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EXHIBIT 99.2
ESCROW AGREEMENT
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THIS ESCROW AGREEMENT (this "Escrow Agreement") is made and entered into as
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of the 7th day of April, 2000 by and among Interiors, Inc., a Delaware
corporation ("Buyer"), U.S. Bank Trust National Association (together with its
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successors and assigns, the "Escrow Agent"), Jerry Howard ("Howard"), Dennis
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Darlington ("Darlington") and the Mamer Family Trust dated October 1, 1997 (the
"Mamer Trust") (Howard, Darlington and the Mamer Trust collectively, the
"Shareholders"). For purposes of this Escrow Agreement, all capitalized terms
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shall have the meanings ascribed to such terms in the Stock Purchase Agreement
(defined below) unless otherwise defined herein.
RECITALS
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A. Pursuant to that certain Stock Purchase Agreement, dated as of October
27, 1999 (the "Stock Purchase Agreement") by and among Buyer and the
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Shareholders, Buyer purchased all of the capital stock of Concepts 4, Inc., a
California corporation (the "Company") from the Shareholders.
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B. Pursuant to that certain First Amendment to Stock Purchase Agreement
dated as of December 15, 1999 by and among Buyer and the Shareholders, the
parties amended the Stock Purchase Agreement.
C. Pursuant to Section 2.02(c) of the Stock Purchase Agreement, Buyer and
the Shareholders agreed that the parties would enter into an escrow agreement in
the event Buyer elected to pay the amount due Shareholders under Section
2.02(a)(iii) more than fifteen (15) Business Days after March 10, 2000.
D. The purposes of the escrow account established hereby are to (i)
secure payment to the Shareholders of the amount due the Shareholders pursuant
to Section 2.02(a)(iii) of the Stock Purchase Agreement, and (ii) to hold the
Escrow Shares in escrow and release the Escrow Shares to the Shareholders or the
Company subject to certain terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained in this Escrow
Agreement, and intending to be legally bound, the parties hereto agree as
follows:
1. Escrow of Funds.
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(a) To secure the payment of the amount due Shareholders under
Section 2.02(a)(iii) of the Stock Purchase Agreement, within ten (10) Business
Days of the date hereof, but in no event later than April 14, 2000 Buyer shall
deliver to the Escrow Agent (i) certificates representing a number of shares of
Buyer Common Stock, the fair market value of which as of the date hereof is Two
Million Eight Hundred Twenty-Two Thousand Nine Hundred Thirty-Eight Dollars
($2,822,938), and (ii) a duly executed stock power separate from such
certificate, the receipt of which Escrow Agent hereby acknowledges. Valuing the
shares will be the responsibility of the Buyer, and shall notify Escrow Agent in
writing of such value assigned
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to shares. The fair market value of the Escrow Shares shall be computed using
the daily average closing bid price per share of Buyer Common Stock for the ten
(10) trading days immediately preceding the date the applicable cash payment was
to be made pursuant to Section 2.02(a)(iii) of the Stock Purchase Agreement.
(b) The respective interests of the Shareholders in the Escrow
Account shall not be assignable or transferable, other than by operation of law.
Notice of any such assignment or transfer by operation of law shall be given to
the Escrow Agent and Buyer, and no such assignment or transfer shall be valid
until such notice is given.
(c) Any securities, non-cash dividends or other property
distributable in respect of or in exchange for any of the Escrow Shares, whether
by way of dividends or otherwise, shall be delivered to Escrow Agent, who shall
hold such securities, non-cash dividends or other property in the Escrow
Account. Such securities shall be issued in the name of the Escrow Agent or its
nominee and all such securities, non-cash dividends or other property shall be
considered part of the Escrow Account for purposes hereof.
2. Investment of Escrow Account. Cash dividends distributable in respect
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of the Escrow Shares, if any, shall be held and invested or reinvested by the
Escrow Agent at the unanimous written request of the Shareholders in
certificates of deposit of banks or trust companies, including those of the
Escrow Agent, organized under the laws of the United States of America.
In the absence of duly authorized and complete written directions regarding
investment of cash held in the account, the Escrow Account will automatically
invest and reinvest in the following: U.S. Bank Money Market (FDIC Insured).
