EXHIBIT 10.2
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of June 8, 1999, by and among
Racom Systems, Inc., a Delaware corporation (the "Company"), Xxxxxx Xxxxxxxxxx
& Xxxxxxxx, LLP (the "Escrow Agent") and the parties who have executed this
Agreement as the Purchaser on the last page hereof (individually, the
"Purchaser" and collectively, the "Purchasers").
Recitals
A. Simultaneously with the execution of this Agreement, the Purchasers
have entered into a Common Stock Purchase Agreement, dated as of the date hereof
(the "Purchase Agreement") incorporated herein by reference, pursuant to which
the Purchasers have agreed to purchase 17,000,000 shares of Common Stock, $.01
par value (the "Common Stock") of the Company.
B. The Escrow Agent is willing to act as escrow agent pursuant to the
terms of this Agreement with respect to the Purchase Price (as defined in the
Purchase Agreement) to be paid for the Common Stock and the delivery of one or
more certificate representing the Common Stock registered in the names of the
Purchasers as set forth in the Purchase Agreement (the "Common Stock" and,
together with the Ancillary Closing Documents (as defined below), (the Purchase
Agreement, Common Stock and Ancillary Closing Documents collectively, referred
to as the "Consideration").
C. The Escrow Agent is willing to act as escrow agent pursuant to the
terms of this Agreement and the Purchase Agreement with respect to One Hundred
Thousand Dollars ($100,000) (the "Escrowed Funds"), which is part of the
Purchase Price and which is to remain in escrow until settlement agreements and
releases have been obtained from all the creditors listed on Schedule A to this
Agreement.
D. Upon the closing of the transaction contemplated by the Purchase
Agreement (the "Closing") and the occurrence of an event described in Section 2
below, the Escrow Agent shall cause the distribution of part of the Purchase
Price, Ancillary Closing Documents and the Common Stock in accordance with the
terms of this Agreement.
E. Upon the occurrence of an event described in Section 2(e) below, the
Escrow Agent shall cause the distribution of the Escrowed Funds in accordance
with the terms of this Agreement.
F. All capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Purchase Agreement.
NOW, THEREFORE, IT IS AGREED:
1. Deposit of Consideration.
------------------------
(a) Upon execution of this Agreement, the Purchasers shall deposit
with the Escrow Agent a copy of the Purchase Agreement, and this Escrow
Agreement or a counterpart thereof, each executed by the Purchasers, the
Purchase Price. Upon execution of this Agreement the Company shall deliver to
the Escrow Agent (i) the Purchase Agreement or a counterpart thereof signed by
the Company, (ii) this Escrow Agreement or a counterpart thereof signed by the
Company, (iii) certificates (with the appropriate restrictive legends)
registered in the names of the Purchasers, as set forth in Schedule 1 to the
Purchase Agreement, representing a number of common shares of the Company equal
to an aggregate of Seventeen Million (17,000,000), held for the purpose of the
purchase by the Purchasers, (iv) bank wiring instructions for transfer of the
Purchase Price by the Escrow Agent into an account specified by the Company for
such purpose. In addition, upon the execution of this Agreement the Company
shall deposit or cause to be deposited with the Escrow Agent an opinion of the
Company's counsel addressed to the Purchasers in the form of Exhibit D attached
to the Purchase Agreement and the schedules to the Purchase Agreement (such
opinion and schedules being hereinafter referred to as the "Ancillary Closing
Documents").
(i) The Purchase Price shall be delivered by the Purchasers to the
Escrow Agent by wire transfer to the following account:
Bank of New York
000 Xxxx 00/xx/ Xxxxxx
Xxx Xxxx, XX 00000
ABA# 000000000
Xxxxxx Gottbetter & Xxxxxxxx, LLP
Acct# 0000000000
Reference: GEM-RCOM
(ii) The Common Stock and Ancillary Closing Documents shall be
delivered by the Company to the Escrow Agent at its address for notice indicated
in Section 5(a)(ii).
(b) Until termination of this Agreement as set forth in Section 2, all
additional amounts of the Purchase Price paid by or which becomes payable
between the Company and the Purchasers shall be deposited with the Escrow Agent.
(c) The Escrow Agent agrees to hold the Consideration and the Purchase
Price received by it in accordance with the terms and conditions set forth
herein until it has received all of the consideration;
(d) The Purchasers and the Company understand that the Purchase Price
delivered to the Escrow Agent pursuant to Section 1(a) shall be held in escrow
in a non-interest bearing XXXX account until the Closing. The Purchase Price
will be returned promptly to the Purchasers if all of
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the Consideration is not received on or before June 30, 1999. After all of the
Consideration has been received by the Escrow Agent, the parties hereto hereby
authorize, direct and instruct the Escrow Agent to promptly effect the Closing
in accordance with the terms set forth below.
