ESCROW/LOCK-UP AGREEMENT
EXHIBIT
10.5
This
Escrow/Lock-Up Agreement (this “Agreement”)
dated
as of January 10, 2006, is made by and among Telecomm Sales Network, Inc., a
Delaware corporation (“Pubco”),
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an individual, in his capacity as Shareholder Agent (as defined
below), EnviroSystems, Inc., a Nevada corporation (the “Company”
or
“EnviroSystems”),
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., as Escrow Agent (the “Escrow
Agent”).
RECITALS
WHEREAS,
pursuant to an Agreement and Plan of Merger, made and entered into as of
November 11, 2005, by and among Pubco, TSN Acquisition Corporation, a Nevada
corporation and an indirect wholly owned subsidiary of Pubco (“Merger
Sub”)
and
the Company (the "Merger
Agreement"),
at
the Effective Time, Merger Sub will be merged with and into the Company (the
“Merger”),
with
the Company as the surviving corporation in accordance with the terms of the
Merger Agreement.
WHEREAS,
pursuant to Section
2.11
of the
Merger Agreement all shares of Pubco Common Stock to be issued (and/or reserved
for issuance) to (i) holders of EnviroSystems Preferred Stock in the Merger
and
(ii) upon exercise of EnviroSystems Options and Warrants, if exercised, for
Pubco Common Stock in the future (each a “Shareholder”
and
collectively the “Shareholders”)
shall
be deposited directly by Pubco into an Escrow Account and held by the Escrow
Agent;
WHEREAS,
the
Shareholders have appointed ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, to act as their agent (the
“Shareholder
Agent”);
WHEREAS,
pursuant to Section
7.5(b)
of the
Merger Agreement, Pubco, MV Nanotech and any of their respective affiliates
shall have a claim against the Escrow Shares held in the Escrow Account for
the
benefit of the prior holders of EnviroSystems Preferred Stock or EnviroSystems
Options and Warrants in order to satisfy any claims for Losses;
WHEREAS,
a
material condition to the consummation of the transactions contemplated by
the
Merger Agreement is that the parties hereto enter into this
Agreement.
AGREEMENT
NOW
THEREFORE,
as a
material inducement to Pubco, Merger Sub and the Company to consummate the
transactions contemplated by the Merger Agreement, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereby agree as follows:
SECTION
1.DEFINED
TERMS
Capitalized
terms used herein without definition shall have the meanings ascribed to them
in
the Merger Agreement.
SECTION
2. CONSENT
OF SHAREHOLDERS
The
Merger Agreement and this Agreement were approved by the shareholders of the
Company at the Company’s Annual Meeting of Stockholders held on December 28,
2005, and, accordingly, the Shareholders shall be deemed to have consented,
without any further act of any such Shareholder, to (i) the establishment of
an
escrow account (the "Escrow
Account")
pursuant to this Agreement to (x) provide for the limitations on sales and
transfers of Escrow Shares pursuant to the Pubco Lock-Up, and (y) to secure
the
indemnification obligations of the prior holders of EnviroSystems Preferred
Stock and EnviroSystems Options and Warrants pursuant to Section
7.5
of the
Merger Agreement, (ii) the appointment of the Shareholder Agent as agent for
the
Shareholders in all respects, (iii) the taking by the Shareholder Agent of
any
and all actions, including the execution by the Shareholder Agent of any and
all
agreements, instruments or other documents, (iv) the appointment of the Escrow
Agent, and (v) all of the other terms and conditions of this
Agreement.
SECTION
3. ESCROW
3.1. SHARES
TO
BE PLACED IN ESCROW.
(a) Pursuant
to Section
2.11
of the
Merger Agreement, on the Closing Date, Pubco shall issue certificates for the
aggregate number of shares of Pubco Common Stock issuable (and/or reserved
for
issuance) to holders of (i) EnviroSystems Preferred Stock in the Merger and
(ii)
upon exercise of Envirosystems Options and Warrants, if exercised, for Pubco
Common Stock in the future (the "Escrow
Shares")
in the
name of the Escrow Agent evidencing the shares of Pubco Common Stock to be
held
in the Escrow Account in accordance with this Agreement. The Escrow Shares
shall
be held by the Escrow Agent in the Escrow Account in accordance with the
provisions of this Agreement and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any party
hereto or the Shareholders.
(b) The
Escrow Shares allocable to each Shareholder shall be as set forth opposite
each
Shareholder’s name on Exhibit
A
hereto.
Such Exhibit A shall set forth (i) the name of each Shareholder, (ii) the number
of shares of Pubco Common Stock received by such Shareholder in the Merger
or
receivable upon the exercise, if any, of Envirosystems Options and Warrants,
and
(iii) the number of Escrow Shares subject to the indemnification obligations
set
forth in Section
7.5
of the
Merger Agreement and Section
5,
hereof.
3.2. ADJUSTMENT
OF EXHIBIT A. If and when Pubco changes the Escrow Shares as provided in
Section
4.3
hereof,
or otherwise deposits additional Escrow Shares with the Escrow Agent, Escrow
Agent, shall revise Exhibit
A, subject
to Pubco’s review and consent, to reflect such change or deposit. In the event
of any prior release of Escrow Shares to an Indemnified Party pursuant to
Section
5,
hereof,
or otherwise pursuant to Section
6,
hereof,
Escrow Agent shall revise Exhibit
A,
as
pro
rata appropriate, subject to Pubco’s review and consent, to reflect such release
by reducing the number of Indemnity Escrow Shares (as hereinafter defined)
opposite the appropriate Shareholder’s name. Escrow Agent shall deliver any
revised Exhibit
A
in
accordance with Section
13.4
hereof.
