ESCROW AGREEMENT
by and among
Cascade Retail Holdings Inc.,
Ridgeline Equity Partners, LP (as Stockholder Representative),
and
Marlowe Asset Management Trust Company, N.A. (as Escrow Agent)
Dated as of October 15, 2025
(the "Closing Date")
TABLE OF CONTENTS
Right-click to update Table of Contents
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of October 15, 2025 (the "Closing Date"), by and among:
(1) CASCADE RETAIL HOLDINGS INC., a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 4500 Elliott Avenue West, Suite 3200, Seattle, Washington 98119 (the "Buyer");
(2) RIDGELINE EQUITY PARTNERS, LP, a limited partnership organized and existing under the laws of the State of Delaware, acting in its capacity as the Stockholder Representative (as defined below) and not in its individual capacity, with its principal place of business at 200 Park Avenue South, 14th Floor, New York, New York 10003, acting through Franklin Osei, Managing Partner (the "Stockholder Representative"); and
(3) Marlowe Asset Management TRUST COMPANY, N.A., a national trust company organized under the laws of the United States, with its principal place of business at One Liberty Place, 1650 Market Street, Suite 3600, Philadelphia, Pennsylvania 19103 (the "Escrow Agent"), with Patricia Keane, Vice President, Escrow Services, designated as the primary contact for purposes of this Agreement.
Each of Buyer, the Stockholder Representative, and the Escrow Agent may be referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Buyer, NovaMart Global Inc., a Delaware corporation (the "Company"), the Stockholder Representative, and the Selling Stockholders named therein have entered into that certain Stock Purchase Agreement, dated as of May 20, 2025 (as the same may be amended, modified, or supplemented from time to time in accordance with its terms, the "Stock Purchase Agreement" or "SPA"), pursuant to which, among other things, Buyer is acquiring one hundred percent (100%) of the issued and outstanding capital stock of the Company for an aggregate purchase price of One Billion Two Hundred Million Dollars ($1,200,000,000) (the "Purchase Price");
WHEREAS, the Stock Purchase Agreement provides that, as a condition to the closing of the transactions contemplated thereby (the "Closing"), an amount equal to Ninety-Six Million Dollars ($96,000,000) (representing eight percent (8%) of the Purchase Price) (the "Escrow Amount") shall be deposited into an escrow account established pursuant to this Agreement to secure certain post-closing indemnification obligations of the Selling Stockholders to the Buyer under Article IX of the Stock Purchase Agreement;
WHEREAS, the Stockholder Representative has been duly appointed pursuant to the Stockholder Representative Agreement, dated as of May 20, 2025, by and among the Stockholder Representative and the Selling Stockholders, and Section 10.15 of the Stock Purchase Agreement, to act on behalf of, and as the exclusive representative of, the Selling Stockholders with respect to all matters arising under this Agreement, including, without limitation, the release and distribution of escrow funds, the receipt and delivery of notices, and the resolution of indemnification claims;
WHEREAS, Marlowe Asset Management Trust Company, N.A. has agreed to serve as Escrow Agent and to hold, invest, and disburse the Escrow Funds (as defined herein) in accordance with the terms and conditions set forth in this Agreement;
WHEREAS, capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Stock Purchase Agreement; and
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the Parties, the Parties hereby agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Business Day" means any day other than a Saturday, a Sunday, or any other day on which banking institutions in New York, New York or Philadelphia, Pennsylvania are authorized or obligated by applicable law or executive order to be closed.
"Claim Amount" means, with respect to any Claim Notice, the estimated amount of the claim for indemnification set forth in such Claim Notice.
"Claim Notice" means a written notice from Buyer to the Stockholder Representative (with a contemporaneous copy to the Escrow Agent) setting forth a claim for indemnification under Article IX of the Stock Purchase Agreement, which notice shall (a) describe the nature and factual basis of the claim in reasonable detail, (b) identify the specific representations, warranties, covenants, or agreements of the SPA alleged to have been breached or giving rise to the claim, (c) set forth the estimated Claim Amount, and (d) indicate whether the claim constitutes a Third-Party Claim or a Direct Claim (as such terms are defined in the SPA). The form of Claim Notice is attached hereto as Exhibit A.
"Closing Date" means the date of the Closing under the Stock Purchase Agreement, which date is October 15, 2025.
"Direct Claim" has the meaning ascribed to such term in the Stock Purchase Agreement.
"Disputed Amount" means the portion (which may be all) of any Claim Amount that is the subject of a timely delivered Objection Notice and that remains unresolved as between Buyer and the Stockholder Representative.
"Escrow Account" means the segregated escrow account established and maintained by the Escrow Agent pursuant to Section 2.1 and Section 2.2 of this Agreement, identified as the "Cascade/NovaMart Indemnification Escrow Account."
"Escrow Amount" means the sum of Ninety-Six Million Dollars ($96,000,000), representing eight percent (8%) of the Purchase Price of One Billion Two Hundred Million Dollars ($1,200,000,000).
"Escrow Funds" means, at any time, the Escrow Amount then on deposit in the Escrow Account, together with all interest, dividends, earnings, and other income accrued or earned thereon, net of any amounts theretofore released or distributed from the Escrow Account in accordance with the terms of this Agreement.
"Escrow Period" means the period commencing on the Closing Date and ending on the Scheduled Release Date; provided, however, that with respect to any Pending Claims, the Escrow Period shall be automatically extended until the final resolution and distribution of Escrow Funds relating to such Pending Claims in accordance with Section 4.2.
"Indemnification Cap" means Two Hundred Sixteen Million Dollars ($216,000,000), representing eighteen percent (18%) of the Purchase Price, as set forth in Section 9.04(b) of the Stock Purchase Agreement, which amount constitutes the aggregate maximum liability of the Selling Stockholders for indemnification obligations under Article IX of the SPA (other than with respect to claims relating to Fundamental Representations, fraud, willful breach, and tax indemnification, which are subject to separate limitations as set forth therein).
