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EXHIBIT 10.2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT dated as of December 22, 1997 (the "Agreement") is
made and entered into by and among Javelin Systems, Inc., a Delaware
corporation ("Parent"), City National Bank, a national banking association (the
"Escrow Agent"), the undersigned shareholders (the "Shareholders") of CCI
GROUP, INC., a Missouri corporation (the "Company") and Xxxxxx Xxxxxxx, as the
agent of the shareholders of the Company (the "Agent").
RECITALS
WHEREAS, the Company, Parent, and Xxxxxx Xxxxxxx, Xxxxxx Xxxx, Xxxxxxx
Xxxx and Xxxxx Xxxxxx, constituting all of the shareholders of the Company, are
parties to that certain Plan of Reorganization and Stock Purchase Agreement
dated December 22, 1997 (the "Stock Purchase Agreement"), whereby Parent will
acquire all of the outstanding stock of the Company such that the Company
becomes a wholly-owned subsidiary of the Parent;
WHEREAS, pursuant to the Stock Purchase Agreement, an aggregate of 670,000
shares of Common Stock of Parent are to be issued to the Shareholders (the
"Purchaser Common Stock");
WHEREAS, the Escrow Agent shall not be concerned with, nor shall it have
any duties or obligations under the Stock Purchase Agreement. The sole
obligation of the Escrow Agent shall be to comply with this Agreement and any
instructions given to it pursuant hereto. Further, the Escrow Agent shall not
be deemed to have any knowledge of any matter set forth in the Stock Purchase
Agreement which has not been set forth in this Agreement;
WHEREAS, the Stock Purchase Agreement provides that 290,000 shares of the
Purchaser Common Stock to be issued to the Shareholders (the "Shareholders
Indemnity Shares") be placed in an escrow account as collateral to secure
certain indemnification obligations of the Shareholders under the Stock
Purchase Agreement on the terms and conditions set forth herein; and
WHEREAS, the parties hereto desire to establish the terms and conditions
pursuant to which such escrow account will be established and maintained.
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINED TERMS. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given them in the Stock Purchase
Agreement.
2. ESCROW AND INDEMNIFICATION.
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(a) ESCROW ACCOUNT. On the Closing Date, Parent shall or shall cause its
transfer agent to deposit with the Escrow Agent the Shareholders Indemnity
Shares, such deposit to constitute an escrow account (the "Escrow Account").
The Shareholders Indemnity Shares allocable to a Shareholder shall be delivered
by Parent or Parent's transfer agent to the Escrow Agent in the form of duly
authorized stock certificates issued in the respective names of each
Shareholder as set forth on Exhibit A hereto, together with endorsed stock
powers. The Shareholders Indemnity Shares shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party hereto. The Escrow Agent agrees
to accept delivery of the Shareholders Indemnity Shares and to hold such in the
Escrow Account subject to the terms and conditions of this Agreement.
(b) SHAREHOLDER INDEMNIFICATION. Pursuant to Section 4.2 of the Stock
Purchase Agreement, the Shareholders shall hold harmless and indemnify Parent
from and against certain Damages that may be suffered by Parent. The
Shareholders Indemnity Shares shall be security for such indemnity obligation,
subject to the limitations, and in the manner provided, in the Stock Purchase
Agreement and this Agreement.
(c) DIVIDENDS, VOTING AND RIGHTS OF OWNERSHIP. Any cash dividends paid
out of current earnings and profits in respect of the Shareholders Indemnity
Shares shall be distributed currently by Parent (or Parent's transfer agent) to
the Shareholders and will not be available to satisfy the indemnification
obligations of the Shareholders. The Shareholders will have the right to vote
the Shareholders Indemnity Shares so long as such Shareholders Indemnity Shares
are held in escrow and Parent will take all reasonable steps necessary to allow
the exercise of such rights. While the Shareholders Indemnity Shares remain in
the Escrow Agent's possession pursuant to this Agreement, the Shareholders will
retain and will be able to exercise all incidents of ownership of such shares
that are not inconsistent with the terms of this Agreement.
