Exhibit 2.5
PURCHASER ESCROW AGREEMENT
(Contingent Shares)
THIS ESCROW AGREEMENT is made effective as of the 24th day of June,
2004, by and among Used Kar Parts, Inc., a Florida corporation ("Purchaser"),
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, as escrow agent (the "Escrow Agent"), and the several
former shareholders of Xenomics, a California corporation ("Xenomics")
identified on Schedule A attached hereto ("Shareholders").
W I T N E S S E T H:
WHEREAS, pursuant a Securities Exchange Agreement (the "Exchange
Agreement") dated as of the date hereof, among Purchaser, Xenomics and the
Shareholders, Purchaser has acquired or will acquire all of the outstanding
capital stock of Xenomics (the "Xenomics Acquisition").
WHEREAS, in connection with the Xenomics Acquisition, the Shareholders
collectively will receive 2,258,001 shares of Purchaser's common stock, par
value $0.001 per share (the "Purchaser Shares") in exchange for their shares of
Xenomics;
WHEREAS, the Exchange Agreement provides that on the Closing Date (as
defined in the Exchange Agreement), 350,000 additional Purchaser Shares are
being issued (the "Contingent Shares") and deposited in escrow, together with
stock powers endorsed in blank (the "Escrow Deposit"), to be held and disposed
of by the Escrow Agent as provided herein; and
WHEREAS, Purchaser and the Shareholders wish to appoint the Escrow
Agent to serve as the escrow agent hereunder, and the Escrow Agent is willing to
do so upon the terms and conditions hereinafter set forth.
NOW THEREFORE, it is agreed:
Section 1
APPOINTMENT OF ESCROW AGENT; CREATION OF ESCROW DEPOSIT
1.1 Appointment of Escrow Agent. Purchaser and the Shareholders hereby
appoint the Escrow Agent, and the Escrow Agent hereby agrees to act, as
depository and administrator of the Escrow Deposit, upon the terms and
conditions set forth below.
1.2 Creation of Escrow Deposit. Promptly following the execution and
delivery of this Agreement, Purchaser, pursuant to the Exchange Agreement, shall
deliver to the Escrow Agent, for deposit into the Escrow Deposit, the Contingent
Shares and Purchaser will deliver 5 duly executed guarantied stock powers, for
the transfer of Contingent Shares to each Shareholder.
Section 2
DISPOSITION OF ESCROW DEPOSIT
2.1 Term of Escrow Deposit.
(a) The Contingent Shares held in the Escrow Deposit shall be
held by the Escrow Agent on the terms and subject to the conditions set forth
herein and in the Exchange Agreement (but the Escrow Agent shall have no
responsibility with respect to the Exchange Agreement other than to perform as
provided in this Agreement) to satisfy the indemnification obligations of
Purchaser pursuant to the Exchange Agreement.
(b) The Contingent Shares held in the Escrow Deposit shall be
held by the Escrow Agent on the terms and subject to the conditions set forth
herein and in the Exchange Agreement until the first anniversary of the Closing
Date or, if earlier, the date of the expiration in their entirety of the
representations and warranties of Purchaser pursuant to Article 2 of the
Exchange Agreement (either date referred to hereinafter as the "Expiration
Date"). On the Expiration Date, the Escrow Agent shall release the remaining
Escrow Deposit to Purchaser, for cancellation of the Contingent Shares as
required by Section 4.2 of the Exchange Agreement, subject in all cases to the
terms and conditions set forth in Sections 2.7 and 2.8.
(c) "Contingent Shares" shall mean the shares of Purchaser's
common stock delivered to the Escrow Agent under this Section 2 together with
all shares or other securities or property, if any, received by the Escrow Agent
as a dividend or distribution paid or made on or in respect of said shares of
Purchaser's common stock or on or in respect of any other shares or securities
so received by the Escrow Agent.