"Joint Written Instructions" means written instructions executed by both an authorized representative of Buyer and the Stockholder Representative, directing the Escrow Agent to release, distribute, or otherwise disburse Escrow Funds to a specified Party or Parties in a specified amount or amounts. The form of Joint Written Instructions is attached hereto as Exhibit C.
"Objection Notice" means a written notice from the Stockholder Representative to Buyer (with a contemporaneous copy to the Escrow Agent) objecting to all or any portion of a Claim Notice, which notice shall set forth in reasonable detail the factual and legal basis for such objection and identify the Disputed Amount (if less than the full Claim Amount set forth in the applicable Claim Notice). The form of Objection Notice is attached hereto as Exhibit B.
"Pending Claim" means any claim for indemnification set forth in a Claim Notice that has been timely delivered to the Stockholder Representative and the Escrow Agent prior to the Scheduled Release Date and that, as of the Scheduled Release Date, has not been finally resolved by Joint Written Instructions, by final non-appealable order of a court of competent jurisdiction, or by the dispute resolution procedures set forth in Article IX of the Stock Purchase Agreement.
"Permitted Investments" has the meaning set forth in Section 3.2.
"Purchase Price" means One Billion Two Hundred Million Dollars ($1,200,000,000), as set forth in the Stock Purchase Agreement.
"Resolved Claim" means any claim for indemnification that has been finally resolved (a) by Joint Written Instructions executed by Buyer and the Stockholder Representative, (b) by a final, non-appealable order or judgment of the Delaware Court of Chancery (or, on appeal, the Delaware Supreme Court), or (c) by the dispute resolution procedures set forth in Article IX of the Stock Purchase Agreement, in each case specifying the amount (if any) to be released to Buyer and the amount (if any) to be released to the Stockholder Representative for distribution to the Selling Stockholders.
"Retained Amount" has the meaning set forth in Section 4.2(b)(i).
"Retention" means the Twelve Million Dollar ($12,000,000) self-insured retention under the R&W Insurance Policy, representing one percent (1%) of the Purchase Price.
"R&W Insurance Policy" means that certain representations and warranties insurance policy issued by Meridian Specialty Insurance Company, Policy No. MSI-RWI-2025-07832, effective as of the Closing Date, with a policy limit of Two Hundred Sixteen Million Dollars ($216,000,000) and a self-insured retention (the Retention) of Twelve Million Dollars ($12,000,000).
"Scheduled Release Date" means the date that is twenty-four (24) months after the Closing Date (i.e., October 15, 2027), or if such date is not a Business Day, the next succeeding Business Day.
"Selling Stockholders" has the meaning ascribed to such term in the Stock Purchase Agreement.
"Stock Purchase Agreement" or "SPA" means the Stock Purchase Agreement, dated as of May 20, 2025, by and among Buyer, the Company, the Stockholder Representative, and the Selling Stockholders named therein, as the same may be amended, modified, or supplemented from time to time in accordance with its terms.
"Third-Party Claim" has the meaning ascribed to such term in the Stock Purchase Agreement.
Section 1.2 — SPA Definitions Incorporated
All capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings ascribed to such terms in the Stock Purchase Agreement. In the event of any conflict or inconsistency between the definitions set forth in this Agreement and those set forth in the Stock Purchase Agreement, the definitions set forth in this Agreement shall control for purposes of this Agreement.
Section 1.3 — Rules of Construction
(a) The headings and captions contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
(b) Whenever the words "include," "includes," or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation" unless the context otherwise requires.
(c) Words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other genders as the context requires.
(d) The terms "hereof," "herein," "herewith," "hereby," and "hereunder" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement.
(e) References to "Sections," "Articles," "Schedules," and "Exhibits" shall be to the sections, articles, schedules, and exhibits of or to this Agreement unless otherwise specifically provided.
(f) References to "$" or "Dollars" shall mean lawful money of the United States of America.
(g) The use of "or" is not intended to be exclusive unless the context otherwise requires.
(h) This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.
ARTICLE II — ESTABLISHMENT OF ESCROW
Section 2.1 — Deposit of Escrow Amount
(a) On the Closing Date, Buyer shall cause the Escrow Amount, being Ninety-Six Million Dollars ($96,000,000), to be deposited by wire transfer of immediately available funds in United States Dollars into the Escrow Account established and maintained by the Escrow Agent. The wire transfer instructions for the Escrow Account shall be as set forth on Schedule B attached hereto, which instructions shall be provided by the Escrow Agent to Buyer and the Stockholder Representative in writing not less than two (2) Business Days prior to the Closing Date. The deposit of the Escrow Amount shall be made in accordance with the funds flow memorandum prepared in connection with the Closing, reflecting the sources of funds for the aggregate Purchase Price, including proceeds of the Seven Hundred Fifty Million Dollar ($750,000,000) Term Loan B facility from Cornerstone National Bank, N.A. and Caluvori Capital Partners, Inc., the Two Hundred Million Dollar ($200,000,000) revolving credit facility draw, and Two Hundred Fifty Million Dollars ($250,000,000) of cash on hand of Buyer and its subsidiaries.
(b) The Escrow Amount of Ninety-Six Million Dollars ($96,000,000) represents a portion of the total Purchase Price of One Billion Two Hundred Million Dollars ($1,200,000,000). The remaining One Billion One Hundred Four Million Dollars ($1,104,000,000) of the Purchase Price (subject to the estimated working capital adjustment relative to the target working capital amount of Seventy-Eight Million Five Hundred Thousand Dollars ($78,500,000), with a collar of plus or minus Five Million Dollars ($5,000,000)) shall be paid to the Selling Stockholders at the Closing through the paying agent designated under the Stock Purchase Agreement (Marlowe Asset Management Trust Company, N.A., acting in its separate capacity as Paying Agent).
