ESCROW AGREEMENT
ESCROW AGREEMENT ("Agreement") dated May 16, 2002 by and among ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, an individual resident in the State of South Carolina, Red Oak
Limited Partnership, a South Carolina limited partnership, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
an individual resident in the State of South Carolina (each an "ASDG
Shareholder"), the only three shareholders of American Sports Development Group,
Inc, a South Carolina corporation formerly known as National Paintball Supply
Company, Inc. ("ASDG"); ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, an individual resident in the State
of California ("Mulholland") and his attorney ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; Universal
Consultants, Inc., a Nevada corporation ("UCI"), National Financial, Inc., a
Nevada corporation ("NFI"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, an individual resident in the State
of California ("▇▇▇▇▇▇▇"), and their attorney ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇.
RECITALS
A. THE LAWSUIT.
A.1 ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. ("▇▇▇▇▇"), UCI, NFI and ▇▇▇▇▇▇▇
have entered into a Settlement Agreement dated December 7, 2001 (the
"Settlement Agreement"), resolving a legal action between UCI, NFI and ▇▇▇▇▇▇▇,
as plaintiffs (hereinafter collectively "Plaintiffs"), and ▇▇▇▇▇▇▇▇▇▇ and Ariss
solely in their individual capacities, as defendants, entitled UNIVERSAL
CONSULTANTS, INC., ET AL., ▇. ▇▇▇▇▇▇▇▇▇▇, ET AL., Case No. 01CC14645 (the
"Lawsuit"), filed on November 13, 2001 in the Superior Court of the State of
California, County of Orange (the "California Court"), which Settlement
Agreement has been approved by permanent protective order of the California
Court (the "Permanent Protective Order") filed December 31, 2001;
B. THE ASDG-INFLATABLES BUSINESS COMBINATION.
B.1 The ASDG Shareholders and American Inflatables, Inc., a Delaware
corporation ("Inflatables"), have entered into a Share Exchange Agreement dated
May 16, 2002 (the "Share Exchange Agreement"), pursuant to which the ASDG
Shareholders will exchange all of the outstanding stock of ASDG for an amount of
Inflatables common stock, par value $0.001 per share (the "Inflatables Common
Stock") having 83% of the voting and distribution rights of all outstanding
Inflatables securities on a fully-diluted basis (the "Share Exchange"), and
capitalized terms not otherwise defined herein shall have the same meaning as
defined in the Share Exchange Agreement;
B.2 The Share Exchange Agreement replaces that certain Reorganization
Agreement dated October 12, 2000, as amended by Amendments No. 1, 2 and 3 by and
between ASDG and Inflatables (the "Reorganization Agreement") that contemplated
the merger of a wholly-owned subsidiary of ASDG with and into Inflatables with
the result that Inflatables would have been a wholly-owned subsidiary of ASDG
(the "Merger") but which has been terminated in accordance with the replacing
and superseding Share Exchange Agreement concurrently executed this date.
B.3 The parties hereto desire that the Share Exchange Agreement shall
replace the Reorganization Agreement and the Share Exchange shall replace the
Merger for purposes of the Settlement Agreement and the Permanent Protective
Order.
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C. THE LAWSUIT SETTLEMENT.
C.1 Pursuant to the Settlement Agreement and Permanent Protective
Order, all of the shares of Inflatables Common Stock previously owned by
▇▇▇▇▇▇▇▇▇▇ - 3,053,984 shares (the "Escrow Shares") - have been secured under an
escrow agreement, as described in the Settlement Agreement and Permanent
Protective Order, and Exhibit I to each of them, currently jointly controlled
and in the possession of attorneys for the settling parties, ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇ (the "De Facto Escrow Officers"), under a Joint Special Power of
Attorney and as current de facto and temporary escrow officers.
C.2 Pursuant to the Settlement Agreement and Permanent Protective Order
the parties thereto will select a jointly approved escrow officer who will hold
the Escrow Shares in escrow (the "Settlement Escrow") within the State of
California, and under the continuing jurisdiction of the California Court, until
consummation of the Merger, at which time the Escrow Shares will be distributed
between UCI, NFI, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇ according to formulae set forth
in the Settlement Agreement, which distribution will be completed either by June
5, 2002 or 120 days after consummation of the Merger, whichever is the later
date, or upon termination of the Reorganization Agreement or failure of the
Merger.
C.3 Pursuant to the Settlement Agreement and Permanent Protective Order
the Settlement Escrow will deliver to NFI its 1,250,000 Escrow Shares
immediately on consummation of the Merger or the termination of the
Reorganization Agreement.
C.4 Pursuant to the Settlement Agreement and the Share Exchange
Agreement and related attachments, UCI has agreed to exercise a warrant for 1.32
million Inflatables Shares at $0.25 per share for which payment has been made by
discharge of the principle amount of that certain Secured Promissory Note dated
December 12, 2000 in the principal amount of $330,000 with Inflatables as maker
and UCI as payee (the "UCI Note"), with ▇▇▇▇▇▇▇▇▇▇ as guarantor, leaving only
payment of the accrued interest at ten percent (10%) per annum commencing on
December 12, 2000 and concluding on the date of exercise of the warrant, as to
the principle, and the same rate on unpaid interest until paid in full, for
which UCI has released Inflatables and for which ▇▇▇▇▇▇▇▇▇▇ has accepted
exclusive responsibility and, in accordance therewith, has irrevocably agreed to
and transferred to the Settlement Escrow for the exclusive benefit of Plaintiffs
sufficient Escrow Shares to fully compensate for the accrued interest.