(d) NO TRANSFER BY SHAREHOLDERS. The Shareholders may not, without the
prior written consent of Parent, sell, assign, pledge or otherwise transfer any
of the Shareholders Indemnity Shares or any beneficial interest therein prior
to the delivery of such shares to the Shareholders.
(e) ESCROW AGENT'S POWER TO TRANSFER. The Escrow Agent is hereby granted
the power to effect any transfer of the Shareholders Indemnity Shares
contemplated by this Agreement. Parent shall cooperate with the Escrow Agent
in promptly issuing (or causing Parent's transfer agent to issue) stock
certificates to effect such transfer.
3. RELEASE OF INDEMNITY SHARES TO SATISFY CLAIMS FOR DAMAGES.
(a) DELIVERY OF CLAIM NOTICE. If Parent has incurred or suffered Damages
for which it is entitled to indemnification under Section 4.2 of the Stock
Purchase Agreement, Parent shall, on or prior to the Expiration Date (as
defined below), give written notice of such claim (a "Claim Notice") to the
Agent, with a copy being provided to the Escrow Agent. Each Claim Notice shall
state the amount of claimed Damages (the "Claimed Amount") and the basis for
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such claim. Parent shall not make any claim for Damages after thirty (30)
calendar days following the date of receipt by Parent of its final audited
consolidated financial statements for the fiscal year ended June 30, 1998 (the
"Expiration Date"). Parent shall notify Escrow Agent in writing that it has
received its final audited consolidated financial statements for the fiscal
year ended June 30, 1997 within five (5) business days of the receipt thereof.
(b) RESPONSE NOTICE; UNCONTESTED CLAIMS. Within ten (10) business days of
the date of a Claim Notice (the "Response Date"), the Agent shall provide to
Parent, with a copy being provided to the Escrow Agent, a written response (the
"Response Notice") in which the Agent shall (i) agree that the full Claimed
Amount is valid, (ii) agree that part, but not all, of the Claimed Amount (the
"Agreed Amount") is valid, or (iii) contest that any of the Claimed Amount is
valid. The Agent may contest all or a portion of a Claimed Amount only based
upon a good faith belief that all or such portion of the Claimed Amount does
not constitute Damages for which Parent is entitled to indemnification under
Section 4.2 of the Stock Purchase Agreement. If no response notice is
delivered by the Agent within such ten (10) day period, the Agent shall be
deemed to have agreed to the Claimed Amount.
(c) UNCONTESTED CLAIMS. If the Agent in the Response Notice agrees or is
deemed to have agreed that the Claimed Amount is valid, the Escrow Agent shall
within two (2) business days following the required Response Date release to
Parent that number of Shareholders Indemnity Shares having a Fair Market Value
sufficient to satisfy the Claimed Amount. The Fair Market Value of the
Shareholders Indemnity Shares for purposes of this Agreement (the "Fair Market
Value") shall be determined as of the Response Date and shall be equal to the
average closing price of a share of Purchaser Common Stock for each of the five
(5) trading days preceding the Response Date as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq").
The Escrow Agent shall be entitled to rely on a written notice from Parent
setting forth the Fair Market Value of a share of Parent Common Stock, which
notice shall also be sent to the Agent.
(d) PARTIALLY CONTESTED CLAIMS. If the Agent in the Response Notice
agrees that part, but not all, of the Claimed Amount is valid, the Escrow Agent
shall promptly following the required Response Date release to Parent that
number of Shareholders Indemnity Shares having a Fair Market Value sufficient
to satisfy the Agreed Amount.
(e) FULLY CONTESTED CLAIMS. If the Agent in the Response Notice contests
the release of all or a part of the Claimed Amount (the "Contested Amount"),
the Escrow Agent shall continue to hold that number of Shareholders Indemnity
Shares having a Fair Market Value necessary to satisfy the Contested Amount
notwithstanding the occurrence of the Expiration Date, until (i) delivery of a
copy of a settlement agreement executed by the Agent and Parent setting forth
instructions to the Escrow Agent as to the number of Shareholders Indemnity
Shares to be released to Parent, if any, or (ii) delivery of a copy of a court
order setting forth instructions to the Escrow Agent as to the number of
Shareholders Indemnity Shares to be released to Parent, if any.