2.2 Xenomics Indemnity Claims. Upon the occurrence of an event which
the record holders of a majority of the Purchaser Shares among the Shareholders
(the "Majority Shareholders") assert constitutes an event for which Purchaser
would be required to indemnify or make any payment to Xenomics or the
Shareholders pursuant to the Exchange Agreement (a "Xenomics Indemnity Claim"),
the Majority Shareholders shall furnish notice of such event (the "Indemnity
Notice") to the Purchaser and the Escrow Agent promptly (and in any event on or
prior to the Expiration Date), setting forth the Majority Shareholders' then
good-faith estimate of the reasonably foreseeable maximum amount of the Xenomics
Indemnity Claim. Upon final determination of the amount of the Xenomics
Indemnity Claim, the Majority Shareholders shall furnish an additional notice
(the "Determination Notice") to the Purchaser and the Escrow Agent promptly,
setting forth the final amount of the Xenomics Indemnity Claim and proof of such
amount by documentary evidence.
2.3 Xenomics Indemnity Claims Not Disputed by Purchaser. Upon delivery
of the Indemnification Notice, Escrow Agent shall retain for transfer to the
Shareholders, pro rata from the Purchaser that number of Contingent Shares
derived by dividing the amount of the Xenomics Indemnity Claim set forth in the
Indemnity notice by $1.25 or such other amount adequately reflecting any stock
split, stock exchange, or stock dividend paid or made on or in respect of the
Contingent Shares after the Closing Date. If, within thirty (30) days after
receipt of the Indemnity Notice or Determination Notice, Purchaser does not give
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the notice provided for in Section 2.4, the Escrow Agent shall transfer to the
Shareholders, pro rata, that number of Contingent Shares derived by dividing the
final amount of the Xenomics Indemnity Claim set forth in the Determination
Notice by $1.25 or such other amount adequately reflecting any stock split,
stock exchange, or stock dividend paid or made on or in respect of the
Contingent Shares after the Closing Date.
2.4 Xenomics Indemnity Claims Disputed by Purchaser in Whole. If
Purchaser disputes either the Xenomics Indemnity Claim described in the
Indemnity Notice or the final amount set forth in the Determination Notice,
Purchaser shall, within thirty (30) days after receipt of the Indemnity Notice
or the Determination Notice, as the case may be, notify the Escrow Agent and the
Majority Shareholders of such dispute, setting forth the basis therefor in
reasonable detail, based on its then good-faith belief. In the event Purchaser
disputes the entire Xenomics Indemnity Claim, the Escrow Agent shall not
transfer any Contingent Shares to Shareholders with respect thereto until the
Escrow Agent receives a written agreement signed by the Majority Shareholders
and Purchaser stating the amount to which the Shareholders are entitled in
connection with such Xenomics Indemnity Claim, or a copy of a court order or
judgment together with an opinion of counsel reasonably acceptable to the Escrow
Agent to the effect that such order or judgment is a final order or judgment of
a court of competent jurisdiction binding on Purchaser and the Shareholders from
which no appeal may be taken or for which the time to appeal has expired (a
"Final Judgment"), at which time the Escrow Agent shall transfer to the
Shareholders the amount of Contingent Shares derived by dividing the amount set
forth in such agreement or Final Judgment by $1.25 or such other amount
adequately reflecting any stock split, stock exchange, or stock dividend paid or
made on or in respect of the Contingent Shares after the Closing Date.
2.5 Xenomics Indemnity Claims Disputed by Purchaser in Part. In the
event Purchaser disputes part of, but not all of, a Xenomics Indemnity Claim,
the Escrow Agent shall transfer to the Shareholders, that number of Contingent
Shares attributable to that portion of the Xenomics Indemnity Claim which is not
disputed by Purchaser up to the entire amount of the Contingent Shares. The
Escrow Agent shall not transfer any Contingent Shares with respect to the
balance of such Xenomics Indemnity Claim except in accordance with the
procedures set forth in Section 2.4.
