EXHIBIT 2.2(c)
INDEMNITY ESCROW AGREEMENT
INDEMNITY ESCROW AGREEMENT (this "Agreement") is made and entered into
as of ___________, 1997, by and among PLATINUM ENTERTAINMENT, INC., a Delaware
corporation ("Buyer"), K-TEL INTERNATIONAL, INC., a Minnesota corporation,
("Seller") and MIDWEST TRUST SERVICES, INC., as Escrow Agent ("Escrow Agent").
The parties hereto are entering into this Agreement pursuant to the
terms of that Asset Purchase and Sale Agreement dated as of March 3, 1997 (the
"Purchase Agreement"), by and among Buyer and Seller.
Accordingly, the parties hereto agree as follows:
1. Definition of Terms. Terms not otherwise defined herein shall have
the meaning ascribed to such terms in the Purchase Agreement. The Escrow Agent
shall not be responsible for any other provisions of the Purchase Agreement.
2. Appointment and Acceptance. Buyer and Seller hereby appoint Escrow
Agent as escrow agent for the purposes and upon the terms and conditions
hereinafter set forth. Escrow Agent hereby accepts such appointment and agrees
to act as escrow agent hereunder and to hold, invest and dispose of any funds
received by it hereunder in accordance with the terms and conditions hereinafter
set forth.
3. Deposit of Escrowed Funds. On the date hereof, Buyer shall, as
partial payment of the Purchase Price, deliver to Escrow Agent for deposit in
escrow pursuant to the provisions hereof, a wire transfer of immediately
available funds in the amount of $2,000,000 (the "Escrowed Funds") into an
interest bearing account.
4. Purpose of Agreement. Seller and Buyer represent that this Agreement
has been executed pursuant to SECTION 2.2(c) of the Purchase Agreement for the
purpose of paying any amounts due to Buyer (or a Buyer Indemnified Party)
pursuant to Seller's indemnification obligations under ARTICLE XIII of the
Purchase Agreement ("Covered Claims"). Buyer represents that it has made the
deposit of the Escrowed Funds pursuant to SECTION 2.2(c) of the Purchase
Agreement.
5. Delivery of Escrowed Funds. Subject to the terms set forth in
ARTICLE XIII of the Purchase Agreement, if at any time Buyer (or a Buyer
Indemnified Party) shall claim that it is entitled to payment of all or a
portion of the Escrowed Funds as a result of any Covered Claim, Buyer shall give
notice of such Covered Claim (the "Notice of Claim") to Seller and the Escrow
Agent. The Notice of Claim shall be an affidavit describing the event or
circumstances giving rise to the Covered Claim, specifying the amount of the
Escrowed Funds requested and certifying that the Notice of Claim is being
submitted in good faith.
If Escrow Agent shall have received a Notice of Claim from Buyer,
Escrow Agent shall promptly deliver a copy thereof to Seller. Within fifteen
(15) business days ("Dispute Period") after delivery by Escrow Agent of a copy
of such Notice of Claim to Seller, Seller may deliver to Escrow Agent a written
notice (the "Notice of Dispute") disputing the request for payment of Escrowed
Funds stated in the Notice of Claim. The Notice of Dispute shall be an affidavit
specifying the amount being disputed (the "Disputed Amount"), describing in
reasonable detail the reasons for such dispute and certifying that the Notice of
Dispute is being submitted in good faith. If Escrow Agent has not received a
Notice of Dispute prior to the expiration of Dispute Period referred to above,
then Escrow Agent shall immediately pay to Buyer, by check or wire transfer of
immediately available funds, the full amount of the Escrowed Funds requested in
the Notice of Claim. If Escrow Agent has received a Notice of Dispute during the
Dispute Period which disputes in part the request for payment of Escrowed Funds
stated in the Notice of Claim, then Escrow Agent shall, following receipt of
such notice of claim, immediately pay to Buyer, by check or wire transfer of
immediately available funds, the amount, if any, of Escrowed Funds requested in
the Notice of Claim which is in excess of the Disputed Amount.