(c) The Escrow Agent shall provide written confirmation of receipt of the Escrow Amount to both Buyer and the Stockholder Representative within one (1) Business Day following the Escrow Agent's receipt of the Escrow Amount. Such confirmation shall specify the date of receipt, the amount received, and the account into which the funds were deposited.
Section 2.2 — Escrow Account
(a) The Escrow Agent shall hold the Escrow Funds in a separate, segregated escrow account maintained at the Escrow Agent's offices, identified as the "Cascade/NovaMart Indemnification Escrow Account" (the "Escrow Account"). The Escrow Agent shall maintain the Escrow Account in accordance with its customary practices for escrow accounts of similar size and nature, and in compliance with all applicable laws and regulations.
(b) The Escrow Account shall not be subject to any lien, attachment, levy, garnishment, trustee process, or any other judicial process of any creditor of any Party hereto. The Escrow Agent shall not voluntarily grant, and shall take no action that would result in, any security interest, lien, or encumbrance on the Escrow Funds in favor of any person.
(c) The Escrow Agent shall not commingle the Escrow Funds with any other funds held by the Escrow Agent for its own account or for the account of any other person or entity. The Escrow Funds shall at all times be maintained in one or more accounts that are clearly identified as belonging to the escrow established pursuant to this Agreement.
Section 2.3 — Title to Escrow Funds
(a) The Escrow Funds shall be the property of the Selling Stockholders (through the Stockholder Representative), subject to the claims, distribution rights, and other terms and conditions set forth in this Agreement and Article IX of the Stock Purchase Agreement. For the avoidance of doubt, Buyer shall not have any ownership interest in the Escrow Funds except to the extent that the Escrow Agent is instructed to release Escrow Funds to Buyer pursuant to Joint Written Instructions or a final, non-appealable court order, in each case in accordance with the terms of this Agreement.
(b) For United States federal income tax purposes, the Escrow Funds shall be treated as owned by the Selling Stockholders in accordance with the provisions of Section 7.1 of this Agreement.
ARTICLE III — INVESTMENT OF ESCROW FUNDS
Section 3.1 — Investment Direction
(a) The Escrow Agent shall invest and reinvest the Escrow Funds, and any earnings thereon, solely in Permitted Investments as directed in writing by the Stockholder Representative from time to time. Any investment direction from the Stockholder Representative must be in writing, must specify one or more categories of Permitted Investments described in Section 3.2, and must be delivered to the Escrow Agent in accordance with the notice provisions of Section 11.1.
(b) In the absence of written investment direction from the Stockholder Representative, or at any time when previously received investment directions have been fully executed and no new directions have been provided, the Escrow Agent shall invest and reinvest the Escrow Funds in the default investment described in Section 3.2(a).
(c) The Escrow Agent shall have no obligation to invest or reinvest the Escrow Funds on the date of receipt if such funds are received after 2:00 p.m. Eastern Time; such funds shall be invested on the next succeeding Business Day. The Escrow Agent may liquidate any investments as necessary to make disbursements required under this Agreement without prior notice to any Party.
Section 3.2 — Permitted Investments
The term "Permitted Investments" means the following categories of investments:
(a) Default Investment. Money market funds that maintain a constant net asset value per share and that are rated at least "AAAm" by Standard & Poor's Ratings Services, "Aaa-mf" by Moody's Investors Service, Inc., or the equivalent by any other nationally recognized statistical rating organization, including, without limitation, money market deposit accounts of the Escrow Agent or any of its affiliates. For the avoidance of doubt, the Escrow Agent and its affiliates may earn fees and other compensation in connection with such money market deposit accounts in addition to the fees payable hereunder, and no such earnings shall be credited to the Escrow Funds;
(b) Government Obligations. Direct obligations of the United States of America, or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, in each case maturing within ninety (90) days of the date of investment;
(c) Certificates of Deposit. Certificates of deposit issued by any commercial bank organized under the laws of the United States of America or any state thereof having combined capital and surplus in excess of One Billion Dollars ($1,000,000,000), maturing within ninety (90) days of the date of investment;
(d) Commercial Paper. Commercial paper rated "A-1" by Standard & Poor's Ratings Services or "P-1" by Moody's Investors Service, Inc. (or the equivalent rating by any other nationally recognized statistical rating organization), maturing within ninety (90) days of the date of issuance; and
(e) Other Investments. Such other investments as Buyer and the Stockholder Representative may jointly direct in writing to the Escrow Agent from time to time, provided that such investments are of a type and quality consistent with the preservation of principal and maintenance of liquidity appropriate for funds held in escrow.
Section 3.3 — Investment Risk
(a) All investment risk, including the risk of loss of principal, associated with the investment and reinvestment of the Escrow Funds in Permitted Investments made in accordance with the terms of this Agreement shall be borne solely by the Selling Stockholders. The Parties acknowledge and agree that the Escrow Agent shall not be liable for, and shall have no responsibility with respect to, any loss, diminution in value, or other adverse consequence resulting from the investment or reinvestment of the Escrow Funds in Permitted Investments in compliance with the terms of this Agreement, including any loss arising from changes in interest rates, market conditions, or the creditworthiness of any issuer or depository institution.
(b) Neither Buyer nor the Stockholder Representative shall hold the Escrow Agent responsible or liable for any loss on any investment of the Escrow Funds made in compliance with the terms of this Agreement, including any loss of principal or interest resulting from the liquidation of investments prior to their stated maturity dates in order to fund disbursements required hereunder.
Section 3.4 — Earnings
(a) All interest, dividends, and other income earned on the Escrow Funds (collectively, "Earnings") shall be added to and become part of the Escrow Funds held in the Escrow Account. Earnings shall be invested and reinvested in Permitted Investments in accordance with the investment directions then in effect under Section 3.1.
