Exhibit 10.3


 


THIS ESCROW
AGREEMENT is made this 16th day of October, 2008 between/among Klafter Olsen &
Lesser LLP (“Co-Lead Counsel for Plaintiffs” and “Party A” herein),  and InfoSonics Corp. (“Party B” herein), and TD Bank., National Association (the “Escrow
Agent” herein).


 


The above-named
parties appoint said Escrow Agent with the duties and responsibilities and upon
the terms and conditions provided in Schedule A annexed hereto and made a part
hereof.


 


ARTICLE
FIRST: The above-named parties agree that the following
provisions shall control with respect to the rights, duties, liabilities,
privileges and immunities of the Escrow Agent:


 


a)              The Escrow Agent shall neither be
responsible for or under, nor chargeable with knowledge of, the terms and
conditions of any other agreement, instrument or document executed
between/among the parties hereto, except as may be specifically provided in
Schedule A annexed hereto.  This
Agreement sets forth all of the obligations of the Escrow Agent, and no
additional obligations shall be implied from the terms of this Agreement or any
other agreement, instrument or document.


 


b)             The Escrow Agent may act in reliance upon
any instructions, notice, certification, demand, consent, authorization,
receipt, power of attorney or other writing delivered to it by any other party
entitled to provide instructions without being required to determine the
authenticity or validity thereof or the correctness of any fact stated therein,
the propriety or validity of the service thereof, or the jurisdiction of the
court issuing any judgment or order.  The
Escrow Agent may act in reliance upon any signature believed by it to be
genuine, and may assume that such person has been properly authorized to do so.


 


c)              Each of the parties,
jointly and severally, agrees to reimburse the Escrow Agent on demand for, and
to indemnify and hold the Escrow Agent harmless against and with respect to,
any and all loss, liability, damage or expense (including, but without
limitation, attorneys’ fees, costs and disbursements) that the Escrow Agent may
suffer or incur in connection with this Agreement and its performance hereunder
or in connection herewith, except to the extent such loss, liability, damage or
expense arises from its willful misconduct or gross negligence as adjudicated
by  a court of competent  jurisdiction.  The
Escrow Agent shall have the further right at any time and from time to time to
charge, and reimburse itself from, the property held in escrow hereunder.


 


d)             The Escrow Agent may
consult with legal counsel of its selection in the event of any dispute or
question as to the meaning or construction of any of the provisions hereof or
its duties hereunder, and it shall incur no liability and shall be fully
protected in acting in accordance with the opinion and instructions of such
counsel.  Each of the parties, jointly
and severally, agrees to reimburse the Escrow Agent on demand for such legal
fees, disbursements and expenses and in addition, the Escrow Agent shall have
the right to reimburse itself for such fees, disbursements and expenses from
the property held in escrow hereunder.


 


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e)              The Escrow Agent
shall be under no duty to give the property held in escrow by it hereunder any
greater degree of care than it gives its own similar property.


 


f)                The Escrow Agent
shall invest the property held in escrow in such a manner as directed in
Schedule A annexed hereto.


 


g)             The Escrow Agent shall have no obligation
to invest or reinvest the property held in escrow if all or a portion of such
property is deposited with the Escrow Agent after 11:00 AM Eastern Time on the
day of deposit.  Instructions to invest
or reinvest that are received after 11:00 AM Eastern Time will be treated as if
received on the following business day in New York.  The Escrow Agent shall have the power to sell
or liquidate the foregoing investments whenever the Escrow Agent shall be
required to distribute amounts from the escrow property pursuant to the terms
of this Agreement.  Requests or
instructions received after 11:00 AM Eastern Time by the Escrow Agent to
liquidate all or any portion of the escrowed property will be treated as if
received on the following business day in New York.  The Escrow Agent shall have no responsibility
for any investment losses resulting from the investment, reinvestment or
liquidation of the escrowed property, as applicable, provided that the Escrow
Agent has made such investment, reinvestment or liquidation of the escrowed
property in accordance with the terms, and subject to the conditions of this
Agreement.