C.5 Pursuant to the Settlement Agreement and Permanent Protective
Order, ▇▇▇▇▇▇▇▇▇▇ has irrevocably agreed to and transferred to the Settlement
Escrow for the exclusive benefit of Plaintiffs sufficient Escrow Shares to fully
compensate for all legal costs, including attorneys' fees (collectively "Legal
Costs") accrued as of the date of the Settlement Agreement in connection with
the Lawsuit, as specified in the Settlement Agreement, in the then stipulated
sum of $95,127, plus all Legal Costs thereafter accrued in the implementation of
the settlement contemplated therein through and including the consummation of
the Merger and the final distribution of Escrow Shares, as assessed in the sole
and exclusive discretion of Plaintiffs, in the additional amount of $85,043, for
a cumulative total of $180,160, inclusive of interest to date.
C.6 Pursuant to the Settlement Agreement and Permanent Protective Order
the final calculation of the amounts of outstanding interest accrued on the UCI
Note and Legal Costs owed to Plaintiffs to be paid by Escrow Shares from the
Escrow Settlement will be made by an assessment process on a valuation date -
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which will assess the amounts owed and the then current formulaically-determined
value of the remaining Escrow Shares, as determined by the Plaintiffs in their
sole and exclusive discretion, with written notice to ▇▇▇▇▇▇▇▇▇▇ but otherwise
without recourse to, nor consent or further authorization from, ▇▇▇▇▇▇▇▇▇▇
concerning any part of the assessment or valuation - which assessment and
valuation will be completed no later than June 5, 2002 or 120 days after
consummation of the Merger, whichever is the later date, or upon termination of
the Reorganization Agreement or failure of the Merger.
C.7 Pursuant to the Settlement Agreement and Permanent Protective
Order, ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ have executed - and the Court has approved and
appended to its Permanent Protective Order - a Confession to Judgment under the
laws of the State of California which, if filed by Plaintiffs for any violation
or breach of the Settlement Agreement or Protective Order, as determined by
Plaintiffs in their sole and exclusive discretion, provide the California Court
the powers, inter alia, without further proceedings our recourse to or consent
or authorization by ▇▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇, to direct the distribution of the
Escrow Shares in accordance with that Confession to Judgment, which include
inter alia, for the aforementioned distribution of Escrow Shares to Plaintiffs.
C.8 The certificates representing the Escrow Shares are currently in a
locked safety deposit box of a commercial California Bank, Union Bank of
California, under the joint control of the De Facto Escrow Officers, and,
pursuant to the Settlement Agreement, Permanent Protective Order and Joint
Special Power of Attorney, will remain there until either selection of a
replacement escrow officer or distribution of the Escrow Shares in accordance
with the Settlement Agreement and Permanent Protective Order.
D. THE ▇▇▇▇▇▇▇▇▇▇ GUARANTY FOR THE ASDG-INFLATABLES BUSINESS
COMBINATION.
D.1 ▇▇▇▇▇▇▇▇▇▇ has guaranteed the performance of Inflatables'
obligations under the Share Exchange Agreement pursuant to a Guaranty of even
date herewith (the "Guaranty").
D.2 The Guaranty provides for the deposit by ▇▇▇▇▇▇▇▇▇▇ of 875,000 of
the Escrow Shares (the "▇▇▇▇▇▇▇▇▇▇ Guaranty Shares"), which shares and any other
securities or property described in Section 4 (collectively, the "Escrow Fund")
shall constitute security for the performance of ▇▇▇▇▇▇▇▇▇▇'▇ obligations under
the Guaranty.
E. THE JOINT ESCROW.
E.1 Plaintiffs, the ASDG Shareholders and ▇▇▇▇▇▇▇▇▇▇ (the "Parties")
desire to utilize the joint escrow contemplated in this Agreement (the "Joint
Escrow") for expedience and to effectuate the purposes of the Settlement
Agreement, Permanent Protective Order, Settlement Escrow and Confession to
Judgment, as applicable, and the purposes of the Guaranty and Escrow Fund, as
applicable; and
E.2 Plaintiffs, the ASDG Shareholders and ▇▇▇▇▇▇▇▇▇▇ greatly desire
that the Share Exchange be consummated; however, Plaintiffs and the ASDG
Shareholders are unwilling to enter into the transactions contemplated in the
Share Exchange Agreement and related attachments without ▇▇▇▇▇▇▇▇▇▇'▇ entry into
the Guaranty and without the Joint Escrow contemplated herein, which combines
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the Settlement Escrow and the Escrow Fund, and each of them; and, further, each
of the Parties desires to enter into this Agreement and the transactions
contemplated herein to induce the other parties to enter into the transactions
contemplated in the Share Exchange Agreement and related attachments.
▇. ▇▇▇▇▇▇▇▇▇▇▇ LITIGATION.
F.1 ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, dba ▇▇▇▇▇▇▇▇▇▇▇ & Associates ("Copenbarger"),
has alleged that he is a judgment creditor of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ in connection
with action number 807767, in the California Court, entitled Copenbarger ▇.
▇▇▇▇▇.
F.2 Copenbarger has brought an action (case no. 02CC05-736, the
"Copenbarger Action") in the California Court naming UCI, NFI, Paintball
Incorporated (which may be a reference to ASDG), Inflatables, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and Does 1 through 100 as defendants (each a "Copenbarger
Defendant") seeking an order forbidding any such defendant from transferring
property belonging to ▇▇. ▇▇▇▇▇▇▇▇▇▇.
