This Escrow
Agreement made and entered into August 29, 2008, by and among
Chicago Title Company (the “Escrow Agent” ),
clickNsettle.com, Inc., a Delaware corporation (
“CNS” ), and Andrew A. Brooks, M.D. and Mikhail
Kvitnitsky (the “Members’ Representatives”
) .
WHEREAS, each of
CNS, Cardo Medical, LLC, a California limited liability company (
“Cardo” ), and Cardo Acquisition, LLC, a
California limited liability company that is a wholly owned
subsidiary of CNS ( “Merger Sub” ), have entered
into a Merger Agreement and Plan of Reorganization, dated as of
June 18, 2008 (the “Merger Agreement” ),
that provides, upon the terms and subject to the conditions
thereof, for the merger of Merger Sub with and into Cardo, with
Cardo being the surviving entity and becoming a wholly owned
subsidiary of CNS (the “Merger” ).
WHEREAS, at the
effective time of the Merger, all equity interests of Cardo
beneficially owned by each Cardo Member shall be converted into the
right to receive and shall be exchanged for shares of Parent Common
Stock (as defined in the Merger Agreement) as set forth in the
Merger Agreement.
WHEREAS, the
Members’ Representatives have been appointed to act on behalf
of all Historical Cardo Members in connection with the Merger
Agreement and this Agreement.
WHEREAS, this
Escrow Agreement is entered into pursuant to
Section 9.3 of the Merger Agreement.
NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth
herein, the parties hereto agree as follows:
1. Unless
otherwise specifically defined herein, capitalized terms used in
this Escrow Agreement shall have the meanings ascribed to them in
the Merger Agreement. Notwithstanding anything in this Agreement to
the contrary, the provisions of this Agreement shall not in any
event be construed so as to enlarge or diminish the rights of CNS
or Cardo under the Merger Agreement and in the event of a conflict
between the provisions of this Agreement and the provisions of the
Merger Agreement, the provisions of the Merger Agreement shall
govern.
2. CNS and
the Members’ Representatives hereby appoint Chicago Title
Company to act as the Escrow Agent hereunder, and the Escrow Agent
hereby agrees to accept the duties of Escrow Agent in accordance
with the terms and conditions of this Escrow Agreement. Pursuant to
the appointment of the Members’ Representatives by the
Historical Cardo Members, Escrow Agent is authorized to accept, act
upon and rely upon any written notice, certificate, instrument,
request, waiver, consent, paper or other document executed by the
Members’ Representatives, as properly signed and delivered on
behalf of all or any one of the Historical Cardo
Members.
3. On the
Closing Date, (a) CNS shall deposit with the Escrow Agent,
simultaneously with the execution and delivery of this Escrow
Agreement, stock certificates registered in the names
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of the
Historical Cardo Members evidencing the Cardo Escrowed Securities
as set forth on Exhibit A attached hereto, which
Exhibit A also lists the pro-rata share of the
total number of Cardo Escrowed Securities deemed deposited by each
Historical Cardo Member ( “Pro-Rata Share” ) and
(b) each of the Historical Cardo Members shall deposit with the
Escrow Agent an undated stock power separate from the stock
certificates representing the Cardo Escrowed Securities deposited
by each such Historical Cardo Member, endorsed in blank (
“Cardo Member Stock Power” ). During the Claim
Period, CNS also shall deposit with the Escrow Agent: (i) all
distributions of stock or other property or securities of CNS that
may be issued with respect to the Cardo Escrowed Securities,
including but not limited to any shares of CNS stock issued as the
result of any stock split, reverse stock split, stock dividend,
combination, recapitalization or similar transaction effected by
CNS; (ii) any other earnings or interest paid with respect to
the Cardo Escrowed Securities; and (iii) concurrently with the
deposit of such property or funds, a list of the allocation of such
property or funds among the Historical Cardo Members in the same
format as Exhibit A hereto. CNS shall give each
Historical Cardo Member notice of any such deliveries made to the
Escrow Agent, and the Members’ Representatives shall cause
each Historical Cardo Member to deposit with the Escrow Agent
within ten (10) business days of such notice, an undated stock
power representing any new distributions of stock or securities of
CNS deposited with the Escrow Agent. Hereinafter, when the context
so requires, the term “Cardo Escrowed Securities” shall
include any additional shares of CNS stock deposited pursuant to
subpart (i) of this Section 3, and all Cardo Escrowed
Securities with any property or funds deposited pursuant to subpart
(ii) of this Section 3, including without limitation any
interest earned thereon, shall collectively be referred to as the
“Escrowed Property” . The Escrowed Property
shall provide security for the payment of any Damages incurred by
any Parent Indemnified Party as finally determined in accordance
with Cardo’s indemnification obligations set forth in
Section 9.2(b) of the Merger Agreement ( “Cardo
Indemnification Obligations” ).
