Exhibit
10.6


 


STOCK
ESCROW AGREEMENT


 



STOCK ESCROW AGREEMENT, dated
as of [●], 2021 (“Agreement”), by and among Legato Merger Corp. II, a Delaware corporation (“Company”),
the stockholders of the Company listed on Exhibit A hereto (the “Founders”) and American Stock Transfer & Trust Company,
a New York limited purpose trust company (“Escrow Agent”).



 


WHEREAS,
the Company was formed for the purpose of completing a merger, stock exchange, asset acquisition, stock purchase, recapitalization, reorganization
or other similar business combination (a “Business Combination”) with one or more businesses or entities.


 


WHEREAS,
the Company has entered into an Underwriting Agreement, dated [●], 2021 (“Underwriting Agreement”), with EarlyBirdCapital,
Inc. (the “Representative”) acting as representative of the several underwriters
(collectively, the “Underwriters”), pursuant to which, among other matters, the Underwriters have agreed to purchase 23,000,000
units (“Units”) of the Company, plus up to an additional 3,000,000 Units if the Representative exercises the over-allotment
option in full. Each Unit consists of one share of the Company’s common stock, par value $0.0001 per share (“Common Stock”),
and one-half of one warrant (“Warrant”), each whole Warrant to purchase one share of Common Stock, all as more fully described
in the Company’s final Prospectus, dated [●], 2021 (“Prospectus”) comprising part of the Company’s Registration
Statement on Form S-1 (File No. 333-_____) under the Securities Act of 1933, as amended (“Registration Statement”), declared
effective on [●], 2021 (“Effective Date”).


 


WHEREAS,
the Founders have agreed as a condition of the sale of the Units to deposit their shares of Common Stock of the Company in escrow as
hereinafter provided.


 


WHEREAS,
the Company and the Founders desire that the Escrow Agent accept the shares of Common Stock, in escrow, to be held and disbursed as hereinafter
provided.


 


IT
IS AGREED:


 


1. Appointment
of Escrow Agent. The Company and the Founders hereby appoint the Escrow Agent to act in accordance with and subject to the terms
of this Agreement and the Escrow Agent hereby accepts such appointment and agrees to act in accordance with and subject to such terms.


 


2. Deposit
of Shares. On or before the Effective Date, the Founders’ respective shares of Common Stock set forth on Exhibit A hereto shall
be deposited in escrow, to be held and disbursed subject to the terms and conditions of this Agreement. The Founders acknowledge that
the shares deposited in escrow will be legended to reflect the deposit of such shares under this Agreement.


 


3. Disbursement
of the Escrow Shares.


 


3.1
If the over-allotment option to purchase all or a portion of the additional 3,000,000 Units of the Company is not exercised in full within
45 days of the date of the Prospectus (as described in the Underwriting Agreement), the Founders agree that the Escrow Agent shall return
to the Company for cancellation, at no cost, the number of shares of Common Stock determined by multiplying 750,000 by a fraction, (i)
the numerator of which is 3,000,000 minus the number of shares of Common Stock included in the Units purchased by the Underwriters upon
the exercise of the over-allotment option, and (ii) the denominator of which is 3,000,000. The Company shall promptly provide notice
to the Escrow Agent of the expiration or termination of the over-allotment option and the number of Units, if any, purchased by the Underwriters
in connection with the exercise thereof.


 


3.2
Except as otherwise set forth herein, the Escrow Agent shall hold the shares remaining after any cancellation required pursuant to Section
3.1 above (such remaining shares to be referred to herein as the “Escrow Shares”) until the earlier of (i) 180 days after
the date of the consummation of an initial Business Combination, (ii) the date on which the closing price of the Common Stock equals
or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading
days within any 30-trading day period following the consummation of the Business Combination, or (iii) after the consummation of an initial
Business Combination, the consummation of a liquidation, merger, stock exchange or other similar transaction which results in all of
the Company’s stockholders having the right to exchange their shares of common stock for cash, securities, or other property (such
period of time during which the Escrow Shares are held in escrow, the “Escrow Period”). Upon the achievement of any of the
conditions set forth above, the Company shall promptly provide notice to the Escrow Agent, in form reasonably acceptable to the Escrow
Agent. Upon completion of the Escrow Period, the Escrow Agent shall disburse such amount of each Founder’s Escrow Shares to the
applicable Founder. The Escrow Agent shall have no further duties hereunder after the disbursement of the Escrow Shares in accordance
with this Section 3.2.


 






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3.3 Notwithstanding
the provisions of Section 3.2, if the Escrow Agent is notified by the Company pursuant to Section 6.7 hereof that the Company’s
Trust Account (as defined in that certain Investment Management Trust Agreement, dated as of the date hereof, by and between the Company
and the Escrow Agent as trustee thereunder) is being liquidated, then the Escrow Agent shall deliver the certificates representing the
Escrow Shares to the Founders promptly after the public stockholders are paid the liquidating distributions and shall have no further
duties hereunder.