If Escrow Agent receives a Notice of Dispute from Seller, Escrow Agent
shall promptly deliver a copy of the Notice of Dispute to Buyer, and shall not
deliver all or the portion of the requested amount of Escrowed Funds set forth
in the Notice of Claim constituting the Disputed Amount until Escrow Agent shall
have received one of the following:
(a) A certified copy of an order, decree or judgment issued or
rendered by a court of competent jurisdiction, which order, decree or
judgment has been finally affirmed on appeal or which by lapse of time
or otherwise is no longer subject to appeal (a "Final Decision")
directing the distribution of the Escrow Funds; or
(b) A joint written direction executed by Buyer and Seller
directing the distribution of the Escrowed Funds.
Upon receipt of either (a) or (b) above, Escrow Agent shall immediately
deliver the Escrowed Funds to the proper party(ies) in accordance therewith.
6. Investment of Escrowed Funds. Escrow Agent shall invest the Escrowed
Funds, from time to time, in 30-day United States Treasury obligations or
certificates of deposit having a maturity not to exceed 30 days, any
governmental mutual funds, or such other investments jointly designated in
writing by Buyer and Seller. The proceeds of all investments made hereunder
shall be distributed in accordance with this Agreement. Escrow Agent shall
deliver monthly statements to Buyer and Seller in accordance with Escrow Agent's
regular practice; the parties hereby agree that, except for the foregoing,
Escrow Agent shall have no obligations to monitor, or advise the parties with
respect to, such investments. All interest or other income earned on the Escrow
Funds shall be paid to Seller on a monthly basis.
7. Release Date and Termination of Escrow.
(a) On the first anniversary of the Closing Date (the "Release
Date"), Escrow Agent shall ascertain the amount of the escrow balance
(the "Escrow Balance"), which amount shall equal the amount of Escrowed
Funds (including all interest or other income attributable thereto and
not previously distributed) then held hereunder less the amount of
Escrowed Funds, if any, then (i) covered by a pending Notice of Claim
which is subject to a Notice of Dispute as provided in SECTION 5
hereof, (ii) covered by a pending Notice of Claim which was delivered
by Escrow Agent to Seller at any time prior to the Release Date and
which either has not been paid or is subject to the ability of Seller
to provide a Notice of Dispute with respect thereto in accordance with
the terms hereof, or (iii) covered by a Notice of Claim to the extent
determined to be valid and no longer subject to a Notice of Dispute,
but not yet paid. On the Release Date, Escrow Agent shall deliver to
Seller (or its designee) the Escrow Balance. If, on the Release Date, a
pending Notice of Claim is subject to a Notice of Dispute as described
in clause (i) above or if, after the Release Date, a pending Notice of
Claim described in clause (ii) above is disputed by a Notice of Dispute
in accordance with SECTION 5 hereof, then this Escrow Agreement shall
continue in full force and effect with respect to the aggregate amount
in dispute until Escrow Agent shall have been instructed as to the
disposition thereof in accordance with the terms of SECTION 5. To the
extent that a Notice of Claim described in clause (ii) above is not
disputed by a Notice of Dispute in accordance with the provisions of
SECTION 5 hereof, the undisputed amount shall be paid to Buyer
immediately after the expiration of the Dispute Period referred to in
SECTION 5. Once all requests for payment of Covered Claims have been
settled and all of the Escrowed Funds have been paid out in accordance
with the foregoing provisions, this Agreement and all of the
obligations of the Escrow Agent hereunder shall terminate (such date
being referred to herein as the "Termination Date").
(b) Notwithstanding the foregoing, this Agreement may be
terminated at any time by and upon the receipt by Escrow Agent of
written notice of termination executed by both Buyer and Seller
directing the distribution of all property then held by Escrow Agent
under and pursuant to this Agreement, and this Agreement shall
automatically terminate if and when all the Escrowed Funds (and all the
securities in which any of the Escrowed Funds shall have been invested)
shall have been distributed by Escrow Agent in accordance with the
terms of this Agreement.
(c) Escrow Agent is authorized to liquidate the securities
held hereunder (unless directed in writing by Seller to distribute such
securities in some other specified manner) to the extent necessary to
distribute to Seller (or its designee) the Escrowed Funds as provided
in SECTION 7(a) above and shall have no liability for any loss arising
out of any such liquidation.