(e) The Purchasers and the Company understand that the Escrowed Funds
delivered to the Escrow Agent pursuant to Section 1(a) shall be held in escrow
in a separate interest bearing escrow account. The Escrowed Funds will be used
for the purpose of satisfying settlement agreements and obtaining releases from
all of the creditors listed on Schedule A.
2. Terms of Escrow.
---------------
(a) The Escrow Agent shall hold the Consideration in escrow until the
earlier to occur of (i) the receipt by the Escrow Agent of the total amount of
the Purchase Price from the Purchaser or (ii) the receipt by the Escrow Agent of
a notice, executed by each of the Company and the Purchaser, stating that the
Purchase Agreement has been terminated or otherwise directing the disposition of
the Consideration.
(b) If the Escrow Agent receives the items referenced in clause (i) of
Section 2(a) prior to its receipt of the notice referenced in clause (ii) of
Section 2(a), then, the Escrow Agent shall deliver as soon as practicable, but
in no event later than three (3) business days, the Common Stock and the
Ancillary Closing Documents executed by the Company to the Purchasers or
pursuant to their respective written instructions and shall deliver immediately
to the Company $70,000 of the Purchase Price.
(c) If the Escrow Agent receives the notice referenced in clause (ii) of
Section 2(a) prior to its receipt of the items referenced in clause (i) of
Section 2(a), then the Escrow Agent shall promptly deliver the Purchase Price,
Common Stock and Ancillary Closing Documents as specified in such notice. The
parties agree that if such notice is silent as to the delivery of such items,
the Escrow Agent shall promptly upon receipt of such notice return (i) the
Purchase Price to the Purchasers, (ii) the Common Stock to the Company and (iii)
the Ancillary Closing Documents to the party that delivered the same.
(d) The Escrow Agent shall hold the Escrowed Funds until the Company has
received settlement agreements and releases from all the creditors listed on
Schedule A. Upon the receipt of executed settlement agreements between the
Company and each of the creditors listed on Schedule A for the amount listed
opposite their name, the escrow agent shall release the portion of Escrowed
Funds to such creditor by wire transfer, attorney's check or certified check.
Any amount of the Escrowed Funds remaining in escrow after settlement agreements
and releases from the creditors have been obtained, shall be released to the
Company.
3. Duties and Obligations of the Escrow Agent.
------------------------------------------
(a) The parties hereto agree that the duties and obligations of the Escrow
Agent are only such as are herein specifically provided and no other. The
Escrow Agent's duties are as a depositary
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only, and the Escrow Agent shall incur no liability whatsoever, except as a
direct result of its willful misconduct or gross negligence.
(b) The Escrow Agent may consult with counsel of its choice, and shall not
be liable for any action taken, suffered or omitted by it in accordance with the
advice of such counsel.
(c) The Escrow Agent shall not be bound in any way by the terms of any
other agreement to which the Purchasers and the Company are parties, whether or
not it has knowledge thereof, and the Escrow Agent shall not in any way be
required to determine whether or not any other agreement has been complied with
by the Purchasers and the Company, or any other party thereto. The Escrow Agent
shall not be bound by any modification, amendment, termination, cancellation,
rescission or supersession of this Agreement unless the same shall be in writing
and signed jointly by each of the Purchasers and the Company, and agreed to in
writing by the Escrow Agent.
(d) If the Escrow Agent shall be uncertain as to its duties or rights
hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, it shall
be entitled to refrain from taking any action, other than to keep safely all
property held in escrow or to take certain action, until it shall jointly be
directed otherwise in writing by the Purchasers and the Company or by a final
judgment of a court of competent jurisdiction.
(e) The Escrow Agent shall be fully protected in relying upon any written
notice, demand, certificate or document which it, in good faith, believes to be
genuine. The Escrow Agent shall not be responsible for the sufficiency or
accuracy of the form, execution, validity or genuineness of documents or
securities now or hereafter deposited hereunder, or of any endorsement thereon,
or for any lack of endorsement thereon, or for any description therein; nor
shall the Escrow Agent be responsible or liable in any respect on account of the
identity, authority or rights of the persons executing or delivering or
purporting to execute or deliver any such document, security or endorsement.
(f) The Escrow Agent shall not be required to institute legal proceedings
of any kind and shall not be required to defend any legal proceedings which may
be instituted against it or in respect of the Consideration.
(g) If the Escrow Agent at any time, in its sole discretion, deems it
necessary or advisable to relinquish custody of the Consideration, it may do so
by delivering the same to any other escrow agent mutually agreeable to the
Purchasers and the Company and, if no such escrow agent shall be selected within
three days of the Escrow Agent's notification to the Purchasers and the Company
of its desire to so relinquish custody of the Consideration, then the Escrow
Agent may do so by delivering the Consideration to the clerk or other proper
officer of a court of competent jurisdiction as may be permitted by law. The
fee of any court officer shall be borne by the Company. Upon such delivery,
the Escrow Agent shall be discharged from any and all responsibility or
liability with respect to the Consideration and this Agreement and the Company
and the Purchasers shall promptly
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pay to the Escrow Agent all monies which may be owed it for its services
hereunder, including, but not limited to, reimbursement of its out-of-pocket
expenses pursuant to paragraph (i) below.
