ESCROW AGREEMENT
Dated as of July 22, 2023
among
BRIGHTFIELD CLOUD SERVICES INC.
NAVEEN SUBRAMANIAM, as Stockholder Representative
and
LONE STAR TRUST COMPANY, N.A., as Escrow Agent
Escrow Account Reference: LSTC-ESC-2023-004417
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This ESCROW AGREEMENT (this "Agreement") is made and entered into as of July 22, 2023, by and among:
(1) Brightfield Cloud Services Inc., a corporation organized and existing under the laws of the State of Delaware ("Buyer" or "BCS"), with its principal offices located at 4200 Westgrove Boulevard, Suite 1100, Irving, Texas 75038;
(2) Naveen Subramaniam, an individual, acting solely in his capacity as Stockholder Representative (the "Stockholder Representative") on behalf of the former stockholders of Codelaunch Labs, Inc., a Delaware corporation; and
(3) Lone Star Trust Company, N.A., a national banking association organized and existing under the laws of the United States (the "Escrow Agent"), with its offices located at 500 West 5th Street, Suite 800, Austin, Texas 78701.
Buyer, the Stockholder Representative, and the Escrow Agent are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Buyer, BCS DevTools Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Buyer ("Merger Sub"), and Codelaunch Labs, Inc., a Delaware corporation (the "Company" or "Codelaunch"), have entered into that certain Agreement and Plan of Merger, dated as of June 1, 2023 (as may be amended, supplemented, or otherwise modified from time to time, the "Merger Agreement"), pursuant to which Merger Sub will merge with and into Codelaunch, with Codelaunch surviving as a wholly owned subsidiary of Buyer (the "Merger"), in accordance with Section 251 of the General Corporation Law of the State of Delaware (the "DGCL");
WHEREAS, the aggregate merger consideration payable by Buyer in connection with the Merger is Twenty-Two Million Dollars ($22,000,000), consisting of: (a) Sixteen Million Five Hundred Thousand Dollars ($16,500,000) in Closing Cash Consideration, representing seventy-five percent (75%) of the aggregate merger consideration; (b) up to Three Million Three Hundred Thousand Dollars ($3,300,000) in maximum Earnout Consideration, representing fifteen percent (15%) of the aggregate merger consideration; and (c) Two Million Two Hundred Thousand Dollars ($2,200,000) constituting the Escrow Amount, representing ten percent (10%) of the aggregate merger consideration;
WHEREAS, the Merger Agreement requires that, at the Closing, Two Million Two Hundred Thousand Dollars ($2,200,000) of the aggregate merger consideration be deposited with the Escrow Agent to secure the indemnification obligations of the former stockholders of Codelaunch (the "Indemnifying Parties") under Article IX of the Merger Agreement;
WHEREAS, Naveen Subramaniam was duly appointed as the Stockholder Representative by the stockholders of Codelaunch pursuant to Section 11.15 of the Merger Agreement and the Written Consent of Stockholders dated June 9, 2023, to act on behalf of the former stockholders of Codelaunch in connection with all post-closing matters, including, without limitation, matters arising under and in connection with this Escrow Agreement;
WHEREAS, the Escrow Agent is willing to serve as escrow agent and to hold, invest, and disburse the Escrow Amount in accordance with the terms and conditions set forth in this Agreement; and
WHEREAS, the Closing Date of the Merger is July 22, 2023.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 Definitions. 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 a day on which banking institutions in the State of Texas are authorized or required by applicable Law to be closed for regular banking business.
"Buyer" means Brightfield Cloud Services Inc., a Delaware corporation, and its successors and permitted assigns.
"Claim Notice" means a written notice from Buyer to the Escrow Agent and the Stockholder Representative asserting an indemnification claim against the Escrow Fund, substantially in the form attached hereto as Exhibit C.
"Closing Date" means July 22, 2023, the date on which the Closing (as defined in the Merger Agreement) occurs.
"Disputed Claim" means any claim or portion of a claim set forth in a Claim Notice for which the Stockholder Representative has delivered a timely Objection Notice in accordance with Section 4.2 of this Agreement.
"Escrow Account" means the segregated trust account designated as account number LSTC-ESC-2023-004417 established and maintained by the Escrow Agent at Lone Star Trust Company, N.A. in accordance with Section 2.1 of this Agreement.
"Escrow Amount" means Two Million Two Hundred Thousand Dollars ($2,200,000) in cash deposited into the Escrow Account on the Closing Date pursuant to Section 2.2 of this Agreement.
"Escrow Fund" means, at any time, the then-remaining balance of the Escrow Account, including all interest, earnings, income, and other proceeds accrued or generated thereon, less any amounts theretofore disbursed from the Escrow Account in accordance with the terms of this Agreement.
"Escrow Release Date" means January 22, 2025, the date that is eighteen (18) months after the Closing Date.
"Former Stockholders" means the Persons who were holders of issued and outstanding shares of capital stock of Codelaunch Labs, Inc. immediately prior to the Effective Time of the Merger (as defined in the Merger Agreement), together with the holders of vested in-the-money options that were exercised or cancelled for consideration in connection with the Merger.
"Fundamental Representations" has the meaning ascribed to such term in the Merger Agreement. For the avoidance of doubt, claims arising from breaches of Fundamental Representations survive for the applicable statute-of-limitations period and are not subject to the Indemnification Cap.
