EXHIBIT 10.3
ESCROW INSTRUCTIONS
THESE ESCROW INSTRUCTIONS (the "ESCROW INSTRUCTIONS") are entered into as
of July 15, 1998, by and among The Producers Entertainment Group Ltd., a
Delaware corporation ("PARENT"), Tom Daniels and Craig Sussman (each
individually a "STOCKHOLDER" and collectively, the "STOCKHOLDERS"), and OTR,
Inc., doing business as Oxford Transfer and Registrar, as the escrow agent
hereunder ("ESCROW AGENT"), and made with reference to the following facts:
A. Parent, the Stockholders, TPEG Merger Company, a California
corporation, and MWI Distribution, Inc., a California corporation ("MWI"), have
entered into that certain Agreement of Merger dated as of July 15, 1998 (the
"MERGER AGREEMENT").
B. Pursuant to the Merger Agreement, Parent is required, upon the
satisfaction of certain conditions, to deliver to the Stockholders through the
escrow created by these Escrow Instructions up to, but in no event more than,
439,815 shares of Parent's common stock (the "ESCROW STOCK").
C. The parties are entering into these Escrow instructions pursuant to
the Merger Agreement in order to provide for the delivery of the Escrow Stock to
the Stockholders.
Accordingly, the parties to these Escrow Instructions agree as follows:
. 1. DELIVERY OF ESCROW STOCK TO ESCROW AGENT. Parent agrees that the
Escrow Stock shall be represented by 24 separate certificates, 22 certificates
each representing 18,325 shares of the Escrow Stock, and two certificates each
representing 18,332.5 shares of the Escrow Stock (the certificates so delivered
to Escrow Agent are referred to collectively as the "STOCK CERTIFICATES"). At
the Closing (as defined in the Merger Agreement), and as a condition precedent
to the Stockholders' obligations to perform at the Closing, Parent shall deliver
to the Escrow Agent the Stock Certificates, each duly endorsed in blank. These
Escrow Instructions shall be effective as of the time Escrow Agent receives the
Stock Certificates. Upon Escrow Agent's receipt of the Stock Certificates,
Escrow Agent shall hold the Stock Certificates in trust for the benefit of
Parent and the Stockholders, as applicable, to be distributed pursuant to the
terms of these Escrow Instructions.
2. INSTRUCTIONS TO ESCROW AGENT. If at any time Escrow Agent receives
a notice signed jointly by Parent and the Stockholders setting forth
instructions to the Escrow Agent regarding the disposition of any or all of
the Stock Certificates, Escrow Agent shall comply with such instructions.
Similarly, if at any time Escrow Agent receives a notice signed jointly by
Parent and the Stockholders that these Escrow Instructions have been
terminated, Escrow
Agent shall deliver any Stock Certificates held by Escrow Agent in accordance
with the instructions set forth in such notice. Upon such delivery, these
Escrow Instructions shall be deemed terminated and Escrow Agent shall be
released and discharged from all further obligations under these Escrow
Instructions.
3. PARTIAL DELIVERIES. If Escrow Agent is unable to deliver Escrow Stock
in accordance with these Escrow Instructions solely because Escrow Agent does
not hold Stock Certificates in the appropriate share increments, Escrow Agent
shall deliver as many shares of Escrow Stock as possible. Escrow Agent, in its
capacity as stock transfer agent for Parent, shall also promptly issue new stock
certificates representing the shares that were not delivered, and shall deliver
those certificates to the Stockholders. Parent agrees to cause Escrow Agent, as
Parent's stock transfer agent, promptly to issue and deliver such certificates
to the Stockholders. In no event, however, shall Escrow Agent deliver to the
Stockholders more than 439,815 shares of Escrow Stock.
4. DISPOSITION OF ESCROW STOCK.
4.1 With regard to delivery of the Escrow Stock, Parent and the
Stockholders shall instruct Escrow Agent in accordance with the provisions of
this paragraph. Promptly after the time Parent or any of its subsidiaries or
affiliates, including MWI and MergerCo (as defined in the Merger Agreement),
either earns Net Distribution Fees Receivable (as defined in the Merger
Agreement) so that Parent (or any such subsidiary or affiliate) would be
required to account for such Net Distribution Fees Receivable in accordance with
GAAP (as defined in the Merger Agreement), or receives any National Geographic
Proceeds (as defined in the Merger Agreement), Parent and the Stockholders shall
determine the number of shares of Escrow Stock that are required to be delivered
to the Stockholders and shall instruct Escrow Agent to deliver to the
Stockholders Stock Certificates representing those shares. The number of shares
of Escrow Stock so required to be delivered to the Stockholders shall equal (a)
the product of (i) the amount of such Net Distribution Fees or such National
Geographic Proceeds and (ii) 2.75, DIVIDED BY (b) 2.70.