2.6 Notice to Withhold on the Expiration Date. On or prior to the
Expiration Date, the Majority Shareholders shall furnish notice (the
"Withholding Notice") to the Escrow Agent and Purchaser of the number of
Contingent Shares, if any, to be retained on account of Xenomics Indemnity
Claims for which an Indemnity Notice but no Determination Notice has been
provided pursuant to Section 2.2, or for which an Indemnity Notice and a
Determination Notice has been provided pursuant to Section 2.2, but either
notice has been disputed by the Purchaser in full or in part pursuant to Section
2.4 (the "Withholding Shares"). The Withholding Notice shall contain the
information specified in Section 2.2 to the extent it requires supplementation
or change based on the Majority Shareholders' knowledge on the notice date. Upon
the receipt by the Escrow Agent of the Withholding Notice, the Escrow Agent
shall retain the Withholding Shares. In the event the Majority Shareholders do
not timely provide the Withholding Notice, the remaining Contingent Shares shall
be distributed by the Escrow Agent to Purchaser in accordance with, and to the
extent provided in, Section 2.7.
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2.7 Distribution of the Escrow Deposit. As soon as practicable
following the Expiration Date, any Contingent Shares as shall remain in the
Escrow Deposit after deduction of Contingent Shares pursuant to the provisions
of Sections 2.3 and 2.5 hereof, and after deduction of Withholding Shares, if
any, shall be released from the provisions of this Agreement and distributed
promptly by the Escrow Agent to Purchaser.
2.8 Retention of Escrow Deposit After Expiration Date. Upon receipt of
the Withholding Notice, the Escrow Agent shall continue to hold after the
Expiration Date, the Withholding Shares until such time as the Escrow Agent
receives a written agreement signed by the Majority Shareholders and Purchaser
stating the number of Contingent Shares, if any, to which the Shareholders are
entitled in connection with any outstanding Xenomics Indemnity Claims identified
in the Withholding Notice, or a copy of a Final Judgment with respect to such
Xenomics Indemnity Claims. As soon as practicable following receipt of such
agreement or Final Judgment, the Escrow Agent shall transfer to the
Shareholders, with respect to such Xenomics Indemnity Claim, the number of
Contingent Shares specified in such agreement or Final Judgment and, unless
there are any additional unresolved Xenomics Indemnity Claims that were
identified in the Withholding Notice, shall distribute to Purchaser, any
remaining Contingent Shares.
2.9 Reservation of the Shareholders' Rights. The rights of the
Shareholders to receive disbursements from the Escrow Account in respect of
Xenomics Indemnity Claims shall be without prejudice to any other rights the
Shareholders may have, under the Exchange Agreement or otherwise, to seek
indemnity for Xenomics Indemnity Claims.
2.10 Reporting. The parties hereto shall, for federal income tax
purposes and, to the extent permitted by applicable law, state and local tax
purposes, report consistent with the Shareholders as the owners of the
Contingent Shares and the Shareholders shall furnish any required tax forms
consistent with the foregoing.
2.11 Voting and Dispositive Authority. Shareholders shall have no
voting and dispositive authority with respect to the Contingent Shares unless
and until such Contingent Shares are transferred to Shareholders in accordance
with the terms of this Agreement. This paragraph shall be construed as a proxy
in favor of the Purchaser acting by vote of a majority of its board of directors
to vote (or execute written consents with respect thereto) in favor of proposals
recommended by management. This proxy shall be deemed complied with on interest
and shall terminate with respect to Contingent Shares upon release.
Section 3 ESCROW AGENT
3.1 Duties. The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement and shall be
limited to the performance of such duties and obligations as are specifically
set forth in this Agreement, as it may be amended from time to time with the
Escrow Agent's written consent.