3. Term. The term of this Escrow Agreement shall commence on the date
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hereof and terminate on the earlier of (a) March 10, 2001, or (b) the date on
which Buyer exercises the Call Option (as defined below) pursuant to Section 4
hereof .
4. Buyer's Option to Redeem. Buyer shall have the right, but not the
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obligation (the "Call Option"), to redeem the Escrow Shares and any securities,
non-cash dividends and other property placed in the Escrow Account (a) at any
time after the date hereof until September 10, 2000, upon payment to the
Shareholders of Three Million One Hundred Five Thousand Two Hundred Thirty-One
Dollars and Eighty Cents ($3,105,231.80), and (b) at any time after September
10, 2000 until March 10, 2001 upon payment of Three Million Three Hundred
Eighty-Seven Thousand Five Hundred Twenty-Five Dollars and Sixty Cents
($3,387,525.60). If Buyer elects to exercise its Call Option, Buyer shall
provide thirty (30) days prior written notice (the "Call Notice") of such
election to the Shareholders and Escrow Agent. Buyer shall also deliver to
Escrow Agent with the Call Notice by wire transfer of immediately available
funds or, at Buyer's election, cashier's check in the amount of cash provided in
this Section 4 (the "Call Cash Payment"). Upon receipt of the Call Cash Payment,
Escrow Agent shall deliver the Escrow Shares and any securities, non-cash
dividends and other property placed in the Escrow Account to Buyer and shall
deliver the Call Cash Payment to the Shareholders.
5. Adjustment of Escrow Shares. In the event the fair market value of the
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Escrow Shares falls below Two Million Two Hundred Fifty Eight Thousand Three
Hundred Fifty Dollars and Forty Cents ($2,258,350.40), then the Shareholders
shall deliver a notice to Buyer of
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such shortfall, and Buyer shall deliver to Escrow Agent additional shares of
Buyer Common Stock within thirty (30) days of the Shareholders' notice so that
the fair market value of the Escrow Shares equals Two Million Eight Hundred
Twenty-Two Thousand Nine Hundred Thirty-Eight Dollars ($2,822,938). In the event
the fair market value of the Escrow Shares as of March 10, 2001 falls below
Three Million Three Hundred Eighty-Seven Thousand Five Hundred Twenty-Five
Dollars and Sixty Cents ($3,387,525.60) (the "Escrow Deficit"), Buyer shall
deliver to the Shareholders additional shares of Buyer Common Stock the fair
market value of which is equal to the Escrow Deficit.
6. Release of Escrow Shares. In the event that Buyer does not exercise
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the Call Option prior to March 10, 2001, Escrow Agent shall deliver to (a) the
Shareholders the Escrow Shares and any securities, non-cash dividends and other
property placed in the Escrow Account the fair market value of which as of March
10, 2001 equals up to Three Million Three Hundred Eighty-Seven Thousand Five
Hundred Twenty-Five Dollars and Sixty Cents ($3,387,525,60) (the "Escrow Payout
Amount") and (b) to Buyer any Escrow Shares and any securities, non-cash
dividends and other property remaining in the Escrow Account after the delivery
to the Shareholders of up to the Escrow Payout Amount.
7. Escrow Agent.
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(a) The duties of the Escrow Agent hereunder shall be entirely
administrative and not discretionary. The Escrow Agent shall be obligated to act
only in accordance with written instructions received by it as Provided in this
Escrow Agreement and is authorized hereby to comply with any orders, judgments
or decrees of any court with or without jurisdiction and shall not be liable as
a result of its compliance with the same.
(b) As to any legal questions arising in connection with the
administration of this Escrow Agreement, the Escrow Agent may rely absolutely
upon the opinions given to it by its counsel and shall be free of liability for
acting in reliance on such opinions.
(c) The Escrow Agent may rely absolutely upon the genuineness and
authorization of the signature and purported signature of any party upon any
instruction, notice, release, receipt or other document delivered to it pursuant
to this Escrow Agreement.
(d) The Escrow Agent may, as a condition to the disbursement of
monies as provided herein, require from the payee or recipient a receipt
therefor and, upon final payment or disposition, a release of the Escrow Agent
from any liability arising out of its execution or performance of this Escrow
Agreement, such release to be in a form satisfactory to the Escrow Agent.