Upon such delivery, any such revised Exhibit
A
(i)
shall be deemed appended to this Agreement in replacement of the prior
Exhibit
A
and (ii)
shall constitute Exhibit
A
for all
purposes under this Agreement.
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SECTION
4. SHAREHOLDER
RIGHTS
4.1. VOTING
OF
ESCROW SHARES. The Shareholders shall be entitled to vote the number of Escrow
Shares set forth opposite their names forth on Exhibit
A,
as
amended from time to time. Pubco shall give the Shareholder Agent at least
as
much notice of meetings of shareholders as it gives its shareholders generally.
The Shareholder Agent shall promptly inform each Shareholder of each such
meeting and of the matters to be considered at such meeting. The Shareholder
Agent shall, in accordance with the instructions received from the Shareholders,
direct the Escrow Agent in writing as to the exercise of voting rights
pertaining to the Escrow Shares as to which such voting instructions have been
received, and the Escrow Agent shall comply with any such written instructions.
In the absence of such instructions, the Escrow Agent shall not vote any of
the
Escrow Shares. The Shareholder Agent shall have no obligation to solicit
consents or proxies from the Shareholders for purposes of any such
vote.
4.2. DIVIDENDS.
Any cash, securities (other than Pubco Common Stock) or other property
distributed as a dividend in respect of any Escrow Shares shall be paid by
Pubco
directly to the Shareholders.
4.3. CHANGE
IN
ESCROW SHARES. If, after the date of this Agreement, the Escrow Shares shall
have been changed into a different number of shares or a different type or
class
of securities, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination, merger or exchange of shares, such
different number of shares or type or class of securities shall be held in
the
Escrow Account subject to the provisions of this Agreement to the same extent
as
the Escrow Shares, and the provisions of this Agreement shall be correspondingly
adjusted to the extent appropriate to reflect equitably such stock dividend,
subdivision, reclassification, recapitalization, split, combination, merger
or
exchange of shares.
4.4. TRANSFERABILITY.
The interests of the Shareholder Agent and the Shareholders in the Escrow
Account and in the Escrow Shares shall not be assignable or transferable, other
than by operation of law. No transfer of any of such interests by operation
of
law shall be recognized or given effect until Pubco and Escrow Agent shall
have
received written notice of such transfer.
4.5. FRACTIONAL
SHARES. No fractional shares of Pubco Common Stock shall be retained in or
released from the Escrow Account pursuant to this Agreement. In connection
with
any release of Escrow Shares from the Escrow Account, any Shareholder who would
otherwise be entitled to receive a fraction of a share of Pubco Common Stock
(after aggregating all fractional shares of Pubco Common Stock issuable to
such
Shareholder) shall be paid by Pubco in cash the dollar amount (rounded to the
nearest whole cent), without interest, determined by multiplying such fraction
by the greater
of (1) the Pubco PIPE Share Price, and (2) if the Pubco Common Stock is listed
or quoted for trading on an exchange or quotation system, the average closing
bid price (or last sale price) of the Pubco Common Stock for the twenty (20)
trading days prior to the date such of such calculation, and
such
fraction of a share shall be returned to Pubco.
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4.6. ESCROW
SHARE REGISTRATION RIGHTS. In the event that following the earlier to occur
of
the expiration of the Pubco Lock-Up or the release of Escrow Shares pursuant
to
Sections
6.2,
6.3
or
6.4
hereof,
such Escrow Shares are not then freely tradable by the holders thereof, such
holders shall have a one (1) time right to demand that Pubco file a registration
statement (the "Pubco
Escrow Shares Registration Statement"),
covering the resale of such Escrow Shares at Pubco's expense. Such demand must
be made no later than sixty (60) days prior to or one (1) year following the
expiration date of the Pubco Lock-Up, or the date such Escrow Shares were
released from Escrow Account and must be made in writing and signed by holders
owning no less than 50.1% of all of the Escrow Shares not then freely tradable.
Pubco will use its best efforts to cause such Pubco Escrow Shares Registration
Statement to be declared effective by the Commission as soon as possible, but
in
no event later than 150 days from the date of such demand.
SECTION
5. INDEMNIFICATION;
CLAIM PROCEDURES
5.1. INDEMNIFICATION.
Pursuant to Section
7.5
of the
Merger Agreement, from and after the Closing Date, and for the one (1) year
period following the Closing Date, those Escrow Shares issued or issuable to
prior holders of Envirosystems Preferred Stock or Envirosystems Options and
Warrants (such holders shall be referred to collectively as the “Indemnity
Shareholders”
and
such Escrow Shares shall be collectively referred to as the “Indemnity
Escrow Shares”)
shall
be available to compensate each Indemnified Party for Losses incurred by such
Indemnified Party resulting from a Damage Event. The Company, and the
Shareholder Agent on behalf of the Shareholders, expressly agree that the
Indemnity Escrow Shares (i) shall be security for such indemnity obligation,
subject to the limitations and in the manner provided for in this Agreement
and
(ii) are subject to release to any Indemnified Party upon the terms set forth
herein.
5.2. CLAIM
PROCEDURE.
(a) If
any
Indemnified Party determines in good faith that there is or has been a Damage
Event giving rise to an indemnification obligation under Section
7.5
of the
Merger Agreement, and such Indemnified Party wishes to make a claim against
the
Indemnity Escrow Shares with respect to such possible Damage Event, then such
Indemnified Party shall deliver to the Shareholder Agent (with a copy to the
Escrow Agent) a written notice of such possible Damage Event (a "Claim
Notice")
setting forth (i) a brief description of the circumstances supporting such
Indemnified Party's belief that such possible Damage Event exists or has
occurred, and (ii) a non-binding, preliminary estimate of the aggregate dollar
amount of all Losses that have arisen and may arise as a direct or indirect
result of such possible Damage Event (such aggregate amount being referred
to as
the "Claim
Amount").
