Exhibit 10.33
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and dated as of February
12, 1999 by and among Interactive Magic, Inc., a North Carolina corporation (the
"Purchaser"), Branch Banking and Trust Company, a North Carolina banking
corporation (the "Escrow Agent"), Multiplayer Games Network, Inc. and Tantalus,
Inc., the stockholders of MPG-Net, Inc., a Delaware corporation (the
"Stockholders") and James Hettinger (the "Representative"), acting by virtue of
this Agreement as the representative of the Stockholders.
WITNESSETH:
WHEREAS, the Purchaser, iMagic Online Corporation, the Stockholders, Donn
Clendenon ("Clendenon"), the Representative and MPG-Net, Inc. (the "Company")
have entered into a Merger Agreement dated as of January 25, 1999 (the "Merger
Agreement") providing for the merger of the Company with and into I-Magic, in
connection with which the Stockholders and Clendenon shall receive as
consideration a number of shares of unregistered Common Stock of the Purchaser
(the "Purchaser Shares") determined pursuant to Section 2 of the Merger
Agreement, allocated among the Stockholders as provided in the Merger Agreement;
WHEREAS, pursuant to the Merger Agreement, the Purchaser, I-Magic, the
Stockholders and the Company have agreed that the Purchaser Indemnitees' rights
of indemnification under Section 9.1 of the Merger Agreement shall survive the
consummation of the transactions contemplated by the Merger Agreement and shall
be secured, pursuant to this Agreement, by a portion of the Purchaser Shares
issued to the Stockholders to be deposited in escrow with the Escrow Agent
pursuant to Section 3.4 of the Merger Agreement (such Purchaser Shares, together
with any accumulations thereto as provided herein, the "Escrow Shares"); and
WHEREAS, the Escrow Agent is willing to act in the capacity of Escrow
Agent hereunder subject to, and upon the terms and conditions of, this
Agreement;
NOW, THEREFORE, in consideration of the premises, covenants and agreements
set forth in this Agreement and of other good and valuable consideration, the
receipt and legal sufficiency of which they hereby acknowledge, and intending to
be legally bound hereby, and as an inducement for the execution and delivery of
the Merger Agreement, the parties hereto hereby agree as follows:
ARTICLE I
DESIGNATION OF REPRESENTATIVE AND ESCROW AGENT;
CAPITAL SHARES SUBJECT TO ESCROW
1.1 Designation of Representative. Each of the Stockholders hereby
irrevocably constitutes, designates and appoints James Hettinger as such
Stockholder's true and lawful agent, representative and attorney-in-fact (the
"Representative", as defined above) for and with respect to all matters and
purposes of and under this Agreement, including without limitation execution and
delivery on behalf of such Stockholder of all such stock powers as the Escrow
Agent shall require to facilitate the distributions of Escrow Shares
contemplated by this Agreement. All action to be taken hereunder by the
Stockholders shall be taken by the Representative on their behalf unless
specifically provided to the contrary herein, and the Escrow Agent and the
Purchaser shall be entitled to rely exclusively on instructions, notices,
instruments and documents in the name of any Stockholder provided by the
Representative.
1.2. Designation of Escrow Agent. The Purchaser, on its own behalf and on
behalf of all Purchaser Indemnitees, and the Stockholders (by and through the
Representative) hereby mutually designate and appoint Branch Banking and Trust
Company, a North Carolina banking corporation, as Escrow Agent for the purposes
set forth herein. The Escrow Agent hereby accepts such appointment and agrees to
act in furtherance of the provisions of the Merger Agreement, but only upon the
terms and conditions provided in this Agreement.