(e) Buyer shall compensate Escrow Agent for its services until
termination of this Escrow Agreement or resignation of the Escrow Agent.
8. Indemnity.
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(a) Buyer and the Shareholders agree to and hereby do waive any suit,
claim, demand or cause of action of any kind which they or it may have or may
assert against the Escrow Agent arising out of or relating to the execution or
performance by the Escrow Agent of this Escrow Agreement, unless such suit,
claim, demand or cause of action is based upon the
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willful neglect or gross negligence or bad faith of the Escrow Agent. They
further agree to indemnify the Escrow Agent against and from any and all claims,
demands, costs, liabilities and expenses, including reasonable counsel fees,
which may be asserted against it or to which it may be exposed or which it may
incur by reason of its execution or performance of this Escrow Agreement. Such
agreement to indemnify shall survive the termination of this Escrow Agreement
until extinguished by any applicable statute of limitations.
(b) In case any litigation is brought against the Escrow Agent in
respect of which indemnity may be sought hereunder, the Escrow Agent shall give
prompt notice of that litigation to the parties hereto, and the parties upon
receipt of that notice shall have the obligation and the right to assume the
defense of such litigation, provided that failure of the Escrow Agent to give
that notice shall not relieve the parties hereto from any of their obligations
under this Section unless that failure prejudices the defense of such litigation
by said parties. At its own expense, the Escrow Agent may employ separate
counsel and participate in the defense. The parties hereto shall not be liable
for any settlement without their respective consents.
9. Acknowledgment by the Escrow Agent. By execution and delivery of this
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Escrow Agreement, the Escrow Agent acknowledges that the terms and provisions of
this Escrow Agreement are acceptable and it agrees to carry out the provisions
of this Escrow Agreement on its part.
10. Resignation or Removal of Escrow Agent, Successors.
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(a) The Escrow Agent may resign as such following the giving of
thirty (30) days' prior written notice to the other parties hereto. Similarly,
the Escrow Agent may be removed and replaced following the giving of thirty (30)
days' prior written notice to the Escrow Agent by the Shareholders. In either
event, the duties of the Escrow Agent shall terminate thirty (30) days after the
date of such notice (or as of such earlier date as may be mutually agreeable);
and the Escrow Agent shall then deliver the balance of the Escrow Account then
in its possession to a successor Escrow Agent as shall be appointed by the other
parties hereto as evidenced by a written notice filed with the Escrow Agent.
(b) If for any reason any person or entity is unwilling to serve as
successor Escrow Agent and if the other parties hereto are unable to agree upon
a successor or shall have failed to appoint a successor prior to the expiration
of thirty (30) days following the date of the notice of resignation or removal,
the then acting Escrow Agent may petition any court of competent jurisdiction
for the appointment of a successor Escrow Agent or other appropriate relief, and
any such resulting appointment shall be binding upon all of the parties hereto.
(c) Every successor appointed hereunder shall execute, acknowledge
and deliver to its predecessor and the other parties hereto, an instrument in
writing accepting such appointment hereunder, and thereupon such successor,
without any further act, shall become fully vested with all the duties,
responsibilities and obligations of its predecessor; but such predecessor shall,
nevertheless, on the written request of its successor or any of the parties
hereto, execute and deliver an instrument or instruments transferring to such
successor all the rights of such predecessor hereunder, and shall duly assign,
transfer and deliver all property, securities and monies held by it pursuant to
this Escrow Agreement to its successor. Should any instrument be required by any
successor for more fully vesting in such successor the duties, responsibilities
and obligations hereby vested or intended to be vested in the predecessor, any
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and all such instruments in writing shall, on the request of any of the other
parties hereto, be executed, acknowledged and delivered by the predecessor.
(d) In the event of an appointment of a successor, the predecessor
shall cease to be custodian of any funds, securities or other assets and records
it may hold pursuant to this Escrow Agreement, and the successor shall become
such custodian.
(e) Upon acknowledgment by any successor Escrow Agent of the receipt
of the then remaining balance of the Escrow Fund, the then acting Escrow Agent
shall be fully released and relieved of all duties, responsibilities and
obligations under this Escrow Agreement.