 


h)             In the event of any
disagreement between/among any of the parties to this agreement, or
between/among them or either or any of them and any other person, resulting in
adverse claims or demands being made in connection with the subject matter of
the Escrow, or in the event that the Escrow Agent, in good faith, be in doubt
as to what action it should take hereunder, the Escrow Agent may, at its
option, refuse to comply with any claims or demands on it, or refuse to take
any other action hereunder, so long as such disagreement continues or such
doubt exists, and in any such event, the Escrow Agent shall not become liable
in any way or to any person for its failure or refusal to act, and the Escrow
Agent shall be entitled to continue so to refrain from acting until (i) the
rights of all parties shall have been fully and finally  adjudicated by a court of competent
jurisdiction, or (ii) all differences shall have been adjusted and all
doubt resolved by agreement among all of the interested persons, and the Escrow
Agent shall have been notified thereof in writing signed by all such
persons.  The Escrow Agent shall have the
option, after 30 calendar days’ notice to the other parties of its intention to
do so, to file an action in interpleader requiring the parties to answer and
litigate any claims and rights among themselves.  The rights of the Escrow Agent under this
paragraph are cumulative of all other rights which it may have by law or
otherwise.


 


i)                 The Escrow Agent
is authorized, for any securities at any time held hereunder, to register such
securities in the name of its nominee(s) or the nominees of any securities
depository, and such nominee(s) may sign the name of any of the parties
hereto to whom or to which such securities belong and guarantee such signature
in order to transfer securities or certify ownership thereof to tax or other
governmental authorities.


 


j)                 Notice to the
parties shall be given as provided in Schedule A annexed hereto.


 


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ARTICLE
SECOND: The Escrow Agent shall make payments of principal or
income earned on the escrowed property as provided in Schedule A annexed hereto.  Each  party
shall provide to the Escrow Agent an appropriate W-9 form for tax
identification number certification or a W-8 form for non-resident alien
certification.  The Escrow Agent shall be  responsible for income reporting to the Internal Revenue
Service with respect to income earned on the escrowed property and for making
tax payments on interest earned on the escrowed property as directed by Party A
in writing.


 


ARTICLE
THIRD: The Escrow Agent may, in its sole discretion, resign
and terminate its position hereunder at any time following 30 calendar days’
written notice to the parties to the Escrow Agreement herein. Any such
resignation shall terminate all obligations and duties of the Escrow Agent
hereunder.  On the effective date of such
resignation, the Escrow Agent shall deliver this Escrow Agreement together with
any and all related instruments or documents to any successor Escrow Agent
agreeable to the parties, subject to this Escrow Agreement herein. If a
successor Escrow Agent has not been appointed prior to the expiration of 30
calendar days following the date of the notice of such resignation, the then
acting Escrow Agent may petition any court of competent jurisdiction for the
appointment of a successor Escrow Agent, or other appropriate relief.  Any such resulting appointment shall be
binding upon all of the parties to this Agreement.


 


ARTICLE
FOURTH: The Escrow Agent shall receive the fees provided in
Schedule B annexed hereto.  In the event
that such fees are not paid to the Escrow Agent within 30 calendar days of
presentment to the party responsible for such fees as set forth in said
Schedule B, then the Escrow Agent may pay itself such fees from the property
held in escrow hereunder.  Once fees have
been paid, no recapture or rebate will be made by the Escrow Agent.


 


ARTICLE
FIFTH: Any modification of this Agreement or any additional
obligations assumed by any party hereto shall be binding only if evidenced by a
writing signed by each of the parties hereto.


 


ARTICLE
SIXTH: In the event funds transfer instructions are given
(other than in writing at the time of execution of this Agreement), whether in
writing, by telecopier or otherwise, by a party entitled to provide transfer
instructions, the Escrow Agent may rely upon the accuracy of the instructions
it receives.