1.3. Capital Stock Subject to Escrow. In accordance with Section 3.4 of
the Merger Agreement, upon execution of this Agreement and subject to compliance
by the Company and the Stockholders with the provisions of the Merger Agreement,
the Purchaser shall issue and the Purchaser and the Stockholders shall deliver,
or cause to be delivered, to the Escrow Agent on the date of the Closing (as
defined in the Merger Agreement) stock certificates (together with any other
certificates issued by the Purchaser in respect of the Escrow Shares, the
"Escrow Certificates") in the names of each of the Stockholders, each
accompanied by a stock power duly executed in blank, representing an aggregate
of 55,500 shares of Common Stock of Purchaser, issued in consummation of the
Merger, allocated among the Stockholders as set forth on Exhibit A to this
Agreement. The Escrow Agent shall hold and distribute the Escrow Certificates
and Escrow Shares in accordance with the terms hereof. Each Stockholder shall,
provide promptly upon the Escrow Agent's request such additional stock powers
duly executed in blank as the Escrow Agent shall require to facilitate the
distributions of Escrow Shares contemplated by this Agreement.
1.4. Value of Escrow Shares. For all purposes pursuant to this Agreement,
including without limitation the distribution of Escrow Shares, the value of
each Escrow Share shall be equal to the Fair Market Value (as defined in the
Merger Agreement) per share of Purchaser's Common Stock at the Effective Time.
The Purchaser and the Representative shall certify to the Escrow Agent the Fair
Market Value, expressed as a dollar amount, and the Escrow Agent shall be
entitled to rely exclusively on such certification without reference to the
terms of the Merger Agreement.
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ARTICLE II
TREATMENT OF ACCUMULATIONS TO ESCROW SHARES
2.1. Duration of Escrow. The Escrow Agent shall hold the Escrow Shares as
provided in this Agreement until complete distribution thereof in accordance
with the applicable provisions of Articles 3 and 4 hereof.
2.2. Additional Property Subject to Escrow. At any time after the date
hereof and prior to the distribution of the Escrow Shares either (i) by delivery
to the Stockholders in accordance with Article 3 hereof or (ii) by delivery to
the Purchaser in accordance with Article 4 hereof, or by a combination of (i)
and (ii), if any of the Stockholders shall become entitled to receive or shall
receive in connection with the Escrow Shares any (i) non-taxable distribution of
securities of the Purchaser or of any other entity including, without
limitation, any certificate in connection with any increase or reduction of
capital, reclassification, recapitalization, merger, business combination,
consolidation, sale of assets, stock split-up or spin-off; or (ii) any
non-taxable distribution of stock options, warrants or rights, whether as an
addition to or in substitution of or exchange for any of the Escrow Shares; or
(iii) non-taxable stock dividend or other non-taxable distribution payable in
securities or property of any description, all of the shares of capital stock,
or other property resulting from any such distribution, stock option, warrant,
right or stock dividend shall be deemed to be Escrow Shares and shall be subject
to the terms hereof to the same extent as the original Escrow Shares. Any cash
dividends and any taxable stock dividends paid with respect to the Escrow Shares
shall be paid immediately by the Purchaser to the Stockholders in accordance
with their respective interests in the Escrow Shares. Each of the Stockholders
shall recognize as income on a current basis all of the cash dividends which
such Stockholder receives, and for any non-cash dividend and any other
non-taxable distribution shall, through the Representative, deliver such
property to the Escrow Agent and execute stock powers or other appropriate
instruments of transfer for all shares, options, warrants or rights as required
for transfer hereunder.
2.3. Retained Voting and Other Rights. The Escrow Agent shall hold the
Escrow Shares and any additional property acquired with respect thereto pursuant
to Section 2.2 above in safekeeping and dispose thereof only in accordance with
the terms of this Agreement. The Escrow Agent may treat the Representative as
the duly authorized agent and representative of the Stockholders with respect to
any additional property related to the Escrow Shares. The Escrow Agent shall
hold the Escrow Shares in accordance with this Agreement and shall vote the
Escrow Shares in accordance with the written proxies (if any) provided by each
corresponding Stockholder. The Escrow Agent shall not vote any Escrow Shares as
to which the Escrow Agent has not received written proxies from the
corresponding Stockholder.