11. Entire Agreement, Amendments and Waivers. This Escrow Agreement and
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the Stock Purchase Agreement contain the entire agreement among the parties
pertaining to the subject matter hereof and supersede all prior and
contemporaneous agreements, negotiations, discussions, arrangements or
understandings with respect thereto. No amendment, supplement, modification or
waiver of this Escrow Agreement shall be binding unless executed in writing by
the Escrow Agent, Buyer and the Shareholders. No waiver of any of the provisions
of this Escrow Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided. In addition
to the remedies provided in this Escrow Agreement, any party may pursue any and
all remedies now or hereafter existing at law or in equity.
12. Execution Counterparts. This Escrow Agreement may be executed in
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one or more counterparts (including by facsimile), each of which shall be
regarded as an original and all of which shall constitute but one and the same
instrument.
13. Severability. If any provision of this Escrow Agreement, or any
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covenant, obligation or agreement contained herein is determined by a court to
be invalid or unenforceable, such determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed
and enforced as if such invalid or unenforceable portion were not contained
therein. Such invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision, covenant, obligation
or agreement shall be deemed to be effective, operative, made, entered into or
taken in the manner and to the full extent permitted by law.
14. Headings. The headings in this Escrow Agreement shall be solely for
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convenience of reference and shall in no way define, limit or describe the scope
or intent of any provisions or sections of this Escrow Agreement.
15. Notices. All notices or other communications which are required or
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permitted hereunder shall be in writing and shall be deemed to be sufficiently
given (a) if delivered personally, upon delivery, (b) if delivered by registered
or certified mail (return receipt requested), postage prepaid, upon the earlier
of actual delivery or upon three days after being mailed, and (c) if delivered
by telecopy, upon confirmation of transmission by telecopy, in each case to the
parties at the following address:
(a) As to Buyer: Interiors, Inc.
320 Washington Street
Mt. Vernon, New York 10553
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Attention: Max Munn
Facsimile: (914) 665-1610
With a copy to: Christopher A. Wilson, Esq.
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071
Facsimile: (213) 627-0705
(b) As to Escrow Agent: U.S. Bank Trust National Association
180 E. 5h St.
St. Paul, MN 55101
Attn: Brent Jordahl
Facsimile: (651) 244-8555
(c) As to Shareholders: Concepts 4, Inc.
3229 East Spring Street, Suite 200
Long Beach, California 90806
Attention: Jerry Howard, President
Facsimile: (562) 424-1331
With a copy to: Lorraine L. Loder, Esq.
601 West Fifth Street, Eighth Floor
Los Angeles, California 90071
Facsimile: (213) 623-1409
Any of the parties hereto may, by notice given hereunder, designate any
further or different address to which subsequent notices or other communications
shall be sent.
16. Expenses. Except as otherwise provided for herein, each party shall be
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responsible for its own costs and expenses with respect to matters involving
this Escrow Agreement.
17. Successors. This Escrow Agreement shall be binding upon, and inure
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to, the benefit of the heirs, executors, successors and assignees of the parties
hereto, and no other person shall have any right, benefit or obligation
hereunder.
18. Gender. Words of the masculine gender include the feminine and the
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neuter, and when the context so requires, words of the neuter gender may refer
to any gender.
19. Applicable Law. This Escrow Agreement shall be governed by and
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construed and enforced in accordance with the internal laws (and not the law of
conflicts) of the State of California.
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(SIGNATURE PAGE TO ESCROW AGREEMENT)
IN WITNESS WHEREOF, each of the parties hereto has caused this Escrow
Agreement to be executed on its behalf as of the day and year first above
written.
BUYER:
INTERIORS, INC.
By: ______________________________
An Authorized Officer
ESCROW AGENT:
U.S. BANK TRUST NATIONAL ASSOCIATION
By: ______________________________
An Authorized Officer
SHAREHOLDERS:
THE HOWARD FAMILY TRUST DATED MARCH 21, 2000
By: ______________________________
All Trustees
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Dennis Darlington
THE MAMER FAMILY TRUST DATED OCTOBER 1, 1997
By: ______________________________
All Trustees
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