F.3 The California Court has enjoined the Copenbarger Defendants from
transferring any shares of stock of Inflatables in which ▇▇. ▇▇▇▇▇▇▇▇▇▇ has an
interest until completion of proceedings therein or until further order of
Court.
F.4 The parties hereto desire to enter into this Agreement prior to
resolution of the Copenbarger Action and therefore intend this Agreement to not
conflict in any way with, any order of any California Court pertaining to the
securities that are the subject matter of this Agreement.
F.5 This agreement, to the extent that it purports to secure the
Guaranty of ▇▇▇▇▇▇▇▇▇▇ to the ASDG Shareholders with the deposit of 875,000
Escrow Shares, is subject and subordinate to any order of the California Court
applicable to such shares whether in the action entitled Copenbarger v. ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, et al., Case No. 807767 or otherwise.
F.6 This Agreement, which fully carries forward the ownership,
interests, rights and entitlements of the Plaintiffs in and to the Escrow Shares
in accordance with the Settlement Agreement and Protective Order, does not
purport, and the parties to this Agreement do not intend, to diminish, modify,
alter or otherwise restrict that ownership, interests, rights and entitlements
of the Plaintiffs as they stood as of the date of execution of the Settlement
Agreement on December 7, 2001 and entry of the Protective order on December 31,
2001.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in the Share Exchange Agreement and related attachments,
and in order to induce each other to enter into the Share Exchange Agreement and
related attachments, and to subsume the Settlement Escrow and Escrow Fund into a
single Joint Escrow, the Parties hereby agree as follows:
1. APPOINTMENT. The De Facto Escrow Officers and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ are
hereby appointed as Joint Escrow Officers (hereinafter collectively referred to
in the singular as "Escrow Officer") to accept, retain and dispose of the Joint
4
Escrow in accordance with the provisions of this Agreement. The Escrow Officer
hereby accepts such appointment and agrees to accept, retain and dispose of the
Escrow Shares and other property deposited with the Escrow Officer (the "Escrow
Corpus") in accordance with the provisions of this Agreement. Except as
expressly directed in this Agreement or by the Permanent Protective Order, the
Escrow Officer may not take action or make any decision hereunder unless the De
Facto Escrow Officers and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ unanimously agree to the action
taken or decision made, and as to any act expressly directed by this Agreement
or the Permanent Protective Order, the De Facto Escrow Officers and ▇▇. ▇▇▇▇▇▇
will each cooperate to effect such act.
2. DEPOSIT OF ESCROW CORPUS. The Parties hereby direct the De Facto
Escrow Officers to deposit with the Escrow Officer, and the Escrow Officer
hereby acknowledges receipt of, the certificates for all Escrow Shares in full
satisfaction of ▇▇▇▇▇▇▇▇▇▇'▇ obligations to make deposits with the Escrow
Officer under the Settlement Agreement, Permanent Protective Order and Guaranty.
Within ten (10) days thereafter the De Facto Escrow Officers will secure from
the California Court any necessary order amending the Permanent Protective Order
to provide for this Joint Escrow as superseding the Settlement Escrow, in
accordance with the terms of this Agreement, and affording, with assistance from
counsel for the ASDG Shareholders, jurisdiction of the California Court to
enforce the terms and interests of the ASDG Shareholders in the Joint Escrow.
Until such Amendment of the Permanent Protective Order is filed and entered by
the California Court, the existing Permanent Protective Order remains in full
force and effect, and its terms govern in the event of any conflict between the
Permanent Protective Order and this Agreement.
3. PRIORITY OF ESCROW AGREEMENTS. The Parties hereto hereby agree that
distribution of the Escrow Shares will be made as follows, in the indicated
order:
a. Upon consummation of the Share Exchange Agreement, or its
termination or failure of the Share Exchange, but no later than five
(5) business days thereafter, 1,250,000 Escrow Shares will be delivered
to NFI, and ▇▇▇▇▇▇▇▇▇▇ will cooperate with NFI in executing and
delivering all necessary documents to effect the delivery to NFI of its
1,250,000 Escrow Shares as required in the Settlement Agreement and
Permanent Protective Order, as further described in Paragraphs C.2, C.3
and 5.g of this Agreement, or if applicable, the Confession to Judgment
as further described in Paragraphs C.7, 5.d and 5.g of this Agreement.
b. No later than either June 5, 2002, or 120 days after
consummation of the Share Exchange Agreement, whichever is later, and
on a date selected by Plaintiffs in their sole discretion on three (3)
days notice to ▇▇▇▇▇▇▇▇▇▇ and the ASDG Shareholders, or upon
termination of the Share Exchange Agreement or failure of the Share
Exchange, Plaintiffs and the Escrow Officer will complete the
assessment and evaluation process as specified in the Settlement
Agreement and Permanent Protective Order, and the required number of
Escrow Shares will be delivered to UCI, for accrued interest on the UCI
Note, and to Plaintiffs, for the total amount of Legal Costs to be paid
by Escrow Shares under the Settlement Agreement and Permanent
Protective Order, and their implementation, and as further described in
Paragraphs C.2, C.5, C.6, 5.e, 5.f and 5.g of this Agreement, and
5
▇▇▇▇▇▇▇▇▇▇ will cooperate with UCI and the Plaintiffs in executing and
delivering all necessary documents to effect the delivery to UCI and
the Plaintiffs of such Escrow Shares as required in the Settlement
Agreement and Permanent Protective Order, or if applicable, the
Confession to Judgment as further described in Paragraphs C.7, 5.d and
5.g of this Agreement.
