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EXHIBIT 10.14
EXECUTION COPY
ESCROW AGREEMENT
This ESCROW AGREEMENT, dated as of June 18, 1999 (this "Agreement"), by
and among XXXXXXXX.XXX, INC., a Washington corporation ("Grantor"), FINGERHUT
COMPANIES, INC., a Minnesota corporation ("Grantee"), and XXXXXXX BREED XXXXXX &
XXXXXX LLP, solely in the capacity as escrow agent (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Grantee and Grantor have executed and delivered a Warrant
Agreement, dated as of December 10, 1998 (the "Warrant Agreement"), as modified
by a letter agreement dated June 18, 1999, between Grantee and Grantor (the
"Letter Agreement") pursuant to which, and subject to the terms and conditions
thereof, Grantee has elected to exercise its Third Tranche Investment Percentage
Warrants, Anti-Dilution Warrants and Third Party Agreement Warrants (all as
defined in the Warrant Agreement) for 404,858 shares (the "Warrant Shares") of
Grantor's Series B convertible preferred stock ("Preferred Stock"); and
WHEREAS, pursuant to the Letter Agreement Grantee has elected to purchase
an additional 8,820 shares of Preferred Stock ("Additional Shares"); and
WHEREAS, Grantor intends to file a registration statement (the
"Registration Statement") in connection with the sale of shares of common stock
in a proposed Qualified Public Offering, as such term is defined in the Warrant
Agreement, with the Securities and Exchange Commission under the Securities Act
of 1933;
WHEREAS, Grantor intends to file such Registration Statement on or about
June 18, 1999 and represents therein that Grantee intends to exercise certain of
its Warrants and purchase the Additional Shares not later than the completion of
the Qualified Public Offering;
WHEREAS, Grantee and Grantor have agreed that on or about the date hereof
Grantee shall cause to be deposited with the Escrow Agent $9,011,348 in cash
(the Exercise Price") to be held in escrow by the Escrow Agent in accordance
with the terms of this Agreement at the request of and as an accommodation to
Grantee and Grantor;
WHEREAS, Grantor and Grantee have agreed that on or about the date hereof
Grantor shall cause to be deposited with the Escrow Agent a certificate for the
Warrant Shares acquired in connection with the payment of the Exercise Price
(the "Certificate");
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein and in the Warrant Agreement and other valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows (capitalized terms used herein without definition shall have
the meaning attributed thereto in the Warrant Agreement):
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1. Escrow Funds and Shares. (a) On the date hereof, Grantee shall deliver
to the Escrow Agent the amount of the Exercise Price (the "Escrow Funds") by
wire transfer to the Xxxxxxx Breed Xxxxxx & Xxxxxx LLP Attorney Trust Account at
Citibank, N.A. (153 East 53rd Street, New York, New York 10043) (ABA No. 021 000
089) (Account No. 00000000) (Attention: Xxxx Xxxxxxx at 212-559-8647) (the
"Escrow Account").
(b) On the date hereof, Grantor shall deliver to the Escrow Agent the
Certificate.
(c) The Escrow Funds shall be held, invested and applied by the Escrow
Agent pursuant to the terms of this Agreement.
2. Investment of Funds. As soon as practicable after the receipt thereof,
the Escrow Agent shall cause the Escrow Funds to be invested in the Citibank
Citiescrow Account or such other investment available to the Escrow Account at
Citibank N.A. as Grantee may request. The Grantee shall bear and retain the sole
responsibility for the selection of the investment hereunder and all risk of
loss from such investment. All net interest earned on the Escrow Funds from
investment as provided in this Section 2 shall be payable to Grantee at the time
the Escrow Funds are disbursed in accordance with Section 3 hereof.
3. Disbursement of Escrow Funds. (a) Upon receipt of a notice from Grantee
substantially in the form of Annex I hereto (the "Notice of Satisfaction of
Grantee Conditions"), the Escrow Agent shall and is hereby directed to withdraw
from the Escrow Account and pay to Grantor the Escrow Funds and to withdraw from
the Escrow Account and pay to Grantee all net interest earned on the Escrow
Funds. Receipt by the Escrow Agent of the Notice of Satisfaction of Grantee
Conditions shall be deemed exercise by Grantee of the Third Tranche Investment
Percentage Warrants, Anti-Dilution Warrants and Third Party Agreement Warrants.
Grantee agrees that if closing of the Qualified Public Offering occurs not later
than October 31, 1999, Grantee will send a Notice of Satisfaction of Grantee
Conditions to the Escrow Agent not later than the date of such closing.
(b) Upon payment of Escrow Funds by the Escrow Agent to Grantor, and
payment of interest earned thereon by the Escrow Agent to Grantee, Escrow Agent
shall deliver the Certificate to Grantee.
(c) If the Escrow Agent does not receive from Grantee, on or before
October 31, 1999, a duly executed Notice of Satisfaction of Grantee Conditions,
the Escrow Agent shall withdraw from the Escrow Account and pay to Grantee the
Escrow Funds and all net interest earned thereon promptly after October 31,
1999, and deliver the Certificate to Grantor.
(d) Payments of Escrow Funds and interest earned thereon by the Escrow
Agent shall, if Grantee so requests and provides appropriate instructions, be
effected by wire transfer of immediately available funds and, absent such
request or instructions, by check.
