Exhibit 2.4
SHAREHOLDER ESCROW AGREEMENT
(Escrowed Shares)
THIS SHAREHOLDER ESCROW AGREEMENT is made effective as of the 24th day
of June, 2004, by and among Used Kar Parts, Inc., a Florida corporation
("Purchaser"), Sommer & Schneider LLP, as escrow agent (the "Escrow Agent"), and
the several former shareholders of Xenomics, a California corporation
("Xenomics") identified on Schedule A attached hereto ("Shareholders").
W I T N E S S E T H:
WHEREAS, pursuant a Securities Exchange Agreement (the "Exchange
Agreement") dated effective as of the date hereof, among Purchaser, Xenomics and
the Shareholders, Purchaser has acquired or will acquire all of the outstanding
capital stock of Xenomics (the "Xenomics Acquisition").
WHEREAS, in connection with the Xenomics Acquisition, the Shareholders,
collectively, will receive 2,258,001 shares of Purchaser's common stock, par
value $0.001 per share (the "Purchaser Shares") in exchange for their shares of
Xenomics;
WHEREAS, the Exchange Agreement provides that on the Closing Date (as
defined in the Exchange Agreement), 300,000 Purchaser Shares issued to the
Shareholders in exchange for their Xenomics shares (the "Escrowed Shares") shall
be deposited in escrow, together with stock powers endorsed in blank (the
"Escrow Deposit"), to be held and disposed of by the Escrow Agent as provided
herein; and
WHEREAS, Purchaser and the Shareholders wish to appoint the Escrow
Agent to serve as the escrow agent hereunder, and the Escrow Agent is willing to
do so upon the terms and conditions hereinafter set forth.
NOW THEREFORE, it is agreed:
Section 1 APPOINTMENT OF ESCROW AGENT; CREATION OF ESCROW DEPOSIT
1.1 Appointment of Escrow Agent. Purchaser and the Shareholders hereby
appoint the Escrow Agent, and the Escrow Agent hereby agrees to act, as
depository and administrator of the Escrow Deposit, upon the terms and
conditions set forth below.
1.2 Creation of Escrow Deposit. Promptly following the execution and
delivery of this Agreement, Purchaser, pursuant to the Exchange Agreement, shall
deliver to the Escrow Agent, for deposit into the Escrow Deposit, the Escrowed
Shares and each Shareholder will deliver 5 duly executed guarantied stock powers
for the transfer of Escrowed Shares to the Purchaser.
Section 2 DISPOSITION OF ESCROW DEPOSIT
2.1 Term of Escrow Deposit.
(a) The Escrowed Shares held in the Escrow Deposit shall be held by the
Escrow Agent on the terms and subject to the conditions set forth herein and in
the Exchange Agreement (but the Escrow Agent shall have no responsibility with
respect to the Exchange Agreement other than to perform as provided in this
Agreement) to satisfy the indemnification obligations of Xenomics and the
Shareholders pursuant to the Exchange Agreement.
(b) The Escrowed Shares held in the Escrow Deposit shall be held by the
Escrow Agent on the terms and subject to the conditions set forth herein and in
the Exchange Agreement until the first anniversary of the Closing Date or, if
earlier, the date of the expiration in their entirety of the representations and
warranties of Purchaser pursuant to Article 2 of the Exchange Agreement (either
date referred to hereinafter as the "Expiration Date"). On the Expiration Date,
the Escrow Agent shall release the remaining Escrow Deposit to Shareholders on a
pro rata basis as required by Section 4.2 of the Exchange Agreement, subject in
all cases to the terms and conditions set forth in Sections 2.7 and 2.8.
(c) "Escrowed Shares" shall mean the shares of Purchaser's common stock
delivered to the Escrow Agent under this Section 2 together with all shares or
other securities, if any, received by the Escrow Agent as a dividend or
distribution paid or made on or in respect of said shares of Purchaser's common
stock or on or in respect of any other shares or securities so received by the
Escrow Agent.