(b) Any Earnings distributed from the Escrow Account pursuant to this Agreement shall be allocated among the Selling Stockholders on a pro rata basis in accordance with their respective ownership percentages of the Company immediately prior to the Closing, as follows:
The allocation of Earnings among the individual participants comprising the "Other Management/Employee Stockholders" category shall be determined in accordance with a supplemental allocation schedule provided by the Stockholder Representative to the Escrow Agent, as further described in Schedule C attached hereto.
Section 3.5 — Income Tax Reporting
The tax treatment and income tax reporting obligations with respect to the Escrow Funds and any Earnings thereon shall be as set forth in Article VII of this Agreement.
ARTICLE IV — RELEASE AND DISTRIBUTION OF ESCROW FUNDS
Section 4.1 — Release Upon Resolved Claims
(a) Joint Written Instructions. Upon receipt by the Escrow Agent of Joint Written Instructions duly executed by both an authorized representative of Buyer and the Stockholder Representative, the Escrow Agent shall release and disburse Escrow Funds from the Escrow Account as directed in such Joint Written Instructions. Joint Written Instructions may direct the Escrow Agent to release Escrow Funds (i) to Buyer, in satisfaction of resolved indemnification claims under the Stock Purchase Agreement, (ii) to the Stockholder Representative, for distribution to the Selling Stockholders, or (iii) in part to Buyer and in part to the Stockholder Representative, as the case may be. The Escrow Agent shall be entitled to rely conclusively on Joint Written Instructions without independent investigation or verification and shall have no responsibility to determine whether such instructions are consistent with the terms of the Stock Purchase Agreement or any other agreement.
(b) Court Order / Final Determination. Upon receipt by the Escrow Agent of a certified copy of a final, non-appealable order, judgment, or decree of the Delaware Court of Chancery (or, if applicable, the Delaware Supreme Court on appeal, or such other court of competent jurisdiction as may have assumed jurisdiction in accordance with Section 11.3) directing the release of all or any portion of the Escrow Funds, the Escrow Agent shall release and disburse Escrow Funds from the Escrow Account in accordance with such order, judgment, or decree. The Escrow Agent shall be entitled to rely conclusively on any such certified copy and shall not be required to determine independently whether such order is final and non-appealable. The Escrow Agent may, in its sole discretion, require an opinion of counsel (at the expense of the Party requesting the release) confirming that such order is final and non-appealable prior to making any disbursement hereunder.
(c) Timing of Release. The Escrow Agent shall release and disburse funds in accordance with this Section 4.1 within three (3) Business Days of receipt of (i) valid Joint Written Instructions complying with the requirements of this Agreement, or (ii) a certified copy of a final court order, as applicable. If any such release would require the Escrow Agent to liquidate investments prior to maturity, the Escrow Agent shall effect such liquidation as promptly as commercially practicable and shall disburse the proceeds thereof within three (3) Business Days of such liquidation.
Section 4.2 — Scheduled Release
(a) Release if No Pending Claims. On the Scheduled Release Date (being twenty-four (24) months after the Closing Date, i.e., October 15, 2027, or if such date is not a Business Day, the next succeeding Business Day), provided that no Pending Claims then exist, the Escrow Agent shall, without the need for any further action or instruction from any Party, release all remaining Escrow Funds (including all accumulated Earnings) to the Stockholder Representative by wire transfer of immediately available funds for distribution to the Selling Stockholders in accordance with the pro rata allocations set forth in Schedule C. For the avoidance of doubt, the Stockholder Representative shall provide the Escrow Agent with updated wire transfer instructions, if necessary, not less than five (5) Business Days prior to the Scheduled Release Date.
(b) Release if Pending Claims Exist. If, on the Scheduled Release Date, one or more Pending Claims exist, the Escrow Agent shall:
(i) retain in the Escrow Account an amount equal to the aggregate Claim Amounts of all Pending Claims outstanding as of the Scheduled Release Date (such retained amount, the "Retained Amount"); and
(ii) release the excess, if any, of the Escrow Funds over the Retained Amount to the Stockholder Representative by wire transfer of immediately available funds for distribution to the Selling Stockholders in accordance with the pro rata allocations set forth in Schedule C.
For purposes of determining the Retained Amount, the Claim Amount with respect to each Pending Claim shall be the amount set forth in the applicable Claim Notice, unless a lesser amount has been agreed to in writing by Buyer and the Stockholder Representative or determined by a court of competent jurisdiction.
(c) Resolution of Pending Claims After Scheduled Release Date. As each Pending Claim is subsequently resolved (whether by Joint Written Instructions, final non-appealable court order, or otherwise in accordance with the dispute resolution procedures set forth in Article IX of the Stock Purchase Agreement), the Escrow Agent shall release the portion of the Retained Amount attributable to such resolved claim as follows:
(i) the portion of the Retained Amount that is determined (pursuant to Joint Written Instructions or a final court order) to be owed to Buyer in respect of such Resolved Claim shall be released to Buyer by wire transfer of immediately available funds to the account designated by Buyer;
(ii) the remaining portion of the Retained Amount attributable to such Resolved Claim (after payment to Buyer of the amount described in clause (i) above), if any, shall be released to the Stockholder Representative by wire transfer of immediately available funds for distribution to the Selling Stockholders in accordance with the pro rata allocations set forth in Schedule C; and
(iii) each such release shall be made within three (3) Business Days of receipt by the Escrow Agent of Joint Written Instructions or a certified copy of a final court order resolving the applicable Pending Claim.
(d) Final Release. Upon the resolution of the last remaining Pending Claim in accordance with Section 4.2(c), the Escrow Agent shall promptly (and in any event within three (3) Business Days of receipt of the applicable Joint Written Instructions or final court order) release all remaining Escrow Funds (including any accumulated Earnings thereon) in accordance with Section 4.2(c)(i) and (ii), and this Agreement shall thereafter terminate in accordance with Article X.