c. Upon completion of the distributions to Plaintiffs as
described herein, the Plaintiffs will completely withdraw from the
Joint Escrow, and will have no further powers obligations, duties,
rights or interests in the Escrow Corpus; thereafter, the sole
remaining powers, obligations, duties, rights and interests in the
Joint Escrow and Escrow Corpus shall be those belonging solely to the
ASDG Shareholders and ▇▇▇▇▇▇▇▇▇▇, in accordance with this Agreement and
the Guaranty; provided, however, this agreement to secure the Guaranty
of ▇▇▇▇▇▇▇▇▇▇ with the deposit of 875,000 Escrow Shares is subject and
subordinate to all orders of the California Court pertaining to such
shares, whether in the action entitled Copenbarger v. ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, et al., Case No. 807767 or otherwise.
.
d. Also upon completion of the deliveries of Escrow
Shares to Plaintiffs as described herein and solely on the condition
that such deliveries have actually been made in their entireties with
all necessary documentation with the Transfer Agent and delivery of the
correct stock certificates, (i) all Shares remaining in the Escrow
Corpus after such distributions in excess of 875,000 shares shall be
distributed to ▇▇▇▇▇▇▇▇▇▇, and (ii) the balance of the Escrow Corpus
shall be distributed between the ASDG Shareholders and ▇▇▇▇▇▇▇▇▇▇ in
accordance with Section 6 of this Agreement, except as limited by any
outstanding order of any court of competent jurisdiction applicable
to such shares, including without limitation the California Court in
the action entitled Copenbarger v. ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, et al., Case No. 807767.
4. DUTY OF CARE. The Escrow Officer shall hold and safeguard the Escrow
Corpus and shall treat the Escrow Corpus as a trust fund in accordance with the
provisions of this Agreement. Any shares of Inflatables Common Stock or other
securities or property payable with respect to the Escrow Corpus as a result of
any stock dividend, split-up or combination, or into which ASDG Common Stock
shall be converted or exchanged as a result of any merger, reclassification or
reorganization shall constitute a part of the Escrow Fund and shall be retained
and disposed of in accordance with the provisions of this Agreement and the
Permanent Protective Order. The Escrow Officer is prohibited from causing or
permitting the Escrow Shares, and any certificates of ownership thereof, to
leave the State of California, and from releasing them from the sole and
exclusive control of the Escrow Officer or his company, except as expressly
empowered to do so by this Agreement, and by this Agreement acknowledges service
and receipt of the Permanent Protective Order and knowledge of its contents in
their entirety.
5. ASSESSMENT AND EVALUATION PROCESS FOR DISBURSEMENT OF ESCROW CORPUS
TO PLAINTIFFS. The assessment and evaluation process for delivery of Escrow
Shares to UCI for accrued interest on the UCI Note, and to Plaintiffs for Legal
Costs under the Settlement Agreement and Permanent Protective Order and their
implementation, as referenced in Paragraph 4(b) of this Agreement, shall be
conducted by Plaintiffs, ▇▇▇▇▇▇▇▇▇▇, the ASDG Shareholders and the Escrow
Officer as follows:
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a. A "Valuation Date" will be set for determining, for
purposes of distribution, the Stock Value of Inflatables Common Stock
in the Joint Escrow, which date shall be no earlier than the date of
consummation or failure of the Share Exchange or termination of the
Share Exchange Agreement and no later than the later of (i) June 5,
2002 or (ii) one hundred twenty (120) days after the date of
consummation or failure of the Share Exchange or termination of the
Share Exchange Agreement, but otherwise at such date as Plaintiffs
shall select, in their sole and exclusive discretion, by written notice
to ▇▇▇▇▇▇▇▇▇▇, the ASDG Shareholders and the Escrow Officer.
b. The "Assessment Date" will be three (3) business days prior
to the Valuation Date, at which time a current written Statement of
Account will be delivered by Plaintiffs to ▇▇▇▇▇▇▇▇▇▇, the ASDG
Shareholders and the Escrow Officer, setting forth the amounts of any
accrued interest from the UCI Note and Legal Costs incurred by
Plaintiffs as specified under the Settlement Agreement and Permanent
Protective Order and their implementation, to be paid from the Escrow
Corpus to Plaintiffs in accordance with the Settlement Agreement and
Permanent Protective Order, or the Confession to Judgment, as
applicable, which Statement of Account shall not be subject to dispute
by ▇▇. ▇▇▇▇▇▇▇▇▇▇ or the Escrow Officer and which may be disputed by
the ASDG Shareholders solely with respect to violations of the
Plaintiffs' obligations under Paragraphs 5.e and 5.f of this Agreement.
c. The Plaintiff's, in their sole discretion, may change the
Valuation Date to any time within the time period permitted under
Paragraph 5(a) by written notice to ▇▇▇▇▇▇▇▇▇▇, the ASDG Shareholders
and the Escrow Officer.