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4. RELEASE OF SHAREHOLDERS INDEMNITY SHARES. Within five (5) business
days after the Expiration Date, the Escrow Agent shall distribute to the
Shareholders on a pro rata basis, all of the Shareholders Indemnity Shares then
being held by the Escrow Agent. Notwithstanding the foregoing, if Parent shall
assert a claim for indemnification prior to the Expiration Date and such claim
has not yet been resolved, the Escrow Agent shall retain in escrow that number
of Shareholders Indemnity Shares having a Fair Market Value reasonably deemed
necessary to satisfy the Claimed Amount of Damages. The Escrow Agent shall be
entitled to rely on a written notice from Parent setting forth the Fair Market
Value of share of Parent Common Stock, which notice shall also be sent to the
Agent.
5. FEES AND EXPENSES. Escrow Agent shall be entitled to the fees set
forth on the fee schedule attached hereto, plus actual expenses incurred in
performing its duties hereunder. Any setup fee shall be payable in advance.
6. LIMITATION OF ESCROW AGENT'S LIABILITY.
(a) The Escrow Agent shall incur no liability with respect to any action
taken or suffered by it in reliance upon any notice, direction, instruction,
consent, statement or other documents believed by it to be genuine and duly
authorized, nor for other action or inaction except its own willful misconduct
or negligence. The Escrow Agent shall have no duty to inquire into or
investigate the validity, accuracy or content of any document delivered to it
nor shall the Escrow Agent be responsible for the validity or sufficiency of
this Agreement. In all questions arising under this Agreement, the Escrow
Agent may rely on the advice of counsel, and for anything done, omitted or
suffered in good faith by the Escrow Agent based on such advice the Escrow
Agent shall not be liable to anyone. The Escrow Agent shall not be required to
take any action hereunder involving any expense unless the payment of such
expense is made or provided for in a manner reasonably satisfactory to it.
(b) In the event conflicting demands are made or conflicting notices are
served upon the Escrow Agent with respect to the Shareholders Indemnity Shares,
the Escrow Agent will have the absolute right, at the Escrow Agent's election,
to do either or both of the following: (i) resign so a successor can be
appointed pursuant to Section 9 hereof, or (ii) file a suit in interpleader and
obtain an order from a court of competent jurisdiction requiring the parties to
interplead and litigate in such court their several claims and rights among
themselves. In the event such interpleader suit is brought, the Escrow Agent
will thereby be fully released and discharged from all further obligations
imposed upon it under this Agreement, and Parent will pay the Escrow Agent all
costs, expenses and reasonable attorneys' fees expended or incurred by the
Escrow Agent pursuant to the exercise of the Escrow Agent's rights under this
Section 6(b) (such costs, fees and expenses will be treated as extraordinary
fees and expenses for the purposes of Section 5 hereof).
(c) Parent and Shareholders, jointly and severally, hereby agree to
indemnify the Escrow Agent for, and hold it harmless against, any loss, damage,
liability or expense incurred without negligence or willful misconduct on the
part of Escrow Agent, arising out of or in connection with its carrying out of
its duties hereunder. As among themselves, each of Parent
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and Shareholders shall be liable for one-half (1/2) of such amounts and Parent
shall be entitled to reimbursement from the Shareholders Indemnity Shares of
the Shareholders' share of any such loss, liability or expense.
7. TERMINATION. This Agreement shall terminate upon the later of the
Expiration Date or the release by the Escrow Agent of all of the Shareholders
Indemnity Shares in accordance with this Agreement.
8. NOTICES. All notices, instruction and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or
certified mail, return receipt requested, postage prepaid, or (ii) via a
reputable nationwide overnight courier service, in each case to the address set
forth below. Any such notice, instruction or communication shall be deemed to
have been delivered three business days after it is sent prepaid, or one (1)
business day after it is sent via a reputable nationwide overnight courier
service.
If to Parent: Javelin Systems, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxx
Tel: 000-000-0000
Fax: 000-000-0000
If to the Agent: Xxxxxx Xxxxxxx
CCI Group, Inc.