"Indemnification Basket" means Two Hundred Twenty Thousand Dollars ($220,000), which represents one percent (1%) of the aggregate merger consideration of Twenty-Two Million Dollars ($22,000,000). The Indemnification Basket shall operate as a tipping basket (and not as a true deductible), such that once aggregate indemnifiable Losses exceed the Indemnification Basket, the full amount of such Losses (from the first dollar thereof) shall be recoverable.
"Indemnification Cap" means Seven Million Seven Hundred Thousand Dollars ($7,700,000), which represents thirty-five percent (35%) of the aggregate merger consideration of Twenty-Two Million Dollars ($22,000,000). The Indemnification Cap shall not apply to claims arising from breaches of Fundamental Representations. The Escrow Fund shall serve as the primary fund for the satisfaction of indemnification claims, and claims that exceed the Escrow Fund but remain below the Indemnification Cap may be pursued by Buyer against the Former Stockholders through the Stockholder Representative in accordance with the terms of the Merger Agreement.
"Joint Written Direction" means written instructions delivered to the Escrow Agent and signed by both Buyer and the Stockholder Representative, substantially in the form attached hereto as Exhibit D.
"Losses" has the meaning ascribed to such term in the Merger Agreement.
"Merger Agreement" means that certain Agreement and Plan of Merger, dated as of June 1, 2023, by and among Buyer, Merger Sub, and Codelaunch, as may be amended, supplemented, or otherwise modified from time to time.
"Objection Notice" means a written notice from the Stockholder Representative to Buyer and the Escrow Agent, delivered during the Objection Period, objecting in whole or in part to the claims set forth in a Claim Notice and setting forth the basis for such objection and the amount in dispute.
"Objection Period" has the meaning set forth in Section 4.2 of this Agreement.
"Pending Claim" means any claim set forth in a Claim Notice delivered by Buyer prior to the Escrow Release Date that remains unresolved (whether as a Disputed Claim or otherwise) as of the Escrow Release Date.
"Permitted Investments" has the meaning set forth in Section 3.2 of this Agreement.
"Person" means any individual, corporation, partnership, limited liability company, trust, governmental authority, or other entity of any kind.
"Resolved Claim" means any claim that has been resolved by (a) a Joint Written Direction executed by Buyer and the Stockholder Representative, or (b) a final, non-appealable order or judgment of a court of competent jurisdiction.
"Retained Amount" has the meaning set forth in Section 5.2 of this Agreement.
"Stockholder Representative" means Naveen Subramaniam, in his capacity as the duly appointed representative of the Former Stockholders, or any successor appointed in accordance with Section 7.3 of this Agreement.
"Survival Period" means the period commencing on the Closing Date and ending on the Escrow Release Date (i.e., the period of eighteen (18) months from July 22, 2023 through and including January 22, 2025); provided, however, that with respect to claims arising from breaches of Fundamental Representations, the Survival Period shall extend for the full applicable statute-of-limitations period as set forth in the Merger Agreement.
Section 1.2 Terms Defined in Merger Agreement. Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings ascribed to such terms in the Merger Agreement.
Section 1.3 Rules of Construction. Unless the context of this Agreement otherwise requires: (a) words of any gender include each other gender; (b) words using the singular or plural number also include the plural or singular number, respectively; (c) the terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement; (d) the terms "Article," "Section," "Exhibit," and "Schedule" refer to the specified Article, Section, Exhibit, or Schedule of or to this Agreement, unless otherwise specified; (e) the word "including" and words of similar import when used in this Agreement mean "including, without limitation," unless the context otherwise requires or unless otherwise specified; (f) the word "or" shall not be exclusive; (g) references to agreements and other documents shall be deemed to include all subsequent amendments and other modifications thereto; (h) references to statutes shall include all regulations promulgated thereunder and references to statutes or regulations shall be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing, or interpreting the statute or regulation; (i) the language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party; and (j) the headings and captions used in this Agreement are used for convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize, or in any way affect any provision of this Agreement.
ARTICLE II — ESTABLISHMENT OF ESCROW; DEPOSIT
Section 2.1 Establishment of Escrow Account.
(a) The Escrow Agent hereby agrees to establish and maintain a segregated escrow account designated as account number LSTC-ESC-2023-004417 at Lone Star Trust Company, N.A., located at 500 West 5th Street, Suite 800, Austin, Texas 78701 (the "Escrow Account"). The Escrow Account shall be maintained by the Escrow Agent in the name of "Lone Star Trust Company, N.A., as Escrow Agent for the benefit of the Parties to the Escrow Agreement dated July 22, 2023" (or such similar designation as the Escrow Agent may determine).
(b) The Escrow Account shall be held by the Escrow Agent in trust for the benefit of the Parties hereto, and the Escrow Agent shall hold, invest, and disburse the Escrow Fund solely in accordance with the terms and conditions of this Agreement. The Escrow Account shall be maintained as a segregated account, separate and apart from the general assets and other accounts of the Escrow Agent. The Escrow Fund shall not be subject to any lien, attachment, trustee process, or any other judicial process of any creditor of any Party.
Section 2.2 Deposit of Escrow Amount.
