**Exhibit 10.3**

 

THIS ESCROWAGREEMENT 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 “EscrowAgent” herein).

 

The above-namedparties appoint said Escrow Agent with the duties and responsibilities and uponthe terms and conditions provided in Schedule A annexed hereto and made a parthereof.

 

**ARTICLEFIRST**: The above-named parties agree that the followingprovisions shall control with respect to the rights, duties, liabilities,privileges and immunities of the Escrow Agent:

 

a)              The Escrow Agent shall neither beresponsible for or under, nor chargeable with knowledge of, the terms andconditions of any other agreement, instrument or document executedbetween/among the parties hereto, except as may be specifically provided inSchedule A annexed hereto.  ThisAgreement sets forth all of the obligations of the Escrow Agent, and noadditional obligations shall be implied from the terms of this Agreement or anyother agreement, instrument or document.

 

b)             The Escrow Agent may act in reliance uponany instructions, notice, certification, demand, consent, authorization,receipt, power of attorney or other writing delivered to it by any other partyentitled to provide instructions without being required to determine theauthenticity or validity thereof or the correctness of any fact stated therein,the propriety or validity of the service thereof, or the jurisdiction of thecourt issuing any judgment or order.  TheEscrow Agent may act in reliance upon any signature believed by it to begenuine, 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, andto indemnify and hold the Escrow Agent harmless against and with respect to,any and all loss, liability, damage or expense (including, but withoutlimitation, attorneys’ fees, costs and disbursements) that the Escrow Agent maysuffer or incur in connection with this Agreement and its performance hereunderor in connection herewith, except to the extent such loss, liability, damage orexpense arises from its willful misconduct or gross negligence as adjudicatedby****a court of competent****jurisdiction.  TheEscrow Agent shall have the further right at any time and from time to time tocharge, and reimburse itself from, the property held in escrow hereunder.

 

d)             The Escrow Agent mayconsult with legal counsel of its selection in the event of any dispute orquestion as to the meaning or construction of any of the provisions hereof orits duties hereunder, and it shall incur no liability and shall be fullyprotected in acting in accordance with the opinion and instructions of suchcounsel.  Each of the parties, jointlyand severally, agrees to reimburse the Escrow Agent on demand for such legalfees, disbursements and expenses and in addition, the Escrow Agent shall havethe right to reimburse itself for such fees, disbursements and expenses fromthe property held in escrow hereunder.

 

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

 

f)                The Escrow Agentshall invest the property held in escrow in such a manner as directed inSchedule A annexed hereto.

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g)             The Escrow Agent shall have no obligationto invest or reinvest the property held in escrow if all or a portion of suchproperty is deposited with the Escrow Agent after 11:00 AM Eastern Time on theday of deposit.  Instructions to investor reinvest that are received after 11:00 AM Eastern Time will be treated as ifreceived on the following business day in New York.  The Escrow Agent shall have the power to sellor liquidate the foregoing investments whenever the Escrow Agent shall berequired to distribute amounts from the escrow property pursuant to the termsof this Agreement.  Requests orinstructions received after 11:00 AM Eastern Time by the Escrow Agent toliquidate all or any portion of the escrowed property will be treated as ifreceived on the following business day in New York.  The Escrow Agent shall have no responsibilityfor any investment losses resulting from the investment, reinvestment orliquidation of the escrowed property, as applicable, provided that the EscrowAgent has made such investment, reinvestment or liquidation of the escrowedproperty in accordance with the terms, and subject to the conditions of thisAgreement.

 

h)             In the event of anydisagreement between/among any of the parties to this agreement, orbetween/among them or either or any of them and any other person, resulting inadverse claims or demands being made in connection with the subject matter ofthe Escrow, or in the event that the Escrow Agent, in good faith, be in doubtas to what action it should take hereunder, the Escrow Agent may, at itsoption, refuse to comply with any claims or demands on it, or refuse to takeany other action hereunder, so long as such disagreement continues or suchdoubt exists, and in any such event, the Escrow Agent shall not become liablein any way or to any person for its failure or refusal to act, and the EscrowAgent shall be entitled to continue so to refrain from acting until (i) therights of all parties shall have been fully and finally  adjudicated by a court of competentjurisdiction, or (ii) all differences shall have been adjusted and alldoubt resolved by agreement among all of the interested persons, and the EscrowAgent shall have been notified thereof in writing signed by all suchpersons.  The Escrow Agent shall have theoption, after 30 calendar days’ notice to the other parties of its intention todo so, to file an action in interpleader requiring the parties to answer andlitigate any claims and rights among themselves.  The rights of the Escrow Agent under thisparagraph are cumulative of all other rights which it may have by law orotherwise.