d. Irrespective of any other provision of this Agreement, the
Settlement Agreement or the Permanent Protective Order, upon personal
service of a certified and conformed copy of any judgment of the
California Court in the Lawsuit, the Escrow Officer will comply with
any provisions thereof by delivering within five (5) business days to
Plaintiffs' designee(s), given in writing to the Escrow Officer along
with service of the Judgment, the number of Escrow Shares stated
therein by delivering any certificates of ownership sufficient to meet
that obligation; and in connection therewith, the parties will hold the
Escrow Officer harmless, and the Plaintiffs and ▇▇▇▇▇▇▇▇▇▇ will
indemnify the Escrow Officer, for any act taken in compliance with said
Judgment.
e. As of May 5, 2002, the total accrued interest on the UCI
Note is $47,521 and interest on the UCI Note thereafter shall accrue at
the rate of ten percent (10%) per annum on that current total accrued
interest, for a maximum of $49,302 assuming that the Assessment and
Valuation Dates selected by Plaintiffs is the last date possible under
the Settlement Agreement and Protective Order, as described herein.
Notwithstanding any other provision of this Agreement, the Settlement
Agreement or the Permanent Protective Order to the contrary, the amount
to be paid to Plaintiffs from the Escrow Shares with respect to accrued
interest on the UCI Note shall not exceed the amount set forth in this
Paragraph 5(e) without the prior written consent solely of the ASDG
Shareholders, which consent shall not be unreasonably withheld.
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f. As of May 5, 2002, the total accrued Legal Costs are
$180,160. Legal Costs accruing thereafter, which may include legal
costs in connection with defense of the Copenbarger Action and
defending the Settlement Escrow and the Joint Escrow from intervention
by Copenbarger, shall be the number of hours actually worked by ▇▇.
▇▇▇▇▇▇▇▇▇ and his staff multiplied by the normal applicable hourly
rates for ▇▇. ▇▇▇▇▇▇▇▇▇ and his staff (which are $400 per hour for ▇▇.
▇▇▇▇▇▇▇▇▇, $200 per hour for ▇▇. ▇▇▇▇▇▇▇▇▇'▇ associate, $50 per hour
for paralegals and no charge for secretarial and other support staff)
plus reasonable expenses. Notwithstanding any other provision of this
Agreement, the Settlement Agreement or the Permanent Protective Order
to the contrary, Plaintiffs and the ASDG Shareholders agree, solely
between themselves, that under no circumstances shall total Legal Costs
exceed $250,000 without the prior written consent solely of the ASDG
Shareholders, which consent shall not be unreasonably withheld by the
ASDG Shareholders. This limitation in no way restores to, nor creates
in, ▇▇. ▇▇▇▇▇▇▇▇▇▇ any right, title, interest, control, discretion in
or right to object to any Assessment submitted by Plaintiffs nor the
distribution of the Escrow Shares to Plaintiffs, and inures solely to
the benefit of the ASDG Shareholders.
g. It is the collective and unanimous legal opinion of Messrs.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, as both counsel for the respective
defendants in the Copenbarger Action and as Escrow Officer herein, that
there is no bar under the Preliminary Injunction issued by the
California Court in the Copenbarger Action, or any other order issued
by the California Court order in the Copenbarger Action, to the
delivery to Plaintiffs of the Escrow Shares as specified in the
Permanent Protective Order and Paragraphs ▇.▇, ▇.▇, ▇.▇, ▇.▇, ▇.▇.,
▇.▇, ▇.▇, 5.d, 5.e and 5.f of this Agreement, nor to the execution of
any documents necessary to have the shares issued in the names of the
Plaintiffs as directed by Plaintiffs, as specified in the Stipulation
entered with the Permanent Protective Order in the Lawsuit, which
stipulation is herewith approved by the Escrow Officer and attached
hereto and incorporated by reference; and in connection therewith, the
parties will hold the Escrow Officer harmless, and the Plaintiffs and
▇▇▇▇▇▇▇▇▇▇ will defend and indemnify the Escrow Officer, including
reasonable attorneys' fees and legal costs, for any act taken in
compliance with the Permanent Protective Order and Paragraphs ▇.▇, ▇.▇,
▇.▇, ▇.▇, ▇.▇., ▇.▇, ▇.▇, 5.d, 5.e and 5.f of this Agreement.
▇▇▇▇▇▇▇▇▇▇, in turn, will indemnify Plaintiffs for any expenses,
liability or obligations incurred by Plaintiffs under this
indemnification clause, and such expenses, liability and obligations
will be deemed an expense of this escrow and a Legal Cost hereunder for
which Plaintiffs are entitled to full reimbursement under the
Assessment and Valuation Process.
6. DISBURSEMENT OF ESCROW CORPUS TO THE ASDG SHAREHOLDERS. The
retention, maintenance and distribution, if applicable, of Escrow Shares to the
ASDG Shareholders under the Guaranty, as referenced in Paragraph 4(d) of this
Agreement, shall be conducted by the ASDG Shareholders, ▇▇▇▇▇▇▇▇▇▇ and the
Escrow Officer as follows:
a. The Escrow Corpus, exclusive of any distribution to
Plaintiffs and ▇▇▇▇▇▇▇▇▇▇ in accordance with Paragraphs 4(a), 4(b) & 5 of this
Agreement, and the Settlement Agreement and Permanent Protective Order, shall
be:
(i) retained by the Escrow Officer until the first
anniversary of the date hereof (the "Guaranty Termination Date");
8
(ii) available to satisfy any one or more claims from
time to time made by any ASDG Shareholder under the Share Exchange
Agreement and the Guaranty; and
(iii) disbursed only to (A) ASDG Shareholders in
accordance with the provisions of Paragraphs 6(b) or 6(c), of this
Agreement, (B) to ▇▇▇▇▇▇▇▇▇▇ in accordance with the provisions of
Paragraph 6(c) of this Agreement, or (C) to a Successor Escrow Officer
in accordance with the provisions of Paragraph 9.