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3.2 Reliance. In the performance of its duties hereunder, the Escrow
Agent shall be entitled to rely upon any document or instrument reasonably
believed by it to be genuine and signed by Purchaser or the Shareholders. The
Escrow Agent may assume that any person purporting to give any notice in
accordance with the provisions hereof has been duly authorized to do so.
3.3 Liability. The Escrow Agent shall not be liable for any error of
judgment, or any action taken or omitted to be taken hereunder in good faith,
except in the case of its bad faith, gross negligence or willful misconduct. The
Escrow Agent shall be entitled to consult with counsel of its choosing
(including internal counsel) and shall not be liable for any act suffered or
omitted by it in good faith in accordance with the advice of such counsel.
3.4 Disputes. In the event that the Escrow Agent shall be uncertain as
to its duties or rights hereunder, or shall receive instructions from any party
hereto with respect to the Contingent Shares which, in its opinion, are in
conflict with any of the provisions of this Agreement, it shall be entitled to
refrain from taking any action until such time as there has been a final
determination of the rights of Purchaser and the Shareholders with respect to
the Contingent Shares (or relevant portion thereof). For purposes of this
Section 4.4, there shall be deemed to have been a final determination of the
rights of Purchaser and the Shareholders with respect to the Contingent Shares
(or relevant portion thereof) at such time as Escrow Agent shall receive (i) an
executed counterpart of an agreement between the Majority Shareholders and
Purchaser or (ii) a copy of a Final Judgment which provides for the disposition
of the Contingent Shares (or relevant portion thereof).
3.5 Resignation. The Escrow Agent may resign at any time and be
discharged of the duties imposed hereunder (but without prejudice for any
liability in the case of its bad faith, gross negligence or willful misconduct
hereunder) by giving notice to the Majority Shareholders and Purchaser at least
sixty (60) business days prior to the date specified for such resignation to
take effect, in which case, upon the effective date of such resignation:
(a) any property then held by the Escrow Agent hereunder shall
be delivered by it to such person as may be designated in writing by Purchaser
and the Majority Shareholders, whereupon the Escrow Agent's obligations
hereunder shall cease and terminate;
(b) if no such person has been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless, cease and
terminate, subject to clause (c) below; and
(c) the Escrow Agent's sole responsibility thereafter shall be
to keep all property then held by it (and to make the investments as
hereinbefore provided) and to deliver the same to the successor escrow agent
designated in writing by Purchaser and the Majority Shareholders or, if no such
successor escrow agent shall have been so designated, in accordance with the
directions of a Final Judgment, and the provisions of Section 4.7 and Section
4.8 shall remain in effect.
3.6 Removal of Escrow Agent. Purchaser and the Majority Shareholders
may, upon at least thirty (30) business days prior written notice to the Escrow
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Agent, dismiss the Escrow Agent hereunder and appoint a successor. In such
event, the Escrow Agent shall promptly account for and deliver to the successor
escrow agent named in such notice the balance of the Escrow Deposit, including
all investments thereof and accrued income thereon, on the date of such
accounting and delivery. Upon acceptance thereof and of such accounting by such
successor escrow agent, and upon reimbursement to the Escrow Agent of all
expenses due to it hereunder through the date of such accounting and delivery,
the Escrow Agent shall be released and discharged from all of its duties and
obligations hereunder, but without prejudice to any liability of the Escrow
Agent for its bad faith, gross negligence or willful misconduct hereunder.
3.7 Indemnification. Each of Purchaser and the Shareholders shall
jointly indemnify and hold the Escrow Agent harmless against any loss,
liability, claim, damage, injury, demand or expense, including reasonable legal
fees, arising out of or in connection with the performance of the Escrow Agent's
obligations hereunder, including the costs and expenses incurred in connection
with the collection of its fees and including the costs and expenses of
defending itself against any claim or liability arising out of or in connection
with the performance of its duties hereunder, except for any loss, liability,
claim, damage, injury, demand or expense resulting from the Escrow Agent's bad
faith, gross negligence or willful misconduct; provided, however, that promptly
after the receipt by the Escrow Agent of notice of any claim or the commencement
of any suit, action or proceeding, the Escrow Agent shall, if a claim of
indemnification in respect thereof is to be made against any of the other
parties hereto, notify such other parties thereof in writing; and provided,
further, that the indemnifying party or parties shall be entitled, jointly or
severally and at their own expense, to participate in or assume the defense of
any such action, suit or proceeding. The right of the Escrow Agent (or any
successor escrow agent appointed hereunder) to indemnification under this
Section 4.7 shall survive the termination of this Agreement.