 

i)                 The Escrow Agentis authorized, for any securities at any time held hereunder, to register suchsecurities in the name of its nominee(s) or the nominees of any securitiesdepository, and such nominee(s) may sign the name of any of the partieshereto to whom or to which such securities belong and guarantee such signaturein order to transfer securities or certify ownership thereof to tax or othergovernmental authorities.

 

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

 

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**ARTICLESECOND**: The Escrow Agent shall make payments of principal orincome earned on the escrowed property as provided in Schedule A annexed hereto**. **Each  partyshall provide to the Escrow Agent an appropriate W-9 form for taxidentification number certification or a W-8 form for non-resident aliencertification.  The Escrow Agent shall be****responsible for income reporting to the Internal RevenueService with respect to income earned on the escrowed property and for makingtax payments on interest earned on the escrowed property as directed by Party Ain writing.

 

**ARTICLETHIRD:**The Escrow Agent may, in its sole discretion, resignand terminate its position hereunder at any time following 30 calendar days’written notice to the parties to the Escrow Agreement herein. Any suchresignation shall terminate all obligations and duties of the Escrow Agenthereunder.  On the effective date of suchresignation, the Escrow Agent shall deliver this Escrow Agreement together withany and all related instruments or documents to any successor Escrow Agentagreeable to the parties, subject to this Escrow Agreement herein. If asuccessor Escrow Agent has not been appointed prior to the expiration of 30calendar days following the date of the notice of such resignation, the thenacting Escrow Agent may petition any court of competent jurisdiction for theappointment of a successor Escrow Agent, or other appropriate relief.  Any such resulting appointment shall bebinding upon all of the parties to this Agreement.

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**ARTICLEFOURTH**: The Escrow Agent shall receive the fees provided inSchedule B annexed hereto.  In the eventthat such fees are not paid to the Escrow Agent within 30 calendar days ofpresentment to the party responsible for such fees as set forth in saidSchedule B, then the Escrow Agent may pay itself such fees from the propertyheld in escrow hereunder.  Once fees havebeen paid, no recapture or rebate will be made by the Escrow Agent.

 

**ARTICLEFIFTH:**Any modification of this Agreement or any additionalobligations assumed by any party hereto shall be binding only if evidenced by awriting signed by each of the parties hereto.

 

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

 

**ARTICLESEVENTH**: TD Bank hereby agrees that any Escrow Funds aresubject to the oversight of the United States District Court of the SouthernDistrict of California (the “Court”) and any disputes arising concerning thisAgreement or Schedule A hereto, shall be resolved by the Court, including but notlimited to, any interpleader proceeding or proceeding for the appointment of asuccessor escrow agent the Escrow Agent may commence pursuant to thisAgreement, and all parties irrevocably submit to the jurisdiction of the Courtfor the determination of all issues in such proceedings, without regard to anyprinciples of conflicts of laws, and irrevocably waive any objection to venueof inconvenient forum..

 

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**ARTICLEEIGHTH:**This Agreement may be executed in one or morecounterparts, each of which counterparts shall be deemed to be an original andall of which counterparts, taken together, shall constitute but one and thesame Agreement.  Facsimile signatures oncounterparts of this Agreement shall be deemed original signatures with allrights accruing thereto.

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**ARTICLENINTH**: The Escrow Agent shall not incur any liability for notperforming any act or fulfilling any obligation hereunder by reason of anyoccurrence beyond its control (including, but not limited to, any provision ofany present or future law or regulation or any act of any governmentalauthority, any act of God or war or terrorism, or the unavailability of theFederal Reserve Bank wire services or any electronic communication facility).

 

In witness whereofthe 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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**SCHEDULEA**

 

1.                                      ThisEscrow Agreement (the “Escrow Agreement”) is entered into in connection with aStipulation of Settlement (the “Settlement Stipulation”) that has been enteredinto among Lead Plaintiff Robert Sibley (the “Lead Plaintiff”) and PlaintiffsRobert Lorizio and Joel Webb (collectively, “Plaintiffs”) individually and onbehalf of all other persons and entities similarly situated against DefendantsInfoSonics 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 StatesDistrict Court for the Southern District of California (the “Court”).  The Parties to this Escrow Agreement are asfollows:

 

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

 

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

 

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

 

2.                                      Paragraph3 of the Settlement Stipulation provides for the payment of a total of$3,800,000.00 (Three Million Eight Hundred Thousand Dollars) (the “SettlementAmount”) into an interest-bearing escrow account (the “Escrow Account”), whichshall be titled the “InfoSonics Corporation Securities Litigation SettlementFund” 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 theSettlement 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.                                      Inaddition, the Settlement Stipulation provides for disbursements from theSettlement Fund for, among other things, the payment of certain Notice andAdministration Expenses, including Tax and Tax Expenses, and attorneys’ feesand expenses awarded by the Court, the distribution of the Net Settlement Fundto Authorized Claimants.

 

3.                                      **Deposits Into Escrow**

 

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

 

B.            Forpurposes of this Escrow Agreement, the Settlement Fund shall also be consideredthe “Escrow Fund”.

 

C.            Inthe event that Party A and Party B give the Escrow Agent joint written noticethat the Settlement Stipulation has terminated, pursuant to its terms, theEscrow Agent shall, without the necessity of any court order, return, by wiretransfer or other similar means, the Settlement Amount (plus any interestaccrued thereon) less the Notice and Administration Expenses paid out of, orincurred by, the Settlement Fund, to InfoSonics and/or AIG to the extent eachfunded the Settlement Amount, as instructed by each such party, whereupon this EscrowAgreement shall terminate.

 

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4.                                      **Interest and Investments**

 

Promptly upon receipt ofthe Settlement Amount, unless notified otherwise in writing by Jeffrey A.Klafter or Kurt B. Olsen of Klafter Olsen & Lesser LLP on behalf ofParty A, the Escrow Agent shall cause the Settlement Amount, less $150,000.00for the payment of Notice and Administration Costs, to be invested andreinvested in United States Treasury Bills having maturities of 90 days orless, except that any residual cash balances and cash pending investment inUnited States Treasury Bills (as well as the $150,000.00 for possible Noticeand Administration Costs) may, unless otherwise directed by a representative ofParty A, be invested and reinvested in the Goldman Sachs Liquid AssetsCash Management Shares Treasury ObligationPortfolio, a money market mutual fund comprised exclusively of investmentssecured 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 “qualifiedsettlement fund” for all reporting purposes under the federal tax laws, and allTaxes and Tax Expenses arising with respect to any income earned by theSettlement Fund shall be paid out of the Settlement Fund.

 

B.            The Escrow Agent shall make all payments of Taxes and TaxExpenses arising with respect to income earned by the Settlement Fund pursuantto written disbursement instructions from Jeffrey Klafter or Kurt B. Olsen onbehalf 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) ofthis Schedule A, then Party B  shallbecome responsible for assuring payment of the taxes on interest generated bythe Escrow Fund.  In such an event, PartyB shall provide the Escrow Agent with a completed W-9 form.

 

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6.                                      **Termination of the Escrow Agreement**

 

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

 

7.                                      **Distribution of the Escrow Fund**

 

Untilthe 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 anypurpose other than for: (1) the payment of Notice and AdministrationExpenses, including  the payment of Taxesor 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 theEscrow Agent only if authorized in writing by Jeffrey Klafter or Kurt B. Olsenon behalf of Party A.

 

8.                                      **Miscellaneous Provisions**

 

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

 

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

 

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C.            Noticeunder the Escrow Agreement shall be provided to each of the Parties indicatedbelow prior to the Final Settlement Date, and only Party A after the EffectiveDate, as follows:

 

Party A

 

Jeffrey A. Klafter, Esq.

Klafter Olsen &Lesser LLP

1311 Mamaroneck Avenue, Suite 220

White Plains, New York10605

Tel: (914) 997-5656

Fax: (914) 997-2444

 

Party B:

InfoSonics

c/o Peter H. Benzian, Esq.

LATHAM & WATKINSLLP

600 West Broadway, Suite 1800

San Diego, CA  92101

Tel: (619) 236-1234

Fax: (619) 696-7419

 

TheEscrow Agent

 

JenniferProvenzano

VicePresident

TDBank, National Association

101Haddonfield Road, 2nd Floor

CherryHill, 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 tosub-paragraph (c) of Article First of the Escrow Agreement or legalfees, disbursements and expenses for which it is entitled to indemnificationpursuant to sub-paragraph (d) of Article First of the EscrowAgreement, the 

 

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Escrow Agent shall reimburseitself 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 reimbursementand indemnification from the Parties only if, and to the extent that, the Courtdoes not permit reimbursement from the Escrow Fund, or if there areinsufficient funds in the Escrow Fund to reimburse the Escrow Agent.

 

E.             Anyobligation 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 theFinal Settlement Date, provided no demand to indemnify the Escrow Agent inaccordance with such paragraphs has been made prior to such time.

 

F.             Allterms used herein (except the terms “Party” or “Parties”) used in this ScheduleA shall have the same meanings that are set forth in the SettlementStipulation.  For purposes of thisSchedule A, the term “Party” or “Parties” shall mean Party A and/or Party B, asdefined in paragraph 1 above.  Any otherinconsistencies between the Settlement Stipulation and this Schedule A shall becontrolled by the language of the Settlement Stipulation.

 

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**SCHEDULEB**

 

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

 

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