b. In order to make a claim against the Escrow Corpus (which
claim shall, if appropriate, include interest thereon at the rate equal to the
South Carolina statutory pre-judgment rate of interest), an ASDG Shareholder
shall deliver to the Escrow Officer either:
(i) a certificate signed by the ASDG Shareholders and
▇▇▇▇▇▇▇▇▇▇ stating in reasonable detail the factual and legal basis for
and the amount of such claim, the resolution thereof agreed to by the
ASDG Shareholders and ▇▇▇▇▇▇▇▇▇▇, and instructions as to the number of
shares to be disbursed to the ASDG Shareholders by the Escrow Officer
in satisfaction of such claim (a "Certificate of Claim Resolution"), or
(ii) a copy of a final, non-appealable order of a
court, arbitrator(s) or other tribunal of competent jurisdiction (a
"Final Order") ordering the Escrow Officer to pay an amount specified
in such Final Order to one or more ASDG Shareholder(s).
Upon receipt of a Certificate of Claim Resolution or a Final Order, the Escrow
Officer shall as soon as practicable, and in any event within ten (10) days,
thereafter pay the amount set forth in such Certificate of Claim Resolution or
Final Order (the "Claim Amount") to the ASDG Shareholder(s) by delivering or
causing to be delivered to the ASDG Shareholder(s) certificate(s) registered in
the name of the ASDG Shareholder(s) for a number of whole shares of Inflatables
Common Stock equal to the Claim Amount divided by the Stock Value; provided,
however, that, if the Escrow Corpus contains property other than Inflatables
Common Stock, the ASDG Shareholders shall be entitled to designate the relative
portions of the Claim Amount that shall be paid by Inflatables Common Stock and
the other property.
c. As soon as practicable after the Guaranty Termination
Date, and in any event within thirty (30) days thereafter:
(i) If there is not then any unresolved Notice of a
Pending Claim (as defined below) from any ASDG Shareholder, the Escrow
Officer shall automatically deliver, or cause to be delivered the
entire remaining Escrow Corpus to ▇▇▇▇▇▇▇▇▇▇. Upon such delivery, this
Agreement shall terminate.
(ii) If there is then unresolved one or more written
notices (a "Notice of a Pending Claim"), signed by an ASDG Shareholder,
stating in reasonable detail the factual and legal basis for and the
amount of one or more then unresolved claims against the Escrow Corpus
and such unresolved claims are for an amount equal to or in excess of
the balance of the Escrow Corpus (based on the Stock Value at the
Guaranty Termination Date), the Escrow Officer shall continue to hold
the Escrow Corpus until resolution of any such unresolved claim by a
Certificate of Claim Resolution or a Final Order. Upon receipt of such
9
Certificate of Claim Resolution or Final Order, the Escrow Officer
shall (x) pay to the ASDG Shareholder(s) the amount set forth in such
Certificate of Claim Resolution or such Final Order in accordance with
the provisions of Section 6(b), (y) retain as much of the Escrow Corpus
as is necessary to cover the full amount of any then still unresolved
claims, and (z) deliver to ▇▇▇▇▇▇▇▇▇▇ the balance, if any, of the
Escrow Fund in accordance with the provisions of Paragraph 6(c)(i).
Upon the payment of the entire Escrow Corpus in accordance with the
provisions of this Paragraph 6(c)(ii), this Agreement shall terminate.
(iii) If there is then unresolved one or more Notices
of a Pending Claim, and the amount of such unresolved claims (based on
the Stock Value at the Guaranty Termination Date) is for an amount less
than the balance of the Escrow Corpus, the Escrow Officer shall deliver
to ▇▇▇▇▇▇▇▇▇▇ the excess of the balance of the Escrow Corpus over the
full amount of any then unresolved claims as the case may be, in
accordance with the provisions of Paragraph 6(c)(i). The remaining,
balance of the Escrow Corpus shall be retained and disposed of in
accordance with the provisions of Paragraph 6(c)(ii).
7. VALUE OF ESCROW SHARES. For all purposes of Paragraphs 4, 5 & 6 of
this Agreement, the "Share Value" of Escrow Shares in the Joint Escrow shall be
deemed to be: (A) the average closing price of Inflatables Common Stock over the
20 trading days prior to the date of determination if Inflatables Common Stock
is traded on a national securities exchange or an NASD market in which closing
prices are regularly quoted; (B) the average ask price at the close of trading
over the 20 trading days prior to the date of determination if Inflatables
Common Stock is traded on a market for which bid and ask prices but not closing
sale prices are regularly quoted; or (C) the fair market value of Inflatables
Common Stock as determined by an accounting firm selected by Inflatables'
independent auditors if no closing or ask price is available as contemplated in
clauses (A) or (B) above. If the Escrow Corpus consists of securities or
property other than Inflatables Common Stock, any reference in this Paragraph 7
to "Inflatables Common Stock" shall include such other securities or property,
and the Stock Value of each unit thereof shall be equal to the fair market value
thereof, as reasonably determined by an accounting firm selected by Inflatables'
independent auditors.