4. Upon
CNS’s delivery of the Cardo Escrowed Securities to Escrow
Agent, Escrow Agent shall deliver written confirmation and
acknowledgement of receipt of the Cardo Escrowed Securities to CNS
and the Members’ Representative and Escrow Agent agrees to
thereafter hold and disburse the Escrowed Property in accordance
with the terms hereof. Escrow Agent shall maintain records and an
account for each Historical Cardo Member showing the number of
Cardo Escrowed Securities of each Historical Cardo Member held by
the Escrow Agent from time to time. Upon the reasonable request of
CNS or the Members’ Representatives, the Escrow Agent shall
make such records available for inspection and copying by CNS, the
Members’ Representatives or their authorized
representatives.
5. The
Escrowed Property will be held for the benefit of the parties
hereto and will not be subject to any lien or attachment of any
other creditor of any party hereto and will be used solely for the
purposes and subject to the conditions set forth herein.
6. The
Members’ Representatives, on behalf of the Historical Cardo
Members, hereby grant (effective as of the date hereof) CNS a first
priority security interest in, and hereby pledge and assign to CNS
all of the Historical Cardo Members’ right, title and
interest in and to the Escrowed Property to secure the Cardo
Indemnification Obligations to the Parent Indemnified Parties. The
Escrow Agent hereby agrees to act as bailee and possessory agent on
behalf of CNS in respect of its security interest in the Historical
Cardo Members’ rights in and to the Escrowed Property.
The
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Escrow Agent
shall, upon receipt of indemnification satisfactory to it from CNS
for its fees and expenses incurred in connection with taking such
actions, take all actions as may be reasonably requested in writing
of it by CNS to further perfect or maintain the security interest
created by the Historical Cardo Members hereunder in and to the
Escrowed Property. Such security interest shall automatically be
released with respect to any Escrowed Property distributed pursuant
to the terms of this Escrow Agreement. The parties hereto agree and
acknowledge that the establishment and maintenance of the escrow
hereunder ( “Escrow” ) is intended to constitute
possession of the Escrowed Property for the purposes of perfecting
the security interest therein created by this Section 6
.
7. Notwithstanding
anything in Section 3 to the contrary, while any Escrowed
Property is held in Escrow: (a) the Historical Cardo Members
will be entitled to receive all cash dividends declared in
connection with any Cardo Escrowed Securities, and CNS shall
deliver any such cash dividends directly to the Historical Cardo
Members and not to or through the Escrow Agent; and (b) the
Historical Cardo Members will be entitled to vote the Cardo
Escrowed Securities so held and to give consents, waivers and
ratifications in respect of such shares; provided, however, that no
vote shall be cast or consent, waiver or ratification given, or
action taken which would be inconsistent with or violate any
provision of this Escrow Agreement, the Merger Agreement or any of
the transactions contemplated by the Merger Agreement.
8. The Escrow
Agent shall hold the Escrowed Property in Escrow until authorized
hereunder to deliver the same or any portion thereof as
follows:
(a) At any
time within one (1) year from the date hereof (the
“Claim Period” ), CNS , on behalf of a Parent
Indemnified Party, may give written notice to the Escrow Agent and
the Members’ Representatives that it is asserting a claim
against the Escrowed Property pursuant to Section 9.2(b) of the
Merger Agreement (a “Claim” ). In each notice of
such a Claim ( “Claim Notice” ), CNS shall
provide to the Escrow Agent and the Members’ Representative:
(i) a statement of the amount of Escrowed Property CNS has
estimated, in accordance with Section 9 of the Merger
Agreement and Section 10 hereof, is reasonably required to
secure payment of the Claim; and (ii) the basis for such Claim
in sufficient detail for the Members’ Representatives to
understand the nature of the Claim and the alleged facts upon which
the Claim is based.