2.2 Purchaser Indemnity Claims. Upon the occurrence of an event which
Purchaser asserts constitutes an event for which Shareholders would be required
to indemnify or make any payment to the Purchaser pursuant to the Exchange
Agreement (a "Purchaser Indemnity Claim"), the Purchaser shall furnish notice of
such event (the "Indemnity Notice") to the Shareholders and the Escrow Agent
promptly (and in any event on or prior to the Expiration Date), setting forth
the Purchaser's then good-faith estimate of the reasonably foreseeable maximum
amount of the Purchaser Indemnity Claim. Upon final determination of the amount
of the Purchaser Indemnity Claim, the Purchaser shall furnish an additional
notice (the "Determination Notice") to the Shareholders and the Escrow Agent
promptly, setting forth the final amount of the Purchaser Indemnity Claim and
proof of such amount by documentary evidence.
2.3 Purchaser Indemnity Claims Not Disputed by Shareholders. Upon
delivery of the Indemnification Notice, Escrow Agent shall retain for transfer
to the Purchaser, pro rata from each of the Shareholders that number of Escrowed
Shares derived by dividing the amount of the Purchaser Indemnity Claim set forth
in the Indemnity Notice by $1.25 or such other amount adequately reflecting any
stock split, stock exchange, or stock dividend paid or made on or in respect of
the Escrowed Shares after the Closing Date. If, within thirty (30) days after
receipt of the Indemnity Notice or Determination Notice, the record holders of a
majority of the Escrowed Shares (the "Majority Shareholders") do not give the
notice provided for in Section 2.4, Escrow Holder shall transfer to Purchaser
that number of Escrowed Shares derived by dividing the final amount of the
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Purchaser Indemnity Claim set forth in the Determination Notice by $1.25 or such
other amount adequately reflecting any stock split, stock exchange, or stock
dividend paid or made on or in respect of the Escrowed Shares after the Closing
Date.
2.4 Purchaser Indemnity Claims Disputed by Shareholders in Whole. If
Majority Shareholders dispute either the Purchaser Indemnity Claim described in
the Indemnity Notice or the final amount set forth in the Determination Notice,
the Majority Shareholders shall, within thirty (30) days after receipt of the
Indemnity Notice or Determination Notice, as the case may be, notify the Escrow
Agent and the Purchaser of such dispute, setting forth the basis therefor in
reasonable detail, based on its then good-faith belief. In the event Majority
Shareholders dispute the entire Purchaser Indemnity Claim, the Escrow Agent
shall not transfer any Escrowed Shares to Purchaser until the Escrow Agent
receives a written agreement signed by the Majority Shareholders and Purchaser
stating the amount to which the Purchaser is entitled in connection with such
Purchaser Indemnity Claim, or a copy of a court order or judgment together with
an opinion of counsel reasonably acceptable to the Escrow Agent to the effect
that such order or judgment is a final order or judgment of a court of competent
jurisdiction binding on Purchaser and the Shareholders from which no appeal may
be taken or for which the time to appeal has expired (a "Final Judgment"), at
which time the Escrow Agent shall transfer to the Purchaser the amount of
Escrowed Shares derived by dividing the amount set forth in such agreement or
Final Judgment by $1.25 or such other amount adequately reflecting any stock
split, stock exchange, or stock dividend paid or made on or in respect of the
Escrowed Shares after the Closing Date .
2.5 Purchaser Indemnity Claims Disputed by Majority Shareholders in
Part. In the event the Majority Shareholders dispute part of, but not all of, a
Purchaser Indemnity Claim, the Escrow Agent shall transfer to the Purchaser,
that number of Escrowed Shares attributable to that portion of the Purchaser
Indemnity Claim which is not disputed by the Majority Shareholders up to the
entire amount of the Escrowed Shares. The Escrow Agent shall not transfer any
Escrowed Shares with respect to the balance of such Purchaser Indemnity Claim
except in accordance with the procedures set forth in Section 2.4.