3.8 ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP.
(a) Each party acknowledges that ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP has
acted as legal counsel to and representative of Purchaser and its affiliates in
the past and is presently doing so (including, without limitation, in connection
with the Exchange Agreement and other related transactions), and agrees that
such counsel and representation do not and will not constitute a grounds for
disqualifying ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP from acting as Escrow Agent hereunder, and
that ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP may continue to so act as legal counsel to and
representative to Purchaser and its affiliates in the future in connection with
those and all other matters.
(b) Notwithstanding anything to contrary contained herein, it
is expressly understood by the parties hereto that the Escrow Agent, in that
capacity, at any time that it is required or permitted to seek legal counsel
under this Agreement, may seek such legal counsel from ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP,
and that the Purchaser and the Shareholders will be jointly liable to ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇ LLP for any services performed and billed to the Escrow Agent by
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP at its customary hourly rates and all of ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇ LLP's disbursements in connection with the provision of such services.
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Section 4
MISCELLANEOUS
4.1 Term. This Agreement shall continue in force until the final
distribution of all amounts held by the Escrow Agent in the Escrow Deposit.
4.2 Notices. All notices and other communications hereunder shall be
given in writing and delivered personally, by registered or certified mail
(postage prepaid, return receipt requested), by overnight courier (postage
prepaid), facsimile transmission or similar means, to the party to receive such
notices or communications at the address set forth below (or such other address
as shall from time to time be designated by such party to the other parties in
accordance with this Section 5.2):
If to the Shareholders:
L. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ shosse, ▇▇▇▇ ▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Purchaser, addressed:
Used Kar Parts, Inc.
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Escrow Agent:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices and communications hereunder shall be deemed given when
received, as evidenced by the signed acknowledgment of receipt of the person to
whom such notice or communication shall have been personally delivered, the
acknowledgment of receipt returned to the sender by the applicable postal
authorities or the confirmation of delivery rendered by the applicable overnight
courier service. A copy of any notice or other communication given by any party
to any other party hereto, with reference to this Agreement, shall be given at
the same time to the other parties to this Agreement.
4.3 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective representatives, successors
and assigns. Neither this Agreement nor any rights, duties or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the parties hereto.
4.4 Attorney-in-Fact. The parties hereby agree that any of the
documents comprising Escrow Deposits as are undated or incomplete shall, if
necessary when and if released from escrow hereunder, be dated as of the date of
such release and delivery and/or completed by the Escrow Agent, and each of the
parties hereto hereby appoints the Escrow Agent as its attorney-in-fact for the
purpose of dating and completing such documents.
[SIGNATURE PAGE FOLLOWS]
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IN WlTNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above set forth.
"PURCHASER:" Used Kar Parts, Inc.,
a Florida corporation
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------
Its: President
"SHAREHOLDERS:" /s/ L. ▇▇▇▇▇ ▇▇▇▇▇
------------------------------
L. ▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
"ESCROW AGENT:" ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Partner
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Schedule A
List of Shareholders
PURCHASER CONTINGENT
SHAREHOLDERS SHARES SHARES
------------ ------ ------
L. ▇▇▇▇▇ ▇▇▇▇▇ 938,360 145,450
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 885,809 137,304
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 348,803 54,066
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ 66,689 10,337
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 18,340 2,843
Totals 2,258,001 350,000
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