The first area to address is who is going to represent you. Two people are key in the transaction of purchasing a shell. Namely, an SEC attorney and a business consultant.

SEC Attorney

There are many SEC attorneys to choose from, but make sure that yours has experience and expertise in the areas of reverse shell mergers. A good SEC attorney will provide you with guidance and perform the necessary due diligence on the proposed shell that you are contemplating buying. The attorney will have to retrace the history of the shell through its SEC filings and take a close look at the trading history of the stock. He will also have to investigate the backgrounds of the principal selling shareholders and the liabilities of the company, including outstanding debts, loans and lawsuits, etc.

Business Consultant

It is also just as important to have a business consultant that is very experienced and familiar with the reverse shell merger marketplace. You want someone who knows how to source you a shell directly from the principal(s) of the shell (the “Sellers”). Too many times I have witnessed a Buyer purchasing a shell through what ends up being a daisy chain of “finders”. In the end the Buyer pays a substantially higher price for the shell, usually $200K to $300K more than he should have. It is imperative that you are resented by someone who has access directly to both Buyers and Sellers. Our company Ventana Capital Partners is such a company. In most cases we can find a shell for a Buyer and have them buy the shares directly from the Sellers. You can go to www.ventanacapitalpartners.com to get further information.

A good consultant will also perform a certain amount of due diligence prior to showing you a shell to make sure representations made by the Seller are true and accurate. The shell must also meet the requirements of the Buyer in question. I have seen too many deals where no one has reviewed the accuracy of the information provided by the Seller or gauged the Sellers ability to provide the necessary documentation to close on the transaction. If you retain the right business consultant he will be able to deliver a properly documented package to your attorney. This will save your attorney time and you money.

Bookmark to:
         

The most important aspect of buying a shell is performing your due diligence. If you have retained a savvy business consultant he will comb through all of the previous filings of the shell under consideration. He will be able to identify who are the major shareholders, the number of authorized and outstanding common and preferred shares along with the number of shareholders. Are there any outstanding warrants or options that could be exercised after you have purchased the shell? Your attorney will then review the business consultant’s findings to determine if you should consider moving forward with the transaction.

Additionally, your business consultant can determine the outstanding liabilities of the shell. Sometimes, a shell has so much debt that you can’t possibly buy it because the purchase price does not cover the outstanding liabilities. There are many companies that have had to file for Chapter 11 or Chapter 7 bankruptcy to be able to eliminate their previous liabilities. If you decide to buy a shell that has come out of bankruptcy make sure you have an experienced SEC attorney handle the entire transaction. The last thing you want is to buy a shell and find out you are now responsible for the liabilities of the past owner.

I have a great true story that illustrates what happens when you buy a bankrupt business without performing your proper due diligence. I am sure you have heard of Jim McCann. Jim is the guy who acquired the 1-800-FLOWERS number in 1986 after successfully building his own chain of 14 flower shops in the New York metropolitan area. Jim heard that 1-800-Flowers had recently filed for bankruptcy protection so he flew out to Dallas to meet with the company. Jim, being affable person that he is, didn’t need those investment bankers or lawyers. He reasoned, why spend all of that extra money? So Jim bought the company for $2,000,000. A hell of a deal, right? Wrong! You see instead of buying “certain assets” of the company Jim bought the entire company, therefore becoming responsible for all of its past debt and liabilities. In the next six months Jim discovered he now owed an additional $7,000,000 of debt from his purchase of 1-800-FlOWERS. As Jim tells it, he was sitting and having a discussion with his Irish mother about filing for bankruptcy protection. Jim’s mother looked him straight in the eye and said “we don’t do that”. So Jim did the honorable thing and struggled through this nightmare for the next six years and eventually paid off the entire debt.

Moral to the story. Don’t be pennywise and dollar foolish. Make sure you retain professional advisors when you are spending substantial amounts of money on anything, especially when it comes to buying a shell.

Bookmark to:
         

The third area to address when purchasing an OTCBB shell is the shell itself. Shells come in many different variations and there are certain nuances to the transaction that Buyers must become familiar with.

First of all you need to define the criteria for the purchase of the shell. Some shells can deliver as little as 51% of the shares outstanding and some as much as 99.9%. If you do not want to deal with having your attorney reversing the outstanding shares in the shell then I suggest you purchase a shell with as close to 100% delivery as you get. The more shares delivered the more expensive the shell is. A shell that can deliver 99.9% can cost between $700,000 and $1,000,000. If, on the other hand, your attorney has extensive experience in reverse shell mergers then he can affect the reverse stock split after you have acquired the shell. You can accomplish the same goal of retaining a high percentage of the shares and save yourself as much as $200,000 in the process.