 


4. Rights
of Founders in Escrow Shares.


 


4.1 Voting
Rights as a Stockholder. Subject to the terms of the Insider Letters described in Section 4.4 hereof and except as herein provided,
the Founders shall retain all of their rights as stockholders of the Company as long as any shares are held in escrow pursuant to this
Agreement, including, without limitation, the right to vote such shares.


 


4.2 Dividends
and Other Distributions in Respect of the Escrow Shares. For as long as any shares are held in escrow pursuant to this Agreement,
all dividends payable in cash with respect to the Escrow Shares shall be paid to the Founders, but all dividends payable in stock or
other non-cash property (“Non-Cash Dividends”) shall be delivered to the Escrow Agent to hold in accordance with the terms
hereof. As used herein, the term “Escrow Shares” shall be deemed to include the Non-Cash Dividends distributed thereon, if
any.


 


4.3 Restrictions
on Transfer. During the Escrow Period, the only permitted transfers of the Escrow Shares will be (i) to officers, directors, consultants
or affiliates of the Founders or the Company, (ii) to a Founder’s stockholders, partners or members upon such Founder’s liquidation,
(iii) by bona fide gift to a member of the Founders’ immediate family or to a trust, the beneficiary of which is a Founder or a
member of a Founder’s immediate family for estate planning purposes, (iv) by virtue of the laws of descent and distribution upon
death of a Founder, (v) pursuant to a qualified domestic relations order binding on a Founder, (vi) to the Company for no value for cancellation
in connection with the consummation of a Business Combination or (vii) by private sales of the Escrow Shares made at or prior to the
consummation of a Business Combination at prices no greater than the price at which the Escrow Shares were originally purchased; provided,
however, that except for clause (vi) or with the Company’s prior written consent, such permitted transfers may be implemented only
upon the respective transferee’s written agreement to be bound by the terms and conditions of this Agreement and of the Insider
Letter signed by the Founder transferring the shares.


 


4.4 Insider
Letters. The Founders have executed letter agreements with the Company and the Representative, dated as of the date hereto, the form
of which is filed as an exhibit to the Registration Statement (“Insider Letter”), respecting the rights and obligations of
such Founders in certain events, including, but not limited to, the liquidation of the Company.


 


5. Concerning
the Escrow Agent.


 


5.1 Good
Faith Reliance. The Escrow Agent shall not be liable for any action taken or omitted by it in good faith and in the exercise of its
own best judgment, and may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or
advice of counsel (including counsel chosen by the Escrow Agent), statement, instrument, report or other paper or document (not only
as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information
therein contained) which is believed by the Escrow Agent in good faith to be genuine and to be signed or presented by the proper person
or persons. The Escrow Agent shall not be bound by any notice or demand, or any waiver, modification, termination or rescission of this
Agreement unless evidenced by a writing delivered to the Escrow Agent signed by the proper party or parties and, if the duties or rights
of the Escrow Agent are affected, unless it shall have given its prior written consent thereto.


 






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5.2 Indemnification.
Subject to Section 5.8 below, the Escrow Agent shall be indemnified and held harmless by the Company from and against any expenses, including
reasonable counsel fees and disbursements, or loss suffered by the Escrow Agent in connection with any action, suit or other proceeding
involving any claim which in any way, directly or indirectly, arises out of or relates to this Agreement, the services of the Escrow
Agent hereunder, or the Escrow Shares held by it hereunder, other than expenses or losses arising from the gross negligence, fraud or
willful misconduct of the Escrow Agent. Promptly after the receipt by the Escrow Agent of notice of any demand or claim or the commencement
of any action, suit or proceeding, the Escrow Agent shall notify the other parties hereto in writing. In the event of the receipt of
such notice, the Escrow Agent, in its sole discretion, may commence an action in the nature of interpleader in an appropriate court to
determine ownership or disposition of the Escrow Shares or it may deposit the Escrow Shares with the clerk of any appropriate court or
it may retain the Escrow Shares pending receipt of a final, non-appealable order of a court having jurisdiction over all of the parties
hereto directing to whom and under what circumstances the Escrow Shares are to be disbursed and delivered. The provisions of this Section
5.2 shall survive in the event the Escrow Agent resigns or is discharged pursuant to Sections 5.5 or 5.6 below.


 


5.3 Compensation.
Subject to Section 5.8 below, the Escrow Agent shall be entitled to reasonable compensation from the Company for all services rendered
by it hereunder. The Escrow Agent shall also be entitled to reimbursement from the Company for all reasonable expenses paid or incurred
by it in the administration of its duties hereunder including, but not limited to, all counsel, advisors’ and agents’ fees
and disbursements and all taxes or other governmental charges.


 


5.4 Further
Assurances. From time to time on and after the date hereof, the Company and the Founders shall deliver or cause to be delivered to
the Escrow Agent such further documents and instruments and shall do or cause to be done such further acts as the Escrow Agent shall
reasonably request to carry out more effectively the provisions and purposes of this Agreement, to evidence compliance herewith or to
assure itself that it is protected in acting hereunder.


