Exhibit 10.8
SHAREHOLDER
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") dated as of May __, 1999 by and
among JLL VENTURES (DELAWARE) CORP., a Delaware corporation ("Acquiror"), PAUL
CHARLES ("Shareholder"), the principal shareholder of CNF, Inc., a California
corporation ("CNF"), and STOCKTRANS, INC., a Pennsylvania corporation, as escrow
agent ("Escrow Agent").
WHEREAS, Acquiror, CNF and the Shareholder are parties to an Agreement
and Plan of Merger dated as of April 16, 1999, and as amended thereafter (the
"Merger Agreement"), providing for Acquiror's acquisition of all of the issued
and outstanding capital stock of CNF; and
WHEREAS, Section 1.4(b) of the Merger Agreement provides for the
establishment of an escrow fund delivered from the Merger Consideration
consisting of an aggregate of 2,000,000 shares of Series A Convertible Preferred
Stock, $.0001 par value per share (the "Preferred Stock"), of Acquiror.
NOW, THEREFORE, in consideration of Acquiror and the Shareholder
executing the Merger Agreement and of the mutual premises and agreements herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions, Other Agreements.
(a) All capitalized terms used herein and not otherwise defined herein
shall have the respective meanings assigned to such terms in the Merger
Agreement.
(b) It is expressly understood and agreed by the parties hereto that
all references in this Agreement to the Merger Agreement and to any exhibits to
such Merger Agreement are for the convenience of the parties hereto other than
the Escrow Agent, and the Escrow Agent shall have no obligations or duties with
respect thereto other than the obligation to refer to the Merger Agreement for
the purpose of determining the definitions of certain capitalized terms used
herein and not otherwise defined herein or to interpret any provisions of such
other agreements referred to in this Agreement for purposes of implementation
thereof.
2. Appointment of Escrow Agent.
StockTrans, Inc. hereby accepts appointment as Escrow Agent to serve in
accordance with the terms, conditions and provisions of this Agreement. The
acceptance by the Escrow Agent of its duties under this Agreement is subject to
the terms and conditions set forth at Section 7 hereafter, which the parties to
this Agreement hereby agree shall govern and control with respect to the rights,
duties, liabilities and immunities of the Escrow Agent.
3. Establishment of Escrow Fund; Power of Attorney.
(a) Pursuant to Section 1.4(b) of the Merger Agreement, at the Closing,
Acquiror shall deposit with the Escrow Agent: 2,000,000 shares of Preferred
Stock (the "Escrow Shares") into an escrow fund (the "Escrow Fund") in order to
secure Shareholder's indemnification obligations under Article 7 of the Merger
Agreement. The Escrow Agent shall hold the Escrow Shares on behalf of the
Shareholder who shall remain the record and beneficial owner of the Escrow
Shares comprising the Escrow Fund. If dividends are paid or a distribution is
made by Acquiror with respect to the Escrow Shares in cash or in property, such
dividends or distributions shall be held as a part of the Escrow Fund. In the
event of any stock splits, recapitalizations, other adjustments to the capital
stock of Acquiror or conversion of the Preferred Stock, the resulting number of
shares or other securities into which the Escrow Shares convert shall be
included in the Escrow Fund.
(b) By virtue of the Shareholder's execution of this Escrow Agreement,
Shareholder has, without any further act, consented to: (i) the establishment of
this escrow pursuant to the Merger Agreement in the manner set forth herein, and
(ii) all of the other terms, conditions and limitations in this Agreement.
(c) By virtue of the Shareholder's execution of this Escrow Agreement,
the Shareholder hereby irrevocably constitutes and appoints the Escrow Agent the
true and lawful agent and attorney-in-fact of the Shareholder with respect to
all matters arising in connection with this Escrow Agreement, including the
administration of the Escrow Fund pursuant to Section 4 below and the subsequent
surrender and cancellation of the Escrow Shares pursuant to Section 4 below.
4. Operation and Administration of the Escrow Fund.
(a) To the extent provided herein and in the Merger Agreement, the
Escrow Fund shall be established and thereafter applied to the payment of
indemnification claims ("Claims") asserted by Acquiror during the eighteen (18)
month period following Closing for the benefit of Acquiror as provided in
Article 7 of the Merger Agreement.