(b) If
the
Shareholder Agent shall object in good faith to any portion of any Claim Amount
specified in any Claim Notice, the Shareholder Agent shall, within thirty (30)
calendar days after the deemed delivery by the Indemnified Party to the
Shareholder Agent of such Claim Notice in accordance with Section
13.4,
deliver
to the Escrow Agent (with a copy to the Indemnified Party) a certificate,
executed by the Shareholder Agent (a "Certificate
of Objections"):
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(i)
specifying each such amount to which the Shareholder Agent objects in good
faith; and
(ii)
specifying in reasonable detail the nature and basis for each such good faith
objection.
(c) If
the
Escrow Agent shall not have received a Certificate of Objections objecting
to a
Claim Amount within thirty (30) calendar days after delivery to the Shareholder
Agent of a Claim Notice specifying such Claim Amount, the Shareholders and
the
Shareholder Agent shall be deemed to have acknowledged that the Claim Amount
claimed on such Claim Notice is correct and final and the Escrow Agent shall,
transfer to such Indemnified Party from the Indemnity Escrow Shares (such
transfer to be applied and deducted from the Indemnity Escrow Shares pro rata
in
accordance with each Indemnity Shareholder's pro rata share of the Indemnity
Escrow Shares) that number
of
Indemnity Escrow Shares having a value equal to the quotient of (i) the
aggregate Losses suffered or incurred by such Indemnified Party, divided by
(ii)
the greater of (1) the Pubco PIPE Share Price, and (2) the average closing
bid
price (or last sale price) of the Pubco Common Stock for the twenty (20) trading
days prior to the date such Losses were incurred (the “Escrow
Share Value”).
(d) If
a
Certificate of Objections delivered by the Shareholder Agent in response to
a
Claim Notice contains instructions to the effect that Indemnity Escrow Shares
having an Escrow Share Value equal to a specified portion (but not the entire
amount) of the Claim Amount set forth in such Claim Notice are to transferred
to
an Indemnified Party, then (i) the Escrow Agent shall be authorized to transfer
to such Indemnified Party that number of Indemnity Escrow Shares having an
Escrow Share Value equal to such specified portion of such Claim Amount, and
(ii) the procedures set forth in Section
5.2(e)
below
shall be followed with respect to the remaining portion of such Claim
Amount.
(e) If
the
Escrow Agent shall have received a Certificate of Objections within thirty
(30)
calendar days after delivery to the Shareholder Agent of a Claim Notice,
disputing all or a portion of the Claim Amount set forth in such Claim Notice
(such Claim Amount or the disputed portion thereof being referred to as the
"Disputed
Amount"),
then,
notwithstanding anything contained in Section
6
hereof,
the Escrow Agent shall continue to hold in the Escrow Account (in addition
to
any other Escrow Shares permitted to be retained in the Escrow, whether in
connection with any other dispute or otherwise), Escrow Shares having an Escrow
Share Value equal to 100% of the Disputed Amount. Such Escrow Shares shall
continue to be held in the Escrow Account until such time as (i) the applicable
Indemnified Party and the Shareholder Agent execute a settlement agreement
containing instructions regarding the release of such shares, and a copy of
such
settlement agreement is provided to Escrow Agent, or (ii) the Escrow Agent
receives a copy of a final, non-appealable court order of a court of competent
jurisdiction containing instructions to the Escrow Agent regarding the release
of such Escrow Shares. The Escrow Agent shall thereupon release such Escrow
Shares from the Escrow Account in accordance with the instructions set forth
in
such settlement agreement or court order.
(f) Notwithstanding
anything to the contrary set forth in this Section
5,
the
Escrow Agent shall not release to an Indemnified Party, and no Indemnified
Party
shall be entitled to receive, any Escrow Shares in respect of indemnification
obligations under Section
7.5
of the
Merger Agreement unless and until the aggregate Losses incurred by all
Indemnified Parties resulting from one or more Damage Events exceeds the Damage
Threshold of $100,000.
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SECTION
6. PUBCO
LOCK-UP; RELEASE OF SHARES TO SHAREHOLDERS
6.1. PUBCO
LOCK-UP.
(a) The
Escrow Shares shall be held by the Escrow Agent and the Shareholders shall
not,
directly
or indirectly, offer, sell, pledge, hypothecate, contract to sell (including
any
short sale), grant any option to purchase, enter into any contract to sell
or
otherwise dispose of or transfer any Escrow Shares for the period commencing
on
the date hereof and ending on
the
date that is the later to occur of (a) twelve (12) months after the date of
the
Merger Closing and (b) nine (9) months from the date the Commission declares
the
Pubco Registration Statement effective (the "Pubco
Lock-Up Termination Date"),
provided, however, that in no event shall the Pubco Lock-Up Termination Date
be
later than fifteen (15) months after the Merger Closing and further provided
that any such Escrow Shares held and reserved for issuance upon exercise of
EnviroSystems Options and Warrants shall be held by the Escrow Agent until
the
latter of the Pubco Lock-Up Termination Date or the exercise or the date upon
which all such EnviroSystems Options and Warrants have been exercised and/or
have expired.