Section 4.3 — Manner of Release
(a) All releases and disbursements to Buyer shall be made by wire transfer of immediately available funds in United States Dollars to the account designated in writing by Buyer, as set forth on Schedule B or as updated from time to time by written notice from Buyer to the Escrow Agent in accordance with Section 11.1.
(b) All releases and disbursements to the Stockholder Representative shall be made by wire transfer of immediately available funds in United States Dollars to the account designated in writing by the Stockholder Representative, as set forth on Schedule B or as updated from time to time by written notice from the Stockholder Representative to the Escrow Agent in accordance with Section 11.1.
(c) Any Party may update its wire transfer instructions by delivering written notice to the Escrow Agent and the other Parties in accordance with Section 11.1; provided that any updated wire transfer instructions shall not be effective until the Escrow Agent has confirmed receipt thereof in writing, and the Escrow Agent shall be entitled to a period of not less than five (5) Business Days following its receipt of such updated instructions before being required to act upon them. The Escrow Agent shall not be liable for any delay in disbursement resulting from changes to wire transfer instructions.
Section 4.4 — No Offset
The Escrow Agent shall have no right of offset, deduction, counterclaim, or netting from or against the Escrow Funds for any amounts owed by any Party to the Escrow Agent or any other person, except as expressly provided in this Agreement. Without limiting the generality of the foregoing, the Escrow Agent shall not deduct its fees or expenses from the Escrow Funds, except as may be permitted under Section 8.3.
ARTICLE V — CLAIMS PROCEDURES
Section 5.1 — Delivery of Claim Notice
(a) Buyer may deliver a Claim Notice to the Stockholder Representative and the Escrow Agent at any time during the Escrow Period (i.e., at any time commencing on the Closing Date and ending on the Scheduled Release Date, being twenty-four (24) months after the Closing Date). A Claim Notice must be delivered to the Stockholder Representative and the Escrow Agent prior to the Scheduled Release Date in order for the claim set forth therein to constitute a Pending Claim for purposes of Section 4.2.
(b) Each Claim Notice shall set forth:
(i) a description of the claim in reasonable detail, including the facts and circumstances giving rise to the claim;
(ii) the specific sections of the Stock Purchase Agreement (including the specific representations, warranties, or covenants) alleged to have been breached or giving rise to the indemnification obligation;
(iii) the estimated amount of the claim (the "Claim Amount"), together with a reasonable explanation of the basis for such estimate, to the extent then known or reasonably ascertainable; and
(iv) whether the claim relates to a Third-Party Claim or a Direct Claim (as such terms are defined in the Stock Purchase Agreement), and, in the case of a Third-Party Claim, a copy of any complaint, demand letter, or other written communication received by the Buyer or the Company from the third party.
(c) For the avoidance of doubt, a Claim Notice may be updated, amended, or supplemented by Buyer at any time prior to the resolution of the applicable claim by delivering a revised Claim Notice to the Stockholder Representative and the Escrow Agent; provided that any increase in the Claim Amount shall be subject to the same objection and dispute resolution procedures set forth in this Article V.
(d) The Parties acknowledge and agree that the survival periods applicable to indemnification claims under the Stock Purchase Agreement are as follows: (i) claims relating to Fundamental Representations (as defined in the SPA) survive indefinitely; (ii) claims relating to the tax representations and covenants set forth in Section 3.18 and Article VII of the SPA survive until the date that is sixty (60) days after the expiration of the applicable statute of limitations (including any extensions or waivers thereof); and (iii) claims relating to general representations and warranties (other than Fundamental Representations and tax representations) survive for a period of twenty-four (24) months from the Closing Date, in each case as set forth in Article IX of the Stock Purchase Agreement.
(e) A copy of the form of Claim Notice is attached hereto as Exhibit A.
Section 5.2 — Objection Notice
(a) The Stockholder Representative shall have thirty (30) calendar days following receipt of a Claim Notice (the "Objection Period") within which to deliver an Objection Notice to Buyer and the Escrow Agent. The Objection Notice shall set forth in reasonable detail the factual and legal basis for the Stockholder Representative's objection to the Claim Notice (in whole or in part) and shall specifically identify the Disputed Amount, which may be equal to or less than the full Claim Amount set forth in the applicable Claim Notice.
(b) If the Stockholder Representative does not deliver an Objection Notice within the thirty (30) calendar day Objection Period, the claim set forth in the applicable Claim Notice shall be deemed irrevocably accepted by the Stockholder Representative and the Selling Stockholders, and the Escrow Agent shall, upon receipt of written notice from Buyer confirming the expiration of the Objection Period without objection (or upon confirmation thereof by the Stockholder Representative), release the Claim Amount to Buyer from the Escrow Funds in accordance with Section 4.1(a) and Section 4.3(a).
(c) A copy of the form of Objection Notice is attached hereto as Exhibit B.
Section 5.3 — Resolution of Disputed Claims
(a) If an Objection Notice is timely delivered by the Stockholder Representative within the Objection Period, Buyer and the Stockholder Representative shall negotiate in good faith for a period of thirty (30) calendar days following delivery of the Objection Notice (the "Negotiation Period") to attempt to resolve the Disputed Amount. During the Negotiation Period, the designated representatives of Buyer and the Stockholder Representative shall make themselves reasonably available for discussions, meetings, or teleconferences as may be necessary or appropriate to facilitate the resolution of the dispute.
(b) If the Disputed Amount is not fully resolved within the Negotiation Period, either Buyer or the Stockholder Representative may submit the dispute to the Delaware Court of Chancery (or, if the Delaware Court of Chancery declines jurisdiction, to the Superior Court of the State of Delaware or the United States District Court for the District of Delaware) in accordance with the dispute resolution and jurisdiction provisions set forth in Article IX of the Stock Purchase Agreement and Section 11.3 of this Agreement. Each Party shall bear its own costs and expenses (including attorneys' fees) in connection with any such proceeding, unless otherwise ordered by the court.
