ESCROW AGREEMENT
This Escrow Agreement (the "Escrow Agreement") is made and entered into as
of July 31, 2003 by and among:
- Softstone, Inc., a Delaware corporation ("SOFS");
- Xxxxx X. Xxxx;
- Xxxx X. Xxxx;
- Xxxxx Xxxx;
- T S Electronics Corporation, a Delaware corporation ("TSEC");
- Xxxx Xxxxxx and Xxxx Xxxxxxxxx (the "TSEC Shareholders"); and
- Xxxxxx Xxxxx, as the escrow agent ("Escrow Agent").
Xxxxx, Xxxx and Xxxxx Xxxx shall sometimes be referred to herein as "the Boyds."
In consideration of the representations, promises and undertakings set
forth below, the parties hereto hereby agree as follows:
1. Agreement. This Escrow Agreement is being entered into concurrent
with an agreement dated July 31, 2003 (the "Reorganization Agreement"), by and
among all the parties to this Escrow Agreement except Escrow Agent, which
agreement provides for the reorganization of SOFS (the "Reorganization").
2. SOFS Minutes. Attached hereto as Exhibit 2 is a copy of minutes of
a Special Meeting of the Directors of SOFS approving the Reorganization
Agreement and the transactions contemplated therein, which minutes SOFS and the
Boyds represent are true and correct (the "SOFS Minutes").
3. The Escrow. In accordance with the provisions of the Reorganization
Agreement and the SOFS Minutes, the following documents, stock certificates and
stock powers shall be delivered to the Escrow Agent prior to or upon the Closing
Date (as defined in the Reorganization Agreement):
3.1 Each of the officers and directors of SOFS shall deliver his
undated but executed resignation as an officer and director of SOFS (the "SOFS
Resignations"), addressed to "the Secretary of Softstone, Inc.
Exhibit 10.5
Page 1 of 8 Pages
3.1.1. TSEC shall deliver (1) a list of the names of persons to
fill the vacancies on the board of directors created by such resignations, (2)
the names of the persons to be elected as officers of the post-reorganization
company and (3) the name to which SOFS shall change its name as part of the
reorganization.
3.2 SOFS shall deliver executed documents representing (a) the
organization of a new Oklahoma limited liability company called herein "SOFS
Sub", (b) the election of Xxxxx Xxxx and Xxxx Xxxx as the managers of SOFS Sub,
and (c) the purchase of the entire ownership interest in SOFS Sub by SOFS in
exchange for (y) the assignment to SOFS Sub of all the assets of SOFS (with the
exception of the shares of capital stock of TSEC described below in paragraph
3.8) and (z) the release of all pre-closing debts of SOFS.
3.3 The Boyds shall deliver undated but executed releases of all
liabilities owed by SOFS to each of the Boyds.
3.4 SOFS Sub shall deliver executed documents reflecting the release
of all pre-closing liabilities of SOFS, known or unknown, related to SOFS's
rubber business or otherwise, but specifically excluding any liabilities arising
in connection with or related to the Reorganization that might be attributable
to actions taken by TSEC, its officers and its agents.
3.5 SOFS shall deliver undated but executed certificates that
transfer, in exchange for the consideration described in paragraph 3.3 and 3.4
above, -
..
(1) to the Boyds, all the ownership interest in SOFS Sub in the percentage
interests as directed by them,
(2) to SOFS Sub, 50,000 shares of common stock of SOFS, and
(3) to SOFS Sub, 100,000 common stock purchase warrants, each warrant
exercisable at $1.25 a share, such warrants to expire one year after the Closing
Date with the shares underlying the warrants to be registered with the first
registration statement filed by the post-reorganization company after a 6-month
lockup period but no later than 9 months after the Closing Date if the warrants
are in the money.
3.6 Xxxx Xxxx, Xxxxxxxxx Xxxxxx and Xxx Xxxxxxx shall deliver an
undated but executed "Written Action by the Directors of SOFS" (a) appointing
Xxxx Xxxxxx to fill the vacancy on the Board of Directors of SOFS created by the
resignation of Xxxxx Xxxx as a director, and (b) electing Xxxx Xxxxxx as
president of SOFS.
3.7 [reserved]
3.8 TSEC shall deliver stock certificates representing all the
issued and outstanding shares of capital stock of TSEC, together with undated
Exhibit 10.5
Page 2 of 8 Pages
stock powers executed by all the TSEC Shareholders, which stock powers transfer
to SOFS all the issued and outstanding shares of capital stock of TSEC.
3.9 For purposes of the Lockup Agreement described in paragraph
1.1(i) of the Reorganization Agreement, each of the Boyds and the insiders of
SOFS that execute Lockup Agreements shall deliver an executed copy of the Lockup
Agreement. SOFS shall deliver stock certificates, bearing the appropriate
legends, representing 5,350,000 shares of SOFS common stock registered in the
names of the TSEC Shareholders in the same proportions as their holdings of TSEC
stock bear to each others holdings. Each of the Boyds and the SOFS Insiders
that execute Lockup Agreements shall deliver stock certificates representing all
shares of SOFS beneficially owned by him to the Escrow Agent.