2.6 Notice to Withhold on the Expiration Date. On or prior to the
Expiration Date, the Purchaser shall furnish notice (the "Withholding Notice")
to the Escrow Agent and Shareholders of the number of Escrowed Shares to be
retained on account of Purchaser Indemnity Claims for which an Indemnity Notice,
but no Determination Notice has been provided pursuant to Section 2.2, or for
which an Indemnity Notice and a Determination Notice has been provided pursuant
to Section 2.2, but either notice has been disputed by the Majority Shareholder
in full or in part pursuant to Section 2.4 (the "Withholding Shares"). The
Withholding Notice shall contain the information specified in Section 2.2 to the
extent it requires supplementation or change based on the Purchaser's knowledge
on the notice date. Upon the receipt by the Escrow Agent of the Withholding
Notice, the Escrow Agent shall retain the Withholding Shares. In the event the
Purchaser does not timely provide the Withholding Notice, any remaining Escrowed
Shares shall be distributed by the Escrow Agent to Shareholders in accordance
with, and to the extent provided in, Section 2.7.
2.7 Distribution of the Escrow Deposit. As soon as practicable
following the Expiration Date, any Escrowed Shares as shall remain in the Escrow
Deposit after deduction of Escrowed Shares pursuant to the provisions of
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Sections 2.3 and 2.5 hereof, and after deduction of Withholding Shares, if any,
shall be released from the provisions of this Agreement and distributed promptly
by the Escrow Agent to the Shareholders, pro rata.
2.8 Retention of Withholding Shares After Expiration Date. Upon receipt
of the Withholding Notice, the Escrow Agent shall continue to hold after the
Expiration Date, the Withholding Shares until such time as the Escrow Agent
receives a written agreement signed by the Majority Shareholders and Purchaser
stating the number of Withholding Shares, if any, to which the Purchaser is
entitled in connection with any outstanding Purchaser Indemnity Claims
identified in the Withholding Notice, or a copy of a Final Judgment with respect
to such Purchaser Indemnity Claims. As soon as practicable following the receipt
of such agreement or Final Judgment, Escrow Agent shall transfer to the
Purchaser the number of Payoff Shares specified in such agreement or Final
Judgment and, unless there are any additional unresolved Purchaser Indemnity
Claims outstanding that were identified in the Withholding Notice, shall
distribute to the Shareholders any remaining Escrow Deposit.
2.9 Reservation of the Shareholders' Rights. The rights of the
Purchaser to receive disbursements from the Escrow Account in respect of
Purchaser Indemnity Claims shall be without prejudice to any other rights the
Purchaser may have, under the Exchange Agreement or otherwise, to seek indemnity
for Purchaser Indemnity Claims.
2.10 Reporting. The parties hereto shall, for federal income tax
purposes and, to the extent permitted by applicable law, state and local tax
purposes, report consistent with the Shareholders as the owners of the Escrowed
Shares and the Shareholders shall furnish any required tax forms consistent with
the foregoing.
2.11 Voting and Dispositive Authority. The Shareholders shall retain
full voting authority with respect to the Escrowed Shares. The Shareholders
shall not dispose of the Escrowed Shares until the time such shares have been
returned to them by Escrow Agent in accordance with this Agreement.
Section 3 ESCROW AGENT
3.1 Duties. The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement and shall be
limited to the performance of such duties and obligations as are specifically
set forth in this Agreement, as it may be amended from time to time with the
Escrow Agent's written consent.
3.2 Reliance. In the performance of its duties hereunder, the Escrow
Agent shall be entitled to rely upon any document or instrument reasonably
believed by it to be genuine and signed by Purchaser or the Shareholders. The
Escrow Agent may assume that any person purporting to give any notice in
accordance with the provisions hereof has been duly authorized to do so.
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3.3 Liability. The Escrow Agent shall not be liable for any error of
judgment, or any action taken or omitted to be taken hereunder in good faith,
except in the case of its bad faith, gross negligence or willful misconduct. The
Escrow Agent shall be entitled to consult with counsel of its choosing
(including internal counsel) and shall not be liable for any act suffered or
omitted by it in good faith in accordance with the advice of such counsel.
3.4 Disputes. In the event that the Escrow Agent shall be uncertain as
to its duties or rights hereunder, or shall receive instructions from any party
hereto with respect to the Escrow Deposit which, in its opinion, are in conflict
with any of the provisions of this Agreement, it shall be entitled to refrain
from taking any action until such time as there has been a final determination
of the rights of Purchaser and the Shareholders with respect to the Escrow
Deposit (or relevant portion thereof). For purposes of this Section 3.4, there
shall be deemed to have been a final determination of the rights of Purchaser
and the Shareholders with respect to the Escrowed Shares (or relevant portion
thereof) at such time as Escrow Agent shall receive (i) an executed counterpart
of an agreement between the Majority Shareholders and Purchaser or (ii) a copy
of a Final Judgment which provides for the disposition of the Escrow Deposit (or
relevant portion thereof).