(b) The
Members’ Representatives shall have 30 days from receipt
of a Claim Notice ( “Notice Period” ) to approve
or object to a Claim, in whole or in part, by delivering written
notice of such approval or objection to the Escrow Agent and CNS.
If at any time the Members’ Representatives deliver written
notice of approval of a Claim or any portion thereof, the full
amount of the Claim as provided in the Claim Notice, or such
portion approved by the Members’ Representatives, shall be
deemed conclusively and irrevocably approved and the Escrow Agent
shall be authorized to release and deliver to CNS, subject to the
provisions of and in the manner provided in Section 9 hereof,
the Escrowed Property or such portion thereof sufficient to satisfy
the Claim as provided in the Claim Notice or such portion approved
by the Members’ Representatives. If within the Notice Period
the Members’ Representatives deliver written notice of
objection to a Claim ( “Objection” ), or fail to
deliver notice of either an approval of or an Objection to a Claim,
such Claim shall be deemed to be contested.
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(c) All
contested Claims or portions thereof shall remain pending, the
Escrow Agent shall maintain in Escrow the Escrowed Property or such
portion thereof as is estimated in the Claim Notice as necessary to
satisfy the Claim, and the Escrow Agent, without concerning itself
as to the grounds for any Objection, shall not disburse the
Escrowed Property or any portion thereof to satisfy any contested
Claim or portion thereof, until there has been a
“Determination” of the Claim in accordance with the
provisions of Section 9 hereof, notwithstanding the
expiration of the Claim Period.
(d) Within
three business days after the Determination of a Claim in favor of
a Parent Indemnified Party in accordance with the provisions of
Section 9(a) hereof, the Escrow Agent shall deliver to
CNS, on behalf of the applicable Parent Indemnified Party, Escrowed
Property having a value (as determined in accordance with
Section 10 hereof) equal to the amount of such
Determination, as follows.
(i) If
the value of the Claim so payable is equal to or greater than the
Escrowed Property then held by the Escrow Agent, the Escrow Agent
shall deliver to CNS all of the Escrowed Property then held by it,
by: (A) completing each Cardo Member Stock Power for the full
number of Cardo Escrowed Securities then held by the Escrow Agent
for each Historical Cardo Member; (B) delivering each such
completed Cardo Member Stock Power and all of the certificates for
the Cardo Escrowed Securities then held by the Escrow Agent to CNS;
and (C) delivering any remaining Escrowed Property to
CNS.
(ii) If
the value of the Claim so payable is less than the Escrowed
Property then held by the Escrow Agent, the Escrow Agent shall
deliver to CNS Escrowed Property having a value equal to the
Determination, as follows, and in the following order.
(A) The
Escrow Agent shall deliver any Escrowed Property other than the
Cardo Escrowed Securities to CNS.
(B) The
Escrow Agent shall calculate ( “Disbursement
Calculation” ) (I) the total number of Cardo
Escrowed Securities required to satisfy the balance of the Claim as
provided in the Determination of Claim, (II) the Pro-Rata
Share of such balance of each Historical Cardo Member and
(III) the number of Cardo Escrowed Securities that will remain
on deposit in Escrow for each Historical Cardo Member after
subtracting each such Pro-Rata Share ( “Pro-Rata
Balance” ). Upon request by Escrow Agent to CNS and the
Members’ Representative, CNS and/or the Members’
Representative shall provide to Escrow Agent the average closing
price per share of the Parent Common Stock on the OTCBB or Eligible
Market, as applicable, for the 10-day period ending on the day
prior to the date of Determination of the Claim, for Escrow
Agent’s use in calculating the Disbursement Calculation. Upon
finalizing the Disbursement Calculation, Escrow Agent shall give
CNS and the Members’ Representatives written notice of the
Disbursement Calculation, which notice shall include (1) the
date of Determination of the Claim, (2) the resulting value of
the Cardo Escrowed Securities used for the Disbursement Calculation
pursuant to Section 10 hereof, and (3) the results of the
calculations set forth in subparts (
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