(c) During the pendency of any dispute regarding a Disputed Amount, the Escrow Agent shall take no action with respect to the Disputed Amount unless and until the Escrow Agent receives (i) Joint Written Instructions executed by both Buyer and the Stockholder Representative, or (ii) a certified copy of a final, non-appealable order of a court of competent jurisdiction, in each case directing the release or other disposition of the Disputed Amount. The Escrow Agent shall continue to hold and invest the Disputed Amount (and any Earnings thereon) in Permitted Investments in accordance with Article III pending such resolution.
Section 5.4 — Partial Resolution
To the extent any Claim Notice includes both a Disputed Amount (subject to a timely Objection Notice) and an undisputed portion (i.e., an amount as to which no objection has been raised in the Objection Notice, or an amount that has been agreed upon during the Negotiation Period), the Escrow Agent shall release the undisputed portion to Buyer upon receipt of (a) Joint Written Instructions directing such release, or (b) a written acknowledgment from the Stockholder Representative confirming that such portion of the claim is not disputed, together with written direction from Buyer to release such amount. Such partial release shall not affect the treatment of the remaining Disputed Amount, which shall continue to be held in the Escrow Account pending resolution in accordance with Section 5.3.
Section 5.5 — Relationship to Indemnification Cap and R&W Insurance
(a) The Parties acknowledge and agree that the Escrow Funds constitute one, but not the sole, source of recovery for indemnification claims asserted by Buyer under Article IX of the Stock Purchase Agreement. The aggregate liability of the Selling Stockholders for indemnification obligations under Article IX of the SPA (other than with respect to claims relating to Fundamental Representations, fraud, willful breach, and tax indemnification, which are subject to separate limitations) is subject to the Indemnification Cap of Two Hundred Sixteen Million Dollars ($216,000,000), representing eighteen percent (18%) of the Purchase Price.
(b) The R&W Insurance Policy (Meridian Specialty Insurance Company, Policy No. MSI-RWI-2025-07832, with a policy limit of Two Hundred Sixteen Million Dollars ($216,000,000) and a self-insured Retention of Twelve Million Dollars ($12,000,000)) provides an additional layer of coverage for certain losses arising from breaches of the representations and warranties set forth in the Stock Purchase Agreement. The Escrow Funds may be used to satisfy all or any portion of the Retention and/or any indemnification claims asserted by Buyer, whether or not such claims are also covered under the R&W Insurance Policy.
(c) Nothing in this Agreement shall limit, impair, or otherwise affect (i) Buyer's rights to make claims under the R&W Insurance Policy, (ii) Buyer's indemnification rights under the Stock Purchase Agreement (including rights to seek recovery from the Selling Stockholders in excess of the Escrow Funds, subject to the Indemnification Cap and other limitations set forth in the SPA), or (iii) the Selling Stockholders' rights and defenses under the Stock Purchase Agreement.
(d) For the avoidance of doubt, the Escrow Agent shall have no responsibility to monitor, interpret, or enforce the Indemnification Cap, the R&W Insurance Policy, or any other limitation on indemnification set forth in the Stock Purchase Agreement, and the Escrow Agent's sole obligation is to hold, invest, and release the Escrow Funds in accordance with the express terms of this Agreement.
ARTICLE VI — DUTIES AND RESPONSIBILITIES OF THE ESCROW AGENT
Section 6.1 — Duties
(a) The Escrow Agent's duties and obligations under this Agreement are purely ministerial and administrative in nature. The Escrow Agent undertakes to perform only such duties as are expressly set forth in this Agreement and shall have no duty to interpret, construe, or enforce the Stock Purchase Agreement, the Stockholder Representative Agreement, the R&W Insurance Policy, or any other agreement or instrument between or among any of the other Parties or any other persons.
(b) The Escrow Agent shall not be required to determine whether any disbursement or release from the Escrow Account is consistent with the terms of the Stock Purchase Agreement, whether any Claim Notice or Objection Notice satisfies the requirements of the Stock Purchase Agreement, or whether any Party is in compliance with its obligations under any other agreement. The Escrow Agent may conclusively rely on Joint Written Instructions or court orders as the sole basis for action under this Agreement.
(c) The Escrow Agent shall provide to Buyer and the Stockholder Representative monthly account statements reflecting the balance of the Escrow Funds (including the principal amount and accumulated Earnings), all deposits into and disbursements from the Escrow Account, and all investment activity during the applicable statement period. Such statements shall be delivered within ten (10) Business Days following the end of each calendar month. The Escrow Agent shall also provide such additional information regarding the Escrow Account as Buyer or the Stockholder Representative may reasonably request from time to time.
Section 6.2 — Reliance
(a) The Escrow Agent may rely upon, and shall be fully protected in acting or refraining from acting upon, any notice, instruction, direction, request, waiver, consent, receipt, certificate, affidavit, letter, telegram, facsimile, electronic mail, or other document or communication believed by it in good faith to be genuine and to have been signed, sent, or presented by the proper person or persons. The Escrow Agent shall have no duty or obligation to verify the identity or authority of any person delivering any such document or communication.
(b) The Escrow Agent shall not be liable for any action taken or omitted to be taken by it in good faith and in accordance with the advice of its legal counsel (which may include in-house counsel of the Escrow Agent or outside counsel selected by the Escrow Agent in its sole discretion). The costs and expenses of such counsel shall constitute reimbursable expenses under Section 8.2, except to the extent such costs and expenses arise from the Escrow Agent's gross negligence, willful misconduct, or bad faith.
Section 6.3 — Limitation of Liability
(a) The Escrow Agent shall not be liable for any loss, liability, cost, damage, or expense arising out of or in connection with the performance of its duties under this Agreement, except to the extent that such loss, liability, cost, damage, or expense is directly caused by the Escrow Agent's own gross negligence, willful misconduct, or bad faith, as finally determined by a court of competent jurisdiction.