4.2 All Escrow Stock that Escrow Agent is required to be delivered to
the Stockholders pursuant to these Escrow Instructions shall be delivered 1/2 to
Craig Sussman and 1/2 to Tom Daniels.
4.2 After the time Parent and its subsidiaries or affiliates have
received all Total Proceeds that can be received by Parent and its subsidiaries
or affiliates, Escrow Agent shall deliver to Parent any remaining shares of
Escrow Stock that he or she holds pursuant to these Escrow Instructions.
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5. DISPUTES. If Escrow Agent receives any notice from Parent or either
or both of the Stockholders that a bona fide dispute (a "DISPUTE") exists in any
way concerning shares of Escrow Stock, Escrow Agent may, in his or her sole and
absolute discretion, and without impairing his or her rights, deposit any or all
of the Stock Certificates with the clerk, or acting clerk, of the Superior Court
of Los Angeles County, California, in the City of Los Angeles,
interplead the parties hereto, and file his or her complaint in interpleader.
Upon taking such actions, Escrow Agent shall be relieved of all liability under
the terms of these Escrow Instructions as to the Escrow Stock so delivered.
Parent and the Stockholders agree to submit to the jurisdiction of such court,
and hereby appoint the clerk, or acting clerk, of such court as their agent for
service of all process in connection with such proceedings, provided that Escrow
Agent shall promptly mail to the parties copies of all such process. Should
Escrow Agent elect not to interplead Escrow Stock with respect to any Dispute,
then Escrow Agent shall retain custody of the Stock Certificates until either of
the following occurs:
5.1 Escrow Agent receives a notice signed jointly by Parent and the
Stockholders that the Dispute has been resolved, provided that such notice shall
contain joint instructions to Escrow Agent regarding delivery or retention of
the Escrow Stock; or
5.2 Escrow Agent receives any statement prepared by Parent's
independent auditors showing that Parent or its subsidiaries or affiliates
received Total Proceeds that, by applying the formula set forth in SECTION 4.1
above, would require Escrow Stock to be delivered to the Stockholders, in which
event Escrow Agent shall deliver to the Stockholders the Stock Certificates
representing such Escrow Stock.
6. ESCROW AGENT'S STANDARD OF CARE. Escrow Agent's duties under these
Escrow Instructions are solely ministerial. Escrow Agent shall not be liable for
any error of judgment, fact or law, or any act done or omitted to be done,
unless such act or omission was due to Escrow Agent's own gross negligence or
willful misconduct. Escrow Agent's determination as to any event, act or
condition shall not subject Escrow Agent to any claim, liability, or obligation
whatsoever, unless it is determined that Escrow Agent's acts or omissions
constituted gross negligence or willful misconduct. Escrow Agent shall not be
responsible for making any determination regarding the genuineness or validity
of any document or item deposited with him or her, or any signature appearing
thereon. Each of Parent and the Stockholders represents and warrants to Escrow
Agent that he or it has duly and validly authorized, executed and delivered
these Escrow Instructions, and that these Escrow Instructions constitutes his or
its valid and binding obligation, enforceable against he or it in accordance
with the terms of these Escrow Instructions.
7. CONFLICTING INSTRUCTIONS. If at any time Escrow Agent receives
conflicting notices, claims, demands or instructions, or if for any other reason
Escrow Agent is unable in good faith to make a determination with regard to the
Escrow Stock, Escrow Agent may refuse to take any action and retain the Escrow
Stock in his or her possession until Escrow Agent has received applicable
written instructions that Parent and the Stockholders have jointly signed.
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Upon receiving such written instructions, Escrow Agent shall act in
accordance with those instructions.
8. ESCROW AGENT'S RESIGNATION. Escrow Agent may resign from its duties
under these Escrow Instructions upon delivering to Parent and the Stockholders
ten days prior written notice to that effect. Upon such resignation, Parent and
the Stockholders shall mutually select a successor to act as the escrow agent
under these Escrow Instructions. Notwithstanding the foregoing provisions of
this paragraph, Escrow Agent's resignation shall in no event be effective until
a successor agrees to act as escrow agent under these Escrow Instructions,
provided that if no successor is appointed and acting within ten days after the
effectiveness of Escrow Agent's resignation, Escrow Agent may, in its sole and
absolute discretion, deliver the Stock Certificates into the court identified in
SECTION 5 above.