3.10 The parties to the First Indemnification Agreement (as defined in
Paragraph 5.1 (h) of the Agreement) shall each execute an undated copy of the
signature page to such agreement and deliver such to the Escrow Agent.
3.11 SOFS shall deliver a good standing certificate from the Secretary
of State of the State of Delaware, attesting to the good standing of SOFS in
such state.
3.12 TSEC shall deliver good standing certificates from the Secretary
of State of Delaware and the appropriate officer of any other state where the
ownership of its assets or the conduct of its business would require such
qualification, attesting to the good standing of TSEC in each such state.
3.13 SOFS Sub shall execute and deliver the Second Indemnification
Agreement (as defined in the Agreement).
3.14 SOFS will deliver an executed Amendment to the Articles of
Incorporation of Softstone, Inc., which amendment will reflect the change of
name of the company and the stock consolidation whereby all outstanding
pre-reorganization shares of common stock of SOFS are consolidated to 600,000
shares.
4. Instructions to the Escrow Agent. In the event that: (1) SOFS
delivers to the Escrow Agent a certificate of its president and corporate
secretary stating that the Reorganization has been approved by SOFS's
shareholders, as provided in the Reorganization Agreement, and that they
believe that the conditions precedent to SOFS's and the Boyds's obligations, as
described in Section 5 of the Agreement, have been satisfied and (2) TSEC
delivers to the Escrow Agent a certificate of its president and corporate
secretary stating that they believe that the conditions precedent to its and
the TSEC Shareholders' obligations, as described in Section 6 of the
Reorganization Agreement, have been satisfied:
4.1 The Escrow Agent shall do the following on the Closing Date in the
following order:
Exhibit 10.5
Page 3 of 8 Pages
a. Date the SOFS Resignation of Xxxxx Xxxx described in
paragraph 3.1 above and place it in the corporate record
book of SOFS.
b. Deliver to Xxxxx Xxxx the documents described in paragraph
3.2 above.
x. Xxxx and place in the corporate record book of SOFS the
releases of all liabilities owed by SOFS to each of the
Boyds, as described in paragraph 3.3 above.
d. Date and place in the corporate record book of SOFS the
document described in paragraph 3.4 above reflecting the
release of SOFS of all liabilities owed to persons other
than the Boyds and the assumption by SOFS Sub of all
pre-closing liabilities of SOFS.
e. Cancel the SOFS Sub certificate evidencing the ownership by
SOFS of all the interest in SOFS Sub. Date and deliver to
the Boyds the certificates described in paragraph 3.5(1)
above and date and place in the company record book the
certificates described in paragraph 3.5 (2) and (3) above.
f. Date and place in the corporate record book of SOFS the
"Written Action of Directors" described in paragraph 3.6
above.
g. Date and place in the corporate record book of SOFS the SOFS
Resignations of Xxxx Xxxx, Xxxx Xxxxxx Xxxx and Xxx Xxxxxxx
described in paragraph 3.1 above.
h. Place in the corporate record book of SOFS the list of
post-reorganization directors and officers of SOFS described
in paragraph 3.1.1 above.
i. [deleted].
j. Place in the corporate record book of SOFS the TSEC stock
certificates and stock powers described in paragraph 3.8
above.
k. Place in a file of the Escrow Agent, for the purposes of the
Lockup Agreement, the SOFS common stock certificates
described in paragraph 3.9 above and mail to each of the
persons that executed a Lockup Agreement a copy of his or
her stock certificates so placed. Date and place in the
corporate record book of SOFS the executed copies of the
Lockup Agreement.
l. Date and place in the company record book of SOFS Sub the
executed First Indemnification Agreement described in
paragraph 3.10 above.
Exhibit 10.5
Page 4 of 8 Pages
m. Place in the corporate record book of SOFS the good standing
certificates described in paragraphs 3.11 and 3.12 above.
n. Date and place in the company record book of SOFS Sub the
executed Second Indemnification Agreement described in
paragraph 3.13 above.
o. Place in the corporate record book of SOFS the certificates
of the company secretaries of SOFS and TSEC described in
paragraph 4 above.
p. File with the Secretary of State of Delaware the Amendment
to the Articles of Incorporation of Softstone, Inc.
described in paragraph 3.15 above, which amendment will
reflect the change of name of SOFS and the stock
consolidation.
5. Standard of Care. The Escrow Agent will not be liable for any act
or omission, or for any claim, demand, loss or damage made or suffered by any
party to this Agreement, excepting such as may arise through or be caused by
Escrow Agent's bad faith, willful misconduct or gross negligence.
6. Reliance. Escrow Agent is authorized to rely on any document reasonably
believed by Escrow Agent to be authentic in making any delivery of certificates,
funds or property hereunder.