Free Trading Shares

Some OTCBB shells can also include “free trading” shares that can be distributed to non-affiliate shareholders of the new company being vended into the shell. There is usually a premium paid for shells that can deliver free trading shares. There are some distinct advantages to getting a shell with free trading shares but that is a conversation for to have with your business advisor and SEC attorney.

Shareholders

You also need to determine if you want over 300 shareholders. If you are planning to grow your company and eventually would like to work your way up to a listing on NASDAQ or AMEX you will need a minimum of 300 shareholders. Therefore, it is advisable to find a shell with at least 300 shareholders.

Bookmark to:
         

This is just the first step in the due diligence process of purchasing a shell. I will address other areas of due diligence in Part 5 of my series “How to Buy an OTCBB Shell.”

Bookmark to:
         

One of the first items on your due diligence list is to check the financials of the shell you are seeking to purchase. The financials listed below are for Shell Profile #2 that was outlined in Part 4 of this series.

The assets of Shell #2 are minimal so there will be no problem with vending in the Buyers Company and meeting the acid test of the surviving company to be of “greater or equal value”. However, the total liabilities could pose a major stumbling block. Upon closer review and speaking with the Sellers attorney we found that all of the liabilities were owed to “related parties” or the principal shareholder of the shell and that all liabilities would be transferred or paid prior to closing.

In some cases there may be liabilities that can be converted into common shares of stock. This is known as convertible debt. Sometimes this debt is purchased by non affiliates of the Buyer. The reason being is that this convertible debt can be converted into free trading common shares of the new company. Please note that the conversion privilege must have been established at least one year prior to the conversion of the debt into free trading shares of common stock.

Bookmark to:
         

A good Consultant will have a Due Diligence Information Request form for the Seller to fill out. This laundry list will cover the list of documents that the Buyers attorney is sure to ask for. Ventana Capital Partners uses an eleven page request form. The document request is voluminous; however, it is necessary to finalize the reverse merger transaction as soon as practicable. It also gives notice to the Seller that this is serious business. The transaction requires the Seller to provide documentation in a timely manner. Once the Seller has completed the information request the Consultant can then start to locate a suitable Buyer. If the Seller balks about completing the document request the Consultant will know immediately the Seller is not serious about selling the shell and will drop the Seller. Buyers do not want to waste their time with Sellers who are not co-operative.

While the Seller is producing all of the necessary documentation for the potential Buyer the Consultant is reviewing the documentation so he can better understand the nuances of the deal prior to involving the Buyer. If there are any inconsistencies or missing documentation the Consultant can assist the Seller with providing the missing pieces. The better prepared the Seller and Consultant are the quicker the transaction can be completed. The Due Diligence Information Request is an extremely important document for it provides all the essential due diligence documentation that will be required by the Buyers attorney. I have seen many a deal “blow up” because the Seller could not produce sufficient documentation to appease the Buyers attorney.

A well prepared due diligence package also gives the Buyers attorney a sense that the Seller is well organized and has nothing to hide. When a Seller can provide a complete due diligence package to the Buyers attorney, that attorney will be delightfully surprised. It sets the tone for the rest of the transaction which will most likely go very smoothly and close quickly.

Bookmark to:
         

The Letter of Intent (the “LOI”) sets forth certain understandings and agreements between the Buyer and Seller. The LOI is usually in the form of a Stock Purchase Agreement. The LOI will sets out the key terms of the acquisition of the Shares by the Buyer. The parties agree to negotiate and enter into a comprehensive Share Purchase Agreement (the “Agreement”) usually within ten business days of the date of the LOI or as soon as practicable thereafter. I have listed an example of the information that is usually outlined in an LOI:

1. Terms.

Subject to certain sections of the LOI the Buyer agrees to purchase from the Seller and that Seller agrees to sell to the Buyer the Shares for an aggregate purchase price of $750,000 US dollars (the “Stock Purchase”).

2. Representations, Warranties and Agreements

2.1 Seller represent, warrant and agree that:

(a) The Seller currently owns 9,500,000 shares of Company common stock fully paid and nonassessable.

(b) The Seller is an authorized representative of approximately 100 shareholders who own 1,800,000 shares of Company common stock. The Seller is authorized to represent these shareholders, and possesses stock powers, executed by each of these stock holders.