 


ARTICLE
SEVENTH: TD Bank hereby agrees that any Escrow Funds are
subject to the oversight of the United States District Court of the Southern
District of California (the “Court”) and any disputes arising concerning this
Agreement or Schedule A hereto, shall be resolved by the Court, including but not
limited to, any interpleader proceeding or proceeding for the appointment of a
successor escrow agent the Escrow Agent may commence pursuant to this
Agreement, and all parties irrevocably submit to the jurisdiction of the Court
for the determination of all issues in such proceedings, without regard to any
principles of conflicts of laws, and irrevocably waive any objection to venue
of inconvenient forum..


 


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ARTICLE
EIGHTH: This Agreement may be executed in one or more
counterparts, each of which counterparts shall be deemed to be an original and
all of which counterparts, taken together, shall constitute but one and the
same Agreement.  Facsimile signatures on
counterparts of this Agreement shall be deemed original signatures with all
rights accruing thereto.


 


ARTICLE
NINTH: The Escrow Agent shall not incur any liability for not
performing any act or fulfilling any obligation hereunder by reason of any
occurrence beyond its control (including, but not limited to, any provision of
any present or future law or regulation or any act of any governmental
authority, any act of God or war or terrorism, or the unavailability of the
Federal Reserve Bank wire services or any electronic communication facility).


 


In witness whereof
the parties have executed this Agreement as of the date first above written.


 


TD BANK, National Association


as Escrow Agent


 


	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  



 


PARTY “A”


 


	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  	
   

  
	
  Name:

  	
   

  	
  Jeffrey Klafter

  	
   

  
	
  Title:

  	
   

  	
  Partner

  	
   

  
	
  Firm:

  	
   

  	
  KLAFTER OLSEN &
  LESSER LLP

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  



 


PARTY “B”


 


	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  	
   

  
	
  Name:

  	
   

  	
  Jeffrey Klausner

  	
   

  
	
  Title:

  	
   

  	
  Chief Financial Officer

  	
   

  
	
  Co.:

  	
   

  	
  INFOSONICS CORPORATION

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  



 


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SCHEDULE
A


 


1.                                      This
Escrow Agreement (the “Escrow Agreement”) is entered into in connection with a
Stipulation of Settlement (the “Settlement Stipulation”) that has been entered
into among Lead Plaintiff Robert Sibley (the “Lead Plaintiff”) and Plaintiffs
Robert Lorizio and Joel Webb (collectively, “Plaintiffs”) individually and on
behalf of all other persons and entities similarly situated against Defendants
InfoSonics Corp. (“InfoSonics” or the “Company”) and Joseph Ram, John J.
Althoff, Jeffrey Klausner, Joseph Murgo, and Abraham Rosler (collectively, the “Defendants”) in In re InfoSonics Corporation Securities Litigation, No. 06-CV-1231 JLS
(WMc) (the “Securities Class Action”), pending in the United States
District Court for the Southern District of California (the “Court”).  The Parties to this Escrow Agreement are as
follows:


 


(1)                                  Klafter
Olsen & Lesser LLP, Co-Lead Counsel on behalf of the Lead Plaintiffs (“Co-Lead
Counsel” or “Party A”);


 


(2)                                  InfoSonics
Corporation (“InfoSonics”) (“Party B”); and


 


(3)                                  TD
Bank, National Association, as escrow agent for the above-specified Parties
(the “Escrow Agent”).


 


2.                                      Paragraph
3 of the Settlement Stipulation provides for the payment of a total of
$3,800,000.00 (Three Million Eight Hundred Thousand Dollars) (the “Settlement
Amount”) into an interest-bearing escrow account (the “Escrow Account”), which
shall be titled the “InfoSonics Corporation Securities Litigation Settlement
Fund” and maintained by TD Bank, National Association or its successor ,
subject to an agreed upon escrow agreement. 
The Settlement Amount and all interest or other income earned on the
Settlement Amount or any portion thereof shall comprise the “Settlement Fund.”  The Settlement Stipulation provides for,
among other things, the investment of the Settlement Fund.


