ESCROW AGREEMENT
Dated as of October 24, 2023
among
NEXFORD INDUSTRIAL HOLDINGS INC. a Delaware corporation
("Buyer")
GERALD T. BRENNAN in his capacity as Seller Representative
("Seller Representative")
and
COMMONWEALTH ESCROW SERVICES INC. a New York corporation
("Escrow Agent")
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In connection with that certain Asset Purchase Agreement, dated as of September 5, 2023, among Nexford Industrial Holdings Inc., Pinnacle Metal Fabricators LLC, an Indiana limited liability company, and its Members (Gerald T. Brennan, Sandra L. Brennan, and Derek J. Kopp)
(the "Purchase Agreement")
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ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is made and entered into as of October 24, 2023, by and among Nexford Industrial Holdings Inc., a Delaware corporation ("Buyer"), Gerald T. Brennan, in his capacity as the Seller Representative (as defined herein) ("Seller Representative"), and Commonwealth Escrow Services Inc., a New York corporation ("Escrow Agent"). Buyer, Seller Representative, and Escrow Agent are each referred to herein as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Buyer, Pinnacle Metal Fabricators LLC, an Indiana limited liability company ("Pinnacle" or the "Company"), and the members of Pinnacle, namely Gerald T. Brennan, Sandra L. Brennan, and Derek J. Kopp (collectively, the "Sellers" and each, a "Seller"), have entered into that certain Asset Purchase Agreement, dated as of September 5, 2023 (as may be amended, supplemented, or otherwise modified from time to time, the "Purchase Agreement"), pursuant to which Buyer is acquiring substantially all of the assets of the Company on the terms and subject to the conditions set forth therein;
WHEREAS, the Purchase Agreement provides for a total purchase price of Thirty Million Dollars ($30,000,000), consisting of a closing cash payment of Twenty-Four Million Dollars ($24,000,000) payable at the Closing and a performance-based earnout of up to Six Million Dollars ($6,000,000), payable upon the achievement of certain milestones as more particularly described in the Purchase Agreement;
WHEREAS, as a condition to the closing of the transactions contemplated by the Purchase Agreement (the "Closing"), the Purchase Agreement requires that Buyer deposit Three Million Dollars ($3,000,000) from the closing cash payment (the "Escrow Amount") into an escrow account to secure the indemnification obligations of the Sellers under Article VIII of the Purchase Agreement, resulting in net cash payable to the Sellers at Closing of Twenty-One Million Dollars ($21,000,000) (being $24,000,000 minus the $3,000,000 Escrow Amount);
WHEREAS, Gerald T. Brennan has been designated as the Seller Representative pursuant to Section 11.14 of the Purchase Agreement, duly authorized by the other Sellers to act on behalf of all Sellers with respect to all matters arising under the Purchase Agreement and this Agreement;
WHEREAS, Commonwealth Escrow Services Inc. has agreed to serve as Escrow Agent and to hold, invest, and distribute the Escrow Amount in accordance with the terms and conditions set forth in this Agreement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants, agreements, representations, and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I — DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set forth below:
"Buyer" means Nexford Industrial Holdings Inc., a Delaware corporation, with its principal office located at 4200 West Lake Shore Drive, Suite 800, Chicago, Illinois 60604.
"Claim Notice" has the meaning set forth in Section 4.1 of this Agreement.
"Claimed Amount" has the meaning set forth in Section 4.1 of this Agreement.
"Closing Date" means October 24, 2023, the date on which the Closing occurs pursuant to the Purchase Agreement.
"Disputed Amount" has the meaning set forth in Section 4.3 of this Agreement.
"Escrow Account" means the segregated escrow account established and maintained by the Escrow Agent pursuant to Section 2.1 of this Agreement.
"Escrow Agent" means Commonwealth Escrow Services Inc., a New York corporation, with offices located at 140 Broadway, 30th Floor, New York, New York 10005.
"Escrow Amount" means Three Million Dollars ($3,000,000).
"Escrow Fund" means the Escrow Amount, together with all interest, dividends, and other income earned thereon, less any distributions, disbursements, or other payments made from the Escrow Account in accordance with the terms of this Agreement.
"Escrow Period" means the period commencing on the Closing Date and ending at 11:59 p.m., Eastern Time, on April 24, 2025 (the date that is eighteen (18) months following the Closing Date), unless such period is extended with respect to one or more Pending Claims as provided in Section 5.2 of this Agreement.
"Holdback Amount" has the meaning set forth in Section 5.2 of this Agreement.
"Joint Written Direction" means a written instruction signed by both (a) an authorized officer of Buyer and (b) the Seller Representative, directing the Escrow Agent to take a specified action with respect to the Escrow Fund, including without limitation the distribution or release of all or any portion of the Escrow Fund.
"Pending Claim" has the meaning set forth in Section 5.2 of this Agreement.
"Permitted Investments" has the meaning set forth in Section 3.1 of this Agreement.
"Purchase Agreement" means that certain Asset Purchase Agreement, dated as of September 5, 2023, by and among Buyer, Pinnacle Metal Fabricators LLC, an Indiana limited liability company, and the Members (as defined therein), as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Release Date" means April 24, 2025, being the date that is eighteen (18) months following the Closing Date.
"Response Period" has the meaning set forth in Section 4.2 of this Agreement.