(b) Upon
any
exercise of EnviroSystems Options and Warrants prior to the Pubco Lock-Up
Termination Date, the shares of Pubco Common Stock issuable upon such exercise
shall become Escrow Shares and shall be held by the Escrow Agent for the benefit
of the holder exercising such EnviroSystems Option and Warrant and delivered
to
such Person as provided in Section
6.2
below.
Upon any exercise of EnviroSystems Options and Warrants on or after the Pubco
Lock-Up Termination Date, the shares of Pubco Common Stock issuable upon such
exercise shall be delivered by the Escrow Agent to the holder exercising such
EnviroSystems Option and Warrant. All cash or other consideration payable upon
exercise of the EnviroSystems Options and Warrants shall be paid to the Escrow
Agent for the benefit of the holders of EnviroSystems Preferred Stock. The
Escrow Agent shall distribute all such consideration to the holders of
EnviroSystems Preferred Stock pro rata as their percentage interests appear
on
Exhibit
C
attached
hereto at such time as such consideration becomes available by reason of the
exercise of an EnviroSystems Option and Warrant.
6.2. RELEASE
UPON TERMINATION OF PUBCO LOCK-UP. On the first business day following the
Pubco
Lock-Up Termination Date, the Escrow Agent shall release to the Shareholders
from the Escrow Account all Escrow Shares then held in the Escrow Account other
than (i) Escrow Shares that at the time are the subject of a Claim Notice or
Dispute Notice and (ii) Escrow Shares held for issuance upon exercise of
EnviroSystems Options and Warrants From and after the Pubco Lock-Up Termination
Date (i) any Escrow Shares remaining that are subject of a Claim Notice or
Dispute Notice, and not held for issuance upon exercise of EnviroSystems Options
and Warrants, shall be released upon the resolution of the dispute providing
the
basis for the Claim Notice or Dispute Notice in accordance with Section
5.2(e), and
(ii)
Escrow Shares reserved for issuance upon exercise of EnviroSystems Options
and
Warrants shall be issued to the holders thereof upon their exercise. Any Escrow
Shares remaining after the exercise and/or expiration of all EnviroSystems
Options and Warrants shall be distributed to the holders of EnviroSystems
Preferred Stock pro rata as their percentage interests appear on Exhibit
C
attached
hereto.
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6.3. RELEASE
UPON EXERCISE OF MV NANOTECH WARRANT BY MV NANOTECH AND SALE OF UNDERLYING
SHARES. Notwithstanding anything to the contrary contained in Section
6.1
above,
in the event that MV Nanotech exercises the MV Nanotech Warrant and sells the
underlying shares of common stock, in full or any part, MV Nanotech shall
promptly send notice of such exercise and sale to the Shareholder Agent with
a
Copy to the Escrow Agent (an “Exercise
Notice”).
Upon
receipt of an Exercise Notice, the Escrow Agent shall release Escrow Shares,
other than Indemnity Escrow Shares, which shall remain subject to Section
5
and
Section
6
hereof,
to the Shareholders. At such time as any such Escrow Shares released pursuant
to
this Section
6.3,
no
longer constitute Indemnity Escrow Shares subject to Section
5,
the
Escrow Agent shall thereupon release such Escrow Shares to the
Shareholders.
6.4. RELEASE
UPON EXERCISE OF MV NANOTECH WARRANT BY TRANSFEREES AND SALE OF UNDERLYING
SHARES. Notwithstanding anything to the contrary contained in Section
6.1
above,
MV Nanotech may, at any time, sell, assign or otherwise transfer (collectively
a
“Transfer”)
all or
a portion of the MV Nanotech Warrant and such Transfer of the MV Nanotech
Warrant will not cause the Pubco Lock-Up to be released. In connection with
any
such Transfer, MV Nanotech shall require as a condition of Transfer that the
transferee agree to provide an Exercise Notice in the event of an exercise
of
the MV Nanotech Warrant and sale of the underlying shares as provided in
Section
6.3
above.
If a Transfer is to an Affiliate of MV Nanotech, any subsequent exercise of
all
or a portion of the MV Nanotech Warrant and sale of the underlying shares by
the
MV Nanotech Affiliate will cause the Pubco Lock-Up to be released in accordance
with Section
6.3
above.
If a Transfer is to a Person that is not an Affiliate of MV Nanotech, then
upon
any subsequent exercise of the MV Nanotech Warrant and sale of the underlying
shares by such non-Affiliate of MV Nanotech, the Pubco Lock-Up shall be released
as to such number of Escrow Shares as shall equal the product of (i) the number
of shares of Pubco Common Stock then subject to the Pubco Lock-Up by, (ii)
a
fraction (a) the numerator of which equals the number shares of Pubco Common
Stock sold following any such exercise and (b) the denominator of which is
the
total number of shares of Pubco Common Stock underlying the MV Nanotech
Warrant). Any partial release of the Pubco Lock-Up shall be made pro rata among
the Escrow Shares, excluding Indemnity Escrow Shares.
6.5. RELEASE
BY PUBCO. Notwithstanding anything to the contrary herein contained, the Pubco
Lock-Up may be released by Pubco, subject to the express prior written consent
of MV Nanotech, which may be withheld in MV Nanotech’s sole
discretion.
6.6. PROCEDURES
FOR RELEASING SHARES.
(a) In
the
event that the Escrow Agent is required to release Escrow Shares to the
Shareholders in accordance with Sections
6.2, 6.3, 6.4 or 6.5
hereof,
the Escrow Agent shall be authorized to transfer to each Shareholder, and shall
so transfer and release to each Shareholder, that number of Escrow Shares,
subject to Section
4.6
hereof,
as listed opposite each Shareholders name on Exhibit A, as adjusted to the
date
of such release.