8. TERMS AND CONDITIONS TO ESCROW OFFICER'S ACCEPTANCE. Acceptance by
the Escrow Officer of its duties under this Agreement is subject to the
following terms and conditions, which the parties to this Agreement hereby agree
shall govern and control the rights, duties and immunities of the Escrow
Officer:
(a) The duties and obligations of the Escrow Officer shall be
determined solely by the express provisions of this Agreement and the Permanent
Protective Order, and the Escrow Officer shall not be bound by the provisions of
the Share Exchange Agreement or any other agreement between or among Plaintiffs,
ASDG, the ASDG Shareholders, Inflatables, ▇▇▇▇▇▇▇▇▇▇ or any other person;
(b) The Escrow Officer shall not be responsible for any
failure or inability of the other parties to this Agreement, or of any one else,
10
to deliver monies or other property to the Escrow Officer or otherwise to honor
any of the provisions of this Agreement;
(c) The annual fee of the Escrow Officer in administering this
Agreement shall be borne by ▇▇▇▇▇▇▇▇▇▇. ▇▇▇▇▇▇▇▇▇▇ and the Escrow Corpus will
jointly indemnify the Escrow Officer for, and hold it harmless against, any
loss, liability or expense, including reasonable attorneys' fees and expenses,
incurred without bad faith, willful misconduct or negligence on the part of the
Escrow Officer arising out of or in connection with its acceptance of, or the
performance of its duties and obligations under, this Agreement, except that the
Escrow Officer will not cause nor permit removal of the Escrow Shares or the
certificates of ownership thereof to leave the State of California prior to and
except for any specified and authorized distribution under Paragraph 5 of this
Agreement or unless by order of the California Court. The provisions of this
Section 8(c) shall survive any termination of this Agreement;
(d) The Escrow Officer shall be fully protected in acting on
and relying upon any written notice, direction, request, waiver, consent,
receipt or other paper or document which the Escrow Officer in good faith
believes to be genuine and to have been signed or presented by the proper party
or parties, as certified to the Escrow Officer from time to time;
(e) The Escrow Officer 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 in fact or law, or for anything which it may do or refrain from
doing in connection herewith, except as a result of its own bad faith, willful
misconduct or negligence;
(f) The Escrow Officer may seek the advice of legal counsel in
the event of any dispute or question as to the construction of any of the
provisions of this Agreement or its duties hereunder, and it shall incur no
liability and shall be fully protected in respect of any action taken, omitted
or suffered by it in good faith in accordance with the written opinion of such
counsel; and
(g) Except as expressly directed in a Judgment or Order from
the California Court, in the event of ambiguity in the provisions governing the
Joint Escrow and Escrow Corpus or uncertainty on the part of the Escrow Officer
as to how to proceed, such that the Escrow Officer, in its sole and absolute
judgment, deems it necessary for its protection so to do, the Escrow Officer may
refrain from taking any action other than to retain custody of the Escrow Corpus
until it shall have received written instructions signed by the then current
parties to the Joint Escrow, or may deposit the Escrow Corpus with the
California Court and thereupon have no further duties or responsibilities in
connection therewith.
9. APPOINTMENT, RESIGNATION OR REMOVAL OF ESCROW OFFICER.
a. The Escrow Officer will be selected jointly by Plaintiffs,
the ASDG Shareholders and ▇▇▇▇▇▇▇▇▇▇, acting through their respective counsel.
b. The Escrow Officer may resign, at any time by giving thirty
(30) days, written notice thereof to all parties to the Joint Escrow, and the
Parties may remove the Escrow Officer by mutual consent. Within thirty (30) days
after receiving such notice from the Escrow Officer, or upon agreement to remove
11
the Escrow Officer, the Parties shall appoint a successor Escrow Officer (the
"Successor Escrow Officer") at which time the Escrow Officer shall deliver the
Escrow Corpus to the Successor Escrow Officer, net of any fees and expenses or
other obligations then owed to the Escrow Officer. After appointment of the
Successor Escrow Officer and delivery of the Escrow Corpus by the Escrow
Officer, the Escrow Officer shall have no further duties or responsibilities in
connection herewith.
10. REPRESENTATIONS AND WARRANTIES. Each party hereto that is not an
individual hereby represents and warrants that (a) it is a corporation duly
organized, validly existing, and in good standing in the jurisdiction of its
incorporation, (b) it is duly authorized by all requisite corporate action to
enter into this Agreement and the transactions contemplated herein and (c) its
entry into and performance of its obligations under this Agreement will not
violate or conflict with any term or provision of its articles or certificate of
incorporation or bylaws, including all amendments thereto. Each party hereto
hereby represents and warrants that (y) this Agreement constitutes a valid and
binding agreement of such party enforceable against such party by its terms and
(z) such party's entry into and performance of its obligations under this
Agreement will not violate or conflict with any material agreement to which it
is bound or to which its property is subject and will not result in the
imposition of any material lien or encumbrance on any of its properties.
11. NOTICES. All notices and demands of any kind which any party hereto
may be required or desire to serve upon another party under the terms of this
Agreement shall be in writing and shall be served upon such other party: (a) by
personal service upon such other-party at such other party's address set forth
below; or (b) by mailing a copy thereof by certified or registered mail, postage
prepaid, with return receipt requested, addressed to such other party at the
address of such other party set forth below; or (c) by sending a copy thereof by
Federal Express or equivalent courier service, addressed to such other party at
the address of such other party set forth below; or (d) by sending a copy
thereof by facsimile to such other party at the facsimile number, if any, of
such other party set forth below.