 


5.5 Resignation.
The Escrow Agent may resign at any time and be discharged from its duties as escrow agent hereunder by its giving the other parties hereto
written notice and such resignation shall become effective as hereinafter provided. Such resignation shall become effective at such time
that the Escrow Agent shall turn the Escrow Shares over to a successor escrow agent appointed by the Company and approved by the Representative,
which approval will not be unreasonably withheld, conditioned or delayed. If no new escrow agent is so appointed within the 60-day period
following the giving of such notice of resignation, the Escrow Agent may deposit the Escrow Shares with any court it reasonably deems
appropriate in the State of New York.


 


5.6 Discharge
of Escrow Agent. The Escrow Agent shall resign and be discharged from its duties as escrow agent hereunder if so requested in writing
at any time by all of the other parties hereto; provided, however, that such resignation shall become effective only upon the appointment
of a successor escrow agent selected by the Company and approved by the Representative, which approval will not be unreasonably withheld,
conditioned or delayed.


 


5.7 Liability.
Notwithstanding anything herein to the contrary, the Escrow Agent shall not be relieved from liability hereunder for its own gross negligence,
fraud or willful misconduct.


 






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5.8 Waiver.
The Escrow Agent hereby waives any right of set-off or any other right, title, interest or claim of any kind (“Claim”) in,
or to any distribution of, the Trust Account and hereby agrees not to seek recourse, reimbursement, payment or satisfaction for any Claim
against the Trust Account for any reason whatsoever.


 


6. Miscellaneous.


 


6.1 Governing
Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without
giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The
parties hereto consent to the jurisdiction and venue of any state or federal court located in the City of New York, Borough of Manhattan,
for purposes of resolving any disputes hereunder. As to any claim, cross-claim, or counterclaim in any way relating to this Agreement,
each party waives the right to trial by jury.


  


6.2 Third
Party Beneficiaries. Each of the parties to this Agreement hereby acknowledges that the Representative is a third party beneficiary
of this Agreement.


 


6.3 Entire
Agreement. This Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof and, except
as expressly provided herein, may only be changed, amended, or modified by a writing signed by each of the parties hereto.


 


6.4 Headings.
The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation
thereof.


 


6.5 Binding
Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their legal representatives,
successors and assigns.


 


6.6 Notices.
Any notice, consent or request to be given in connection with any of the terms or provisions of this Agreement shall be in writing and
shall be sent by express mail or similar private courier service, by certified mail (return receipt requested), by hand delivery, by
email or by facsimile transmission:


 


If
to the Company, to:


  


Legato Merger Corp. II


777 Third Avenue, 37th Floor


New York, NY 10017


Attn: Gregory Monahan


Email: gmonahan@crescendopartners.com

  


If
to a Founder, to his/her/its address set forth in Exhibit A.


 


and
if to the Escrow Agent, to:


 


American Stock Transfer& Trust
Company


6201 15th Avenue’


Brooklyn, NY 11219


Attn:


Fax No.:


Email:




 






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A
copy of any notice sent hereunder shall be sent to:


 


EarlyBirdCapital,
Inc.


366
Madison Ave 8th Floor


New
York, NY 10017


Attn:
Steven Levine


Fax
No.:


Email:
slevine@ebccap.com


 


with
a copy to:


 


Graubard
Miller


The
Chrysler Building


405
Lexington Avenue


New
York, New York 10174


Attn:
David Alan Miller, Esq. / Jeffrey M. Gallant, Esq.


Fax
No.: (212) 818-8881


Email:
dmiller@graubard.com / jgallant@graubard.com


 


and:


 


Loeb
& Loeb LLP


345
Park Avenue


New
York, NY 10154


Attn:
Mitchell S. Nussbaum, Esq. / David Levine, Esq.


Fax
No.:


Email:
mnussbaum@loeb.com / dlevine@loeb.com


 


The
parties may change the persons and addresses to which the notices or other communications are to be sent by giving written notice to
any such change in the manner provided herein for giving notice.


 


6.7 Liquidation
of the Trust Account. The Company shall give the Escrow Agent written notification of the liquidation of the Trust Account in the
event that the Company fails to consummate a Business Combination within the time period specified in the Company’s Amended and
Restated Certificate of Incorporation, as the same may be amended from time to time.


 


6.8 Counterparts.
This Agreement may be executed in several counterparts, each one of which shall constitute an original and may be delivered by facsimile
transmission and together shall constitute one instrument.


 


[Signature
Page Follows]


 






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WITNESS
the execution of this Agreement as of the date first above written.


 


	 	LEGATO MERGER CORP. II
	 	 
	 	By:	 
	 	Name:  	Gregory Monahan
	 	Title:	Chief Executive Officer
	 	 
	 	AMERICAN STOCK TRANSFER & TRUST COMPANY

	 	 
	 	By:	            
	 	Name:	 
	 	Title:	 


 


[Signature
Page to Stock Escrow Agreement]


 






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EXHIBIT
A


 


	Name
    and Address of Founder	 
	 	 


 






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