(a) On the Closing Date, Buyer shall cause Two Million Two Hundred Thousand Dollars ($2,200,000) to be deposited by wire transfer of immediately available funds into the Escrow Account in accordance with the wire transfer instructions set forth in Exhibit B attached hereto. Such deposit may be effected through Pinnacle National Bank, N.A. (acting as paying agent for the Merger) or directly from Buyer, at Buyer's election, provided that the full Escrow Amount is received in the Escrow Account on the Closing Date. The Escrow Agent shall promptly confirm receipt of the Escrow Amount to both Buyer and the Stockholder Representative by written notice delivered within one (1) Business Day following receipt.
(b) The Escrow Amount represents Twenty-Two Cents ($0.22) per share of the Ten Million (10,000,000) fully diluted shares of Codelaunch common stock outstanding immediately prior to the Effective Time of the Merger. The Escrow Amount is allocable among the Former Stockholders on a pro rata basis in accordance with their respective ownership percentages as follows:
(c) The Escrow Amount shall serve as the primary (but not exclusive) source for the satisfaction of indemnification obligations of the Former Stockholders under Article IX of the Merger Agreement. The deposit of the Escrow Amount into the Escrow Account shall be deemed to constitute a reduction of the merger consideration otherwise payable to the Former Stockholders at the Closing, and the Former Stockholders' entitlement to receive their respective pro rata portions of the Escrow Fund shall be contingent upon, and subject to, the terms and conditions of this Agreement and the Merger Agreement.
Section 2.3 Escrow Fund as Security.
(a) The Escrow Fund shall secure the indemnification obligations of the Former Stockholders (as Indemnifying Parties) under Article IX of the Merger Agreement, subject to and in accordance with the terms and conditions thereof, including the Indemnification Cap of Seven Million Seven Hundred Thousand Dollars ($7,700,000), representing thirty-five percent (35%) of the aggregate merger consideration, and the Indemnification Basket of Two Hundred Twenty Thousand Dollars ($220,000), representing one percent (1%) of the aggregate merger consideration.
(b) With respect to claims arising from breaches of Fundamental Representations (as defined in the Merger Agreement), such claims shall not be subject to the Indemnification Cap and shall survive for the full applicable statute-of-limitations period. The Escrow Fund shall secure such Fundamental Representation claims during the period the Escrow Fund remains in existence and has not been fully disbursed.
(c) The Parties acknowledge and agree that the Escrow Fund is not intended to be the exclusive remedy of Buyer for indemnification claims under the Merger Agreement, and nothing in this Agreement shall limit or restrict Buyer's right to pursue recovery of Losses in excess of the Escrow Fund up to the Indemnification Cap (or without regard to the Indemnification Cap in the case of Fundamental Representations), directly against the Former Stockholders through the Stockholder Representative, as and to the extent provided in the Merger Agreement.
ARTICLE III — INVESTMENT OF ESCROW FUND
Section 3.1 Investment Direction.
(a) The Escrow Agent shall invest and reinvest the Escrow Fund, including all interest and earnings thereon, in Permitted Investments as directed in writing by the Stockholder Representative. Any such written investment direction shall specify the particular Permitted Investment(s) in which the Escrow Fund (or any designated portion thereof) shall be invested.
(b) In the absence of written investment direction from the Stockholder Representative, the Escrow Agent shall invest the Escrow Fund in the default investment described in Section 3.2(d) of this Agreement.
(c) The Escrow Agent shall not be responsible for any loss of principal or income resulting from any investment made in accordance with this Section 3.1.
Section 3.2 Permitted Investments. As used in this Agreement, "Permitted Investments" means any of the following:
(a) 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 with maturities not exceeding one hundred eighty (180) days from the date of acquisition thereof;
(b) Money market mutual funds that invest primarily in obligations of the United States government or agencies thereof and that are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization;
(c) Certificates of deposit or demand deposit accounts at Lone Star Trust Company, N.A. (or any affiliate thereof) that are insured by the Federal Deposit Insurance Corporation ("FDIC"), subject to applicable FDIC insurance limits; and
(d) An interest-bearing demand deposit account maintained at Lone Star Trust Company, N.A. (the "Default Investment"), which shall serve as the default investment in the absence of written investment direction from the Stockholder Representative.
Section 3.3 Tax Treatment of Earnings.
(a) All interest, earnings, income, and other proceeds generated on or with respect to the Escrow Fund (collectively, "Escrow Earnings") shall be treated for United States federal, state, and local income tax purposes as income of the Former Stockholders. Escrow Earnings shall be allocated among the Former Stockholders on a pro rata basis in accordance with their respective percentages of the Escrow Amount as set forth in Section 2.2(b) of this Agreement.
(b) The Escrow Agent shall report all Escrow Earnings to the Internal Revenue Service on IRS Form 1099 (or other applicable form) under the taxpayer identification number of the Stockholder Representative, or as otherwise directed by the Parties in a Joint Written Direction. The Stockholder Representative shall be responsible for the further allocation and reporting of Escrow Earnings to the Former Stockholders.
(c) The Stockholder Representative shall furnish the Escrow Agent with a completed and executed IRS Form W-9 (Request for Taxpayer Identification Number and Certification) simultaneously with the execution and delivery of this Agreement. The Escrow Agent shall not be required to make any investment or disbursement until it has received a properly completed IRS Form W-9 (or applicable IRS Form W-8, in the case of any non-U.S. Person).