9. ADJUSTMENT FOR STOCK SPLITS, ETC.; DIVIDENDS, ETC. Parent and the
Stockholders agree that the Escrow Stock is subject to adjustment for stock
splits and other adjustments, as provided in SECTION 2 of the Merger Agreement.
For all purposes, including the payment of dividends and voting, ownership of
any Escrow Stock required to be delivered to the Stockholders pursuant to these
Escrow Instructions shall transfer to the Stockholders as of the time the
applicable Total Proceeds are payable to Parent or its subsidiaries or
affiliates.
10. NOTICES. All notices, statements and other documents that any party
is required or desires to give to any other party hereunder shall be given in
writing and shall be served in person by express mail, by certified mail, by
overnight delivery, or by facsimile at the respective addresses of the parties
as set below, or at such other addresses as may be designated in writing by such
party in accordance with the terms of this paragraph.
If to either Stockholder:
Craig Sussman
Tom Daniels
5757 Wilshire Boulevard, Penthouse
Los Angeles, California 90036
Facsimile: 323.634.6596
With a copy to:
Michael Wolf, Esq.
Wolf, Rifkin & Shapiro, LLP
11400 W. Olympic Boulevard, Ninth Floor
Los Angeles, California 90064-1565
Facsimile: 310.479.1422
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If to Parent:
Irwin Meyer
The Producers Entertainment Group Ltd.
5757 Wilshire Boulevard, Penthouse
Los Angeles, California 90036
Facsimile: 213.634.8635
With a copy to:
C. N. Franklin Reddick III, Esq.
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard, Suite 800
Los Angeles, California 90024-3902
Facsimile: 310.443.8512
If to Escrow Agent:
Oxford Transfer and Registrar
317 S.W. Adler, Suite 1120
Portland, Oregon 97204
Attn: Lori Livingston
Facsimile: 503.273.9168
Delivery shall be deemed conclusively made (i) at the time of
service, if personally served, (ii) when deposited in the United States mail,
properly addressed and postage prepaid, if delivered by express mail or
certified mail, (iii) upon deposit with the private overnight deliverer, if
served by overnight delivery, and (iv) at the time of electronic transmission
(as confirmed in writing), provided a copy is mailed within twenty-four (24)
hours after such transmission. The time to respond to any notice shall run
from the time the notice is actually delivered to the person to whom the
notice is addressed.
11. MISCELLANEOUS.
11.1 GOVERNING LAW. California law, without regard to conflict or
choice of law principles, shall govern the construction and interpretation of
these Escrow Instructions.
11.2 CONSTRUCTION. As used in these Escrow Instructions, "include"
and "including" mean include and including, without limitation.
11.3 PRONOUNS. All pronouns used in these Escrow Instructions shall
be deemed to refer to the masculine, feminine or neuter gender, as the context
requires.
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11.4 CAPTIONS. The section headings contained in these Escrow
Instructions are for reference purposes only and shall not in any way affect the
meaning or interpretation of these Escrow Instructions.
11.5 ENTIRE AGREEMENT. These Escrow Instructions set forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, between the parties.
11.6 AMENDMENTS; WAIVERS. These Escrow Instructions may be amended,
modified, superseded, canceled, renewed or extended and the terms or covenants
hereof may be waived, only by a written instrument executed by all the parties
hereto, or in the case of a waiver, by the party waiving compliance. The failure
of any party, at any time or times to require performance of any provision
hereof shall in no manner affect such party's right at a later time to enforce
the same. No waiver by any party of the breach of any term or covenant contained
in these Escrow Instructions, whether by conduct or otherwise, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such breach, or a waiver of the breach of any other term or
covenant contained in these Escrow Instructions.
11.7 COUNTERPARTS. These Escrow Instructions may be executed in one or
more counterparts, each of which shall be deemed an original, but together which
shall constitute one and the same document.
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IN WITNESS WHEREOF, each of the parties has caused the Escrow Instructions
to be duly executed as of the date first written above
"PARENT"
The Producers Entertainment Group Ltd.,
a Delaware corporation
By: /s/ IRWIN MEYER
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Irwin Meyer
Its: Chief Executive Officer
"STOCKHOLDERS"
/s/ CRAIG SUSSMAN
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Craig Sussman
/s/ TOM DANIELS
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Tom Daniels
"ESCROW AGENT"
OTR, Inc.,
doing business as
Oxford Transfer and Registrar Company
By:/s/ LORI LIVINGSTON
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Its: President
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