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(b) Any
release of Escrow Shares to the Shareholders pursuant to Section
6
hereof
may be effected by mailing a stock certificate to the Shareholders certified
mail, return receipt requested.
6.7. SALE
OF
ESCROW SHARES NOT RELEASED PURSUANT TO THIS SECTION 6. After the occurrence
of
an event described in Sections
6.2, 6.3,
and/or
6.4
above,
any Escrow Shares that are not released by the Escrow Agent pursuant to those
Sections, Shareholder Agent may, upon written instructions from the Shareholders
that beneficially own such Escrow Shares, sell such Escrow Shares on behalf
of
such Shareholders, provided that all proceeds from such sales are retained
in
the Escrow Account until such time as the underlying Escrow Shares would be
eligible for release to the respective Shareholders pursuant to this Agreement.
At such time, Escrow Agent shall release the escrowed funds to the proper
Shareholders. The Shareholders, Shareholder Agent and Escrow Agent hereby
expressly agree that Pubco shall have no direct and/or indirect liability and/or
obligations whatsoever (including, but not limited to, indemnification rights
and/or obligations provided in Section
7
of this
Agreement), and hereby fully discharge and release Pubco from and hereby waive
and relinquish, any and all claims, demands, contentions, and causes of action
by reason of any matter or thing arising out of or in any way connected with
or
related to, directly or indirectly, any event relating to a sale of Escrow
Shares.
SECTION
7. FEES
AND EXPENSES
7.1. ESCROW
AGENT FEES AND EXPENSES. The Escrow Agent's fees, as set forth on Exhibit
B
hereto
shall be, payable by Pubco. It is understood that the fees and usual charges
agreed upon for services of the Escrow Agent shall be considered compensation
for ordinary services as contemplated by this Agreement. In the event that
the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
renders any service not provided for in this Agreement, or if the parties
request a substantial modification of its terms, or if any controversy arises,
or if the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to this Agreement or its subject matter, the Escrow Agent shall
be
reasonably compensated for such extraordinary services and reimbursed for all
reasonable costs, attorneys' fees, including allocated costs of in-house
counsel, and expenses occasioned by such default, delay, controversy or
litigation, and the Escrow Agent shall have the right to retain all documents
and/or other things of value at any time held by the Escrow Agent in the Escrow
Account until such compensation, fees, costs and expenses are paid. Any such
extraordinary fees, costs and expenses shall be payable 50% by Pubco and 50%
by
the Shareholders pro rata by way of a sale of the Escrow Shares, which are
not
at that time Indemnity Escrow Shares, and disbursement of the proceeds from
the
Escrow Account at which time the amounts due by Shareholders hereunder shall
then become due and payable.
7.2. SHAREHOLDER
AGENT'S FEES AND EXPENSES. All of Shareholder Agents (i) reasonable fees
relating to its/his/her services performed in such capacity and (ii) all
reasonable costs and expenses, including those of any legal counsel or other
professional retained by the Shareholder Agent, in connection with the
acceptance and administration of the Shareholder Agent's duties hereunder,
up to
a maximum of $25,000, shall be reimbursed to the Shareholder Agent by Pubco,
upon presentment to Pubco of appropriate written documentation, reasonably
acceptable to Pubco, itemizing such fees and expenses, with such supporting
documentation that Pubco may reasonably request. Thereafter, any of such
Shareholder Agent fees and expenses in excess of $25,000, shall be reimbursed
to
the Shareholder Agent by the Shareholders pro rata by way of a sale of the
Escrow Shares, which are not at that time Indemnity Escrow Shares, and
disbursement of the proceeds from the Escrow Account at which time the amounts
due by the Shareholders hereunder shall then become due and payable. Pubco
shall
not be obligated to reimburse the Shareholder Agent for any fees charged or
expenses (including attorneys' fees) incurred by the Shareholder Agent in
connection with the Shareholder Agent's performance of his duties hereunder,
in
excess of $25,000. The Shareholder Agent hereby agrees that he shall not seek
payment or reimbursement of any such fees and expenses in excess of $25,000,
if
any, from Pubco, the Surviving Corporation or the Company. Shareholder Agent
agrees to only seek payment or reimbursement of all such fees and expenses,
in
excess of $25,000, from the Shareholders, or, in Shareholder Agent’s discretion,
from the Escrow Account, provided, however, that if Shareholder Agent seeks
reimbursement from the Escrow Account, the Escrow Shares that Shareholder Agent
acquires as reimbursement shall remain subject to the Pubco-Lock
Up.
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7.3. LIMITATION
ON PUBCO LIABILITY. In the event of a sale of Escrow Shares pursuant to
Sections
7.1
and
7.2
above,
the Shareholders, Shareholder Agent and Escrow Agent hereby expressly agree
that
Pubco shall have no direct and/or indirect liability and/or obligations
whatsoever (including, but not limited to, indemnification rights and/or
obligations provided in Section
7
of this
Agreement), and hereby fully discharge and release Pubco from and hereby waive
and relinquish, any and all claims, demands, contentions, and causes of action
by reason of any matter or thing arising out of or in any way connected with
or
related to, directly or indirectly, any event relating to a sale of Escrow
Shares.
SECTION
8. TERMINATION
This
Agreement shall terminate on the later of: (a) the date on which all
EnviroSystems Options and Warrants have been exercised and/or have become
unexercisable or (b) there are no Escrow Shares or other property remaining
in
the Escrow Account.