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ARTICLE III
DISTRIBUTION OF ESCROW SHARES UPON TERMINATION OF AGREEMENT
3.1. Deadline For Claims and Termination of Agreement. The Purchaser shall
not be entitled to assert any claim against the Escrow Shares after February 12,
2000 ("Claims Deadline"); PROVIDED, HOWEVER, that any claim made in good faith
and in writing on or prior to the Claims Deadline (whether or not formal legal
action shall yet have been commenced based upon such claim) shall continue,
subject to final resolution as provided herein. This Agreement shall terminate
upon complete distribution of the Escrow Shares in accordance with this
Agreement.
3.2. Distribution of Escrow Shares Upon Termination of Agreement.
(a) Within five (5) business days after the Claims Deadline, the Escrow
Agent shall deliver to the Stockholders Escrow Certificates representing that
portion of the Escrow Shares (the "Distribution Proceeds") not otherwise subject
to claims pursuant to Article 4 below, in proportion to the initial deposits of
shares made on their behalf by the Purchaser. Thereafter, the balance of the
Escrow Shares shall continue to be held by the Escrow Agent in accordance with
the terms of this Agreement until all claims asserted against the Escrow Shares
have been finally resolved in accordance with Article 4 below; whereupon, the
balance of the Escrow Shares shall be distributed to the Stockholders as
provided above in full discharge of the Escrow Agent's obligations under this
Agreement.
(b) Notwithstanding the foregoing, in the event that under any of the
provisions contained herein, the Escrow Agent would be required to deliver
fractional interests in Escrow Shares to the Stockholders, the Purchaser shall
be entitled at its option to purchase from the Escrow Agent, at any time prior
to the Escrow Agent's delivery of Escrow Certificates representing Escrow
Shares, such fractional interests in Escrow Shares as shall be necessary to
eliminate such fractional interests, at a purchase price calculated according to
the fair market value per share of the Purchaser's Common Stock at the Effective
Time, as determined in accordance with Section 1.4 above. In such event, the
Escrow Agent shall distribute to the Stockholders who otherwise would have been
entitled to fractional interests in Escrow Shares, the cash equivalent of such
fractional shares (based on the purchase price as described above). To
facilitate the Purchaser's right to repurchase fractional shares, the Escrow
Agent shall notify the Purchaser in writing not less than one (1) business day
prior to any delivery of Escrow Certificates to any Stockholder.
3.3 Share Distributions. Whenever the Escrow Agent is required to make a
disbursement of Escrow Certificates and Escrow Shares pursuant to this
Agreement, the Escrow Agent shall complete the blank stock powers deposited by
the Stockholders with the Escrow Agent pursuant to Section 1.3 hereof, and shall
deliver to the Purchaser (a) such stock powers, (b) all of the Escrow
Certificates then held in escrow, and (c) instructions to issue new share
certificates (i) to the person to whom the disbursement shall be made, for that
number of Purchaser Shares to which such person is entitled, and (ii) to the
Stockholders, for any remaining
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balance of Escrow Shares that are required to be held by the Escrow Agent after
such disbursement. The Purchaser promptly shall deliver to the Escrow Agent all
such share certificates prepared at the Escrow Agent's instructions, for
disbursement by the Escrow Agent hereunder. The time for performance of the
Escrow Agent's obligation to disburse Escrow Certificates pursuant to this
Agreement shall be extended by any unreasonable delay in the Purchaser's
response to the instructions delivered by the Escrow Agent pursuant to this
Section 3.3.
ARTICLE IV
DELIVERY OF CAPITAL STOCK AND OTHER PROPERTY OUT OF ESCROW
4.1. Claims Against Escrow Shares. If, at any time on or prior to the
Claims Deadline, the Purchaser (on its own behalf or on behalf of any other
Purchaser Indemnitee) shall assert a claim for indemnification pursuant to
Section 9.1 of the Merger Agreement, the Purchaser shall submit to the Escrow
Agent and to the Representative a written claim in good faith signed by an
authorized officer of the Purchaser stating: (i) that a Purchaser Indemnitee has
incurred or reasonably believes it may incur Damages and the reasonable estimate
of the amount of any such Damages; (ii) in reasonable detail, the facts alleged
as the basis for such claim and the section or sections of the Merger Agreement
alleged as the basis or bases for the claim; and (iii) if the Damages have
actually been incurred, the number of Escrow Shares to which such Purchaser
Indemnitee is entitled with respect to such Damages, which shall be determined
by dividing the amount thereof by the fair market value per share of the Escrow
Shares as of the Effective Time, as certified to the Escrow Agent in accordance
with Section 1.4 above. If the claim is for Damages which such Purchaser
Indemnitee reasonably believes it may incur or is otherwise unliquidated, the
written claim of the Purchaser shall state the reasonable estimate of such
Damages, in which event a claim shall be deemed to have been asserted against
the Escrow Shares on behalf of the Purchaser in the amount of such estimated
Damages, but no payment or distribution shall be made by the Escrow Agent out of
the Escrow Shares until such Damages have actually been incurred and the
Purchaser submits a notice to the Escrow Agent and the Representative in
accordance with clause (iii) of this Section 4.1, whether or not the Damages are
incurred prior to the Claims Deadline.