(d) The Parties acknowledge and agree that the Escrow Agent shall have no responsibility or liability for the tax consequences to any Party or any Former Stockholder resulting from or arising in connection with the establishment, maintenance, investment, or disbursement of the Escrow Fund.
Section 3.4 Losses on Investments. The Escrow Agent shall not be liable for any decline in value, loss of principal, or diminution in the Escrow Fund resulting from any Permitted Investment made in accordance with this Article III. The Parties acknowledge that investments in Permitted Investments are subject to market risk and that the Escrow Agent provides no guarantee of any rate of return on, or the preservation of, the Escrow Fund.
ARTICLE IV — CLAIMS AGAINST THE ESCROW FUND
Section 4.1 Claim Notice.
(a) At any time prior to the Escrow Release Date, Buyer may deliver a Claim Notice to the Escrow Agent and the Stockholder Representative asserting a claim for indemnification against the Escrow Fund. Notwithstanding the foregoing, with respect to any Disputed Claim or Pending Claim that has been asserted by Buyer prior to the Escrow Release Date, Buyer may continue to pursue such claim and deliver supplemental Claim Notices with respect thereto at any time until such claim is finally resolved in accordance with the terms of this Agreement.
(b) Each Claim Notice shall be substantially in the form attached hereto as Exhibit C and shall include the following:
(i) a description of the claim in reasonable detail, including the factual basis therefor;
(ii) identification of the specific representations, warranties, covenants, or other obligations under the Merger Agreement that Buyer alleges have been breached or that give rise to the indemnification obligation;
(iii) the aggregate amount of Losses claimed by Buyer (or, if the amount of Losses is not then reasonably determinable, a good-faith estimate of the anticipated amount of such Losses, together with a statement that such amount is an estimate and may be subject to adjustment); and
(iv) a demand for payment of the claimed amount from the Escrow Fund.
(c) The Claim Notice shall reference the Indemnification Basket and shall certify whether: (A) aggregate indemnifiable Losses exceed the Indemnification Basket of Two Hundred Twenty Thousand Dollars ($220,000), such that the full amount of Losses (from the first dollar thereof) is recoverable from the Escrow Fund pursuant to the tipping basket mechanism; or (B) the claim involves a breach of Fundamental Representations, in which case the Indemnification Basket shall not apply. No distribution from the Escrow Fund shall be made pursuant to this Article IV unless and until aggregate indemnifiable Losses exceed the Indemnification Basket (except with respect to claims involving breaches of Fundamental Representations, which are not subject to the Indemnification Basket).
Section 4.2 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 disputing, in whole or in part, the claim(s) set forth in such Claim Notice.
(b) Each Objection Notice shall set forth in reasonable detail: (i) the specific basis for the Stockholder Representative's objection to the claim(s) or amount(s) set forth in the Claim Notice; (ii) the amount of the claim that is disputed (if the Stockholder Representative disputes only a portion of the claimed amount, the Objection Notice shall identify the undisputed portion, if any); and (iii) any facts, circumstances, or legal arguments supporting the Stockholder Representative's position.
(c) If the Stockholder Representative does not deliver a timely Objection Notice within the Objection Period, the claim(s) set forth in the applicable Claim Notice shall be deemed to be an undisputed Resolved Claim, and the Escrow Agent shall distribute the claimed amount from the Escrow Fund to Buyer in accordance with Section 4.4 of this Agreement. For purposes of clarity, the failure of the Stockholder Representative to object within the Objection Period shall constitute an irrevocable acceptance of the claim and the amount set forth in the Claim Notice.
Section 4.3 Resolution of Disputed Claims.
(a) If the Stockholder Representative timely delivers an Objection Notice in accordance with Section 4.2, the disputed portion of the claim shall constitute a Disputed Claim.
(b) Upon the occurrence of a Disputed Claim, Buyer and the Stockholder Representative shall negotiate in good faith for a period of thirty (30) calendar days following the date of delivery of the Objection Notice (the "Negotiation Period") to attempt to resolve such Disputed Claim. Either Party may request a meeting or conference call during the Negotiation Period, and the other Party shall reasonably accommodate such request.
(c) If the Disputed Claim is not resolved within the Negotiation Period, either Buyer or the Stockholder Representative may submit the dispute to a court of competent jurisdiction in the State of Delaware, in accordance with the jurisdiction and venue provisions of Section 8.3 of this Agreement, for final adjudication.
(d) During the pendency of any Disputed Claim (including any judicial proceedings), the Escrow Agent shall retain in the Escrow Account an amount equal to the full amount of such Disputed Claim (as set forth in the applicable Claim Notice, or such lesser amount as may be agreed by the Parties in a Joint Written Direction) until the Escrow Agent receives either a Joint Written Direction or a certified copy of a final, non-appealable order or judgment of a court of competent jurisdiction directing the distribution of such amounts.
(e) If the Stockholder Representative's Objection Notice disputes only a portion of the claimed amount, the undisputed portion shall be treated as a Resolved Claim and shall be disbursed to Buyer in accordance with Section 4.4 of this Agreement.
Section 4.4 Payment of Resolved Claims.