(c) At closing, Company will provide the Buyer an executed Board Resolution from the Company approving the transactions contemplated herein

(d) The Company shall operate its business, if any, prior to the closing of the Stock Purchase in the normal and ordinary course consistent with past practices. Upon closing of the transactions contemplated herein, all directors and officers will resign as such and appoint successors to be named prior to closing; and

(e) There are no outstanding subscriptions, rights, options, warrants, convertible securities or other agreements or commitments obligating the Company, to sell, convey or issue any additional common shares or any securities convertible into common shares.

2.2 The Agreement will contain customary representations, warranties, indemnifications, acknowledgements and agreements, in addition to those contained in this LOI.

2.3 Subject to any provisions in the Agreement to the contrary, the representations, warranties and covenants of the parties will be a condition on which the parties will have relied on in entering into the Agreement.

3. Conditions Precedent. The closing of the Agreement shall be conditional on the following:

(a) a satisfactory completion by Buyer of a due diligence review of the affairs and business of the Company, such review to be concluded no later than ten business days from the execution of this LOI by all parties;

(b) execution of this letter by the Seller, and the Agreement, and properly transfer of all of the shares of Common Stock of the Company to the Buyer;

(c) a legal opinion from counsel to the Company opining as to the transactions contemplated hereby as well as confirming that the shares of Common Stock transferred hereby represent a majority of the outstanding securities of the Company and pursuant to the Company’s Articles of Incorporation and Bylaws such interest shall constitute authority to take action without necessity of a meeting of the shareholders of the Company;

(d) a Board resolution approving the transaction, written consent of the majority shareholder, execution of the definitive share purchase agreements, appointment of new Board of Directors, resignation of current officers and directors and the filing of Form 8K announcing change in control;

(e) there being no order, ruling, judgment or decree in effect, including any regulatory agency, which would enjoin or prohibit the Stock Purchase;

(f) the Company shall have no liabilities;

(g) the Company shall have no outstanding unresolved SEC issues;

(h) the Company will have filed its 10K for 2006 with the SEC;

(i) the Company’s current operating business shall be sold to the Officers and Directors;

(j) undated resignation of as Director and resignation as Officer; appointment of new officer;

(k) Seller shall have transferred the shares of common stock referenced in Section 2.1(b) into Buyers and others as designated by Buyer and have the authority to transfer such shares to the Buyer as contemplated herein; and

(l) The Company having no disagreements with its independent auditors or legal counsel.

4. Closing and Standstill

4.1 The parties will use their reasonable best efforts to complete the Stock Purchase by the transferring of the Shares no later than March 1, 2007 from the execution hereof or as soon as reasonably practicable thereafter. At closing, the parties will deliver such documentation as may be reasonably requested by the other party’s counsel to effect the transactions contemplated herein.

4.2 Until the completion of the Agreement occurs, or until termination of this LOI in accordance with the terms hereof, or until otherwise mutually agreed to by the parties in writing the parties agree as follows:

(a) Seller hereby agrees to take all necessary steps to ensure that the Company does not sell its material assets either directly or indirectly, and that the Company shall not incur any liabilities.

(b) Each party shall keep confidential any information obtained in connection with the transactions contemplated herein, unless such information has been rightfully obtained from a third party or is generally available to the public. In the event that public disclosure is required to be made by any regulation or law, or by any regulatory filing in connection with the transactions contemplated herein, such disclosure shall be agreed by all parties, including, without limitation, approval as to form and content.

(c) Seller and Company shall provide Buyer and its representatives with access to financial and other information relating to the Company as may be reasonably necessary in order for Buyer to make informed decisions as to the viability of the business arrangements contemplated herein.

(d) Seller and Company agree not to contact, undertake negotiations with or provide any information in connection with the transactions contemplated herein to any third party for any purpose including pursuing another transaction or series of transactions similar to the ones contemplated herein, until this letter agreement is terminated in accordance with the terms hereof, and subject to the terms of any successor Agreement.

5. Termination

Seller and Buyer agree that the LOI will be automatically terminated if the closing has not occurred before or on the closing date of February 28, 2007 and will be of no further affect on the parties thereafter unless the parties to this Agreement, agree in writing to extend the closing date beyond February 28, 2007.

6. No Third Party Rights; Assignment.

Nothing in this LOI will create or be deemed to create any third party beneficiary rights in any person or entity not a party to this LOI except as provided below. No assignment of this Agreement or of any rights or obligations hereunder may be made by either Seller, or Buyer (by operation of law or otherwise) without the prior written consent of the other parties hereto and any attempted assignment without the required consents will be void.