"Seller Representative" means Gerald T. Brennan, in his capacity as representative of the Sellers under the Purchase Agreement and this Agreement, or any successor Seller Representative appointed in accordance with Section 7.4 of this Agreement.
"Sellers" means, collectively, Gerald T. Brennan (holding a sixty-five percent (65%) membership interest in the Company), Sandra L. Brennan (holding a twenty percent (20%) membership interest in the Company), and Derek J. Kopp (holding a fifteen percent (15%) membership interest in the Company), each of whom is a member of Pinnacle Metal Fabricators LLC.
ARTICLE II — ESTABLISHMENT OF ESCROW; DEPOSIT
Section 2.1 — Establishment of Escrow Account.
Promptly upon execution of this Agreement (and in any event no later than the Closing Date), the Escrow Agent shall establish a segregated escrow account (the "Escrow Account") at a federally insured banking institution selected by the Escrow Agent. The Escrow Account shall be titled: "Commonwealth Escrow Services Inc., as Escrow Agent for Nexford Industrial Holdings Inc. / Pinnacle Metal Fabricators LLC Indemnification Escrow." The Escrow Account shall be established under the Escrow Agent's tax identification number. The Escrow Agent shall hold the Escrow Fund in the Escrow Account separate and apart from its own assets and the assets of any other person or entity, and shall not commingle the Escrow Fund with any other funds. The Escrow Agent shall maintain accurate records of all deposits to, earnings on, and disbursements from the Escrow Account and shall make such records available for inspection by Buyer and Seller Representative upon reasonable request.
Section 2.2 — Deposit of Escrow Amount.
On the Closing Date, Buyer shall cause the deposit of Three Million Dollars ($3,000,000) (the "Escrow Amount") into the Escrow Account by wire transfer of immediately available funds in accordance with the wire transfer instructions set forth on Exhibit A attached hereto. The Escrow Amount constitutes a portion of the Twenty-Four Million Dollars ($24,000,000) closing cash payment otherwise payable to the Sellers at the Closing pursuant to the Purchase Agreement. Promptly upon receipt of the Escrow Amount (and in any event within one (1) business day of receipt), the Escrow Agent shall acknowledge receipt of the Escrow Amount in writing (which may be by email) to both Buyer and Seller Representative, specifying the amount received and the date of receipt. In the event that the Escrow Agent does not receive the Escrow Amount on the Closing Date, the Escrow Agent shall promptly notify both Buyer and Seller Representative of such non-receipt.
Section 2.3 — Ownership of Escrow Fund.
For all purposes (including, without limitation, federal, state, and local tax purposes), the Escrow Fund shall be treated as the property of the Sellers until such time as all or any portion of the Escrow Fund is distributed to Buyer in satisfaction of indemnification claims in accordance with the terms of this Agreement. The Sellers shall be treated as the owners of the Escrow Fund for purposes of Sections 468B and 7872 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. To the extent any amounts are distributed from the Escrow Fund to Buyer in satisfaction of indemnification claims asserted pursuant to Article IV of this Agreement, such amounts shall be treated as adjustments to the purchase price paid by Buyer under the Purchase Agreement for all tax purposes, and the Parties shall not take any position inconsistent with such treatment on any tax return or in any tax proceeding unless required to do so by a determination (within the meaning of Section 1313(a) of the Internal Revenue Code of 1986, as amended) of the applicable taxing authority.
ARTICLE III — INVESTMENT OF ESCROW FUND
Section 3.1 — Permitted Investments.
The Escrow Agent shall invest and reinvest the Escrow Fund, in whole or in part, in one or more of the following instruments or obligations (collectively, "Permitted Investments"):
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (including United States Treasury bills, notes, and bonds), having maturities not exceeding ninety (90) days from the date of acquisition thereof;
(b) certificates of deposit or time deposits issued by any federally insured commercial bank organized under the laws of the United States or any state thereof having combined capital and surplus of not less than Five Hundred Million Dollars ($500,000,000), with maturities not exceeding ninety (90) days from the date of acquisition thereof;
(c) money market funds invested exclusively in obligations described in clause (a) or clause (b) above and rated at least "AAAm" (or the equivalent rating) by Standard & Poor's Ratings Services, a division of S&P Global Inc., Moody's Investors Service, Inc., or any other nationally recognized statistical rating organization; or
(d) such other investments as may be mutually agreed to in a writing signed by Buyer, Seller Representative, and Escrow Agent.
In the absence of written investment instructions from Buyer and Seller Representative specifying a particular Permitted Investment, the Escrow Agent shall invest the Escrow Fund in a money market fund described in clause (c) above. The Escrow Agent shall have no liability for any loss or diminution in value of the Escrow Fund resulting from investments made in accordance with the investment instructions received from Buyer and Seller Representative or, in the absence of such instructions, in accordance with the default investment provision set forth in the immediately preceding sentence. The Parties acknowledge that the Escrow Agent is not providing investment advice and that all investment risks shall be borne by the beneficial owners of the Escrow Fund.
Section 3.2 — Income and Losses.