 


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3.                                      In
addition, the Settlement Stipulation provides for disbursements from the
Settlement Fund for, among other things, the payment of certain Notice and
Administration Expenses, including Tax and Tax Expenses, and attorneys’ fees
and expenses awarded by the Court, the distribution of the Net Settlement Fund
to Authorized Claimants.


 


3.                                      Deposits Into Escrow


 


A.            The
Settlement Stipulation requires InfoSonics to pay or cause AIG to pay the Settlement
Amount into the Escrow Account as follows: (a) by depositing $150,000.00
(one hundred fifty thousand dollars) no later than ten (10) days following
the notice of entry of an order by the Court preliminarily approving the
Settlement described herein (the “First Payment Date”); and (b) depositing
$3,650,000.00 (three million seven hundred thousand dollars), no later than
thirty (30) days following notice of entry of an order by the Court
preliminarily approving the Settlement described herein (the “Second Payment
Date”).  These amounts shall be paid to
the Escrow Account by wire transfer or other similar means.


 


B.            For
purposes of this Escrow Agreement, the Settlement Fund shall also be considered
the “Escrow Fund”.


 


C.            In
the event that Party A and Party B give the Escrow Agent joint written notice
that the Settlement Stipulation has terminated, pursuant to its terms, the
Escrow Agent shall, without the necessity of any court order, return, by wire
transfer or other similar means, the Settlement Amount (plus any interest
accrued thereon) less the Notice and Administration Expenses paid out of, or
incurred by, the Settlement Fund, to InfoSonics and/or AIG to the extent each
funded the Settlement Amount, as instructed by each such party, whereupon this Escrow
Agreement shall terminate.


 


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4.                                      Interest and Investments


 


Promptly upon receipt of
the Settlement Amount, unless notified otherwise in writing by Jeffrey A.
Klafter or Kurt B. Olsen of Klafter Olsen & Lesser LLP on behalf of
Party A, the Escrow Agent shall cause the Settlement Amount, less $150,000.00
for the payment of Notice and Administration Costs, to be invested and
reinvested in United States Treasury Bills having maturities of 90 days or
less, except that any residual cash balances and cash pending investment in
United States Treasury Bills (as well as the $150,000.00 for possible Notice
and Administration Costs) may, unless otherwise directed by a representative of
Party A, be invested and reinvested in the Goldman Sachs Liquid Assets  Cash Management Shares Treasury Obligation
Portfolio, a money market mutual fund comprised exclusively of investments
secured by the full faith and credit of the United States.


 


5.                                      Taxes and Related Matters


 


A.            The Settlement Fund shall be deemed and treated as a “qualified
settlement fund” for all reporting purposes under the federal tax laws, and all
Taxes and Tax Expenses arising with respect to any income earned by the
Settlement Fund shall be paid out of the Settlement Fund.


 


B.            The Escrow Agent shall make all payments of Taxes and Tax
Expenses arising with respect to income earned by the Settlement Fund pursuant
to written disbursement instructions from Jeffrey Klafter or Kurt B. Olsen on
behalf of Party A.


 


C.            If the Settlement Fund (including all interest thereon)
is returned to InfoSonics and/or AIG, in accordance with paragraph 3(C) of
this Schedule A, then Party B  shall
become responsible for assuring payment of the taxes on interest generated by
the Escrow Fund.  In such an event, Party
B shall provide the Escrow Agent with a completed W-9 form.


 


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6.                                      Termination of the Escrow Agreement


 


Unless the Escrow
Agreement terminates, as set forth in paragraph 3(C) of this Schedule A,
this Escrow Agreement and Escrow Account will automatically terminate after all
funds deposited in the Escrow Account, together with all interest earned
thereon, are disbursed in accordance with the provisions of this Escrow
Agreement, the Settlement Stipulation, or orders of the Court issued pursuant
to and in furtherance of the Settlement Stipulation.