4.2. Resolution of Asserted Claims Against the Escrow Shares. If, within
fifteen (15) days after the Purchaser gives notice to the Escrow Agent and the
Representative of an asserted claim pursuant to Section 4.1 (iii) above that the
Purchaser Indemnitee has incurred actual Damages, the Representative shall fail
to notify the Escrow Agent and the Purchaser, in writing, that the
Representative reasonably disputes in good faith the right of the Purchaser
Indemnitee to indemnity in respect of the asserted claim, then the Escrow Agent,
at the expiration of such fifteen (15) day period, shall make immediate payment
to the Purchaser, out of the Escrow Shares (taken on a pro rata basis as to each
Stockholder in proportion to their initial deposits of Escrow Shares hereunder),
of the amount of the asserted claim by delivering to the Purchaser Escrow
Certificates representing the number of Escrow Shares having an aggregate value
(as certified to the Escrow Agent in accordance with Section 1.4 above) equal to
the amount of the claim.
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4.3. Resolution of Disputed Claims Against Escrow Shares. If, within the
fifteen (15) day period after notice of an asserted claim is given to the Escrow
Agent and the Representative under Section 4.1 above, the Representative shall
notify the Escrow Agent and the Purchaser, in writing, that the Representative
reasonably disputes in good faith the asserted claim made by the Purchaser
against the Escrow Shares, then the Representative and the Purchaser shall use
their respective reasonable best efforts to effect a settlement and compromise
of such asserted claim. Any Damage established by reason of any such settlement
and compromise shall be certified in writing to the Escrow Agent by the
Representative and the Purchaser, and the Escrow Agent shall pay to the
Purchaser out of the Escrow Shares, by transfer to the Purchaser of a number of
Escrow Shares set forth in the certification received from the Purchaser and the
Representative (taken on a pro rata basis as to each Stockholder in proportion
to their initial deposits of Escrow Shares hereunder), any amount due and owing
to the Purchaser by reason of such settlement and compromise. If any such
settlement and compromise so certified to the Escrow Agent establishes that no
amount shall be due and owing to the Purchaser under the asserted claim, then
the Escrow Agent shall treat the asserted claim as rejected by mutual agreement
of the parties, and the asserted claim shall be totally disregarded by the
Escrow Agent as if never the subject of assertion against the Escrow Shares.
4.4. Unresolved Claims Against Escrow Shares. If the Purchaser and the
Representative are unable to settle and compromise any disputed claim asserted
against the Escrow Shares, the Escrow Agent shall not make any payment or
distribution out of the Escrow Shares with respect to such unresolved asserted
claim unless and until the Escrow Agent shall have received either:
(a) a certificate signed on behalf of the Purchaser and the
Representative certifying the amount of the asserted claim in dispute and
directing payment thereof; or
(b) a certified copy of an award of an arbitrator referred to in
Article 7 hereof determining the amount of the asserted claim in dispute; or
(c) a certified copy of a final judgment of a court of competent
jurisdiction determining the amount of the asserted claim in dispute, certified
by the party providing such copy as being binding and nonappealable.
Upon receipt of any such certification, the claim shall be treated as a resolved
asserted claim pursuant to Section 4.2 above, and the Escrow Agent shall pay and
distribute Escrow Shares in the manner described in Section 4.2.