7. Escrow.

In connection with this Agreement the parties have appointed the escrow agent, Dewey, Cheatum & Howe. (the “Escrow Agent”). The Escrow Agent is holding Fifty Thousand ($50,000) Dollars from the Buyer as a deposit (the “Deposit”) for the transactions contemplated herein. The Deposit shall be fully refundable if, on or prior to June 28, 2007 the Buyer decides, for whatever reason whatsoever not to pursue the transactions contemplated herein. In such event the Buyer shall notify the Escrow Agent in writing and the Escrow Agent will immediately return the funds as instructed. The Escrow Agent shall return the Deposit to the Buyer regardless of any dispute or written instrument from the Seller. Escrow Agent is specifically indemnified and held harmless hereby for its actions or inactions in following these instructions. In the event of a dispute involving the escrow instructions or the consideration to be delivered in escrow, the escrow agent is authorized to implead consideration received in the courts located in Miami Dade County, Florida upon ten days written notice, and be relieved of any further escrow duties thereupon. Any and all costs of attorney’s fees and legal actions of escrow agent for any dispute resolution or impleader action shall be paid in equal shares by the parties to this agreement.

“Company”

By:________________Accepted this_____day of February, 2007.

“Seller”

__________________Accepted this______day of February, 2007.

“Buyer”

____________________Accepted this________day of February, 2007.

Bookmark to:
         

The Definitive Agreements address all of the areas that must be addressed and satisfied prior to closing. There are a multitude of agreements that must be prepared prior to closing. The agreements vary according to transaction. However, there are a number of items that must be addressed in the Definitive Agreements.

Here is a brief overview:

• Finalize a definitive merger agreement. The exact terms of what will take place and how it will take place is spelled out in this document.

• Structure the transaction. How is the transfer of shares going to take place? Are there any free trading shares that will be purchased by non-affiliates? Any forward or reverse splits of the stock? How are the liabilities going to be dealt with? Are there any notes that have conversion privileges? How will the existing business entity be vended out of the shell?

• Stock Purchase Agreements. This outlines the transfer of shares to the new shareholders. I have provided an example of such an agreement in Part 9.

• Prepare documents, including board and shareholder consents that signify approval. To the extent corporate approval has been obtained by written consent as opposed to shareholder meetings, send an information statement to the remaining shareholders of the public company.

At the time the merger agreement is consummated, a Form 8-K describing the terms of the merger must be filed with the SEC. A second 8-K, including a brief description of the assets acquired and the nature of the shares of the public company’s stock must be filed when the merger transaction closes. Finally, within four days after filing the second 8-K, an amendment, including two years of audited financials of the private target together with relevant pro formas of the combined entity, must be filed.

Bookmark to:
         

• Sufficient information to complete and file the required 8-K with the SEC.
• Management information, including completion of the “Officer and Director Questionnaire,” for all Officers and Directors of the private company merging into the shell.
• Buyer and Seller signing the Definitive Agreements.
• Initial deposit followed by balance of funds sufficient to close on the transaction placed into escrow.
• Audited Financial Statement, conformed to US, GAAP for the private merger partner. The audit statements of the private company will be consolidated with the public company’s financial statements.
• Consent from the majority, at least 51%, of existing shareholders of the public company to sell their shares to the private company to effect the merger.
• Agreement for the Officers and Directors of the public shell to be replaced with the Officers and Directors designated by the private company merger partner.
• List of all shareholders in the private company that will make the share exchange.
• Number of shares to be outstanding “post merger”, and complete disclosure of share ownership post merger.
• Affecting a reverse split to reduce the number of shares owned by the previous minority shareholders of the public company upon completion of the merger.
• Agreement specifying the State the company will be domiciled in post merger.
• Satisfaction of warranties and representations between public shell and merger partner.
• Designation of securities attorneys and SEC qualified auditors that will represent the private merger partner.
• Preparation of the share exchange agreement, stock purchase agreement, definitive merger agreement, and all other documents necessary to complete the merger.
• Final preparation of the 8K that is required to be filed with the SEC within 4 days of closing the merger. The 8-K must disclose the same type of information that it would be required to provide in registering a class of securities under the Securities Exchange Act of 1934. (See Sec Final Rule 33-8587, pdf file)
• Coordinating financing (PIPE) in conjunction with the Closing of the reverse shell merger.