(b) In no event shall the Escrow Agent be liable for any indirect, incidental, special, consequential, exemplary, or punitive damages of any kind, including lost profits, lost revenues, or diminution in value, regardless of the form of action, whether in contract, tort (including negligence), strict liability, or otherwise, and regardless of whether the Escrow Agent was advised of the possibility of such damages.
(c) Without limiting the generality of the foregoing, the Escrow Agent shall not be liable for:
(i) any loss resulting from a default by any bank, trust company, depository institution, or other financial institution with which Escrow Funds are deposited or in which Escrow Funds are invested in accordance with this Agreement;
(ii) any loss, damage, or delay resulting from actions taken or omitted to be taken by the Escrow Agent pursuant to, and in compliance with, Joint Written Instructions or a final court order;
(iii) any delay or failure in the performance of its obligations under this Agreement caused by circumstances beyond the Escrow Agent's reasonable control, including, without limitation, those described in Section 11.13; or
(iv) any loss arising from the acts, delays, or omissions of any prior escrow agent.
Section 6.4 — Right to Interplead
(a) If at any time the Escrow Agent is uncertain as to its duties or obligations under this Agreement, or if the Escrow Agent receives conflicting claims, instructions, or demands from Buyer and the Stockholder Representative with respect to the Escrow Funds or any portion thereof, the Escrow Agent may, in its sole and absolute discretion:
(i) refrain from taking any action (other than continuing to hold and invest the Escrow Funds in Permitted Investments in accordance with Article III) until the Escrow Agent receives (A) Joint Written Instructions resolving such uncertainty or conflict, or (B) a final, non-appealable order of a court of competent jurisdiction directing the Escrow Agent's course of action; or
(ii) deposit the Escrow Funds (or any disputed portion thereof) with the Delaware Court of Chancery (or, if the Delaware Court of Chancery declines jurisdiction, with the Superior Court of the State of Delaware or the United States District Court for the District of Delaware) in an interpleader action pursuant to the applicable rules of civil procedure, and upon such deposit, the Escrow Agent shall thereupon be released and discharged from all further obligations, duties, and liabilities under this Agreement with respect to the funds so deposited.
(b) The costs and expenses of any interpleader action commenced pursuant to this Section 6.4 (including, without limitation, the Escrow Agent's reasonable attorneys' fees and court costs) shall be borne equally (fifty percent (50%) each) by Buyer, on the one hand, and the Selling Stockholders (through the Stockholder Representative), on the other hand, unless a court of competent jurisdiction orders otherwise.
Section 6.5 — Resignation and Removal
(a) Resignation. The Escrow Agent may resign from its duties and obligations under this Agreement at any time by giving not less than thirty (30) days' prior written notice of its resignation to Buyer and the Stockholder Representative. Such resignation shall take effect on the date specified in such notice or, if no date is specified, on the thirtieth (30th) day following delivery of such notice, or upon the earlier appointment of a successor escrow agent in accordance with Section 6.5(c).
(b) Removal. The Escrow Agent may be removed from its duties and obligations under this Agreement at any time by the joint written consent of Buyer and the Stockholder Representative, upon not less than thirty (30) days' prior written notice to the Escrow Agent. Such removal shall take effect on the date specified in such notice or, if no date is specified, on the thirtieth (30th) day following delivery of such notice, or upon the earlier appointment of a successor escrow agent in accordance with Section 6.5(c).
(c) Appointment of Successor. Upon the resignation or removal of the Escrow Agent, Buyer and the Stockholder Representative shall, acting jointly, appoint a successor escrow agent within thirty (30) days of the effective date of such resignation or removal. If Buyer and the Stockholder Representative fail to appoint a successor escrow agent within such thirty (30) day period, the Escrow Agent may petition the Delaware Court of Chancery to appoint a successor escrow agent, or, in the alternative, the Escrow Agent may deposit the Escrow Funds with the Delaware Court of Chancery and, upon such deposit, shall be released and discharged from all further obligations, duties, and liabilities under this Agreement. The costs and expenses of any such petition or deposit shall be borne equally by Buyer and the Selling Stockholders.
(d) Effective Date of Successor Appointment. The appointment of a successor escrow agent shall be effective upon (i) the successor escrow agent's written acceptance of its appointment and agreement to be bound by the terms and conditions of this Agreement (or a successor escrow agreement mutually acceptable to Buyer, the Stockholder Representative, and the successor escrow agent), and (ii) the transfer and delivery of the Escrow Funds to the successor escrow agent. The resigning or removed Escrow Agent shall cooperate in good faith with the successor escrow agent to effect an orderly transition, including the transfer of all records, documents, and information relating to the Escrow Account.
Section 6.6 — Merger or Consolidation of Escrow Agent
Any entity into which the Escrow Agent may be merged or consolidated, or any entity resulting from any merger or consolidation to which the Escrow Agent is a party, or any entity to which the Escrow Agent transfers all or substantially all of its escrow business or assets, shall be the successor Escrow Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the Parties, and such successor shall have all of the rights, powers, duties, and obligations of the Escrow Agent hereunder as fully as if such successor had been originally named as the Escrow Agent in this Agreement.
ARTICLE VII — TAX MATTERS
Section 7.1 — Tax Treatment
(a) For United States federal income tax purposes (and for purposes of applicable state and local income tax laws), the Parties agree and acknowledge that the Escrow Funds shall be treated as owned by the Selling Stockholders. The deposit of the Escrow Amount into the Escrow Account shall be treated as a payment of a portion of the Purchase Price to the Selling Stockholders, subject to a contingent obligation to return such funds to the extent required to satisfy indemnification claims under the Stock Purchase Agreement.