3.5 Resignation. The Escrow Agent may resign at any time and be
discharged of the duties imposed hereunder (but without prejudice for any
liability in the case of its bad faith, gross negligence or willful misconduct
hereunder) by giving notice to the Majority Shareholders and Purchaser at least
sixty (60) business days prior to the date specified for such resignation to
take effect, in which case, upon the effective date of such resignation:
(a) any property then held by the Escrow Agent hereunder shall
be delivered by it to such person as may be designated in writing by Purchaser
and the Majority Shareholders, whereupon the Escrow Agent's obligations
hereunder shall cease and terminate;
(b) if no such person has been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless, cease and
terminate, subject to clause (c) below; and
(c) the Escrow Agent's sole responsibility thereafter shall be
to keep all property then held by it (and to make the investments as
hereinbefore provided) and to deliver the same to the successor escrow agent
designated in writing by Purchaser and the Majority Shareholders or, if no such
successor escrow agent shall have been so designated, in accordance with the
directions of a Final Judgment, and the provisions of Section 3.7 and Section
3.8 shall remain in effect.
3.6 Removal of Escrow Agent. Purchaser and the Majority Shareholders
may, upon at least thirty (30) business days prior written notice to the Escrow
Agent, dismiss the Escrow Agent hereunder and appoint a successor. In such
event, the Escrow Agent shall promptly account for and deliver to the successor
escrow agent named in such notice the balance of the Escrow Deposit, including
all investments thereof and accrued income thereon, on the date of such
accounting and delivery. Upon acceptance thereof and of such accounting by such
successor escrow agent, and upon reimbursement to the Escrow Agent of all
expenses due to it hereunder through the date of such accounting and delivery,
the Escrow Agent shall be released and discharged from all of its duties and
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obligations hereunder, but without prejudice to any liability of the Escrow
Agent for its bad faith, gross negligence or willful misconduct hereunder.
3.7 Indemnification. Each of Purchaser and the Shareholders shall
jointly indemnify and hold the Escrow Agent harmless against any loss,
liability, claim, damage, injury, demand or expense, including reasonable legal
fees, arising out of or in connection with the performance of the Escrow Agent's
obligations hereunder, including the costs and expenses incurred in connection
with the collection of its fees and including the costs and expenses of
defending itself against any claim or liability arising out of or in connection
with the performance of its duties hereunder, except for any loss, liability,
claim, damage, injury, demand or expense resulting from the Escrow Agent's bad
faith, gross negligence or willful misconduct; provided, however, that promptly
after the receipt by the Escrow Agent of notice of any claim or the commencement
of any suit, action or proceeding, the Escrow Agent shall, if a claim of
indemnification in respect thereof is to be made against any of the other
parties hereto, notify such other parties thereof in writing; and provided,
further, that the indemnifying party or parties shall be entitled, jointly or
severally and at their own expense, to participate in or assume the defense of
any such action, suit or proceeding. The right of the Escrow Agent (or any
successor escrow agent appointed hereunder) to indemnification under this
Section 3.7 shall survive the termination of this Agreement.
3.8 Sommer & Schneider LLP.
(a) Each party acknowledges that Sommer & Schneider LLP has
acted as legal counsel to and representative of Purchaser and its affiliates in
the past and is presently doing so (including, without limitation, in connection
with the Exchange Agreement and other related transactions), and agrees that
such counsel and representation do not and will not constitute a grounds for
disqualifying Sommer & Schneider LLP from acting as Escrow Agent hereunder, and
that Sommer & Schneider LLP may continue to so act as legal counsel to and
representative to Purchaser and its affiliates in the future in connection with
those and all other matters.
(b) Notwithstanding anything to contrary contained herein, it
is expressly understood by the parties hereto that the Escrow Agent, in that
capacity, at any time that it is required or permitted to seek legal counsel
under this Agreement, may seek such legal counsel from Sommer & Schneider LLP,
and that the Purchaser and the Shareholders will be jointly liable to Sommer &
Schneider LLP for any services performed and billed to the Escrow Agent by
Sommer & Schneider LLP at its customary hourly rates and all of Sommer &
Schneider LLP's disbursements in connection with the provision of such services.