 


7.                                      Distribution of the Escrow Fund


 


Until
the Settlement has been approved by the Court and such approval becomes final
(the “Effective Date”), no portion of the Escrow Fund may be disbursed for any
purpose other than for: (1) the payment of Notice and Administration
Expenses, including  the payment of Taxes
or Tax Expenses arising with respect to income earned on the Settlement Fund;
or (2) the payment of any Fee and Expense Award by the Court.  Any such disbursements may be made by the
Escrow Agent only if authorized in writing by Jeffrey Klafter or Kurt B. Olsen
on behalf of Party A.


 


8.                                      Miscellaneous Provisions


 


A.            The
Escrow Agent shall send to each of the Parties, as set forth in paragraph 8(C) of
this Schedule A, a monthly escrow account statement and advices for all
transactions in the Escrow Account as they occur, except that after the Escrow
Agent has received notice of the occurrence of the Effective Date, the Escrow
Agent shall send such statements and advices only to Party A.


 


B.            This
Escrow Agreement may not be assigned by the Escrow Agent, prior to the
Effective Date, without prior written approval of each of the Parties, and after
the Effective Date, without prior written approval of Party A; provided,
however, that if no approval can be obtained after good faith effort, then upon
thirty (30) days written notice by the Escrow Agent to the Parties hereto, the
Escrow Agent shall have the right to apply to the Court for instructions.


 


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C.            Notice
under the Escrow Agreement shall be provided to each of the Parties indicated
below prior to the Final Settlement Date, and only Party A after the Effective
Date, as follows:


 


Party A


 


Jeffrey A. Klafter, Esq.


Klafter Olsen &
Lesser LLP


1311 Mamaroneck Avenue, Suite 220


White Plains, New York
10605


Tel: (914) 997-5656


Fax: (914) 997-2444


 


Party B:


InfoSonics


c/o Peter H. Benzian, Esq.


LATHAM & WATKINS
LLP


600 West Broadway, Suite 1800


San Diego, CA  92101


Tel: (619) 236-1234


Fax: (619) 696-7419


 


The
Escrow Agent


 


Jennifer
Provenzano


Vice
President


TD
Bank, National Association


101
Haddonfield Road, 2nd Floor


Cherry
Hill, New Jersey  08002


212—381-7930


Fax:
856-482-5706


 


D.            To the extent the Escrow Agent incurs loss, liability,
damage or expense for which it is entitled to indemnification pursuant to
sub-paragraph (c) of Article First of the Escrow Agreement or legal
fees, disbursements and expenses for which it is entitled to indemnification
pursuant to sub-paragraph (d) of Article First of the Escrow
Agreement, the 


 


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Escrow Agent shall reimburse
itself from the Escrow Fund to the extent there are funds in the Escrow Fund,
subject to the approval of the Court. The Escrow Agent shall seek reimbursement
and indemnification from the Parties only if, and to the extent that, the Court
does not permit reimbursement from the Escrow Fund, or if there are
insufficient funds in the Escrow Fund to reimburse the Escrow Agent.


 


E.             Any
obligation of Party B to indemnify the Escrow Agent pursuant to sub-paragraphs (c) and
(d) of Article First of the Escrow Agreement shall terminate on the
Final Settlement Date, provided no demand to indemnify the Escrow Agent in
accordance with such paragraphs has been made prior to such time.


 


F.             All
terms used herein (except the terms “Party” or “Parties”) used in this Schedule
A shall have the same meanings that are set forth in the Settlement
Stipulation.  For purposes of this
Schedule A, the term “Party” or “Parties” shall mean Party A and/or Party B, as
defined in paragraph 1 above.  Any other
inconsistencies between the Settlement Stipulation and this Schedule A shall be
controlled by the language of the Settlement Stipulation.


 


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SCHEDULE
B


 


TD Bank, National
Association will charge a one time 
Acceptance Fee of $1,000 and an Administrative Fee for acting as Escrow
Agent in the amount of $3,000 per annum, which shall be charged to the portion
of the Escrow Fund invested in a money market-mutual fund comprised exclusively
of investments secured by the full faith and credit of the United-States.


 


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