(b) All interest, earnings, dividends, and other income accrued or earned on the Escrow Funds shall be reported as income of the Selling Stockholders, allocated among the Selling Stockholders on a pro rata basis in accordance with their respective ownership percentages of the Company immediately prior to the Closing, as follows:
(c) The Stockholder Representative shall provide (or cause each Selling Stockholder to provide) to the Escrow Agent a completed and duly executed Internal Revenue Service Form W-9 (Request for Taxpayer Identification Number and Certification) or, in the case of any Selling Stockholder that is not a United States person (as defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), the applicable Internal Revenue Service Form W-8, in each case on or prior to the Closing Date. If any Selling Stockholder fails to provide a completed Form W-9 or Form W-8, as applicable, the Escrow Agent shall be entitled to withhold from any payment to such Selling Stockholder such amounts as may be required under applicable law.
Section 7.2 — Tax Reporting
(a) The Escrow Agent shall report all income earned on the Escrow Funds to the Internal Revenue Service on IRS Forms 1099 (or such other forms as may be required by applicable law) in the names and taxpayer identification numbers of the Selling Stockholders, allocated as directed by the Stockholder Representative in accordance with Section 7.1(b).
(b) For reference, the following taxpayer identification numbers have been provided by the respective Parties and Selling Stockholders:
Taxpayer identification numbers for the individual Selling Stockholders (Julian Reeves, Priya Narasimhan, and Other Management/Employee Stockholders) shall be set forth in the Forms W-9 delivered to the Escrow Agent.
(c) The Escrow Agent shall provide copies of all tax reporting forms issued in connection with the Escrow Funds to the Stockholder Representative and the applicable Selling Stockholders at the same time such forms are filed with the Internal Revenue Service, or as soon as reasonably practicable thereafter.
Section 7.3 — Withholding
(a) The Escrow Agent shall be entitled to deduct and withhold from any payment or distribution made pursuant to this Agreement such amounts as the Escrow Agent determines in good faith are required to be deducted and withheld under the Internal Revenue Code of 1986, as amended, or any provision of applicable federal, state, local, or foreign tax law. If any amounts are so deducted and withheld, such amounts shall be remitted to the appropriate taxing authority in accordance with applicable law.
(b) Any amounts deducted and withheld by the Escrow Agent pursuant to this Section 7.3 and duly remitted to the applicable taxing authority shall be treated for all purposes of this Agreement as having been paid to the person in respect of which such deduction and withholding was made.
ARTICLE VIII — COMPENSATION AND EXPENSES OF ESCROW AGENT
Section 8.1 — Fees
(a) Buyer shall pay the Escrow Agent's fees for its services under this Agreement in accordance with the fee schedule set forth on Schedule A attached hereto. Such fees shall be payable in advance as set forth on Schedule A, or as otherwise agreed in writing between Buyer and the Escrow Agent.
(b) The Escrow Agent's fees shall not be paid from the Escrow Funds. Under no circumstances shall the Escrow Agent deduct or set off its fees from the Escrow Funds, except as expressly permitted under Section 8.3.
Section 8.2 — Expenses
(a) Buyer shall reimburse the Escrow Agent for all reasonable and documented out-of-pocket expenses incurred by the Escrow Agent in connection with the performance of its duties under this Agreement, including, without limitation, reasonable attorneys' fees and costs, court costs, filing fees, and the costs of any interpleader action. Such reimbursement shall be made within thirty (30) days of receipt by Buyer of an invoice from the Escrow Agent setting forth such expenses in reasonable detail.
(b) Notwithstanding the foregoing, Buyer shall not be required to reimburse the Escrow Agent for any expenses arising from or attributable to the Escrow Agent's own gross negligence, willful misconduct, or bad faith.
Section 8.3 — Lien
The Escrow Agent shall have no lien on the Escrow Funds for any fees, charges, or expenses owed to the Escrow Agent under this Agreement. If Buyer fails to pay the Escrow Agent's fees and expenses when due and payable under this Article VIII, the Escrow Agent may seek payment directly from Buyer and shall not deduct such amounts from the Escrow Funds. Nothing in this Section 8.3 shall limit the Escrow Agent's right to pursue any available legal remedies against Buyer for the collection of unpaid fees and expenses.
ARTICLE IX — INDEMNIFICATION OF ESCROW AGENT
Section 9.1 — Indemnification by Buyer and Selling Stockholders
(a) Buyer and the Selling Stockholders (acting through the Stockholder Representative, on behalf of all Selling Stockholders), jointly and severally, shall indemnify, defend, and hold harmless the Escrow Agent and its officers, directors, employees, agents, and affiliates (each, an "Escrow Agent Indemnified Party") from and against any and all losses, liabilities, damages, claims, suits, actions, judgments, costs, and expenses (including, without limitation, reasonable attorneys' fees and disbursements) ("Escrow Agent Losses") arising out of or in connection with the Escrow Agent's acceptance of its appointment as Escrow Agent under this Agreement and the performance of its duties hereunder, except to the extent that such Escrow Agent Losses are finally determined by a court of competent jurisdiction to have been caused by the Escrow Agent's own gross negligence, willful misconduct, or bad faith.
(b) As between Buyer, on the one hand, and the Selling Stockholders (through the Stockholder Representative), on the other hand, the indemnification obligations set forth in this Section 9.1 shall be borne fifty percent (50%) by Buyer and fifty percent (50%) by the Selling Stockholders, unless a court of competent jurisdiction determines by final, non-appealable order or judgment that one Party's actions (or failure to act) were the sole proximate cause of the applicable Escrow Agent Losses, in which case such Party shall bear one hundred percent (100%) of such indemnification obligations.
(c) The indemnification obligations of this Article IX shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent.
ARTICLE X — TERMINATION
Section 10.1 — Termination
This Agreement shall automatically terminate upon the final distribution and release of all Escrow Funds from the Escrow Account in accordance with Article IV, at which time the Escrow Agent shall have no further obligations, duties, or liabilities under this Agreement, except for those obligations and liabilities that by their nature survive termination as provided in Section 10.2.