(b) Acquiror shall make application to the Escrow Agent, with a copy
to the Shareholder (each an "Application"), if it has incurred or suffered
damages or losses pursuant to Section 7.1(a) of the Merger Agreement. The
Application shall identify the amount of the damages or losses (the "Claim
Amount") and shall include proof that such damage or loss has been paid or
incurred by Acquiror and shall instruct the Escrow Agent to apply, the Claim
Amount, as subject to potential adjustment in paragraph 4(e) below, in the
manner set forth in paragraph 4(g) below.
(c) Unless the Escrow Agent is otherwise notified in writing by the
Shareholder within thirty (30) days from the date of its receipt of the
Application, that Shareholder is disputing the Claim Amount or the application
thereof against the Escrow Fund, then the Escrow Agent shall apply the Claim
Amount against the Escrow Fund in the manner set forth in paragraph 4(g) below.
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(d) If the Escrow Agent is notified in writing by the Shareholder
within thirty (30) days from the date of Shareholder's receipt of the
Application that the Shareholder in good faith contests the Claim Amount or the
application of the Claim Amount against the Escrow Fund, then, and in that
event, the Escrow Agent shall be permitted to submit the issues in dispute to
arbitration in accordance with the provisions of Section 9.8 of the Merger
Agreement.
(e) If the arbitration results in a finding (or settlement between the
parties) in support of the Application (which for this purpose shall include any
finding, conclusion or settlement which awards Acquiror at least 80% of the
Claim Amount (hereafter, the "Adjusted Claim Amount")); then, and in that event,
there shall be added to the Adjusted Claim Amount interest on the Adjusted Claim
Amount in the amount of ten (10%) percent per annum, applied from the date of
the Application.
(f) Any cash received in respect of the Escrow Shares (e.g., dividends)
shall be placed in an interest bearing account of Escrow Agent and shall become
a part of the Escrow Fund.
(g) The Claim Amount shall be applied against the Escrow Fund; first
against any cash therein and thereafter, against the Escrow Shares in the
following manner. The Claim Amount shall be applied against the Escrow Shares by
surrender of such number of Escrow Shares to Acquiror for cancellation as
determined by dividing the Claim Amount by the "fair market value" of the Escrow
Shares. For this purpose, the "fair market value" of the Escrow Shares shall be
sixty percent (60%) of the average closing price of the Acquiror's common stock
(on the exchange, NASDAQ or OTC Electronic Bulletin Board on which the shares
principally trade) for the ten (10) trading days prior to the final
determination of the Claim Amount.
5. Release of Escrow Shares; Termination.
(a) Subject to Section 5(c) below, 1,000,000 of the Escrow Shares shall
remain in escrow until six (6) months following the Closing whereupon, at the
expiration of such period, such Escrow Shares shall be delivered and released to
the Shareholder.
(b) Subject to Section 5(c) below , the remainder of the Escrow Shares
shall remain in escrow hereof for a period of eighteen (18) months following the
Closing; whereupon, at the expiration of such period, the Escrow Fund shall be
delivered and released to the Shareholder.
(c) Notwithstanding the above, the Escrow Agent may continue to retain
in escrow, subject to the terms of this Agreement, any Escrow Shares that may be
necessary to satisfy any pending, outstanding or contested Claim(s) timely
submitted prior to the release of such Escrow Shares. The Escrow Shares retained
pursuant to this subparagraph shall remain subject to escrow until resolution of
the matters identified herein.
(d) Once all of the Escrow Shares have been either released to Acquiror
for cancellation or returned to the Shareholder, the provisions of this
Agreement other than Section 17 shall no longer be of any force and effect and
this Agreement shall be deemed to have terminated.
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6. Fees and Expenses of Escrow Agent.
The Escrow Agent shall be entitled to a fee of $1,250 and reimbursement
of all reasonable out-of-pocket expenses incurred by the Escrow Agent in
connection with the performance of its duties hereunder, including reasonable
fees and disbursements of counsel. The responsibility for payment of the $1,250
fee and reimbursement to the Escrow Agent shall be paid by Acquiror.
7. Duties and Liabilities of the Escrow Agent.
(a) The Escrow Agent shall act hereunder as depository only, and it
shall not be responsible or liable in any manner whatever for any determinations
regarding the cancellation and forfeiture of the Escrow Shares to be made
pursuant to Section 4 hereof. It is agreed that the duties and obligations of
the Escrow Agent are those herein specifically provided and no other. Except as
otherwise specifically provided in this Agreement, the Escrow Agent shall not
have any liability under, nor duty to inquire into, the terms and provisions of
any agreement or instrument, other than this Agreement. The duties of the Escrow
Agent are ministerial in nature, and the Escrow Agent shall not incur any
liability whatsoever other than for its own willful misconduct or gross
negligence.