Bookmark to:
         

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”) is made this March 10, 2007 by and among each of the parties set forth on Schedule A attached hereto (the “Sellers”), _________________ (the “Buyer”) and Dewey, Cheatum & Howe (the “Escrow Agent”).

THE PARTIES HEREBY AGREE AS FOLLOWS:

1. Purchase and Sale of Stock.

(a) Sale of Shares. Subject to the terms and conditions of this Agreement, and in reliance upon the representations and warranties and covenants contained herein, Buyer agrees to purchase from Sellers and Sellers agrees to sell to Buyer ____________________ (__________) shares of common stock (the “Shares”), and any rights attached to the shares as of the date hereof (including any forward splits of stock or other dividends), of Reverse Merger, Inc (the “Company”) for a total purchase price of Dollars (USD$ ), including related escrow and transaction fees (the “Purchase Price”).

(b) If required by applicable law, the sale and purchase of the Shares under this agreement is being made pursuant to the Company’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission (the “SEC”) on December 22, 2000, file number 000-555555 (the “Registration Statement”), as declared effective on February 28, 2001, and the Sellers have delivered to the Buyer the definitive prospectus contained therein.

(c) Closing.

(i) The closing of the transactions contemplated hereunder (the “Closing”) shall take place at the office of the Escrow Agent on such date and time as the parties hereto may mutually agree upon (the “Closing Date”).

(ii) At the Closing:
(a) Sellers shall transfer to Buyer, good and marketable title to the Shares, free and clear of any and all liens, claims, encumbrances and adverse interests of any kind, by delivering to Buyer the certificates representing the Shares in negotiable form, duly endorsed in blank, or with stock transfer powers (containing a bank’s signature guarantee or other signature guarantee acceptable to the Company’s transfer agent, if the transfer agent requires such a guarantee) attached thereto (the “Transaction Documents”);
(b) Buyer shall have delivered the Escrow Payment (as defined herein) to Sellers or their designated agent in the amount set forth opposite each Sellers name on Schedule A; and
(c) the Escrow Agent will take control of, and will be entitled to payment of, the Escrow Fee (as defined herein).

2. Representations and Warranties of Seller. Each Seller hereby represents and warrants to the Buyer that:

(a) Seller is the record and beneficial owner of the Shares and has sole power over the disposition of the Shares. The Shares are free and clear of any liens, claims, encumbrances, and charges.

(b) The Shares have not been sold, conveyed, encumbered, hypothecated or otherwise transferred by Seller except pursuant to this Agreement.

(c) Seller has the requisite power and authority to enter into and to consummate the transactions contemplated hereby and otherwise to carry out its obligations hereunder. The execution, delivery and performance by the Seller of this Agreement have been duly authorized by all requisite action by the Seller, and the Agreement, when executed and delivered by the Seller, constitutes a valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

3. Representations and Warranties of the Buyer. Buyer hereby warrants and represents to each Seller that:

(a) Authority. Buyer has the requisite power and authority to enter into and to consummate the transactions contemplated hereby and otherwise to carry out its obligations hereunder. The execution, delivery and performance by the Buyer of this Agreement have been duly authorized by all requisite action by the Buyer, and the Agreement, when executed and delivered by the Buyer, constitutes a valid and binding obligation of the Buyer, enforceable against the Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

4. Escrow Agent.

(a) Buyer Deliveries. On or before the Closing Date, the Buyer shall have delivered to the Escrow Agent the Purchase Price for the Shares (the “Escrowed Funds”) and the Transaction Documents. The Buyer shall deliver the Escrowed Funds to the Escrow Agent pursuant to the following wire transfer instructions:

BANK: CITIBANK, N.A., 330 Madison Avenue, New York, New York
ABA: 000000000
BENEFICIARY: Dewey, Cheatum & Howe
ACCOUNT: 10000000
REFERENCE: “[insert Buyer name]”

(b) Intention to Create Escrow Over Escrowed Funds. The Sellers intend that the Transaction Documents and the Escrowed Funds shall be held in escrow by the Escrow Agent pursuant to this Agreement for their benefit and for the benefit of the Buyer.

gent shall hold and release the Escrowed Funds only in accordance with the terms and conditions of this Agreement.