(a) Promptly upon receipt of either (i) a Joint Written Direction signed by both Buyer and the Stockholder Representative, or (ii) a certified copy of a final, non-appealable order or judgment of a court of competent jurisdiction, the Escrow Agent shall distribute the amount specified therein from the Escrow Fund to Buyer (or to such other Person as may be specified in such Joint Written Direction or court order) within five (5) Business Days of such receipt by wire transfer of immediately available funds to the account designated by Buyer pursuant to the wire transfer instructions set forth in Exhibit B (or as otherwise specified in such Joint Written Direction or court order).
(b) In no event shall any single disbursement or series of disbursements from the Escrow Fund exceed the then-remaining balance of the Escrow Fund. If a Joint Written Direction or court order directs payment of an amount that exceeds the then-remaining balance of the Escrow Fund, the Escrow Agent shall distribute the entire then-remaining balance of the Escrow Fund in satisfaction (or partial satisfaction) of such obligation, and the Escrow Agent shall have no further obligation with respect to such excess amount.
(c) The Parties acknowledge and agree that the Escrow Fund is the primary recourse for indemnification claims under the Merger Agreement. However, the Parties further acknowledge that indemnifiable Losses may exceed the Escrow Fund. In such event, Buyer may pursue recovery of such excess Losses directly against the Former Stockholders through the Stockholder Representative, up to the Indemnification Cap of Seven Million Seven Hundred Thousand Dollars ($7,700,000) (or without regard to the Indemnification Cap in the case of breaches of Fundamental Representations), in accordance with the terms of the Merger Agreement. Nothing in this Agreement shall limit or impair Buyer's right to pursue such additional recovery.
ARTICLE V — RELEASE OF ESCROW FUND
Section 5.1 Scheduled Release.
(a) On the Escrow Release Date (January 22, 2025), which is eighteen (18) months after the Closing Date, the Escrow Agent shall release to the Stockholder Representative the entire then-remaining balance of the Escrow Fund, less the Retained Amount (if any) determined in accordance with Section 5.2 of this Agreement. Such release shall be made by wire transfer of immediately available funds to the account(s) designated by the Stockholder Representative in writing, for further distribution by the Stockholder Representative to the Former Stockholders on a pro rata basis in accordance with each Former Stockholder's respective share of the Escrow Amount as set forth below:
(b) The Stockholder Representative shall be solely responsible for the further distribution of the released amounts to the Former Stockholders in accordance with their respective pro rata shares, and the Escrow Agent shall have no liability or obligation with respect to such further distribution.
(c) Not later than ten (10) Business Days prior to the Escrow Release Date, the Escrow Agent shall deliver written notice to Buyer and the Stockholder Representative confirming the anticipated balance of the Escrow Fund and requesting confirmation of the wire instructions and any Retained Amount required pursuant to Section 5.2.
Section 5.2 Retained Amount for Pending Claims.
(a) If, as of the Escrow Release Date, any Claim Notice has been delivered by Buyer for which the claim remains unresolved (whether as a Disputed Claim or otherwise) and constitutes a Pending Claim, the Escrow Agent shall retain in the Escrow Account an amount equal to the aggregate claimed amounts of all such Pending Claims (the "Retained Amount"). The Escrow Agent shall release only the excess (if any) of the Escrow Fund over the Retained Amount to the Stockholder Representative on the Escrow Release Date in accordance with Section 5.1.
(b) For purposes of calculating the Retained Amount, each Pending Claim shall be valued at the amount set forth in the applicable Claim Notice (or, if the claimed amount has been reduced by a partial resolution or partial Joint Written Direction, at the then-remaining claimed amount), unless the Parties otherwise agree in a Joint Written Direction.
(c) Upon the final resolution of each Pending Claim (whether by Joint Written Direction or final, non-appealable court order), the Escrow Agent shall distribute the applicable portion of the Retained Amount as follows:
(i) to Buyer, to the extent the Pending Claim is sustained in whole or in part, in the amount so determined; and
(ii) to the Stockholder Representative, for further distribution to the Former Stockholders in accordance with their respective pro rata shares, to the extent the Pending Claim is not sustained or is sustained in an amount less than the Retained Amount attributable to such Pending Claim (in which case the excess over the sustained amount shall be released to the Stockholder Representative).
(d) The Escrow Agent shall make each distribution described in this Section 5.2 within five (5) Business Days following receipt of a Joint Written Direction or a certified copy of a final, non-appealable order or judgment of a court of competent jurisdiction, as applicable.
Section 5.3 Early Release.
At any time prior to the Escrow Release Date, Buyer and the Stockholder Representative may, by Joint Written Direction, instruct the Escrow Agent to release all or any portion of the Escrow Fund to the Stockholder Representative (for distribution to the Former Stockholders) or to Buyer, as specified in such Joint Written Direction. The Escrow Agent shall comply with any such Joint Written Direction within five (5) Business Days of receipt thereof.
Section 5.4 Manner of Release.
All releases and distributions from the Escrow Fund under this Article V (and under Article IV) shall be made by wire transfer of immediately available funds to the account(s) designated in writing by the receiving Party in accordance with the wire transfer instructions set forth in Exhibit B hereto (or as otherwise specified in a Joint Written Direction or court order). Each Party shall promptly notify the Escrow Agent in writing of any changes to its wire transfer instructions.