All interest, dividends, and other income earned on the Escrow Fund (collectively, "Investment Income") shall be added to, and shall become part of, the Escrow Fund and shall be held and disbursed in accordance with the terms of this Agreement. The Escrow Agent shall not be liable for any loss of principal or Investment Income arising from any investment made in accordance with this Article III, including without limitation any loss resulting from the liquidation of any investment prior to its maturity in order to make a distribution required under this Agreement.
Section 3.3 — Tax Reporting.
(a) The Seller Representative shall provide or cause to be provided to the Escrow Agent a properly completed and executed Internal Revenue Service Form W-9 (Request for Taxpayer Identification Number and Certification) (or any applicable substitute or successor form) for each of the Sellers not later than three (3) business days following the execution of this Agreement.
(b) For all tax reporting purposes, all Investment Income earned on the Escrow Fund shall be reported as income of the Sellers, allocated among the Sellers in proportion to their respective membership interests in the Company as follows:
(i) Gerald T. Brennan — sixty-five percent (65%);
(ii) Sandra L. Brennan — twenty percent (20%); and
(iii) Derek J. Kopp — fifteen percent (15%).
(c) The Escrow Agent shall prepare and file, or cause to be prepared and filed, Internal Revenue Service Form 1099 (or any applicable substitute or successor form) with respect to each Seller, reporting the Investment Income allocable to such Seller in accordance with the percentages set forth in Section 3.3(b) above. Copies of all such forms shall be provided to the Seller Representative and to each Seller at his or her last known address.
(d) If any Seller fails to provide a properly completed and executed Form W-9 (or applicable substitute form) to the Escrow Agent within the time period specified in Section 3.3(a), the Escrow Agent shall withhold from any distributions otherwise payable to such Seller from the Escrow Fund such amounts as may be required by applicable federal, state, or local tax law, and the Escrow Agent shall remit such withheld amounts to the appropriate taxing authority. The Escrow Agent shall have no liability to any Seller or any other person for any amounts so withheld and remitted.
ARTICLE IV — CLAIMS AGAINST THE ESCROW FUND
Section 4.1 — Claim Notices.
At any time during the Escrow Period, Buyer may submit a claim against the Escrow Fund by delivering a written notice (a "Claim Notice") to the Escrow Agent and the Seller Representative. Each Claim Notice shall set forth with reasonable specificity the following:
(a) the nature of the indemnification claim being asserted under the Purchase Agreement, including a statement that the claim arises under Article VIII of the Purchase Agreement;
(b) the specific representation, warranty, covenant, or agreement under the Purchase Agreement that is alleged to have been breached or with respect to which an indemnifiable loss has been or may be incurred;
(c) the dollar amount claimed by Buyer in connection with such claim (the "Claimed Amount"), set forth in reasonable detail, together with a reasonably detailed calculation or estimate of the damages, losses, costs, or expenses comprising the Claimed Amount; and
(d) a reasonably detailed description of the facts and circumstances giving rise to or supporting the claim, including, to the extent applicable, copies of any demand letters, complaints, or other documentation received by Buyer from third parties relating to the claim.
For the avoidance of doubt, no Claim Notice may be submitted with respect to any individual claim for which the amount of losses is less than Twenty-Five Thousand Dollars ($25,000) (the "de minimis threshold"), as such claims are excluded from the indemnification obligations of the Sellers under Section 8.4(a) of the Purchase Agreement. Furthermore, the Parties acknowledge that the Purchase Agreement contains an aggregate indemnification basket of Three Hundred Thousand Dollars ($300,000) (representing one percent (1%) of the Thirty Million Dollar ($30,000,000) total purchase price), structured as a "tipping basket" — such that once the aggregate amount of qualifying indemnification claims exceeds Three Hundred Thousand Dollars ($300,000), Buyer shall be entitled to recover from dollar one of such aggregate claims, subject to the indemnification cap. The indemnification cap under the Purchase Agreement is Nine Million Dollars ($9,000,000), representing thirty percent (30%) of the total purchase price. The Escrow Agent shall have no duty or obligation to verify, investigate, or determine whether any Claim Notice complies with the foregoing limitations, which are solely matters as between Buyer and the Sellers under the Purchase Agreement.
Section 4.2 — Response to Claim Notices.
Within thirty (30) days following receipt of a Claim Notice by the Seller Representative (the "Response Period"), the Seller Representative shall deliver a written response to the Escrow Agent and Buyer either:
(a) accepting the Claim Notice in its entirety or in part, specifying in reasonable detail the amount of the Claimed Amount that is accepted (the "Accepted Amount"); or
(b) disputing the Claim Notice in its entirety or in part, specifying in reasonable detail the portion of the Claimed Amount that is disputed and the factual and legal grounds upon which such dispute is based.
If the Seller Representative fails to deliver a written response within the Response Period, the Seller Representative shall be deemed to have accepted the Claim Notice and the full Claimed Amount in its entirety for purposes of this Agreement, and the Escrow Agent shall treat such Claim Notice as fully accepted upon the expiration of the Response Period. The Escrow Agent shall have no duty to determine the adequacy, sufficiency, or timeliness of any response delivered by the Seller Representative and shall be entitled to rely conclusively on the information set forth in any such response.
Section 4.3 — Resolution of Accepted Claims.
To the extent a Claim Notice is accepted (or deemed accepted pursuant to Section 4.2) by the Seller Representative, the Escrow Agent shall, within five (5) business days following the date of such acceptance (or, in the case of a deemed acceptance, within five (5) business days following the expiration of the Response Period), distribute the Accepted Amount (or, in the case of a deemed acceptance, the full Claimed Amount) from the Escrow Fund to Buyer by wire transfer of immediately available funds in accordance with the wire transfer instructions provided by Buyer as set forth on Exhibit A hereto (or as otherwise updated by Buyer in writing to the Escrow Agent). To the extent a Claim Notice is partially accepted and partially disputed, the Escrow Agent shall distribute the Accepted Amount to Buyer in accordance with the immediately preceding sentence and shall retain in the Escrow Account an amount equal to the disputed portion of the Claimed Amount (the "Disputed Amount") pending resolution of such dispute in accordance with Section 4.4.
Section 4.4 — Resolution of Disputed Claims.
(a) Good Faith Negotiation. If a Claim Notice (or any portion thereof) is disputed by the Seller Representative, Buyer and Seller Representative shall negotiate in good faith for a period of thirty (30) days following the Escrow Agent's receipt of the Seller Representative's written response disputing such Claim Notice (the "Negotiation Period") in an effort to resolve the dispute. During the Negotiation Period, the Escrow Agent shall continue to hold the Disputed Amount in the Escrow Account and shall take no action with respect to the Disputed Amount unless and until it receives a Joint Written Direction or a final, non-appealable order as described in Section 4.4(b) below.
(b) Dispute Resolution. If the dispute is not resolved by mutual agreement of Buyer and Seller Representative within the Negotiation Period, either Buyer or Seller Representative may seek resolution of the dispute through the dispute resolution mechanisms set forth in the Purchase Agreement. For disputes relating to the performance-based earnout, such dispute shall be submitted to Calder & Fitch LLP, an independent accounting firm located in Indianapolis, Indiana, for binding determination in accordance with Section 2.7 of the Purchase Agreement. For all other disputes, the dispute shall be resolved in accordance with the governing law and dispute resolution provisions of the Purchase Agreement, including, without limitation, the submission of such dispute to the courts specified in Section 10.2 of this Agreement.
(c) Distribution Upon Resolution. Upon final resolution of any disputed Claim Notice (whether by mutual agreement of Buyer and Seller Representative, binding determination by Calder & Fitch LLP, arbitration award, or court order), Buyer and Seller Representative shall promptly deliver a Joint Written Direction to the Escrow Agent directing the Escrow Agent to distribute the resolved amount from the Escrow Fund. The Joint Written Direction shall specify the amount (if any) to be paid to Buyer from the Escrow Fund and the amount (if any) to be released to the Seller Representative for the account of the Sellers. The Escrow Agent shall make such distributions within five (5) business days following receipt of such Joint Written Direction.
(d) Court Orders and Arbitration Awards. Notwithstanding the foregoing, if a court of competent jurisdiction or an arbitral tribunal issues a final, non-appealable order or award directing the distribution of all or any portion of the Disputed Amount, the Escrow Agent shall comply with such order or award upon receipt of a certified copy thereof, together with a written opinion or certification of counsel for the presenting party that such order or award is final and non-appealable, without requiring a Joint Written Direction.
Section 4.5 — Joint Written Directions.
The Escrow Agent may rely conclusively, and shall be fully protected in relying, upon any Joint Written Direction that bears the signature of both (a) an authorized officer of Buyer and (b) the Seller Representative (or any successor Seller Representative appointed in accordance with Section 7.4). The Escrow Agent shall have no duty or obligation to inquire into, investigate, or verify the basis, accuracy, or propriety of any Joint Written Direction, and shall not be liable for any action taken or omitted in good faith in reliance upon any Joint Written Direction.
ARTICLE V — RELEASE AND DISTRIBUTION OF ESCROW FUND
Section 5.1 — Scheduled Release.
On or promptly after the Release Date, and in no event later than five (5) business days following the Release Date (April 24, 2025), the Escrow Agent shall distribute to the Seller Representative, for the account of the Sellers, the entire balance of the Escrow Fund then remaining in the Escrow Account, less the aggregate amount of any Pending Claims retained in the Escrow Account pursuant to Section 5.2 of this Agreement. No Joint Written Direction or other instruction from Buyer shall be required for the Escrow Agent to make the distribution contemplated by this Section 5.1, and the Escrow Agent is hereby authorized and directed to make such distribution upon the occurrence of the Release Date without further action by any Party, subject only to the retention of the Holdback Amount (if any) required by Section 5.2.
The Seller Representative shall distribute amounts received from the Escrow Agent pursuant to this Section 5.1 to the individual Sellers in accordance with their respective membership interests, as follows:
(a) Gerald T. Brennan — sixty-five percent (65%);
(b) Sandra L. Brennan — twenty percent (20%); and
(c) Derek J. Kopp — fifteen percent (15%).
The Escrow Agent shall have no responsibility or liability for the allocation or distribution of funds among the individual Sellers following disbursement to the Seller Representative.
Section 5.2 — Pending Claims Reserve.
If, as of the Release Date, there exist one or more outstanding and unresolved Claim Notices that have been delivered by Buyer to the Escrow Agent and the Seller Representative in accordance with Section 4.1 but that have not yet been fully resolved in accordance with Sections 4.2 through 4.4 (each, 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 "Holdback Amount"), and shall release the balance of the Escrow Fund (if any) in excess of the Holdback Amount to the Seller Representative in accordance with Section 5.1. For the avoidance of doubt, the Escrow Period shall be deemed extended solely with respect to the Holdback Amount until such time as all Pending Claims have been finally resolved.
The Escrow Agent shall release the Holdback Amount (or the remaining portion thereof) only upon the occurrence of one of the following:
(a) receipt of a Joint Written Direction from Buyer and Seller Representative specifying the amounts to be distributed to Buyer and the amounts to be distributed to the Seller Representative for the account of the Sellers; or
(b) receipt of a certified copy of a final, non-appealable order of a court of competent jurisdiction or a final, binding arbitration award directing the distribution of all or any portion of the Holdback Amount, together with a written opinion or certification of counsel for the presenting party that such order or award is final and non-appealable.
Upon the resolution of all Pending Claims and the distribution of all amounts required to be distributed to Buyer (if any) in connection with such Pending Claims, the Escrow Agent shall distribute any remaining balance of the Escrow Fund (including any Investment Income accrued thereon) to the Seller Representative for the account of the Sellers within five (5) business days following such final resolution.
Section 5.3 — Manner of Distribution.
All distributions from the Escrow Fund shall be made by wire transfer of immediately available funds to the accounts designated by the recipient in writing to the Escrow Agent. The wire transfer instructions for Buyer and for the Seller Representative (on behalf of the Sellers) are set forth on Exhibit A attached hereto. Each of Buyer and Seller Representative may update its wire transfer instructions from time to time by delivering written notice to the Escrow Agent in accordance with Article IX of this Agreement, provided that any such updated instructions shall not be effective until the Escrow Agent has had a reasonable opportunity (not less than five (5) business days) to verify such updated instructions. The Escrow Agent shall not be responsible for any delays, losses, or misdirected payments resulting from incorrect wire transfer instructions provided by any Party.
ARTICLE VI — ESCROW AGENT
Section 6.1 — Duties and Responsibilities.
The Escrow Agent's duties and obligations hereunder are purely ministerial in nature and shall be determined solely by the express provisions of this Agreement. The Escrow Agent shall have no implied duties or obligations and shall not be charged with knowledge of, or any duties or responsibilities under, any other agreement or document, including, without limitation, the Purchase Agreement. The Escrow Agent shall have no duty to enforce any obligation of any person to make any payment or delivery or to enforce any obligation of any person to perform any other act. The Escrow Agent shall have no duty to investigate the facts or law relating to any Claim Notice, any dispute, or any other matter arising under this Agreement or the Purchase Agreement. The Escrow Agent shall have no obligation to take any legal action of any kind in connection with this Agreement or the Escrow Fund. The Escrow Agent is not a party to, and has no duties or obligations under, the Purchase Agreement or any other agreement or instrument to which Buyer, the Sellers, or the Company is a party (other than this Agreement).
Section 6.2 — Reliance.
The Escrow Agent may rely on, and shall be fully protected in acting or refraining from acting upon, any written notice, instruction, direction, request, waiver, consent, receipt, certificate, affidavit, or other document or instrument furnished to it hereunder that the Escrow Agent believes in good faith to be genuine and to have been signed, executed, or presented by the proper party or parties. The Escrow Agent shall have no duty to make any investigation or inquiry as to any statement contained in any such document and may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained. The Escrow Agent may consult with legal counsel of its own choosing (including in-house counsel), and the reasonable fees and expenses of such counsel shall be reimbursable as provided in Section 6.4. The Escrow Agent shall not be liable for any action taken, suffered, or omitted by it in good faith in accordance with the advice of such counsel.
Section 6.3 — Liability; Limitation.
The Escrow Agent shall not be liable for any action taken or omitted to be taken by it in good faith and believed by it to be authorized or within the rights or powers conferred upon it by this Agreement, except to the extent that any such action or omission is determined by a court of competent jurisdiction in a final, non-appealable judgment to have resulted from the Escrow Agent's gross negligence, willful misconduct, or bad faith. In no event shall the Escrow Agent be liable for any indirect, incidental, consequential, special, exemplary, or punitive damages of any kind whatsoever (including, without limitation, lost profits or lost business opportunities), regardless of the form of action and whether or not any such damages are foreseeable. The Escrow Agent shall not be obligated to take any action that might, in its reasonable judgment, involve it in any expense, liability, or legal proceedings unless it has been furnished with indemnity reasonably satisfactory to the Escrow Agent against any and all expenses and liabilities that may be incurred by reason of taking such action.
Section 6.4 — Compensation and Expenses.
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. Buyer shall also 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, the reasonable fees and disbursements of legal counsel retained by the Escrow Agent pursuant to Section 6.2 or otherwise. The obligations of Buyer under this Section 6.4 shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent.
Section 6.5 — Indemnification of Escrow Agent.
Buyer and Seller Representative (on behalf of the Sellers), jointly and severally (as between Buyer, on the one hand, and the Sellers, on the other hand, with each side bearing fifty percent (50%) of any indemnification obligation arising under this Section 6.5), agree to indemnify, defend, and hold harmless the Escrow Agent and its respective directors, officers, employees, agents, and representatives (each, an "Indemnified Party") from and against any and all losses, claims, damages, liabilities, penalties, judgments, settlements, costs, and expenses (including, without limitation, reasonable attorneys' fees and disbursements) (collectively, "Escrow Agent Losses") incurred by any Indemnified Party arising out of or in connection with this Agreement, including any Escrow Agent Losses incurred in connection with any litigation, investigation, or other proceeding relating to the Escrow Fund or the Escrow Agent's duties hereunder; provided, however, that no Indemnified Party shall be entitled to indemnification under this Section 6.5 to the extent that such Escrow Agent Losses are finally determined by a court of competent jurisdiction in a final, non-appealable judgment to have resulted from the gross negligence, willful misconduct, or bad faith of the Escrow Agent. The obligations of Buyer and Seller Representative under this Section 6.5 shall survive the termination of this Agreement, the resignation or removal of the Escrow Agent, and the distribution of the Escrow Fund.
Section 6.6 — Resignation and Removal.
(a) Resignation. The Escrow Agent may resign from its duties and obligations under this Agreement at any time upon not less than thirty (30) days' prior written notice to Buyer and Seller Representative. Such resignation shall not take effect until the appointment of a successor escrow agent and the transfer of the Escrow Fund to such successor, or as otherwise provided in Section 6.6(c).
(b) Removal. Buyer and Seller Representative, acting jointly, may remove the Escrow Agent from its duties and obligations under this Agreement at any time upon not less than thirty (30) days' prior written notice to the Escrow Agent.
(c) Appointment of Successor. Upon the resignation or removal of the Escrow Agent, Buyer and Seller Representative shall use commercially reasonable efforts to appoint a successor escrow agent within thirty (30) days following the date of such resignation or removal notice. If Buyer and Seller Representative fail to appoint a successor escrow agent within such thirty (30)-day period, the Escrow Agent may, in its sole discretion, petition any court of competent jurisdiction for the appointment of a successor escrow agent or, in the alternative, may deposit the Escrow Fund with any such court, and upon such deposit, the Escrow Agent shall be relieved and discharged of all further duties and obligations hereunder. The Escrow Agent shall continue to serve in its capacity as Escrow Agent until a successor has been appointed, has accepted such appointment, and has received the transfer of the Escrow Fund.
(d) Transfer to Successor. Upon the appointment and acceptance of a successor escrow agent, the resigning or removed Escrow Agent shall transfer and deliver the Escrow Fund to the successor escrow agent within five (5) business days following the date of such appointment and acceptance. Upon such transfer and delivery, the resigning or removed Escrow Agent shall be fully released and discharged from all duties and obligations under this Agreement (other than with respect to any Escrow Agent Losses arising prior to such transfer and the obligations of indemnification set forth in Section 6.5 relating thereto).
Section 6.7 — Conflicting Instructions; Interpleader.
(a) Conflicting Instructions. If the Escrow Agent receives instructions, directions, or demands from Buyer, on the one hand, and the Seller Representative, on the other hand, that are in conflict or are otherwise inconsistent with each other or with the terms of this Agreement, the Escrow Agent shall be entitled to refrain from taking any action (other than to continue to hold the Escrow Fund in the Escrow Account and to invest the same in Permitted Investments) until such time as the Escrow Agent receives (i) a Joint Written Direction resolving such conflict or (ii) a final, non-appealable order of a court of competent jurisdiction directing the Escrow Agent to take specified action with respect to the Escrow Fund.
(b) Interpleader. In the event of any dispute, disagreement, or conflicting claims with respect to the Escrow Fund or the Escrow Agent's obligations hereunder, the Escrow Agent shall be entitled, in its sole discretion and at the expense of Buyer and Seller Representative (shared equally between them), to file an action in interpleader in any court of competent jurisdiction and to deposit the Escrow Fund with such court. Upon the filing of such interpleader action and the deposit of the Escrow Fund with the court, the Escrow Agent shall be fully relieved and discharged from all further duties and obligations under this Agreement with respect to the Escrow Fund so deposited.
ARTICLE VII — SELLER REPRESENTATIVE
Section 7.1 — Appointment and Authority.
Gerald T. Brennan is hereby confirmed as the Seller Representative, duly authorized and empowered to act on behalf of all Sellers (Gerald T. Brennan, Sandra L. Brennan, and Derek J. Kopp) for all purposes under this Agreement. The Seller Representative's authority under this Agreement includes, without limitation, the power and authority to:
(a) receive and respond to Claim Notices delivered by Buyer;
(b) give and receive all notices and communications under this Agreement on behalf of the Sellers;
(c) negotiate, compromise, and resolve disputes with Buyer relating to Claim Notices and the Escrow Fund;
(d) execute and deliver Joint Written Directions on behalf of the Sellers;
(e) provide wire transfer instructions for distributions of the Escrow Fund to the Sellers;
(f) provide IRS Forms W-9 and other tax-related documentation on behalf of the Sellers;
(g) engage legal counsel, accountants, and other advisors on behalf of the Sellers in connection with matters arising under this Agreement; and
(h) take all other actions that the Seller Representative deems necessary, appropriate, or desirable in connection with the administration of this Agreement and the Escrow Fund on behalf of the Sellers.
Section 7.2 — Binding Effect.
All decisions, actions, consents, waivers, and instructions made or given by the Seller Representative pursuant to this Agreement shall be final and binding upon all Sellers, and each Seller, by virtue of the authorization granted to the Seller Representative in Section 11.14 of the Purchase Agreement, has irrevocably consented to the appointment and authority of the Seller Representative as described in this Article VII. Neither Buyer nor the Escrow Agent shall be required to deal with any individual Seller with respect to any matter arising under this Agreement and may rely conclusively upon the actions and instructions of the Seller Representative as being the actions and instructions of all Sellers.
Section 7.3 — Liability and Indemnification of Seller Representative.
The Seller Representative shall not be personally liable to any Seller for any action taken or omitted to be taken by the Seller Representative in good faith in his capacity as Seller Representative under this Agreement, except to the extent that such action or omission constitutes gross negligence or willful misconduct. The Sellers shall, severally (in proportion to their respective membership interests), indemnify, defend, and hold harmless the Seller Representative from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys' fees and disbursements) incurred by the Seller Representative in connection with his service as Seller Representative under this Agreement, except to the extent that such losses, claims, damages, liabilities, costs, or expenses are finally determined by a court of competent jurisdiction in a final, non-appealable judgment to have resulted from the gross negligence or willful misconduct of the Seller Representative.
Section 7.4 — Successor Seller Representative.
If Gerald T. Brennan is unable or unwilling to continue to serve as Seller Representative (by reason of death, disability, resignation, or otherwise), a successor Seller Representative shall be appointed by a majority-in-interest of the Sellers (determined by reference to their respective membership interests in the Company). Promptly following any such appointment, written notice of the identity and contact information of the successor Seller Representative shall be delivered to Buyer and the Escrow Agent. No change in the Seller Representative shall be effective as to the Escrow Agent until such time as the Escrow Agent has received such written notice. Until receipt of such notice, the Escrow Agent shall be entitled to continue to deal with Gerald T. Brennan (or, if Gerald T. Brennan is deceased or incapacitated, to refrain from taking any action) as the Seller Representative.
ARTICLE VIII — RELATIONSHIP TO PURCHASE AGREEMENT AND R&W INSURANCE
Section 8.1 — Relationship to Purchase Agreement.
This Agreement is entered into pursuant to, and is subject to, the terms of the Purchase Agreement. In the event of any conflict or inconsistency between the provisions of this Agreement and the provisions of the Purchase Agreement, the provisions of the Purchase Agreement shall control and govern; provided, however, that the duties, obligations, and liabilities of the Escrow Agent shall be determined solely by reference to the express terms of this Agreement, and the Purchase Agreement shall have no effect on the rights, duties, or obligations of the Escrow Agent.
The Parties acknowledge and agree that the indemnification obligations of the Sellers secured by the Escrow Fund are subject to the limitations and conditions set forth in the Purchase Agreement, including, without limitation, the following:
(a) the aggregate indemnification cap of Nine Million Dollars ($9,000,000), representing thirty percent (30%) of the total purchase price of Thirty Million Dollars ($30,000,000);
(b) the aggregate indemnification basket of Three Hundred Thousand Dollars ($300,000), representing one percent (1%) of the total purchase price, structured as a "tipping basket" — such that once the aggregate amount of qualifying indemnification claims exceeds Three Hundred Thousand Dollars ($300,000), Buyer shall be entitled to indemnification from dollar one of such aggregate claims;
(c) the de minimis threshold of Twenty-Five Thousand Dollars ($25,000) per individual claim, such that individual claims below such threshold shall be disregarded for purposes of both the basket and indemnification recovery;
(d) the general survival period of eighteen (18) months following the Closing Date (expiring April 24, 2025), during which Claim Notices may be delivered with respect to breaches of representations and warranties generally;
(e) an extended survival period of thirty-six (36) months following the Closing Date (expiring October 24, 2026) with respect to Fundamental Representations (as defined in the Purchase Agreement), including representations regarding organization and authority, capitalization, title to assets, and brokers' fees;
(f) an extended survival period of sixty (60) days following the expiration of the applicable statute of limitations (including any extensions or waivers thereof) with respect to Tax representations and covenants; and
(g) an indefinite survival period with respect to claims arising from Fraud (as defined in the Purchase Agreement).
The Escrow Agent shall have no duty or responsibility to monitor, enforce, or verify compliance with any of the foregoing limitations, which are solely matters as between Buyer and the Sellers under the Purchase Agreement.
Section 8.2 — R&W Insurance.
The Parties acknowledge that Buyer has obtained a representation and warranty insurance policy (Policy No. SSI-RW-2023-04718) issued by Sentinel Specialty Insurance Company (the "R&W Insurance Policy") with a policy limit of Nine Million Dollars ($9,000,000) and a retention amount of Seven Hundred Fifty Thousand Dollars ($750,000). The retention under the R&W Insurance Policy shall be satisfied first from the Escrow Fund before any claim may be submitted to Sentinel Specialty Insurance Company for payment under the R&W Insurance Policy. Nothing in this Agreement shall limit, modify, or otherwise affect Buyer's rights, remedies, or entitlements under the R&W Insurance Policy, and the existence of the Escrow Fund shall not be a condition to, or limitation upon, Buyer's ability to make a claim under the R&W Insurance Policy (subject to the terms and conditions of such policy). The Escrow Agent shall have no duties or obligations with respect to the R&W Insurance Policy.
Section 8.3 — No Third-Party Beneficiaries (Escrow Fund).
This Agreement does not create any rights in, and is not intended to benefit, any third party (including, without limitation, Sentinel Specialty Insurance Company, the Company, or any creditor, employee, or other person) against the Escrow Fund or any Party to this Agreement, except as expressly set forth herein. No person other than the Parties to this Agreement shall have any right to enforce any provision of this Agreement or to assert any claim against the Escrow Fund.
ARTICLE IX — NOTICES
Section 9.1 — Notices.
All notices, requests, demands, claims, consents, waivers, approvals, and other communications required or permitted under this Agreement shall be in writing and shall be deemed duly given and effective: (i) when delivered personally to the recipient; (ii) one (1) business day after being deposited with a nationally recognized overnight courier service (with confirmation of delivery); (iii) three (3) business days after being deposited in the United States mail, sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) when transmitted by email to the recipient (with written confirmation of receipt by the recipient), in each case addressed as follows:
If to Buyer:
Nexford Industrial Holdings Inc. 4200 West Lake Shore Drive, Suite 800 Chicago, Illinois 60604
Attention: Philip M. Stanhope, General Counsel
Email: pstanhope@nexfordindustrial.com
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 120 South LaSalle Street, Suite 4500 Chicago, Illinois 60603
Attention: Oliver Mackenzie
Email: omackenzie@calderwoodharkness.com
If to Seller Representative:
Gerald T. Brennan c/o Pinnacle Metal Fabricators LLC 1127 Industrial Parkway Hammond, Indiana 46320
Email: gbrennan@pinnaclemetal.com
with a copy (which shall not constitute notice) to:
Halverson Burke & Crane LLP 350 North Meridian Street, Suite 1400 Indianapolis, Indiana 46204
Attention: Thomas A. Gilroy
Email: tgilroy@halversenburke.com
If to Escrow Agent:
Commonwealth Escrow Services Inc. 140 Broadway, 30th Floor New York, New York 10005
Attention: Margaret H. Velasquez, Vice President
Email: mvelasquez@commonwealthescrow.com
Any Party may change its address or other contact information for purposes of notices under this Agreement by giving written notice of such change to each of the other Parties in accordance with this Section 9.1. Notwithstanding the foregoing, notice to the Escrow Agent shall not be deemed effective until actually received by the Escrow Agent.
ARTICLE X — GENERAL PROVISIONS
Section 10.1 — Governing Law.
This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of New York, without giving effect to any choice of law or conflict of laws rules, principles, or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.
Section 10.2 — Jurisdiction and Venue.
Each of the Parties hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the courts of the State of New York sitting in the Borough of Manhattan, City of New York, and the United States District Court for the Southern District of New York, and any appellate court from any thereof, in any action, suit, or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, and each of the Parties hereby irrevocably and unconditionally agrees that all claims in respect of any such action, suit, or proceeding shall be heard and determined in such courts. Each of the Parties hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any such action, suit, or proceeding in any such court, and any claim that any such action, suit, or proceeding has been brought in an inconvenient forum. Each of the Parties agrees that a final judgment in any such action, suit, or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law.
Section 10.3 — Waiver of Jury Trial.
EACH PARTY HERETO HEREBY IRREVOCABLY 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 (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE, OR ENFORCEMENT OF THIS AGREEMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT, OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY SUCH ACTION, SUIT, PROCEEDING, CLAIM, OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.3.
Section 10.4 — Amendments and Waivers.
This Agreement may not be amended, supplemented, or otherwise modified except by a written instrument executed by each of Buyer, Seller Representative, and Escrow Agent. No waiver of any provision of this Agreement, or any right, remedy, or power hereunder, shall be effective unless set forth in a written instrument signed by the Party or Parties against whom such waiver is to be enforced. No failure or delay by any Party in exercising any right, remedy, or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, remedy, or power preclude any other or further exercise thereof or the exercise of any other right, remedy, or power.
Section 10.5 — Entire Agreement.
This Agreement (including the Schedules and Exhibits attached hereto), together with the Purchase Agreement and the other agreements, instruments, and documents delivered in connection with the Purchase Agreement, constitutes the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, warranties, commitments, offers, contracts, and writings (whether written or oral) with respect to such subject matter.
Section 10.6 — Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective heirs, executors, administrators, legal representatives, successors, and permitted assigns. No Party may assign, delegate, or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of each of the other Parties; provided, however, that Buyer may assign its rights (but not its obligations) under this Agreement, without the consent of any other Party, to (a) any direct or indirect wholly owned subsidiary of Buyer or (b) any successor to Buyer by merger, consolidation, or acquisition of all or substantially all of the assets of Buyer. Any purported assignment, delegation, or transfer in violation of this Section 10.6 shall be null and void and of no force or effect.
Section 10.7 — Counterparts; Electronic Signatures.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by electronic means (including by email transmission of a PDF copy or by electronic signature using Brightwater Software, Ashford Health IT, or any similar platform) shall be effective as delivery of a manually executed counterpart, and each Party hereby agrees that electronic signatures shall be treated in all respects as having the same effect as original signatures.
Section 10.8 — Severability.