4. Escrow Agent's Duties and Fees. (a) The Escrow Agent shall be obligated
to perform only such duties as are expressly set forth in this Agreement. The
Escrow Agent may rely upon, and shall be protected in acting or refraining from
acting upon, any written notice, instruction or request furnished to it under
this Agreement and believed by it to be genuine and to have been signed or
presented by the proper party or parties, provided that, as set forth below,
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any modification of this Agreement shall be required to be signed by each of the
parties to this Agreement. The Escrow Agent acts under this Agreement as a
depositary only and is not a party to or bound by any agreement or undertaking
which may be evidenced by or arise out of any items deposited with or delivered
to it pursuant to this Agreement and is not responsible or liable in any manner
for the sufficiency, correctness, genuineness or validity of any such items and
undertakes no responsibility or liability for the form of execution of such
items or the identity, authority, title or rights of any person executing or
depositing same. The Escrow Agent shall not be liable to Grantee or Grantor or
their respective successors and assigns for any action taken or omitted to be
taken hereunder in good faith; provided, however, that the Escrow Agent shall be
and remain liable for any damages arising as a result of its willful misconduct
or gross negligence.
(b) Grantee and Grantor, jointly and severally, shall indemnify the Escrow
Agent for and hold the Escrow Agent harmless against, any loss, damage,
liability or expense incurred by the Escrow Agent not caused by its gross
negligence or willful misconduct, arising out of or in connection with its
entering into this Agreement and the performance of its duties under this
Agreement, including the costs and expenses of defending itself against any
claim or liability in any legal proceeding in connection with this Agreement
(including reasonable attorneys' fees). The Escrow Agent may consult with
counsel of its choice and shall have full and complete authorization and
protection for any action taken or suffered by it under this Agreement in good
faith and in accordance with the opinion of such counsel.
(c) Grantee shall pay the reasonable compensation of the Escrow Agent for
the services to the rendered by the Escrow Agent hereunder and shall pay to or
reimburse the Escrow Agent for all expenses, disbursements and advances,
including reasonable attorneys' fees, incurred or made by the Escrow Agent in
connection with the performance of its duties hereunder.
(d) Grantee and Grantor warrant to the Escrow Agent that, except as
provided in Section 4(e), there are no Federal, state or local tax liability or
filing requirements concerning the Escrow Agent's actions contemplated hereunder
and warrants and represents to the Escrow Agent that the Escrow Agent has no
duty to withhold or file any report or any tax liability under any Federal or
state income tax, local or state property tax, local or state sales or use
taxes, or any other tax by any taxing authority. Grantee and Grantor, jointly
and severally, agree to indemnify the Escrow Agent fully for any tax liability,
penalties or interest incurred by the Escrow Agent arising hereunder and agrees
to pay in full any such tax liability together with penalty and interest if any
is ultimately assessed against the Escrow Agent for any reason as a result of
its action hereunder (except for the Escrow Agent's individual income tax
liability).
(e) Due to the requirement that all trust accounts have Taxpayer
Identification Numbers documented by appropriate W-8 and W-9 forms, Escrow Agent
shall promptly provide such forms to Grantee and Grantor, and Grantee and
Grantor shall return such forms to the Escrow Agent, duly completed and signed,
within five days of receipt thereof. Grantee and Grantor acknowledge that
failure to provide such forms may prevent or delay disbursement of Escrow Funds
hereunder.
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5. Notices. All notices, consents, requests, instruction, approvals and
other communications provided for in this Agreement shall be in writing and
shall become effective when delivered at the following addresses:
(a) if to Grantee:
Fingerhut Companies, Inc.
0000 Xxxxx Xxxx, #000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
(b) if to Grantor:
XxxxXxxx.xxx, Inc. Inc.
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention:Xxxxxxx X. Xxxxxx
With a copy to:
Xxxxx X. Xxxxxxx, Xx.
Xxxxxx & Whitney LLP
X.X. Xxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
(c) if to the Escrow Agent:
Xxxxxxx Breed Xxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
6. Miscellaneous Provisions. (a) This Agreement shall be governed by and
construed in accordance with the internal, substantive laws of the State of New
York without giving effect to the conflict of law rules thereof.
(b) This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one in the same instrument.
(c) This Agreement may not be assigned by Grantee or Grantor in any manner
whatsoever.
(d) Grantee and Grantor shall cooperate with the Escrow Agent and deliver
to the Escrow Agent such additional information and documents as the Escrow
Agent shall reasonably request in the performance of its obligations under this
Agreement, including such documents as
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it shall reasonably request to evidence termination of this Agreement and to
evidence consent to the final payment of the Escrow Funds and interest on the
Escrow Funds in accordance with the terms of the Agreement.
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IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the day and year first above written.
By:
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Title:
By:
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Title:
XXXXXXX BREED XXXXXX & XXXXXX LLP
By:
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A Partner
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Annex I
to
Escrow Agreement
[Grantor's Letterhead]
__, 1999
Notice of Satisfaction of Grantee's Condition
Xxxxxxx Breed Xxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxxx, Esq.
Re: Disbursement of Escrow Funds
Dear Sirs:
Pursuant to Section 3(a) of the Escrow Agreement, dated as of June 18,
1999 (the "Escrow Agreement"), among XxxxXxxx.xxx, Inc. ("Grantor"), Fingerhut
Companies, Inc. ("Grantee"), and Xxxxxxx Breed Xxxxxx & Xxxxxx LLP, solely in
its capacity as escrow agent (the "Escrow Agent"), you are hereby notified that
the condition that the closing of the Qualified Public Offering (as defined in
the Escrow Agreement) has occurred on or before October 31, 1999 has been
satisfied.
Accordingly you are hereby directed to pay to Grantor the Escrow Funds and
to Grantee all net interest earned thereon as provided in Section 3(a) of the
Escrow Agreement and to deliver the Certificate to Grantee as provided in
Section 3(e) of the Escrow Agreement.
IN WITNESS WHEREOF, Grantee has duly caused this Notice to be delivered to
you in accordance with the terms of the Escrow Agreement.
By:
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Name:
Title:
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