ARTICLE VI — ESCROW AGENT
Section 6.1 Duties and Responsibilities.
(a) The Escrow Agent's duties and responsibilities under this Agreement are limited solely to those expressly set forth herein and are ministerial and administrative in nature. The Escrow Agent shall not be deemed to be a fiduciary of any Party, any Former Stockholder, or any other Person, and shall have no duties or obligations other than those expressly set forth in this Agreement.
(b) The Escrow Agent shall act solely in accordance with the terms and conditions of this Agreement and with written instructions received from the Parties in the manner contemplated hereby. The Escrow Agent shall have no duty to determine or inquire into the occurrence or non-occurrence of any event, condition, or contingency, or the performance or non-performance by any Party of its obligations under this Agreement or the Merger Agreement.
(c) The Escrow Agent shall not be required to institute or defend any legal proceedings or take any other action that may involve it in any expense or liability unless it shall have been furnished with adequate security and indemnity reasonably satisfactory to it.
Section 6.2 Reliance.
(a) The Escrow Agent may rely upon, and shall be fully protected in acting or refraining from acting upon, any written notice, instruction, certificate, statement, request, consent, agreement, or other document or instrument furnished to it hereunder that it believes in good faith to be genuine and to have been signed, presented, or delivered by the appropriate Person. The Escrow Agent shall not be required to investigate or verify the accuracy, completeness, or validity of any such document or instrument.
(b) The Escrow Agent may consult with and rely upon the advice of legal counsel (including, without limitation, Calderwood & Harkness LLP or Caldwell, Raines & Fitch LLP) with respect to any questions of law arising under or in connection with this Agreement, and the Escrow Agent shall not be liable for any action taken, suffered, or omitted by it in good faith in accordance with the opinion or advice of such counsel.
(c) The Escrow Agent may employ agents, sub-agents, and attorneys-in-fact and shall not be liable for the acts or omissions of any such agent, sub-agent, or attorney-in-fact appointed with due care.
Section 6.3 Limitation of Liability.
(a) The Escrow Agent shall not be liable for any action taken or omitted to be taken by it in good faith and in the exercise of its own reasonable judgment, except to the extent that a court of competent jurisdiction determines by final, non-appealable judgment that Losses suffered by a Party were proximately caused by the Escrow Agent's own gross negligence, willful misconduct, or fraud.
(b) The Escrow Agent shall not be liable for the acts or omissions of any predecessor or successor escrow agent or for any event, occurrence, or circumstance that took place prior to its acceptance of, or after its resignation or removal as, Escrow Agent under this Agreement.
(c) In no event shall the Escrow Agent be liable for any indirect, incidental, consequential, special, exemplary, or punitive damages (including, without limitation, lost profits, lost revenues, or loss of business opportunity), regardless of the form of action and whether or not such damages were foreseeable, even if the Escrow Agent has been advised of the possibility of such damages.
(d) The Escrow Agent shall not be obligated to take any legal action or to commence any proceedings in connection with this Agreement or the Escrow Fund, or to appear in, prosecute, or defend any such legal action or proceedings.
(e) The Escrow Agent shall not be liable for any loss or impairment of the Escrow Fund or any delay in the investment or reinvestment of the Escrow Fund resulting from any event or circumstance beyond the Escrow Agent's reasonable control, including, without limitation, acts of God, war, terrorism, earthquakes, fire, flood, strikes, work stoppages, equipment failure, interruption of power or communications, or any law, rule, regulation, order, or act of any governmental authority.
Section 6.4 Indemnification of Escrow Agent.
(a) Buyer and the Stockholder Representative (on behalf of the Former Stockholders), jointly and severally, shall indemnify, defend, and hold harmless the Escrow Agent and its directors, officers, employees, agents, successors, and assigns (collectively, the "Escrow Agent Indemnified Parties") from and against any and all losses, liabilities, claims, damages, costs, and expenses (including, without limitation, reasonable attorneys' fees and disbursements and costs of investigation) (collectively, "Escrow Agent Losses") arising out of or in connection with this Agreement, the Escrow Fund, or the performance by the Escrow Agent of its duties hereunder, except to the extent that such Escrow Agent Losses are determined by a court of competent jurisdiction in a final, non-appealable judgment to have been proximately caused by the Escrow Agent's own gross negligence, willful misconduct, or fraud.
(b) Buyer and the Stockholder Representative shall have the right of contribution between them with respect to amounts paid to the Escrow Agent Indemnified Parties pursuant to this Section 6.4. Unless otherwise agreed in writing by Buyer and the Stockholder Representative, such contribution shall be allocated equally (50%/50%) between Buyer, on the one hand, and the Former Stockholders (acting through the Stockholder Representative), on the other hand.
(c) The indemnification obligations of the Parties under this Section 6.4 shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent.
Section 6.5 Compensation of Escrow Agent.
(a) Buyer shall pay all fees, charges, and expenses of the Escrow Agent in connection with the performance of its duties and obligations under this Agreement, in accordance with the fee schedule attached hereto as Exhibit A.
(b) Fees shall be invoiced annually in advance, and all other charges and expenses shall be invoiced as incurred. Buyer shall pay each invoice within thirty (30) days of receipt thereof.