8. Notices. Any notices or other communication required to be sent or
given hereunder by any of the parties shall in every case be in writing and
shall be deemed properly served if (a) delivered personally, (b) sent by
registered or certified mail, in all such cases with first class postage
prepaid, return receipt requested, (c) delivered by a recognized overnight
courier service, or (d) sent by facsimile transmission to the parties at the
addresses as set forth below or at such other addresses as may be furnished in
writing.
(a) If to Seller:
K-tel International, Inc.
2605 Fernbrook Lane North
Minneapolis, Minnesota 55447
Attention: David Weiner
Telecopy No.: (612) 509-9409
with a copy to:
Kaplan Strangis & Kaplan, P.A.
5500 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attention: Bruce J. Parker, Esq.
Telecopy No.: (612) 375-1143
and
Philip Kives
K-5 Leisure Products, Inc.
220 Saulteaux Crescent
Winnipeg, Manitoba, Canada R3J 3W2
Telecopy No.: (204) 832-7782
(b) If to Buyer:
Platinum Entertainment, Inc.
2001 Butterfield Road
Downers Grove, Illinois 60515
Attention: Steven Devick
Telecopy No.: (630) 769-0049
with a copy to:
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
Attention: Matthew S. Brown, Esq.
Adam H. Schecter, Esq.
Telecopy No.: (312) 902-1061
(c) If to Escrow Agent:
Midwest Trust Services, Inc.
500 West Chestnut Street
Hinsdale, Illinois 60521
Attention: Mary Henthorn
Telecopy No.: (630) 323-0531
Date of service of such notice shall be (w) the date such notice is personally
delivered, (x) three days after the date of mailing if sent by certified or
registered mail, (y) the next succeeding business day after date of delivery to
the overnight courier if sent by overnight courier or (z) the next succeeding
business day after transmission by facsimile.
9. Escrow Agent's Liability. Escrow Agent undertakes to perform such
duties and only such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this Agreement against
Escrow Agent. In the absence of bad faith, gross negligence or wilful misconduct
on its part, Escrow Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to Escrow Agent. Escrow Agent may act upon
any instrument, certificate, opinion or other writing believed by it in good
faith and without gross negligence to be genuine, and shall not be liable in
connection with the performance by it of its duties pursuant to the provisions
of the Agreement, except for its own bad faith, gross negligence or wilful
misconduct. Escrow Agent may consult with counsel of its own choice and shall
have full and complete authorization and protection for any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
opinion of such counsel. Escrow Agent may execute powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys.
10. Indemnification of Escrow Agent. Buyer and Seller hereby agree
severally and not jointly (one-half to be borne by Buyer and one-half to be
borne by Seller) to indemnify Escrow Agent for, and to hold it harmless against,
any loss, liability or expense incurred without gross negligence, wilful
misconduct or bad faith on the part of Escrow Agent, arising out of or in
connection with its entering into the Agreement, carrying out its duties
hereunder and accepting the Escrowed Funds, including the costs and expenses of
defending itself against any claim of liability in connection with the exercise
or performance of any of its powers or duties hereunder (including reasonable
fees, expenses and disbursements of its counsel).
11. Escrow Agent to Follow Instructions of Buyer and Seller.
Notwithstanding any provision contained herein to the contrary, Escrow Agent
shall at any time and from time to time take such action hereunder with respect
to the Escrowed Funds (and the securities in which any of the Escrowed Funds
shall have been invested) as shall be directed in writing by both Buyer and
Seller, provided that Escrow Agent shall first be indemnified to its
satisfaction with respect to any of its costs or expenses which might be
involved.
12. Resignation of Escrow Agent. Escrow Agent, or any successor, may
resign at any time upon giving written notice, thirty (30) days before such
resignation shall take effect, to Buyer and Seller. In the event Escrow Agent
shall resign or be unable to serve, it shall be succeeded by such bank or trust
company as Buyer and Seller shall appoint, or if no appointment is made, by a
bank or trust company appointed by a court of competent jurisdiction. In the
absence of a successor so appointed by Buyer and Seller, Escrow Agent may
petition such a court to appoint a successor escrow agent. The resigning escrow
agent shall transfer to its successor all monies, securities and investments
then held subject to this escrow and all pending notices, instructions and
directions then in its possession, and shall thereupon be discharged, and the
successor shall thereupon succeed to all the rights, powers and duties and shall
assume all of the obligations of the resigning escrow agent.