ARTICLE V
RESPONSIBILITIES AND DUTIES OF ESCROW AGENT
5.1. Rights, Duties, Liabilities and Immunities of Escrow Agent. The
Purchaser and the Stockholders (by and through the Representative) hereby agree
as follows with respect to the rights, duties, liabilities and immunities of the
Escrow Agent:
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(a) The Escrow Agent shall act as a depository only and shall not be
responsible or liable in any manner whatsoever for the sufficiency, correctness,
genuineness, or validity of the Escrow Shares deposited with it, or any part
thereof, nor shall the Escrow Agent be responsible for evaluating the merits of
any claim asserted against the Escrow Shares; rather, the Representative, acting
for and on behalf of the Stockholders, shall be responsible for disputing any
such claim in the manner specified herein. The Escrow Agent shall have no
implied duties or obligations, and shall not be charged with knowledge or notice
of any fact except as specifically provided herein.
(b) The parties shall hold the Escrow Agent harmless for any action
taken in reliance upon any written certificate, notice, request, waiver,
consent, receipt or other paper or document furnished to it, not only as to its
due execution and the validity and effectiveness of its provisions, but also as
to the truth and acceptability of any information therein contained which the
Escrow Agent in good faith believes to be genuine and what it purports to be.
(c) The Escrow Agent shall not be liable for any error of judgment,
or for any act done or steps taken or made by it in good faith, or for any
mistake of fact or law, or for any things which it may do or refrain from doing
in connection herewith, except due to the Escrow Agent's own gross negligence or
intentional misconduct. In no event shall the Escrow Agent be liable for
incidental, indirect, special, consequential or punitive damages.
(d) The Escrow Agent may consult with and obtain advice from its own
legal counsel in the event of any question as to any of the provisions of this
Agreement or its duties hereunder, and the Escrow Agent shall incur no liability
and shall be fully protected in acting in good faith in accordance with the
opinion and instructions of such counsel.
(e) The Escrow Agent shall have no duties except those expressly set
forth herein, and shall not be bound by any notice of a claim or demand with
respect thereto, or any waiver, modification, amendment, termination or
rescission of this Agreement, unless in a writing received by it, and, if its
duties or rights herein are affected, unless it shall have given its prior
written consent thereto.
(f) The Escrow Agent is not a party to, is not bound by and is not
required to enforce the Merger Agreement or any other agreement (other than this
Agreement) to which the Escrow Shares may relate.
(g) From and at all times after the date of this Agreement, the
Purchaser and the Stockholders (collectively, the "Indemnitors") shall, to the
fullest extent permitted by law, indemnify and hold harmless the Escrow Agent
and each director, officer, employee, attorney, agent and affiliate of the
Escrow Agent (collectively, the "Indemnified Parties") against any and all
actions, claims (whether or not valid), losses, damages, liabilities, costs and
expenses of any kind or nature whatsoever (including without limitation
reasonable attorneys' fees, costs and expenses) incurred by or asserted against
any of the Indemnified Parties from and after the date hereof, whether direct,
indirect or consequential, as a result of or arising from or in any way
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relating to the performance by the Escrow Agent hereunder or any claim, demand,
suit, action or proceeding (including any inquiry or investigation) by any
person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or failure of performance of
this Escrow Agreement or any transactions contemplated herein, whether or not
any such Indemnified Party is a party to any such action, proceeding, suit or
the target of any such inquiry or investigation; PROVIDED HOWEVER, that no
Indemnified Party shall have the right to be indemnified hereunder for any
liability to the extent finally determined by a court of competent jurisdiction,
subject to no further appeal, to have resulted from the gross negligence or
willful misconduct of such Indemnified Party; AND PROVIDED FURTHER, the
Indemnitors shall pay the Escrow Agent's reasonable actual day-to-day expenses,
disbursements and advances (including reasonable attorneys' fees) incurred or
made by the Escrow Agent in connection with performing the Escrow Agent's
obligations hereunder other than in connection with any dispute concerning any
Escrow Shares. If any such action or claim shall be brought or asserted against
any Indemnified Party, such Indemnified Party shall promptly notify the
Indemnitors in writing, and the Indemnitors shall assume the defense thereof,
including the employment of counsel and the payment of all expenses. Such
Indemnified Party shall, in its sole discretion, have the right to employ
separate counsel (who may be selected by such Indemnified Party in its
reasonable discretion) in any such action and to participate in the defense