SECTION
9. ESCROW
AGENT; LIMITATION OF ESCROW AGENT'S LIABILITY
9.1. DUTIES
OF
THE ESCROW AGENT. The Escrow Agent shall have no duties or responsibilities
other than those expressly set forth in this Agreement, and no implied duties
or
obligations shall be read into this Agreement against the Escrow Agent. The
Escrow Agent shall have no duty to enforce any obligation of any person, other
than as provided herein. The Escrow Agent shall be under no liability to anyone
by reason of any failure on the part of any party hereto or any maker, endorser
or other signatory of any document or any other person to perform such person's
obligations under any such document.
9.2. LIABILITY
OF THE ESCROW AGENT.
(a) In
performing any duties under this Agreement, the Escrow Agent shall not be liable
to any party for consequential damages, (including, without limitation lost
profits) losses, or expenses, except for gross negligence or willful misconduct
on the part of the Escrow Agent. The Escrow Agent shall not incur any such
liability for any act or failure to act made or omitted in good faith or for
any
action taken or omitted in reliance upon any instrument, including any written
statement or affidavit provided for in this Agreement that the Escrow Agent
shall in good faith believe to be genuine, nor will the Escrow Agent be liable
or responsible for forgeries, fraud, impersonations, or determining the scope
of
any representative authority. In addition, the Escrow Agent may consult with
legal counsel in connection with the Escrow Agent's duties under this Agreement
and shall be fully protected in any act taken, suffered, or permitted by him/her
in good faith in accordance with the advice of counsel. The Escrow Agent is
not
responsible for determining and verifying the authority of any person acting
or
purporting to act on behalf of any party to this Agreement. The Escrow Agent
shall not be responsible for the authenticity of any instructions, or be in
any
way liable for any unauthorized instruction or for acting on such an
instruction, whether or not the person giving the instruction was, in fact,
an
authorized representative of Pubco and the Shareholder Agent.
-9-
(b) In
no
event shall the Escrow Agent be liable to the parties for any consequential,
special, or exemplary damages, including but not limited to lost profits, from
any cause whatsoever arising out of, or in any way connected with acting upon
instructions believed by the Escrow Agent to be genuine.
(c) Pubco
and
the Shareholders agree, to the extent of 50% for Pubco and 50% for the
Shareholders, to jointly and severally indemnify and hold the Escrow Agent
harmless against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees, including allocated
costs of in-house counsel and disbursements that may be imposed on the Escrow
Agent or incurred by the Escrow Agent in connection with the performance of
its/his/her duties under this Agreement, including but not limited to any
litigation arising from this Agreement or involving its subject matter, except
in the case of the Escrow Agent's gross negligence or willful misconduct. Any
such indemnity obligation of the Shareholders shall be borne by the Shareholders
pro rata by way of a sale of the Escrow Shares and disbursement of the proceeds
from the Escrow Account.
(d) If
any
controversy arises between the parties to this Agreement, or with any other
party, concerning the subject matter of this Agreement, its terms or conditions,
the Escrow Agent will not be required to determine the controversy or to take
any action regarding it. The Escrow Agent may hold all documents and may wait
for settlement of any such controversy by final appropriate legal proceedings
or
other means as, in the Escrow Agent's discretion, the Escrow Agent may require,
despite what may be set forth elsewhere in this Agreement. In such event, the
Escrow Agent will not be liable for interest or damage. Furthermore, the Escrow
Agent may at its option, file an action of interpleader requiring the parties
to
answer and litigate any claims and rights among themselves. In such event,
the
Escrow Agent is authorized to deposit with the clerk of the court all documents
and funds held in the Escrow Account. Upon initiating such action, the Escrow
Agent shall be fully released and discharged of and from all obligations and
liability imposed by the terms of this Agreement.
9.3. SUCCESSOR
ESCROW AGENT. In the event the Escrow Agent becomes unavailable or unwilling
to
continue in its capacity herewith, the Escrow Agent may resign and be discharged
from its duties or obligations hereunder by giving the parties to this Agreement
written notice 60 days' prior to the date when such resignation shall take
effect. Pubco may appoint a successor Escrow Agent without the consent of the
Shareholder Agent so long as such successor is a bank with assets of at least
$100 million, and may appoint any other successor Escrow Agent with the consent
of the Shareholder Agent, which consent shall not be unreasonably withheld.
If,
within such notice period, Pubco provides to the Escrow Agent written
instructions with respect to the appointment of a successor Escrow Agent and
directions for the transfer of any Escrow Shares then held by the Escrow Agent
to such successor, the Escrow Agent shall act in accordance with such
instructions and promptly transfer such Escrow Shares to such designated
successor.
9.4. CHANGE
OF
CONTROL OF ESCROW AGENT. Any company into which the Escrow Agent may be merged
or with which it may be consolidated, or any company to whom the Escrow Agent
may transfer a substantial amount of its business, shall be the successor to
the
Escrow Agent without the execution or filing of any paper or any further act
on
the part of any of the parties, anything herein to the contrary
notwithstanding.
SECTION
10. SHAREHOLDER
AGENT; LIMITATION OF SHAREHOLDER AGENT'S
LIABILITY
10.1. DUTIES
OF
THE SHAREHOLDER AGENT. The Shareholder Agent shall have no duties or
responsibilities other than those expressly set forth in this Agreement, and
no
implied duties or obligations shall be read into this Agreement against the
Shareholder Agent. The Shareholder Agent shall have no duty to enforce any
obligation of any person, other than as provided herein. The Shareholder Agent
shall be under no liability to anyone by reason of any failure on the part
of
any party hereto or any maker, endorser or other signatory of any document
or
any other person to perform such person's obligations under any such
document.
10.2. LIABILITY
OF THE SHAREHOLDER AGENT.