(h) This Agreement shall not create any fiduciary duty on the Escrow
Agent's part to the Purchasers or the Company, nor disqualify the Escrow Agent
from representing either party hereto in any dispute with the other, including
any dispute with respect to the Consideration.
(i) The Escrow Agent represents that it is counsel to at least one of the
Purchasers. The parties agree that the Escrow Agent's engagement as provided
for herein is not and shall not be objectionable for any reason.
(j) Upon the performance of this Agreement, the Escrow Agent shall be
deemed released and discharged of any further obligations hereunder.
4. Indemnification.
---------------
(a) The Purchasers hereby indemnify and hold free and harmless Escrow
Agent from any and all losses, expenses, liabilities and damages (including but
not limited to reasonable attorney's fees, and amounts paid in settlement)
resulting from claims asserted by the Company against Escrow Agent with respect
to the performance of any of the provisions of this Agreement.
(b) The Company hereby indemnifies and holds free and harmless Escrow Agent
from any and all losses, expenses, liabilities and damages (including but not
limited to reasonable attorney's fees, and amount paid in settlement) resulting
from claims asserted by the Purchasers against Escrow Agent with respect to the
performance of any of the provisions of this Agreement.
(c) The Purchasers and the Company, jointly and severally, hereby indemnify
and hold the Escrow Agent harmless from and against any and all losses, damages,
taxes, liabilities and expenses that may be incurred by the Escrow Agent,
arising out of or in connection with its acceptance of appointment as the Escrow
Agent hereunder and/or the performance of its duties pursuant to this Agreement,
the Purchase Agreement, and the Common Stock, including, but not limited to, all
legal costs and expenses of the Escrow Agent incurred defending itself against
any claim or liability in connection with its performance hereunder, provided
that the Escrow Agent shall not be entitled to any indemnity for any losses,
damages, taxes, liabilities or expenses that directly result from its willful
misconduct or gross negligence.
(d) In the Event of any legal action between the Parties to this Agreement
to enforce any of its terms, the legal fees of the prevailing Party shall be
paid by the Party (ies) who did not prevail.
5. Miscellaneous.
-------------
(a) All notices, requests, demands and other communications hereunder shall
be in writing, sent by telecopier, upon proof of sending thereof to the
following addresses:
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(i) If to the Company: with a copy to:
Mr. Art Rancis
Chief Executive Officer
Racom Systems, Inc.
0000 Xxxxxxxxx Xxxxx Xxxx.
Xxxxxxxxx Xxxxxxx, XX 00000
Tel.: (000) 000-0000
Fax: (303) 000- 0000
(ii) If to the Purchasers:
At the fax number set forth in the Purchase Agreement
(iii) If to the Escrow Agent:
Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
Attn: Xxxx X. Xxxxxxxxxx, Esq.
000 Xxxxx Xxxxxx, 0/xx/ Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
or at such other address as any of the parties to this Agreement may hereafter
designate in the manner set forth above to the others.
(b) This Agreement shall be construed and enforced in accordance with the
law of the State of New York applicable to contracts entered into and performed
entirely within New York.
(c) This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6. Termination of Escrow.
---------------------
This Escrow Agreement shall begin upon the date hereof and shall terminate
either pursuant to Section 2(a) or (d) or the release of the Escrowed Funds.
Upon the termination of the Escrow Agreement, the Escrow Agent shall distribute
any remaining amount of the Escrowed Funds to the Company.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.
Escrow Agent: The Company:
Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP RACOM SYSTEMS, INC.
/s/ Xxxx X. Xxxxxxxxxx By: /s/ Art Rancis
-------------------------------- ---------------------------------
Name: Art Rancis
Title: Chief Executive Officer
Purchasers:
GEM SINGAPORE PTE LTD.
By: /s/ Xxxxxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxxxxx Xxxxxxxx
Title: President
TURBO INTERNATIONAL LTD.
By: /s/ Xxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Director
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SCHEDULE A
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Creditor Amount Owed Settlement Amount
-------- ----------- -----------------
Arapahoe County Treasurer $6,769.91 $3,385
Holland & Xxxx $24,973.67 $12,487
Xxxx X. Xxxxx $20,000 $0
LaSalle Partners $38,893.87 $19,447
Xxxxxxx Corporation $7,650.11 $3,825
Xxxxxx Public Relations $16,006.09 $8,003
NASDAQ Stock Market $5,000 $5,000
Picopak $32,417.43 $16,209
Ramtron International $52,802.82 $26,401
US West Communications $8,176.11 $4,088
========== ========
Total $212.690.01 $100,000
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