(c) The Escrow Agent's fees and expenses shall not be payable from the Escrow Fund. Notwithstanding the foregoing, if both Buyer and the Stockholder Representative fail to pay the Escrow Agent's fees and expenses within thirty (30) days after the date of the Escrow Agent's invoice therefor, the Escrow Agent shall be entitled, upon ten (10) Business Days' prior written notice to Buyer and the Stockholder Representative, to deduct and pay such fees and expenses from the Escrow Fund, and any such deduction shall reduce the Escrow Fund accordingly.
Section 6.6 Resignation and Removal.
(a) The Escrow Agent may resign from its duties and obligations hereunder at any time by delivering thirty (30) days' prior written notice to Buyer and the Stockholder Representative. Such resignation shall take effect upon the expiration of such thirty (30)-day notice period or upon the earlier appointment of, and transfer of the Escrow Fund to, a successor escrow agent.
(b) The Escrow Agent may be removed at any time by Joint Written Direction delivered to the Escrow Agent not less than thirty (30) days prior to the effective date of such removal.
(c) Upon the effective date of the Escrow Agent's resignation or removal, Buyer and the Stockholder Representative shall jointly appoint a successor escrow agent that is a national banking association or state-chartered bank with combined capital, surplus, and undivided profits of not less than Five Hundred Million Dollars ($500,000,000). If Buyer and the Stockholder Representative are unable to agree upon a successor escrow agent within sixty (60) calendar days after the date of the notice of resignation or removal, the Escrow Agent may (i) petition a court of competent jurisdiction in the State of Delaware to appoint a successor escrow agent, or (ii) deposit the Escrow Fund with such court, and in either event the Escrow Agent shall be discharged from further obligations under this Agreement.
(d) The transfer of the Escrow Fund to a successor escrow agent shall be completed within ten (10) Business Days following the appointment of such successor. The resignation or removal of the Escrow Agent and the appointment of a successor escrow agent shall not affect the rights or obligations of any Party under this Agreement, except as expressly provided herein.
Section 6.7 Interpleader.
If at any time the Escrow Agent receives conflicting instructions, demands, or notices from the Parties, or if there is any dispute or uncertainty as to whom the Escrow Fund (or any portion thereof) should be delivered, the Escrow Agent may, in its sole and absolute discretion: (a) refrain from taking any action (other than continuing to hold and invest the Escrow Fund in accordance with this Agreement) until the Escrow Agent receives a Joint Written Direction or a certified copy of a final, non-appealable order or judgment of a court of competent jurisdiction resolving such conflict or dispute; or (b) commence an interpleader action in any court of competent jurisdiction in the State of Delaware, deposit the Escrow Fund with such court, and thereupon be discharged and released from all obligations under this Agreement with respect to the Escrow Fund so deposited. The costs and expenses of any such interpleader action (including reasonable attorneys' fees and disbursements) shall be borne jointly and severally by Buyer and the Stockholder Representative (on behalf of the Former Stockholders).
Section 6.8 Escrow Agent Contact.
All notices, instructions, and other communications to the Escrow Agent under this Agreement shall be directed to:
Lone Star Trust Company, N.A. 500 West 5th Street, Suite 800 Austin, Texas 78701
Attention: Reginald Huang, Vice President — Escrow Services
Telephone: (512) 555-0147
Email: rhuang@lonestartrust.com
or to such other address, facsimile number, or email address as the Escrow Agent may designate by written notice to Buyer and the Stockholder Representative.
ARTICLE VII — STOCKHOLDER REPRESENTATIVE
Section 7.1 Appointment and Authority.
(a) Naveen Subramaniam, in his capacity as Stockholder Representative, has been duly appointed by the Former Stockholders pursuant to Section 11.15 of the Merger Agreement and the Written Consent of Stockholders dated June 9, 2023, to serve as the representative, agent, and attorney-in-fact of all Former Stockholders with respect to all matters arising under or in connection with this Agreement, the indemnification provisions of Article IX of the Merger Agreement, and all other post-closing matters contemplated by the Merger Agreement.
(b) The Stockholder Representative is hereby authorized and empowered to take all actions and to make all decisions, on behalf of all Former Stockholders, that the Stockholder Representative deems necessary, desirable, or appropriate in connection with this Agreement, including, without limitation: (i) negotiating, executing, and delivering any Joint Written Direction, Objection Notice, or other document or instrument; (ii) negotiating, compromising, and settling any claim, dispute, or controversy arising under or in connection with this Agreement; (iii) engaging legal counsel, accountants, and other advisors; (iv) receiving all notices, communications, and distributions under this Agreement on behalf of the Former Stockholders; and (v) taking any and all other actions contemplated by this Agreement to be taken by or on behalf of the Former Stockholders.
(c) All actions taken by the Stockholder Representative in accordance with this Agreement shall be final and binding upon all Former Stockholders, and no Former Stockholder shall have the right to object to, dissent from, or otherwise challenge any action taken by the Stockholder Representative pursuant to this Agreement. The Escrow Agent and Buyer shall be entitled to rely conclusively on the actions, instructions, and decisions of the Stockholder Representative as being the actions, instructions, and decisions of all Former Stockholders, and shall have no obligation to inquire into the authority of the Stockholder Representative to act on their behalf.
Section 7.2 Exculpation.