(a) In
performing any duties under this Agreement, the Shareholder Agent shall not
be
liable to any party for consequential damages, (including, without limitation
lost profits) losses, or expenses, except for gross negligence or willful
misconduct on the part of the Shareholder Agent. The Shareholder Agent shall
not
incur any such liability for any act or failure to act made or omitted in good
faith or for any action taken or omitted in reliance upon any instrument,
including any written statement or affidavit provided for in this Agreement
that
the Shareholder Agent shall in good faith believe to be genuine, nor will the
Shareholder Agent be liable or responsible for forgeries, fraud, impersonations,
or determining the scope of any representative authority. In addition, the
Shareholder Agent may consult with legal counsel in connection with the
Shareholder Agent's duties under this Agreement and shall be fully protected
in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel. The Shareholder Agent is not responsible for
determining and verifying the authority of any person acting or purporting
to
act on behalf of any party to this Agreement.
(b) Any
and
all losses, claims, damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees, including allocated costs of in-house
counsel and disbursements that may be imposed on the Shareholder Agent or
incurred by the Shareholder Agent in connection with the performance of
its/his/her duties under this Agreement, including but not limited to any
litigation arising from this Agreement or involving its subject matter, except
in the case of the Shareholder Agent's gross negligence or willful misconduct,
shall be borne by the Shareholders pro rata by way of a sale of the Escrow
Shares and disbursement of the proceeds from the Escrow Account.
-10-
10.3. SUCCESSOR
SHAREHOLDER AGENT. In the event the Shareholder Agent becomes unavailable to
continue in its capacity herewith, the Shareholder Agent may resign and be
discharged from its duties or obligations hereunder by giving the parties to
this Agreement written notice 60 days' prior to the date when such resignation
shall take effect. After such notice and prior to the date when such resignation
shall take effect, the Shareholders shall appoint a successor Shareholder Agent
by majority vote of the Escrow Shares.
SECTION
11. RESOLUTION
OF CONFLICTS
11.1. In
case
the Shareholder Agent shall timely object in writing to any claim or claims
by a
Pubco Indemnified Party made in any Claim Notice, as provided in Section
5
hereof,
the Shareholder Agent and the Indemnified Party shall attempt in good faith
for
thirty (30) calendar days following delivery of the Certificate of Objections
to
agree upon the rights of the respective parties with respect to each of such
claims. If the Shareholder Agent and the Indemnified Party should so agree,
a
memorandum setting forth such agreement shall be prepared and signed by both
parties and shall be furnished to the Escrow Agent. The Escrow Agent shall
be
entitled to rely on any such memorandum and shall distribute amounts from the
Escrow Fund in accordance with the terms thereof.
11.2. If
no
such agreement can be reached after good faith negotiation, either the Pubco
Indemnified Party or the Shareholder Agent may, by written notice to the other,
demand arbitration of the matter unless the amount of the damage or loss is
at
issue in pending litigation with a third party, in which event arbitration
shall
not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either such event the matter shall be settled by arbitration
conducted by a single arbitrator. The arbitrator shall be jointly selected
by
the Indemnified Party and the Shareholder Agent within fifteen (15) calendar
days after such written notice is sent, or absent such agreement, such
arbitrator shall be appointed pursuant to the Commercial Arbitration Rules
then
in effect of the American Arbitration Association. The decision of the
arbitrator as to the validity and amount of any claim in such Indemnification
Notice shall be binding and conclusive upon the parties to this Agreement and
the Escrow Agent shall be entitled to act in accordance with such decision
and
make or withhold payments out of the Escrow Fund in accordance
therewith.
11.3. Any
such
arbitration shall be held in New York, New York under the Commercial Arbitration
Rules then in effect of the American Arbitration Association. For purposes
of
this Section
11,
in any
arbitration hereunder in which any claim or the amount thereof stated in the
Indemnification Notice is at issue, the Pubco Indemnified Party shall be deemed
to be the "Non-Prevailing Party" unless the arbitrator awards the Pubco
Indemnified Party more than one-half (1/2) of the amount in dispute; otherwise,
the Shareholder Agent (on behalf of the Shareholders) shall be deemed to be
the
Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay
its
own expenses, the fees of the arbitrator, the administrative fee of the American
Arbitration Association, and the expenses, including without limitation,
attorneys' fees and costs, reasonably incurred by the other party to the
arbitration. Judgment upon any award rendered by the arbitrators may be entered
in any court having jurisdiction.
-11-
SECTION
12. TAX
MATTERS
12.1. The
parties agree to treat the Escrow Shares in the Escrow Account as owned by
the
applicable Shareholders in all cases, and to file all tax returns on a basis
consistent with such treatment.
12.2. All
earnings on the Escrow Shares, if any, shall be treated as having been received
by the applicable Shareholders for United States federal income tax purposes
whether or not such amounts are currently distributed to the applicable
Shareholders. Unless otherwise required by law, the parties agree that, for
United States federal income tax purposes, the applicable Shareholders shall
report their pro rata shares of any earnings as their income.
12.3. The
Escrow Agent annually shall file any applicable information returns with the
IRS
and provide payee statements to the Shareholders documenting any earnings.
The
Shareholders shall provide to the Escrow Agent within thirty (30) days after
the
Closing Date all forms and information necessary to complete such information
returns and payee statements (including, without limitation, IRS Forms W-8
or
W-9, as applicable). In the event that the Escrow Agent becomes liable for
the
payment of Taxes relating to Earnings or any payment made hereunder (including,
but not limited to, withholding Taxes), the Escrow Agent may deduct such Taxes
from the amounts payable to the Shareholders from the Escrow Account, if any,
or, to the extent no such amounts are payable to the Shareholders, the Escrow
Agent may collect such Taxes directly from the applicable Shareholders. Except
as otherwise provided in this Agreement, the Escrow Agent shall have no
obligation to prepare or file any other tax returns, nor to pay any taxes or
estimated taxes.