(d) Release of Escrow. On the Closing Date, the Escrow Agent will release the Escrowed Funds, delivering the respective Escrow Payment to each Seller as set for opposite such Seller’s name on Schedule A (the “Escrow Payment” being such Seller’s Purchase Price less the portion of the Escrow Agent’s fee as set for opposite such Seller’s name on Schedule A). As compensation for acting as Escrow Agent, the Escrow Agent shall receive $2,000 (the “Escrow Fee”) from the Escrowed Funds to be deducted as set forth opposite each Seller’s name on Schedule A. If the Closing Date does not occur prior to October 31, 2006, the Escrow Agent may return the Escrowed Funds to the Buyer without incurring any liability to any party and terminating its responsibilities under this Agreement.

(e) Duties and Responsibilities of the Escrow Agent. The Escrow Agent’s duties and responsibilities shall be subject to the following terms and conditions:

(i) The Sellers and the Buyer acknowledge and agree that the Escrow Agent (i) shall not be responsible for or bound by, and shall not be required to inquire into whether either the Sellers or the Buyer are entitled to receipt of the Transaction Documents or Escrowed Funds pursuant to, any other agreement or otherwise; (ii) shall be obligated only for the performance of such duties as are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii) may rely on and shall be protected in acting or refraining from acting upon any written notice, instruction, instrument, statement, request or document furnished to it hereunder and believed by the Escrow Agent in good faith to be genuine and to have been signed or presented by the proper person or party, without being required to determine the authenticity or correctness of any fact stated therein or the propriety or validity or the service thereof; (iv) may assume that any person believed by the Escrow Agent in good faith to be authorized to give notice or make any statement or execute any document in connection with the provisions hereof is so authorized; (v) shall not be under any duty to give the property held by Escrow Agent hereunder any greater degree of care than the Escrow Agent gives its own similar property, but in no event less than a reasonable amount of care; and (vi) may consult with counsel satisfactory to the Escrow Agent, the opinion of such counsel to be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Escrow Agent hereunder in good faith and in accordance with the opinion of such counsel.

(ii) The Sellers and the Buyer acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and that the Escrow Agent shall not be liable for any action taken by Escrow Agent in good faith and believed by the Escrow Agent to be authorized or within the rights or powers conferred upon the Escrow Agent by this Agreement. The Sellers and the Buyer agree to indemnify and hold harmless the Escrow Agent and any of the Escrow Agent’s partners, employees, agents, and representatives for any action taken or omitted to be taken by the Escrow Agent or any of them hereunder, including the fees of outside counsel and other costs and expenses of defending itself against any claim or liability under this Agreement, except in the case of gross negligence or willful misconduct on the part of the Escrow Agent committed in its capacity as Escrow Agent under this Agreement. The Escrow Agent shall owe a duty only to the Sellers and the Buyer under this Agreement and to no other person.

(iii) The Sellers agrees to reimburse the Escrow Agent for outside counsel fees, to the extent authorized hereunder and incurred in connection with the performance of its duties and responsibilities hereunder.

(iv) The Escrow Agent may at any time resign as Escrow Agent hereunder by giving five (5) days prior written notice of resignation to the Buyer. Prior to the effective date of the resignation as specified in such notice, the Buyer will issue to the Escrow Agent an Instruction authorizing delivery of the Escrowed Funds to a substitute escrow agent selected by the Buyer. If no successor escrow agent is named by the Company, the Escrow Agent may apply to a court of competent jurisdiction in the State of New York for appointment of a successor escrow agent, and to deposit the Escrowed Funds with the clerk of any such court.

(v) This Agreement sets forth exclusively the duties of the Escrow Agent with respect to any and all matters pertinent thereto and no implied duties or obligations shall be read into this Agreement.

(vi) The provisions of this Section 4 shall survive the resignation of the Escrow Agent or the termination of this Agreement.

5. Miscellaneous.

a) Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective heirs, legal representatives, successors and assigns of the parties.

(b) Governing Law/Venue. This Agreement shall be governed by and construed under the laws of the State of New York as applied to agreements entered into and to be performed entirely within New York. Any dispute or controversy concerning or relating to this Agreement shall be exclusively resolved in the federal or state courts located in the City, County and State of New York.

(c) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

(d) Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

(e) Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or sent by overnight delivery by a nationally recognized overnight courier upon proof of sending thereof and addressed to the party to be notified at the address indicated for such party above and on Schedule A attached hereto, or at such other address as such party may designate by written notice to the other parties.

(f) Expenses. Each of the parties shall bear its own costs and expenses incurred with respect to the negotiation, execution, delivery, and performance of this Agreement.

(g) Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of Seller and Buyer.

(h) Entire Agreement. This Agreement represents and constitutes the entire agreement and understanding between the parties with regard to the subject matter contained herein All prior agreements, understandings and representations are hereby merged into this Agreement.