The Stockholder Representative shall not be liable to any Former Stockholder for any action taken or omitted to be taken by the Stockholder Representative in good faith and in the reasonable belief that such action or omission is in the best interests of the Former Stockholders as a group, except to the extent that a court of competent jurisdiction determines by final, non-appealable judgment that such action or omission constituted willful misconduct or fraud on the part of the Stockholder Representative. The Stockholder Representative shall not be required to make any inquiry concerning either the performance or observance of any of the terms, provisions, or conditions of this Agreement or the Merger Agreement.
Section 7.3 Successor Stockholder Representative.
(a) If the Stockholder Representative is unable or unwilling to continue to serve in such capacity (whether by reason of death, disability, resignation, or any other cause), a successor Stockholder Representative shall be appointed by the Former Stockholders holding a majority of the aggregate Escrow Amount attributable to them (calculated based on their respective pro rata shares as set forth in Section 2.2(b) of this Agreement).
(b) The Stockholder Representative may resign at any time by delivering written notice to Buyer and the Escrow Agent, which resignation shall take effect upon the appointment and acceptance of a successor Stockholder Representative. Written notice of the identity and contact information of any successor Stockholder Representative shall be delivered promptly to Buyer and the Escrow Agent.
(c) Until a successor Stockholder Representative is appointed and has accepted such appointment, the Escrow Agent shall not be required to take any action that would otherwise require the direction or consent of the Stockholder Representative.
ARTICLE VIII — GENERAL PROVISIONS
Section 8.1 Notices.
All notices, requests, demands, claims, consents, waivers, and other communications required or permitted to be given hereunder shall be in writing and shall be delivered by: (a) personal delivery; (b) certified mail, return receipt requested, postage prepaid; (c) nationally recognized overnight courier service (with tracking capability); or (d) email transmission (with confirmation of receipt), addressed as follows (or to such other address as any Party may designate from time to time by written notice to the other Parties):
If to Buyer:
Brightfield Cloud Services Inc. 4200 Westgrove Boulevard, Suite 1100 Irving, Texas 75038
Attention: Harold Ostrander, General Counsel
Email: hostrander@brightfieldcloud.com
with a copy to (which shall not constitute notice):
Calderwood & Harkness LLP 2000 McKinney Avenue, Suite 3400 Dallas, Texas 75201
Attention: Beatrice Holloway
Email: bholloway@calderwoodharkness.com
If to the Stockholder Representative:
Naveen Subramaniam c/o Codelaunch Labs, Inc. 1607 East 6th Street, Suite 300 Austin, Texas 78702
Email: naveen@codelaunchlabs.com
with a copy to (which shall not constitute notice):
Caldwell, Raines & Fitch LLP 600 Congress Avenue, Suite 2200 Austin, Texas 78701
Attention: Geoffrey Aldrich
Email: galdrich@calrainefitch.com
If to the Escrow Agent:
Lone Star Trust Company, N.A. 500 West 5th Street, Suite 800 Austin, Texas 78701
Attention: Reginald Huang, Vice President — Escrow Services
Email: rhuang@lonestartrust.com
Any notice delivered in accordance with this Section 8.1 shall be deemed to have been duly given and received: (i) if delivered personally, upon the date of delivery; (ii) if sent by certified mail, three (3) Business Days after the date of mailing; (iii) if sent by overnight courier, one (1) Business Day after deposit with such courier; and (iv) if sent by email, upon confirmation of receipt by the receiving Party (provided that a copy is also sent by another method specified herein within two (2) Business Days).
Section 8.2 Governing Law.
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without giving effect to any choice-of-law or conflict-of-law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 8.3 Jurisdiction and Venue.
(a) Any action, suit, or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby shall be brought exclusively in the Court of Chancery of the State of Delaware or, if such court lacks subject matter jurisdiction, in the Superior Court of the State of Delaware or the United States District Court for the District of Delaware, and each Party hereby irrevocably submits to the exclusive jurisdiction of such courts for the purpose of any such action, suit, or proceeding.
(b) Each Party hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim, or otherwise, in any action, suit, or proceeding arising out of or relating to this Agreement: (i) any claim that it is not personally subject to the jurisdiction of the above-named courts; (ii) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts; and (iii) any claim that the action, suit, or proceeding in any such court is brought in an inconvenient forum.
(c) Each Party agrees that service of process in any action, suit, or proceeding may be made by delivering a copy of the process by personal delivery, certified mail, or nationally recognized overnight courier service at the address set forth in Section 8.1 of this Agreement, and such service shall be deemed effective upon delivery.
Section 8.4 Waiver of Jury Trial.
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, CLAIM, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT ACTION, SUIT, OR PROCEEDING. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF AN ACTION, SUIT, OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER; (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (C) IT MAKES THIS WAIVER VOLUNTARILY; AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.4.
Section 8.5 Amendments and Waivers.
(a) This Agreement may not be amended, modified, or supplemented except by a written instrument duly executed by Buyer, the Stockholder Representative, and the Escrow Agent. No amendment to this Agreement shall be effective or binding upon any Party unless and until such written instrument has been executed by all three Parties.
(b) No waiver of any term, provision, or condition of this Agreement, or of any breach thereof, shall be effective unless made in writing and signed by the Party against whom such waiver is sought to be enforced. No failure or delay by any Party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law.