If to any Plaintiff(s) and/or ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇:
-----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇▇▇▇▇ and/or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇:
-------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
The ▇▇▇▇▇▇▇▇▇ Firm, PC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
12
If to any ASDG Shareholder:
--------------------------
American Sports Development Group, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
If to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇:
-----------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
In case of service by mail, Federal Express or equivalent courier service,
facsimile or by personal service, such service shall be deemed complete upon
receipt, provided that if service is made by facsimile, a copy of the item(s)
served shall also be served by mail as provided herein. The addresses and
facsimile numbers to which, and persons to whose attention, notices and demands
shall be delivered or sent may be changed from time to time by notice served, as
hereinabove provided, by any party upon the other parties.
12. CHOICE OF LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of California without
giving effect to any provision of California law that would cause the laws of
any other jurisdiction to apply.
13. BENEFITS AND ASSIGNMENT. Nothing in this Agreement, expressed or
implied, shall give or be construed to give any Person, other than the parties
hereto, and their respective successors and permitted assigns, heirs, personal
representatives and legatees, any legal claim under any covenant, condition or
provision hereof, all the covenants, conditions and provisions contained in this
Agreement being for the sole benefit of the foregoing Persons only. No party may
assign any of its rights or obligations under this Agreement except to a
successor by operation of law.
14. COUNTERPARTS. For the convenience of the parties, any number of
counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument. Rebuttable proof of execution of this Agreement by any
party may be made by presentation of a copy of this Agreement bearing a
facsimile or photostatic copy of the signature of the party whose execution is
sought to be proved, and such copies shall be as valid as the originals and as
admissible as evidence of proof of the execution and terms and provisions hereof
as the originals.
15. ENTIRETY OF AGREEMENT. This Agreement, together with the Settlement
Agreement, the Permanent Protective Order, Share Exchange Agreement, the
Shareholders Agreement (as defined in the Share Exchange Agreement) and the
Guaranty, states the entire agreement of the parties with respect to the subject
matter hereof, merges all prior negotiations, agreements and understandings, if
any, and states in full all representations, warranties and agreements which
have induced this Agreement. In the event that this Agreement or the Joint
Escrow formed hereunder is deemed void or unenforceable by a court or other
adjudicative body of competent jurisdiction, the ownership, rights, interests
and entitlements of Plaintiffs in the Escrow Shares will revert back to the
13
Settlement Escrow formed pursuant to the Settlement Agreement and Permanent
Protective Order as if this Agreement and the Joint Escrow had never been
executed and formed, respectively. Each party agrees that in dealing with third
parties no contrary representations will be made.
16. AMENDMENT. This Agreement may be modified or amended only by an
instrument in writing, duly executed by the parties hereto. No such
modification or amendment shall be binding on the Escrow Officer unless the
Escrow Officer consents thereto in writing.
17. NONWAIVER. No waiver by any party of any provision contained in
this Agreement (or any breach thereof) shall be effective unless it is in
writing executed by the party against which such waiver is to be enforced. No
such waiver shall be deemed or construed as a further or continuing waiver of
any such provision (or breach) on any other occasion or as a waiver of any other
provision (or of the breach of any other provision) contained in this Agreement
on the same or any other occasion.
18. HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
19. CONSTRUCTION. In this Agreement (i) words denoting the singular
include the plural and vice versa, (ii) "it" or "its" or words denoting any
gender include all genders, (iii) the word "including" shall mean "including
without limitation", whether or not expressed, (iv) any reference herein to a
Paragraph or Section refers to a Paragraph or Section of this Agreement, unless
otherwise stated, (v) when calculating the period of time within or following
which any act is to be done or steps taken, the date which is the reference day
in calculating such period shall be excluded and if the last day of such period
is not a business day, then the period shall end on the next day which is a
business day, (vi) except as otherwise expressly provided herein, all dollar
amounts are expressed in United States funds, (vii) in the event that there is
any dispute regarding the interpretation or construction of the provisions of
this Agreement, there shall be no presumption that any provision of this
Agreement is to be construed against either party hereto.
20. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. In addition, any
provision determined to be invalid or contrary to applicable law shall be deemed
automatically amended upon such determination to the minimum extent necessary to
make such provision enforceable to the maximum extent possible as compared to
the original terms of such provision. In the event that the provisions of
Paragraphs C.2 through C.7 or Section 5, or any of their subparts are deemed
void or unenforceable by a court or other adjudicative body of competent
jurisdiction, the ownership, rights, interests and entitlements of Plaintiffs in
the Escrow Shares will revert back to the Settlement Escrow formed pursuant to
the Settlement Agreement and Permanent Protective Order as if this Agreement and
the Joint Escrow had never been executed and formed, respectively. Each party
agrees that in dealing with third parties no contrary representations will be
made.
SIGNATURES ON FOLLOWING PAGE
14
IN WITNESS WHEREOF, the parties hereto have caused this Joint Escrow
Agreement to be duly executed as of the day and year first above written.
NATIONAL FINANCIAL, INC. UNIVERSAL CONSULTANTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------ ------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director Title: Director
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------- ------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
ASDG Shareholders: ESCROW OFFICER:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------- ------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------- ------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
RED OAK LIMITED PARTNERSHIP /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, General Partner
