. This Escrow Agreement shall be construed, performed,
governed and enforced in accordance with the laws of the State of Delaware,
without regard to conflict of law principles.
12. Resolution of Conflicts. Any dispute arising under or in connection
with this Agreement shall be resolved in accordance with the conflict resolution
procedure set forth in Section 9.7 of the Merger Agreement.
13. Severability. In the event that any provision of this Escrow Agreement
or the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this Escrow
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Escrow Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
14. Amendment; Waiver. Any amendment or waiver of any of the terms or
conditions of this Escrow Agreement must be in writing and must be duly executed
by or on behalf of the party to be charged with such waiver. The failure of a
party to exercise any of its rights hereunder or to insist upon strict adherence
to any term or condition hereof on any one occasion shall not be construed as a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to the terms and conditions of this Escrow Agreement at a later date.
Further, no waiver of any of the terms and conditions of this Escrow Agreement
shall be deemed to or shall constitute a waiver of any other term of condition
hereof (whether or not similar).
15. Attorneys' Fees. If any court proceeding is brought in connection with
this Escrow Agreement, or any document, agreement, instrument or certificate
delivered under or pursuant to this Escrow Agreement, the prevailing party in
such proceeding (whether at trial or on appeal) shall be entitled to recover
from the other party all costs, expenses and reasonable attorneys' fees
incidental to any such proceeding. The term "prevailing party" as used herein
shall mean the party in whose favor a final judgment or award is entered in any
such judicial proceeding; provided, however, that if such proceeding is resolved
prior to a final judgment or award on the merits, the party in whose favor the
proceeding is settled may by motion may apply
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to the court for an award of the aforementioned costs, fees and expenses, and
may take judgment therefor.
16. Counterparts. This Escrow Agreement, any amendment hereto and any
notices hereunder may be executed in counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
[Signatures on following page]
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IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of
the date first above written.
GOAMERICA, INC.
By: _____________________________________
Daniel R. Luis
President and Chief Executive Officer
STOCKHOLDERS' AGENT
_________________________________________
Bill M. McDonagh, as Stockholders' Agent
AMERICAN STOCK TRANSFER & TRUST
COMPANY, as ESCROW AGENT
By: _____________________________________
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Schedule I
[To be updated immediately prior to closing to include all HOVRS
Stockholders (including option holders who exercise prior to closing)]
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Percentage Amount of
Name and Address of HOVRS Stockholder Interest Escrow Cash
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[Name]
[Address]
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[Name]
[Address]
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[Name]
[Address]
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TOTAL 100.00% $5,000,000
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