thereof, and the fees and expenses of such counsel shall be paid by such
Indemnified Party, except that the Indemnitors (or any one of them, as
applicable) shall be required to pay such fees and expenses if: (a) the
Indemnitors agree to pay such fees and expenses, (b) the Indemnitors shall fail
to assume the defense of such action or proceeding or shall fail, in the
reasonable discretion of such Indemnified Party, to employ counsel satisfactory
to the Indemnified Party in any such action or proceeding, (c) any one of the
Indemnitors is the plaintiff in any such action or proceeding or (d) the named
parties to any such action or proceeding (including any impleaded parties)
include both the Indemnified Party and any one of the Indemnitors, and the
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to such Indemnitor. The Indemnitors shall be liable to pay
reasonable actual fees and expenses of counsel pursuant to the preceding
sentence. All such fees and expenses payable by the Indemnitors pursuant to the
foregoing sentence shall be paid from time to time as incurred, both in advance
of and after the final disposition of such action or claim. All amounts advanced
by the Indemnitors hereunder shall be subject to complete reimbursement of the
Indemnitors by the Indemnified Party in the event of a determination that such
Indemnified Party is not entitled to indemnity hereunder, as provided above. The
obligations of the Indemnitors under this Section shall survive any termination
of this Escrow Agreement and the resignation or removal of the Escrow Agent. The
Stockholders and the Purchaser shall be jointly and severally liable to
Indemnified Parties for the obligations under this subsection (g); PROVIDED
HOWEVER THAT AS between the Purchaser and the Stockholders, the prevailing party
in any such litigation shall be entitled to collect from the non-prevailing
party all amounts that such prevailing party has paid to any Indemnified Party
pursuant to this subsection (g). The Purchaser shall have the option at any time
to pay any amount due to an Indemnified Party in satisfaction of the
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Stockholders' undisputed obligations hereunder, and upon any such payment, the
Purchaser may treat the amount of such payment as an immediate, undisputed
liquidated claim against the Escrow Shares pursuant to Section 4.2 above.
(h) The Escrow Agent is authorized, in its discretion, to comply
with orders issued or process entered by any court with respect to the Escrow
Shares, without determination by the Escrow Agent of such court's jurisdiction
in the matter. If any portion of the Escrow Certificates or Escrow Shares is at
any time attached, garnished or levied upon under any court order, or in case
the payment, assignment, transfer, conveyance or delivery of any such property
shall be stayed or enjoined by any court order, or in case any order, judgment
or decree shall be made or entered by any court affecting such property or any
part thereof, then and in any such event, the Escrow Agent is authorized, in its
sole discretion, to rely upon and comply with any such order, writ, judgment or
decree which it is advised by legal counsel selected by it is binding upon it
without the need for appeal or other action; and if the Escrow Agent complies
with any such order, writ, judgment or decree, it shall not be liable to any of
the parties hereto or to any other person or entity by reason of such compliance
even though such order, writ, judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
(i) If, at any time, there shall exist any dispute with respect to
the holding or disposition of any portion of the Escrow Shares or any other
obligations of the Escrow Agent hereunder, or if at any time the Escrow Agent is
unable to determine, to the Escrow Agent's sole satisfaction, the proper
disposition of any portion of the Escrow Shares or the Escrow Agent's proper
actions with respect to its obligations hereunder, or if the Purchaser and the
Representative have not within thirty (30) days of the furnishing by the Escrow
Agent of a notice of resignation pursuant to Section 5.3 hereof appointed a
successor escrow agent to act hereunder, then the Escrow Agent may, in its sole
discretion, take either or both of the following actions upon written notice to
Purchaser and the Representative:
(i) Hold and decline to make further disbursements of Escrow
Certificates representing the Escrow Shares that the Escrow Agent would
otherwise be obligated to make hereunder until such dispute or uncertainty
shall be resolved to the sole satisfaction of the Escrow Agent or until a
successor Escrow Agent shall have been appointed (as the case may be);
(ii) Petition (by means of an interpleader action or any other
appropriate method) the Superior Court for Wake County, North Carolina, or
if said Court should be without subject matter jurisdiction or should
decline to exercise jurisdiction, any other state or federal court of
competent jurisdiction in North Carolina, for instructions with respect to
such dispute or uncertainty, and deposit into such court the Escrow
Certificates representing all Escrow Shares for holding and disposition in
accordance with the instructions of such court.