SECTION
13. GENERAL
13.1. INSPECTION.
The Escrow Shares shall at all times be clearly identified as being held by
the
Escrow Agent hereunder. Any party hereto may at any time during the Escrow
Agent's business hours (with reasonable notice) inspect any records or reports
relating to the Escrow Shares.
13.2. CONTROLLING
DOCUMENT. To the extent provisions of the Merger Agreement are inconsistent
with
the provisions contained herewith, the Merger Agreement shall supersede this
Agreement and be the controlling document; provided, however, that the
provisions of Section
9
of this
Agreement shall control for all purposes with regard to the Escrow Agent's
duties.
13.3. OTHER
AGREEMENTS. Nothing in this Agreement is intended to limit any of Pubco's or
any
other Indemnified Party’s rights, or any obligation of the Company or any
Shareholder, under the Merger Agreement or under any other agreement entered
into in connection with the transactions contemplated by the Merger
Agreement.
13.4. NOTICES.
Any notice or other communication required or permitted to be delivered to
any
party under this Agreement shall be in writing and shall be deemed properly
delivered, given and received when delivered (by hand, by registered mail,
by
courier or express delivery service or by facsimile) to the address or facsimile
telephone number set forth beneath the name of such party below (or to such
other address or facsimile telephone number as such party shall have specified
in a written notice given to the other parties hereto). Such notices shall
be
deemed delivered hereunder: (a) if delivered by hand or facsimile, when
delivered; (b) if delivered by registered mail, three (3) business days after
deposit in the United States Mail; or (c) if delivered by courier or express
delivery service, one (1) business day following deposit with the courier or
delivery service:
-12-
if
to the
Escrow Agent:
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇, Esq.
▇▇
▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
if
to
Pubco:
Telecomm
Sales Network, Inc.
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with
a
copy to:
Gusrae,
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ PLLC
▇▇▇
▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
if
to the
Shareholder Agent:
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇
▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇▇
Coie LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
13.5. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, and all of which together shall constitute one and the
same instrument.
-13-
13.6. HEADINGS.
The underlined headings contained in this Agreement are for convenience of
reference only, shall not be deemed to be a part of this Agreement and shall
not
be referred to in connection with the construction or interpretation of this
Agreement.
13.7. GOVERNING
LAW; VENUE. This Agreement shall be governed by and construed in accordance
with
the internal laws of the State of New York without regard to the conflicts
of
laws principles thereof. Subject to Section
11
hereof,
the parties hereto hereby irrevocably agree that any suit or proceeding arising
directly and/or indirectly pursuant to or under this Agreement, shall be brought
solely in a federal or state court located in the City, County and State of
New
York. By its execution hereof, the parties hereby covenant and irrevocably
submit to the in personam
jurisdiction of the federal and state courts located in the City, County and
State of New York and agree that any process in any such action may be served
upon any of them personally, or by certified mail or registered mail upon them
or their agent, return receipt requested, with the same full force and effect
as
if personally served upon them in New York City. The parties hereto expressly
and irrevocably waive any claim that any such jurisdiction is not a convenient
forum for any such suit or proceeding and any defense or lack of in
personam
jurisdiction with respect thereto. In the event of any such action or
proceeding, the party prevailing therein shall be entitled to payment from
the
other party hereto of its reasonable counsel fees and disbursements.
13.8. AMENDMENTS.
This Agreement may not be amended, modified, altered or supplemented other
than
by means of a written instrument duly executed and delivered on behalf of Pubco,
the Shareholder Agent and the Escrow Agent.
13.9. SEVERABILITY.
In the event that any provision of this Agreement, or the application of any
such provision to any Person or set of circumstances, shall be determined to
be
invalid, unlawful, void or unenforceable to any extent, the remainder of this
Agreement, and the application of such provision to Persons or circumstances
other than those as to which it is determined to be invalid, unlawful, void
or
unenforceable, shall not be impaired or otherwise affected and shall continue
to
be valid and enforceable to the fullest extent permitted by law.
13.10. ENTIRE
AGREEMENT. This Agreement and the Merger Agreement and the other agreements
contemplated in the Merger Agreement set forth the entire understanding of
the
parties relating to the subject matter hereof and thereof and supersede all
prior agreements and understandings among or between any of the parties relating
to the subject matter hereof and thereof.
13.11. CONSTRUCTION.
(a) For
purposes of this Agreement, whenever the context requires: the singular number
shall include the plural, and vice versa; the masculine gender shall include
the
feminine and neuter genders; the feminine gender shall include the masculine
and
neuter genders; and the neuter gender shall include the masculine and feminine
genders.
(b) The
parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) As
used
in this Agreement, the words "include" and "including," and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to
be
followed by the words "without limitation."
(d) Except
as
otherwise indicated, all references in this Agreement to "Sections" are intended
to refer to Sections of this Agreement.
-14-
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
TELECOMM
SALES NETWORK, INC.
By:
/s/
J.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name:
J.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title:
President
Address:
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ESCROW
AGENT
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address:
▇▇
▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
ENVIROSYSTEMS,
INC.
By:
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name:
Title:
Address:
-15-
SHAREHOLDER
AGENT
/s/
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
Address:
As
to
Sections 6.3 and 6.4 only:
MV
NANOTECH CORP.
By:
/s/
▇▇▇▇▇▇ ▇▇▇▇▇▇
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
Address:
-16-