(b) The Escrow Agent shall not incur any liability for following the
instructions herein contained or expressly provided for, or written instructions
given by the parties hereto. The Escrow Agent shall not have any responsibility
for the genuineness or validity of any document or other material presented to
or deposited with it nor shall it have any liability for any action taken,
suffered or omitted in accordance with any written instructions or certificates
given to it hereunder and believed by it in good faith to be what it purports to
be and to be signed by the proper party or parties, nor for retaining the Escrow
Fund in the absence of instructions to the contrary.
(c) The Escrow Agent shall not be liable for any error of judgment, or
for any act done or step taken or omitted by it in good faith, or for any
mistake of fact or law, or for anything which it may do or refrain from doing in
connection with this Agreement, except its own gross negligence or willful
misconduct.
(d) The Escrow Agent may consult with, and obtain the advice of, legal
counsel selected by it in the event of any question as to any of the provisions
hereof or its duties hereunder, and the Escrow Agent shall incur no liability
and shall be fully protected for any action taken, suffered or omitted by it in
good faith in accordance with the advice of such counsel, provided that the
Escrow Agent shall have used reasonable care in the selection of such counsel.
(e) In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall have received instructions, claims or
demands from any party hereto which, in its reasonable opinion, conflict with
any of the provisions of this Agreement or with instructions, claims or demands
of any other party hereto, the Escrow Agent shall refrain from taking any action
and its sole obligation shall be to keep safely all property held in escrow
hereunder until it shall be directed otherwise in writing by all of the parties
hereto or by a final order or judgment of
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an arbitration panel or court of competent jurisdiction, or an award of an
arbitrator pursuant to an arbitration conducted pursuant to Section 9.8 of the
Merger Agreement.
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to initiate or defend any
legal proceedings which may be instituted against it in respect of the subject
matter of this Agreement, provided that the Escrow Agent shall at all times take
such action as is reasonably necessary to keep safely all property held in
escrow hereunder. If the Escrow Agent does elect to so act or is required to so
act in order to keep safely all property held in escrow hereunder, the Escrow
Agent will do so only to the extent that it is indemnified to its reasonable
satisfaction against the cost and expense of such defense or initiation.
8. Amendment.
This Agreement may be amended, modified or rescinded only by a writing
executed by Acquiror, Shareholder and Escrow Agent.
9. Voting of Escrow Shares; Rights During Escrow Period; Restriction on
Transfer.
All rights to vote the Escrow Shares while they are part of the Escrow
Fund shall be retained by the Shareholder. The Shareholder shall not have any
right to transfer or assign his interest in the Escrow Shares in the Escrow Fund
during such period of time as such Escrow Shares remain a part of the Escrow
Fund unless Acquiror shall first have consented thereto in writing and provided
that any such transferee shall deliver to the Escrow Agent a duly signed stock
power covering such Escrow Shares and the Escrow Agent shall hold such
transferee's shares and stock powers in escrow subject to this Agreement.
10. Notices.
Any notices or other communications required or permitted hereunder
shall be sufficiently given if sent by certified mail, postage prepaid and
return receipt requested, or by hand delivery or by telecopy (promptly confirmed
by delivery of an original copy of such notice or communication):
(i) If to the Acquiror, to:
c/o Synergy Group International, Inc.
4825 East Sunrise Drive
Tucson, AZ 85718
Attention: Vincent J. Marold
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with a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll, P.C.
Eleven Penn Center
1835 Market Street, 14th Floor
Philadelphia, PA 19103
(ii) If to Shareholder, to
Mr. Paul Charles
c/o CNF, Inc.
7722 East Gray Road
Scottsdale, AZ 85260
with a copy to:
Stephen Boatwright, Esquire
Gammage & Burnham
2 North Central, 18th Floor
Phoenix, AZ 85004
(iii) If to Escrow Agent, to:
StockTrans, Inc.
7 East Lancaster Avenue
Ardmore, PA 19003
Attention: Jonathan Miller
11. Parties in Interest.
This Agreement shall be binding upon and shall inure to the benefit of
the successors and permitted assigns of each of the parties hereto.
12. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
13. Governing Law.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Delaware applicable to contracts
executed and to be performed entirely within said State.
14. Severability.
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In case any provision in this Agreement shall be held invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions hereof will not in any way be affected or impaired thereby, unless
the provisions held invalid shall substantially impair the benefits of the
remaining portions of this Agreement.