13. Escrow Agent's Fee and Expenses, Etc.
(a) Escrow Agent shall be entitled to (i) a [$150] annual fee,
which annual fee shall be prorated to the date of termination of this
Agreement, for services rendered and for reimbursement of extraordinary
expenses incurred in performance of its duties which expenses are not
included in said fee, plus (ii) out of pocket expenses which expenses
shall be charged as incurred. Such annual fees shall be paid by Buyer
and such out-of-pocket expenses shall be divided equally between the
Buyer, on one hand and Seller, on the other hand.
(b) In case said property shall be attached, garnished, or
levied upon any court order, or the delivery thereof shall be stayed or
enjoined by an order of court, or any order, judgement or decree shall
be made or entered by any court order affecting the property deposited
under this Agreement, or any part thereof, Escrow Agent is hereby
expressly authorized in its sole direction, to obey and comply with all
writs, orders or decrees so entered or issued, which it is advised by
legal counsel of its own choosing is binding upon it, whether with or
without jurisdiction, and in case Escrow Agent obeys or complies with
any such writ, order or decree it shall not be liable to any of the
parties hereto or to any other person, firm or corporation, by reason
of such compliance notwithstanding such writ, order or decree be
subsequently reversed, modified, annulled, set aside or vacated.
(c) In case said Escrow Agent becomes involved in litigation
on account of this deposit or of this Agreement, it shall have the
right to retain counsel and shall have a lien on the property deposited
hereunder for any and all costs, attorneys' fees, charges,
disbursements, and expenses in connection with such litigation; and
shall be entitled to reimburse itself therefor out of the property
deposited hereunder, and if it shall be unable to reimburse itself from
the property deposited hereunder, the parties hereto jointly and
severally agree to pay to said Escrow Agent on demand, its reasonable
charges, counsel and attorneys' fees, disbursements, and expenses in
connection with such litigation.
(d) In case conflicting demands are made upon it for any
situation not addressed in this Agreement, Escrow Agent may withhold
performance of this escrow until such time as said conflicting demands
shall have been withdrawn or the rights of the respective parties shall
have been settled by court adjudication, arbitration, joint order or
otherwise.
(e) The parties acknowledge that Escrow Agent will have no
obligations or responsibilities with respect to tax reporting of the
parties.
14. Successors. The obligations imposed and the rights conferred by
this Escrow Agreement shall be binding upon and inure to the benefit of the
respective heirs (including estates), successors and permitted assigns of the
parties hereto, but will not be assignable or delegable by any party without the
prior written consent of the other parties.
15. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois, without giving
effect to principles of conflicts of law.
16. Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated herein.
17. Amendment. This Agreement cannot be terminated, altered or amended
except pursuant to an instrument in writing signed by Buyer, Seller and Escrow
Agent.
18. Enforceability. If any provision of the Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other provision of this Escrow Agreement, and the Agreement
shall be carried out as if any such invalid or unenforceable provision were not
contained herein.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed on original and all of which
together shall constitute one and the same instrument.
20. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
21. Attorneys' Fees. In the event of a dispute between Buyer and Seller
regarding the distribution of the Escrowed Funds, upon the issuance of a final,
non-appealable order or judgment by a court of competent jurisdiction, the
prevailing party's legal fees and related expenses shall be paid by the
non-prevailing party. The determination of which party is the "prevailing" party
shall be made by the court issuing such final, non-appealable order or judgment.
IN WITNESS WHEREOF, the parties hereto have caused the this Agreement
to be signed as of the date first above written.
K-TEL INTERNATIONAL, INC.,
a Minnesota corporation
By:
Its:
PLATINUM ENTERTAINMENT, INC.,
a Delaware corporation
By:
Its:
MIDWEST TRUST SERVICES, INC., AS ESCROW AGENT
By:
Its: