E
SCROW AGREEMENT
(General Indemnity Escrow)
ESCROW
AGREEMENT (“
Agreement ”),
dated as of January 19, 2007, by and among (a) Fortress America
Acquisition Corporation, a Delaware corporation ("FAAC"); (b) VTC,
L.L.C., a Maryland limited liability company (“VTC”);
(c) Vortech, LLC, a Maryland limited liability company
(“Vortech”); (d) Thomas P. Rosato
(“Rosato”) and Gerard J. Gallagher
(“Gallagher” who together with Rosato own or control
all of the outstanding membership interests of both VTC and Vortech
(each a “Member” and jointly the
“Members”); (e) Thomas P. Rosato in his capacity as the
Members’ Representative; and (f) SunTrust Bank, a Georgia
banking corporation (the “
Escrow Agent ”).
RECITALS:
WHEREAS,
pursuant to that certain Second Amended and Restated
Membership Interest Purchase Agreement dated as of July 31,
2006, as amended by by an Amendment To The Second Amended and
Restated Membership Interest Purchase Agreement dated January
16, 2007 copies of which without schedules or exhibits are
attached hereto as
Exhibit 1 (“
Membership Interest Purchase Agreement ”),
that are hereby incorporated by reference, FAAC will acquire all of
the outstanding membership interests of each VTC and
Vortech;
WHEREAS,
pursuant to Section 2.6 of the Membership Interest Purchase
Agreement, the Members designated Thomas P. Rosato as their
representative, agent and attorney-in-fact for purposes of
this Agreement and other various matters described therein
(the “
Members’ Representative ”);
WHEREAS,
as partial consideration for their respective membership
interests in VTC and Vortech, each of the Members has received
from FAAC pursuant to the terms of the Membership Interest
Purchase Agreement and Stock Acquistion Agreements, copies of
which (without schedules or exhibits) are attached as
Exhibit 2 (jointly
the “
Stock Purchase Agreements ”)
in the aggregate 2,534,988 shares of FAAC common stock of which
2,461,728 shares are hereby delivered by FAAC and the Members to
the Escrow Agent (the “
Escrow Deposit ”)
to hold in escrow pursuant to ther terms of this
Agreement;
WHEREAS,
the parties desire to specify and clarify their rights and
responsibilities with respect to the Escrow Deposit;
and
WHEREAS,
the Escrow Agent is willing to serve in such capacity, but
only pursuant to the terms and conditions of this
Agreement.
NOW,
THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto agree as follows:
1.
Definitions .
1.1.
As
used in this Agreement, the following terms shall have the
meanings set forth below:
“
Agreed Share Value ”
has the meaning set forth in Section 5.3.
“
Agreement ”
means this Escrow Agreement.
“
Business Day ”
shall mean any day other than a Saturday, Sunday, or any Federal or
Commonwealth of Virginia holiday. If any period expires on a day
that is not a Business Day or any event or condition is required by
the terms of this Agreement to occur or be fulfilled on a day that
is not a Business Day, such period shall expire or such event or
condition shall occur or be fulfilled, as the case may be, on the
next succeeding Business Day.
“
Escrow Account ”
has the meaning set forth in Section 4.1.
“
Escrow Agent ”
has the meaning set forth in the Preamble.
“
Escrow Property ”
has the meaning set forth in Section 4.1.
“
Escrow Deposit ”
has the meaning set forth in the Recitals.
"
Final Determination "
has the meaning set forth in Section 5.1(b).
“
FAAC ”
has the meaning set forth in the Preamble.
"
Indemnity Claim "
has the meaning set forth in Section 5.2.
"
Indemnity Claim Notice "
has the meaning set forth in Section 5.2.
“
Members ”
has the meaning set forth in the Preamble.
“
Members’ Representative ”
has the meaning set forth in the Recitals.
“
Membership Interest Purchase Agreement ”
has the meaning set forth in the Recitals.
1.2.
Capitalized
terms used but not defined in this Agreement have the meanings
ascribed to such terms in the Membership Interest Purchase
Agreement.
2.
Appointment of Escrow Agent .
FAAC, the Members, and the Members’ Representative hereby
appoint the Escrow Agent to act as an escrow agent as provided
herein, and the Escrow Agent hereby accepts such
appointment.
3.
Members’ Representative .
3.1.
The
parties acknowledge that, pursuant to the Membership Interest
Purchase Agreement, the Members’ Representative is
authorized to act as the agent and attorney-in-fact on behalf
of all of the Members in all matters necessary to carry out
the terms and conditions of this Agreement.
3.2.
The
Members’ Representative represents and warrants to the
Escrow Agent that he has the irrevocable right, power and
authority with respect to all of the Members (a) to give and
receive directions and notices hereunder, (b) to make all
determinations that may be required or that he deems
appropriate under this Agreement, and (c) to execute and
deliver all documents that may be required or that he deems
appropriate under this Agreement. The Escrow Agent may act
upon the directions, instructions and notices of the
Members’ Representative named above and thereafter upon
the directions and instructions of the successor
Members’ Representative named in a writing executed by a
majority-in-interest of the Members (pursuant to the
provisions of Section 2.6 of the Membership Interest Purchase
Agreement) filed with the Escrow Agent.
4.
Delivery of Escrow Deposit .
4.1.
FAAC
acknowledges that it deposited the Escrow Deposit in an
account (the “
Escrow Account ”)
with the Escrow Agent. The FAAC common stock in the Escrow Account,
together with any dividends (and any interest or other net income
received from or earned thereon) is hereinafter collectively
referred to as the “
Escrow Property .”
4.2.
If,
during the term of this Agreement, there is Escrow Property
other than the FAAC common shares, the Escrow Agent will
invest the Escrow Property (other than the FAAC common stock)
as provided in Section 11.
5.
Disbursement of the Escrow Property .
The Escrow Agent will hold the Escrow Property and, subject to the
Escrow Agent’s right in Section 9 to withhold disbursements
when the Escrow Agent is uncertain as to what action to take, make
disbursements therefrom as follows .
5.1.
Escrow
Agent shall disburse all or a portion of the Escrow Property
on deposit in the Escrow Account to FAAC, the Members or both,
as the case may be, upon receipt of:
(a)
one
or more fully executed Payment Request Forms in substantially
the form attached hereto as
Exhibit 3 ,
executed by FAAC and the Members' Representative on behalf of the
Members, and otherwise pursuant to the terms hereof. Upon receipt
of a Payment Request Form, the shares and amounts specified therein
shall be promptly delivered or paid directly to the party or
parties entitled to payment as specified in the Payment Request
Form; or
(b)
a
copy of a Final Determination (as defined below) establishing
a party's right to the Escrow Property. A "
Final Determination "
shall mean (i) with respect to an Indemnity Claim (or any other
dispute between the Members’ Representative and FAAC with
respect to whether either party is entitled to some portion, or all
of the Escrow Property), a final determination stating that it is
being provided under the procedures of Section 11.11 of the
Membership Interest Purchase Agreement; or (ii) otherwise a final
judgment of an arbitrator, arbitration panel or court of competent
jurisdiction and shall in all cases be accompanied by a certificate
of the presenting party to the effect that such judgment is a final
judgment of an arbitrator, arbitration panel or court of competent
jurisdiction, as applicable, and indicating the party, address,
accounts or other information as necessary to process
payments.
5.2.
If
FAAC asserts in good faith a claim (an “
Indemnity Claim ”)
against the Members pursuant to the Membership Interest Purchase
Agreement, FAAC shall send written notice of such Indemnity Claim
(an “
Indemnity Claim Notice ”)
to the Escrow Agent and to the Members’ Representative. Such
Indemnity Claim Notice shall set forth in reasonable detail the
basis for such Indemnity Claim and a good faith, non-binding
estimate of the amount of such Indemnity Claim. In submitting such
Indemnity Claim to the Escrow Agent, FAAC shall account for any
applicable threshold, exclusion or cap provided for in the
Membership Interest Purchase Agreement. Whenever FAAC sends such an
Indemnity Claim Notice, the parties shall comply with the
procedures set forth herein.
(a)
If
the Members’ Representative decides, in his sole and
absolute discretion, to dispute the Indemnity Claim described
in the Indemnity Claim Notice, the Members’
Representative shall, on or before the twentieth (20
th )
Business Day following the Escrow Agent’s receipt of such
notice, send to the Escrow Agent and FAAC a written objection to
such Indemnity Claim.
(b)
If
the Escrow Agent receives from the Members’
Representative a written objection to such Indemnity Claim on
or before the twentieth (20
th )
Business Day following the Escrow Agent’s receipt of the
Indemnity Claim Notice describing such Indemnity Claim, and if that
Indemnity Claim cannot be settled through negotiation within twenty
(20) days of receipt of the written objection, then the dispute
shall be resolved in accordance with Section 11.11 of the
Membership Interest Purchase Agreement and Escrow Agent shall hold
the funds subject to such dispute until a Final Determination is
delivered with respect thereto.
(c)
If
the Escrow Agent does not receive from the Members’
Representative a written objection to such Indemnity Claim
Notice on or before the twentieth (20
th )
Business Day following the Escrow Agent’s receipt of the
Indemnity Claim Notice describing such Indemnity Claim, then the
Escrow Agent shall make a disbursement to FAAC from the Escrow
Property in the amount of the Indemnity Claim described in such
Indemnity Claim Notice.
5.3.
To
the extent that a Payment Request Form, Final Determination,
or Indemnity Claim (made and not timely answered pursuant to
Section 5.2(c) above) specifies a dollar amount (rather than a
share amount) payable thereunder or in satisfaction thereof,
the amount specified or claimed shall be satisfied by the
delivery from the Escrow Property to FAAC or the
Members’ Representative, as the case may be, of
certificates for FAAC common stock equal in value to the
amount specified or claimed (with the FAAC common stock valued
at Five and 46/100 Dollars ($5.46) per share (the
“
Agreed Share Value ”)
6.
Payments from the Escrow Property .
6.1.
The
Escrow Agent shall make no payments from the Escrow Property
unless permitted pursuant to Sections 5, 7, 9, 10 and
13.
6.2.
Any
cash amounts payable by the Escrow Agent under this Agreement
shall be paid by bank check or by wire transfer, as specified
in the Payment Request Form or Final Determination received by
the Escrow Agent.
6.3.
Any
amounts payable in FAAC common stock under this Agreement
shall be payable by the delivery of stock certificates for
FAAC common stock valued at the Agreed Share Value. To the
extent that the number of shares deliverable by the Escrow
Agent does not correspond with stock certificates then held by
the Escrow Agent, the Escrow Agent shall deliver to FAAC one
or more share certificates evidencing shares in excess of the
number of FAAC common shares then deliverable with
instructions to FAAC (i) to retain and cancel a specified
number of shares (if shares are deliverable to FAAC hereunder)
or issue to the Members’ Representative, or to whomever
the Members’ Representative directs FAAC (if shares are
deliverable to the Members’ Representative hereunder), a
certificate or certificates for FAAC common shares in the
amount deliverable by the Escrow Agent to FAAC or the
Members’ Representative as applicable and (ii) to issue
to the Escrow Agent a certificate for the residual balance, if
any, of those FAAC common shares evidenced the share
certificate(s) delivered by the Escrow Agent to
FAAC.
6.4.
All
interest and other income, if any, received from or earned on
the Escrow Property net of distributions paid or to be paid
pursuant to Section 7.3 (“Earnings”) shall be
applied first to pay any Escrow Fees then due under Section
13, with any remaining Earnings to become a part of the Escrow
Property and be paid in accordance with the other terms of
this Agreement.
6.5.
The
parties hereto (other than the Escrow Agent) each warrant to
and agree with the Escrow Agent that, unless otherwise
expressly set forth in this Agreement, there is no security
interest in the Escrow Property or any part of the Escrow
Property; no financing statement under the Uniform Commercial
Code of any jurisdiction is on file in any jurisdiction
claiming a security interest in or describing, whether
specifically or generally, the Escrow Property or any part of
the Escrow Property. Notwithstanding anything to the contrary
herein provided, the Escrow Agent shall in no event be deemed
to be a collateral agent or agent for any pledge or purported
pledge of property held under this Agreement. The Escrow Agent
makes no representation concerning whether or not any security
interest exists with respect to any property held under the
terms of this Agreement and the Escrow Agent shall have no
duty or obligation with respect to the creation, perfection or
continuation of any such security interest, it being
understood that the duties of the Escrow Agent with respect to
any property held pursuant to this Agreement are limited and
confined exclusively to the duties and responsibilities
expressly set forth herein. This Agreement shall not be deemed
or construed to be a security agreement or to grant a security
interest in any property held in escrow
hereunder.
7.
Tax Matters .
7.1.
The
parties agree that the Escrow Property is intended to consist
only of FAAC common shares and that no taxable income is
anticipated. Notwithstanding the previous sentence, for tax
reporting purposes in each calendar year (other than the
calendar year in which this Agreement is terminated pursuant
to Section 14 below), all interest or other income earned from
the investment of the Escrow Property together with all fees
and expenses pursuant to Section 13 below (or that may
otherwise be taken into consideration for purposes of
calculating and reporting taxes due on earnings with respect
to the Escrow Account and Funds) shall be allocable to FAAC
and so reported to the Internal Revenue Service and any other
applicable taxing authority, except to the extent that any law
or regulation should otherwise require, as provided in a
written notice from FAAC to the Escrow Agent. Notwithstanding
anything to the contrary contained herein, for the calendar
year during which this Agreement is terminated pursuant to
Section 14 below, all income, fees and expenses shall be
allocated pro rata to the persons receiving payments of the
Escrow Property during that year.
7.2.
Each
of the parties agrees to provide the Escrow Agent with a
certified tax identification number by signing and returning a
Form W-9 (or Form W-8, in the case of non-U.S. persons) to the
Escrow Agent within 30 days from the date hereof. The parties
understand that, in the event their tax identification numbers
are not certified to the Escrow Agent, the Internal Revenue
Code may require withholding of a portion of any interest or
other income earned on the investment of the Escrow Property,
in accordance with the Internal Revenue Code, as amended from
time to time.
7.3.
The
Escrow Agent shall distribute quarterly to FAAC amounts when
and in the amounts requested in writing in good faith by FAAC
to cover the potential federal, state or local tax obligations
of FAAC on account of the cumulative allocation to FAAC of
taxable income attributable to the interest and other income
earned on the Escrow Property. Such distributions shall be
requested and made with respect to each quarter as early as
fifteen (15) days prior to the date that United States
taxpayers are required to make estimated federal tax payments
with respect to such quarter. For purposes of the foregoing,
such federal, state and local tax obligations of FAAC
initially shall be assumed to equal an effective combined
federal and state income tax rate equal to forty-two percent
(42%) (but in no event lower than the highest Federal marginal
income tax rate plus seven percent (7%)).
7.4.
The
Escrow Agent shall report to the Internal R
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