The Escrow Agent shall have no liability to the Purchaser, the Stockholders or
any other person with respect to any such actions taken pursuant to this Section
5.1(i), specifically including any
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liability or claimed liability that may arise, or be alleged to have arisen, out
of or as a result of any delay in the disbursement of Escrow Shares or any delay
in or with respect to any other action required or requested of the Escrow
Agent, except for any resulting from the gross negligence or willful misconduct
of the Escrow Agent.
5.2. Compensation. The Escrow Agent shall receive a one-time acceptance
fee of $250 and a fee of $1,500 per year for its services hereunder. These fees
shall be payable by the Purchaser, which shall pay the acceptance fee and the
annual fee for the first year upon the execution of this Agreement. Except for
the first year's fee, annual fee payments shall be subject to proration in the
event that the escrow arrangement terminates before the end of a year.
5.3. Successor Escrow Agent. The Escrow Agent or any successor to it
hereafter appointed may at any time resign by giving notice in writing to the
Representative and the Purchaser, and such resignation shall become effective
and the Escrow Agent shall be discharged from its prospective duties hereunder
upon the appointment of a successor Escrow Agent as hereinafter provided. In the
event of any such resignation, a successor Escrow Agent shall be appointed by
mutual written consent of the Representative and the Purchaser. Any successor
Escrow Agent shall deliver to the Representative and the Purchaser a written
instrument accepting the appointment hereunder, and thereupon it shall succeed
to all the rights and duties of the Escrow Agent hereunder and shall be entitled
to receive all assets then held by the predecessor Escrow Agent hereunder.
ARTICLE VI
THE REPRESENTATIVE
6.1. General. The Representative may be removed and a new Representative
or Representatives may be appointed at any time and from time to time by the
written agreement of each of the Stockholders. Any such removal and appointment
shall be effective upon receipt by the Escrow Agent and the Purchaser of a duly
executed copy of the instrument appointing the new Representative. In the event
that the Representative shall resign or otherwise cease to act as the
Representative, the Stockholders shall immediately select a successor
Representative to act hereunder.
6.2. Responsibility. The Representative shall have no liability to the
Stockholders with respect to any action taken by him or her under this
Agreement, except with respect to the Representative's negligence or willful
misconduct. The Representative may act in reliance upon the advice of counsel in
reference to any matter in connection with this Agreement and shall not incur
any liability to the Stockholders, or any one of them, for any action taken in
good faith in accordance with such advice. All Stockholders (inclusive of the
Representative) shall jointly and severally indemnify the Representative,
ratably according to their respective interests in the Escrow Shares, from and
against any and all Damages incurred in connection with the Representative's
actions under this Agreement or by virtue of acting in his capacity as the
Representative, except to the extent resulting from the Representative's
negligence or willful misconduct.
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ARTICLE VII
ARBITRATION
7.1. Resolution of Disputed Claims. Subject to any prior resolution in the
manner described in Section 4.3 above, any unresolved dispute under this
Agreement with respect to any matter that is the subject of an asserted claim
against the Escrow Shares shall be submitted to and settled by binding
arbitration in accordance with the Commercial Rules, existing at the date
thereof, of the American Arbitration Association. The dispute shall be submitted
by the Representative (on behalf of any Stockholders) or the Purchaser (on
behalf of the Purchaser Indemnitees) to one arbitrator agreed to by the
Representative and the Purchaser or, if the Representative and the Purchaser
cannot agree on one arbitrator, then each shall select one arbitrator, and those
two arbitrators shall select a third arbitrator. The arbitrators shall hear the
dispute in Raleigh, North Carolina or another mutually agreeable location
determined in good faith by the Representative and the Purchaser. Each
arbitrator must be experienced in the subject matter in dispute.