15. Consent to Limited Jurisdiction.
The Escrow Agent hereby agrees that any legal action or proceeding with
respect to disputes arising out of this Agreement not otherwise subject to
arbitration under Section 9.8 of the Merger Agreement may be brought in the
state or federal courts of the State of Pennsylvania, Philadelphia County, and,
by execution and delivery of this Agreement, the Escrow Agent irrevocably
accepts for itself and in respect of the property held by it as Escrow Agent
hereunder the jurisdiction of the aforesaid courts, it being understood and
agreed that such consent to jurisdiction is for the sole and limited purpose of
resolving disputes under this Agreement and shall in no way be deemed to be a
general and unconditional consent to the jurisdiction of the aforesaid courts.
16. Resignation and Removal of Escrow Agent.
(a) The Escrow Agent may at any time resign as Escrow Agent hereunder
by giving written notice of its resignation to each of the parties hereto, at
their respective addresses set forth in Section 11 of this Agreement, at least
thirty (30) days prior to the date specified for such resignation to take
effect. The Escrow Agent may be removed at any time by an instrument in writing
executed by a majority of the parties hereto other than Escrow Agent and
delivered to the Escrow Agent.
(b) If at any time the Escrow Agent shall resign or shall be removed in
accordance with the provisions of clause (a) above, Acquiror and the Shareholder
shall use their respective best efforts to jointly appoint a successor escrow
agent under this Agreement. In the event of the resignation or removal of the
Escrow Agent, if no appointment of a successor escrow agent shall have been made
pursuant to the preceding sentence within the thirty (30) day period referred to
in the first sentence of paragraph (a) above, then the retiring Escrow Agent may
apply to any court of competent jurisdiction to appoint a successor escrow
agent. Such court may thereupon, after such notice, if any, as such court may
deem proper and prescribe, appoint a successor escrow agent hereunder.
17. Indemnification.
Except for the expenses in Section 6 of this Agreement, Acquiror and
the Shareholder, jointly and severally agree to indemnify, defend and hold the
Escrow Agent harmless from and against any and all loss, damage, liability and
expense that may be incurred by the Escrow Agent arising out of or in connection
with its duties, obligations or performance as Escrow Agent hereunder, except as
caused by its gross negligence or willful misconduct, including without
limitation the reasonable legal costs and expenses of defending itself against
any claim or liability in connection with its performance hereunder. The terms
of this Section 17 shall survive the termination of this Agreement and, with
respect to claims arising in connection with the Escrow
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Agent's duties while acting as such, the resignation or removal of the Escrow
Agent. The Escrow Agent agrees to notify Acquiror and the Shareholder in writing
of the written assertion of a claim against the Escrow Agent or of any suit or
proceeding commenced against the Escrow Agent promptly after the Escrow Agent
has received any such written assertion of a claim or has been served with the
summons or other legal process, in each case giving information as to the nature
and basis of the claim, but in no event will the failure to give such notice
affect the obligation of Acquiror to indemnify the Escrow Agent pursuant to this
Section 17 unless the rights of Acquiror and Shareholder shall have been
materially impaired by such failure. Each of Acquiror and the Shareholder will
be entitled to participate at its own expense in the defense of any suit or
proceeding brought to enforce any such claim and, if it so elects in writing,
may assume the entire defense and control of any such suit or proceeding.
Neither Acquiror nor the Shareholder shall be liable for any counsel fees or
other expenses incurred by the Escrow Agent after the date that Acquiror or the
Shareholder shall have so elected to assume the defense and control of any such
suit or proceeding. In addition, neither Acquiror nor the Shareholder shall be
liable for any settlement of any such suit, proceeding or claim without the
prior written consent of Acquiror and the Shareholder.
18. Counterparts. This Agreement may be executed in two or more
counterparts and delivered via facsimile, each of which shall be deemed to be an
original, and all of which together shall be deemed to be one and the same
instrument.
(THIS SPACE LEFT BLANK INTENTIONALLY)
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IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed as of the date first written above.
JLL VENTURES (DELAWARE) CORP.,
a Delaware corporation
By: /s/ Vincent J. Marold
-----------------------------
Name: Vincent J. Marold
Title: President
PAUL CHARLES
/s/ Paul Charles
----------------------------
Signature
STOCKTRANS, INC.
By: /s/ Jonathan Miller
----------------------------
Name: Jonathan Miller
Title: President
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