7. Liability of Escrow Agent. In accepting any securities or documents
delivered hereunder, it is agreed and understood by the undersigned that Escrow
Agent will not be called on to construe any contract or instrument deposited
herewith and, in the event of a dispute, will be required to act in respect to
the deposit herein made only on the consent in writing of the undersigned. In
the event of its failure to obtain such consent in writing, Escrow Agent
reserves the right to hold all papers in connection with or concerning this
escrow until a mutual agreement in writing has been reached between all parties
and delivered to Escrow Agent or until delivery is legally authorized and
ordered by final judgment or decree of a court of competent jurisdiction. If
Escrow Agent obeys or complies with any judgment, order or decree of a court of
competent jurisdiction, Escrow Agent will not be liable to any of the parties
hereto nor to any other person, firm or corporation by reason of such
compliance, notwithstanding any such judgment, order or decree be subsequently
reversed, modified, annulled, set aside or vacated.
8. Applicable Law. The law of New York shall apply to the effect and
interpretation of this Escrow Agreement.
9. Execution in Counterparts. This Escrow Agreement and any of the
documents described herein that are necessary for the Closing may be executed in
counterparts, each of which shall be deemed an original and together which shall
constitute one and the same instrument.
Exhibit 10.5
Page 5 of 8 Pages
10. Further Assurances. If, at any time before, on or after the Closing
Date, any further action by any of the parties to this Escrow Agreement is
necessary or desirable to carry out the purposes of this Escrow Agreement, such
party shall take all such necessary or desirable action or use such party's best
efforts to cause such action to be taken.
11. Judicial Proceedings. Each party hereto agrees that all disputes
regarding this Escrow Agreement, not otherwise resolved by themselves, shall be
submitted to binding arbitration in accordance with the rules of the American
Arbitration Association. The venue of the arbitration proceeding shall be New
York, New York. Each party hereto agrees that personal service of all process
may be made by registered or certified mail pursuant to the provisions of
Section 12.
12. Notices. Any notice or demand desired or required to be given hereunder
shall be in writing and deemed given when personally delivered, sent by
facsimile, overnight courier or deposited in the mail (postage prepaid,
certified or registered, return receipt requested) and addressed as set forth
below or to such other address as any party shall have previously designated by
such a notice. Any notice delivered personally or by facsimile shall be deemed
to be received on the date of personal delivery or confirmed transmission by
facsimile; any notice sent by overnight courier shall be deemed to be received
upon confirmation one business day after the date sent; and any notice mailed
shall be deemed to be received on the date stamped on the receipt.
Notices shall be sent to the following addresses:
If to TSEC or TSEC Shareholders:
TS Electronics
XinMao Xxxxxxxxxx Xxxx, X0, Xxxxx 0X-X
Xxxxxxx, Xxxxx
If to SOFS
or SOFS Sub: Xxxxx Xxxx
000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Copy to: Xxxxxx X. Xxxxx, Esq.
Fuller, Tubb, Xxxxxxx and Xxxxxx
000 Xxxxxx X. Xxxx Xxx., Xxxxx 0000
Xxxxxxxx Xxxx, XX 00000
If to the Boyds: Xxxxx Xxxx
000 Xxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Exhibit 10.5
Page 6 of 8 Pages
Copy to: Xxxxxx X. Xxxxx, Esq.
Fuller, Tubb, Xxxxxxx and Xxxxxx
000 Xxxxxx X. Xxxx Xxx., Xxxxx 0000
Xxxxxxxx Xxxx, XX 00000
If to the Escrow Agent: Xxxxxx Xxxxx, C.L.A.
Fuller, Tubb, Xxxxxxx and Xxxxxx
000 Xxxxxx X. Xxxx Xxx., Xxxxx 0000
Xxxxxxxx Xxxx, XX 00000
13. Parties in Interest. All of the terms and provisions of this Escrow
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether herein
so expressed or not.
14. Amendment. Except as otherwise provided herein, TSEC, SOFS, the TSEC
Shareholders, the Boyds, and Escrow Agent may amend, modify or supplement this
Escrow Agreement at any time, but only in a writing duly executed by each and
every such party.
15. Headings. The headings preceding the text of sections of this Escrow
Agreement are for convenience only and shall not be deemed a part hereof.
Exhibit 10.5
Page 7 of 8 Pages
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Escrow Agreement as of the date and year first above written.
Softstone, Inc. T S Electronics Corporation
By____________________________ By____________________________
Xxxxx X. Xxxx, President Xxxx Xxxxxx, President
______________________________ ______________________________
Xxxxx X. Xxxx Xxxx Xxxxxx
______________________________ ______________________________
Xxxx X. Xxxx Xxxx Xxxxxxxxx
______________________________
Xxxxx Xxxx
______________________________
Xxxxxx Xxxxx
Exhibit 10.5
Page 8 of 8 Pages