ARTICLE VIII
MISCELLANEOUS
8.1. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Stockholders (directly and by and through the
Representative), the Purchaser, the Purchaser Indemnitees (by and through the
Purchaser), I-Magic and the Escrow Agent, and their respective successors,
heirs, and assigns.
8.2. Waiver of Consent. No failure or delay on the part of any party
hereto in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement,
nor consent to any departure by any party therefrom, shall in any event be
effective unless the same shall be in writing, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice to or demand on any party in any case shall entitle such party
to any other or further notice or demand in similar or other circumstances.
8.3. Captions. The Article and Section captions used herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
8.4. Notices. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered by registered or certified
mail or by recognized overnight courier, postage prepaid, addressed as-follows:
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If to the Purchaser or I-Magic, to:
Interactive Magic, Inc.
Post Office Box 13491
Research Triangle Park, North Carolina 27709
Attention: President.
Facsimile No.: (919) 461-0723
with a copy to its counsel,
Bachner, Tally, Polevoy & Misher, LLP
380 Madison Avenue
New York, New York 10017
Attention: Jill Cohen, Esq.
Facsimile No.: (212) 682-5729
if to the Escrow Agent, to:
Branch Banking and Trust Company
223 West Nash Street
Wilson, North Carolina 27893
Attention: Corporate Trust Department
if to the Representative, to:
James Hettinger
900 Eisenhower Boulevard
Key West, Florida 33040
and if to any Stockholder, to such Stockholder at such Stockholder's address
appearing in the Purchaser's books and records, or (in each case) to such other
address as shall be furnished in writing by any such party, and such notice or
communication shall be deemed to have been given as of the date so delivered or
mailed.
8.5. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
8.6. Governing Law. The interpretation and construction of this Agreement,
and all matters relating thereto, shall be governed by the laws of the State of
Delaware, without regard to the choice of law provisions thereof. The
non-prevailing party in any dispute arising hereunder between the Purchaser and
the Stockholders (or the Representative acting on their behalf) shall bear and
pay the costs and expenses (including without limitation reasonable attorneys'
fees and expenses) incurred by the prevailing party or parties in connection
with
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resolving such dispute, however resolved, including by arbitration. The
Purchaser may treat any such amount due from the Stockholders as an immediate,
undisputed liquidated claim against the Escrow Shares pursuant to Section 4.2
above.
8.7. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated thereby.
8.8. Other Purchaser Remedies. The remedies available to the Purchaser
under this Agreement, including without limitation the right to assert claims
against the Escrow Shares, shall be in addition to and not to the exclusion of
any other rights or remedies available to the Purchaser under applicable law,
whether pursuant to this Agreement, the Merger Agreement or otherwise.
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IN WITNESS WHEREOF, the Purchaser, I-Magic, each of the Stockholders and
the Escrow Agent have caused their corporate names to be hereunto subscribed by
their respective officers "hereunto duly authorized, and the Representative has
executed this Agreement, all as of the day and year first above written.
INTERACTIVE MAGIC, INC.
By: /s/ Michael Oliver
-------------------------------------
Name: Michael Oliver
Title: Chief Financial Officer
MULTIPLAYER GAMES NETWORK, INC.
By: /s/ James Hettinger
-------------------------------------
Name: James Hettinger
Title: Chief Executive Officer
TANTALUS, INC.
By: /s/ James Hettinger
-------------------------------------
Name: James Hettinger
Title: President
ESCROW AGENT:
BRANCH BANKING AND TRUST COMPANY
By: /s/ Margaret Smith
-------------------------------------
Name: Margaret Smith
Title: Vice President
REPRESENTATIVE:
/s/ James Hettinger
-------------------------------------
James Hettinger
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