Section 4 MISCELLANEOUS
4.1 Term. This Agreement shall continue in force until the final
distribution of all amounts held by the Escrow Agent in the Escrow Deposit.
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4.2 Notices. All notices and other communications hereunder shall be
given in writing and delivered personally, by registered or certified mail
(postage prepaid, return receipt requested), by overnight courier (postage
prepaid), facsimile transmission or similar means, to the party to receive such
notices or communications at the address set forth below (or such other address
as shall from time to time be designated by such party to the other parties in
accordance with this Section 5.2):
If to the Shareholders:
L. David Tomei
3018 California Street
San Francisco, CA 94115
Samuil Umansky
6034 Monterey Avenue
Richmond, CA 94805
Hovsep S. Melkonyan
950 Evelyn Avenue
Albany, CA 94706
Anatoly V. Lichtenstein
32 Kashirskoe shosse, Bldg 3, Apt. 229
Moscow, Russia 115522
Kathryn P. Wilke
769 Horizon Drive
Martinez, CA 94553
If to Purchaser, addressed:
Used Kar Parts, Inc.
3 West 57th Street
New York, NY 10019
Attention: President
Telephone No.: (646) 442-4985
With a copy to:
Sommer & Schneider LLP
595 Stewart Avenue, Suite 710
Garden City, NY 11530
Attention: Herbert H. Sommer
Telecopier No.: (516) 228-8181
Telephone No.: (516) 228-8211
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If to the Escrow Agent:
Sommer & Schneider LLP
595 Stewart Avenue, Suite 710
Garden City, NY 11530
Attention: Herbert H. Sommer
Telecopier No.: (516) 228-8181
Telephone No.: (516) 228-8211
All such notices and communications hereunder shall be deemed given when
received, as evidenced by the signed acknowledgment of receipt of the person to
whom such notice or communication shall have been personally delivered, the
acknowledgment of receipt returned to the sender by the applicable postal
authorities or the confirmation of delivery rendered by the applicable overnight
courier service. A copy of any notice or other communication given by any party
to any other party hereto, with reference to this Agreement, shall be given at
the same time to the other parties to this Agreement.
4.3 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective representatives, successors
and assigns. Neither this Agreement nor any rights, duties or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the parties hereto.
4.4 Attorney-in-Fact. The parties hereby agree that any of the
documents comprising Escrow Deposits as are undated or incomplete shall, if
necessary when and if released from escrow hereunder, be dated as of the date of
such release and delivery and/or completed by the Escrow Agent, and each of the
parties hereto hereby appoints the Escrow Agent as its attorney-in-fact for the
purpose of dating and completing such documents.
[SIGNATURE PAGE FOLLOWS]
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IN WlTNESS WHEREOF, the parties hereto have executed this Shareholder
Escrow Agreement as of the date first above set forth.
"Purchaser:" Used Kar Parts, Inc.,
a Florida Corporation
By: /s/ Christoph Bruening
---------------------------
Its: President
"SHAREHOLDERS:" /s/ L. David Tomei
---------------------------
L. David Tomei
/s/ Samuil Umansky
---------------------------
Samuil Umansky
/s/ Hovsep S. Melkonyan
---------------------------
Hovsep S. Melkonyan
/s/ Anatoly V. Lichtenstein
---------------------------
Anatoly V. Lichtenstein
/s/ Kathryn P. Wilke
---------------------------
Kathryn P. Wilke
"ESCROW AGENT:" Sommer & Schneider LLP
By: /s/ Herbert H. Sommer
---------------------------
Herbert H. Sommer, Partner
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Schedule A
List of Shareholders
PURCHASER ESCROWED
SHAREHOLDERS SHARES SHARES
- ------------ ------ ------
L. David Tomei 938,360 124,671
Samuil Umansky 885,809 117,689
Hovsep S. Melkonyan 348,803 46,342
Anatoly V. Lichtenstein 66,689 8,861
Kathryn P. Wilke 18,340 2,437
Totals 2,258,001 300,000
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