00000 Xxxxx Xxxxx Xxxxx
Xxxxx Xxxx, XX 00000
If to the Escrow Agent: City National Bank
Attn: Xxx Xxxxxxx, AVP
000 X. Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery,
telecopy or ordinary mail), but no such notice, instruction or communication
shall be deemed to have been delivered unless and until it is actually received
by the party to whom it was sent. Any party may change the address to which
notices, instructions or communications are to be delivered by giving the other
parties to this Agreement notice thereof in the manner set forth in this
Section 8.
9. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by giving
resignation to the parties to this Agreement,
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specifying not less than 60 days' prior written notice of the date when such
resignation shall take effect. Parent may appoint a successor Escrow Agent
without the consent of the Shareholders Representative so long as such
successor is a bank with assets of at least $500 million, and may appoint any
other successor Escrow Agent with the consent of the Agent, which shall not be
unreasonably withheld. If, within such notice period, Parent provides to the
Escrow Agent written instructions with respect to the appointment of a
successor Escrow Agent and directions for the transfer of the Shareholders
Indemnity Shares then held by the Escrow Agent to such successor, the Escrow
Agent shall act in accordance with such instructions and promptly transfer the
Shareholders Indemnity Shares to such designated successor.
10. AGENT. For purposes of this Agreement, the Shareholders hereby
consent to the appointment of Xxxxxx Xxxxxxx, as the Agent and as
attorney-in-fact for and on behalf of the each Shareholder, and the taking by
the Agent of any and all actions and the making of any decisions required or
permitted to be taken by him under this Agreement, including without
limitation, the exercise of the power to (i) authorize delivery to Parent of
the Shareholders Indemnity Shares, or any portion thereof, in satisfaction of
Damages or Claimed Amounts, (ii) agree to negotiate, enter into settlements and
compromises with respect to such Damages or Claimed Amounts, (iii) resolve any
claims or disputes hereunder and (iv) take all actions necessary in the
judgment of the Agent for the accomplishment of the foregoing and all of the
other terms, conditions and limitations contained in this Agreement.
11. GENERAL.
(a) GOVERNING LAW; FORUM. This Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the
State of California (without giving effect to principles of conflicts of laws).
Any legal action or other legal proceeding relating to this Agreement or the
enforcement of any provision of this Agreement may be brought or otherwise
commenced in any state or federal court located in Orange County, California.
Each party to this Agreement:
(i) expressly and irrevocably consents and submits to the
jurisdiction of each state and federal court located in Orange County,
California (and each appellate court located in the State of California) in
connection with any such legal proceeding;
(ii) agrees that each state and federal court located in
California shall be deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or federal
court located in California, any claim that such party is not subject
personally to the jurisdiction of such court, that such legal proceeding has
been brought in an inconvenient forum, that the venue of such proceeding is
improper or that this Agreement or the subject matter of this Agreement may not
be enforced in or by such court.
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(b) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be decreed an original, but all of which
together shall constitute one and the same instrument.
(c) ENTIRE AGREEMENT. Except as set forth in the Stock Purchase
Agreement, this Agreement constitutes the entire understanding and agreement of
the parties with respect to the subject matter of this Agreement and supersedes
all prior agreements or understandings, written or oral, between the parties
with respect to the subject matter hereof.
(d) WAIVERS. No waiver by any party hereto of any condition or of any
breach of any provision of this Agreement shall be effective unless in writing.
No waiver by any party of any such condition or breach, in any one instance,
shall be deemed to be a further or continuing waiver of any such condition or
breach or a waiver of any other condition or breach of any other provision
contained herein.
(e) AMENDMENT. This Agreement may be amended only with the written
consent of Parent, the Escrow Agent and the Agent (or their duly designated
successors).
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IN WITNESS WHEREOF, the parties hereto have duly executed this Escrow
Agreement as of the day and year first above written.
JAVELIN SYSTEMS, INC.
By:
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Name:
------------------------
Title:
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CITY NATIONAL BANK
By:
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Name:
------------------------
Title:
------------------------
AGENT:
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XXXXXX XXXXXXX
SHAREHOLDERS:
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XXXXXX XXXXXXX,
as shareholder
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XXXXXX XXXX
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XXXXXXX XXXX
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XXXXX XXXXXX
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EXHIBIT A
NAME STOCK CERTIFICATE NUMBER NUMBER OF SHARES
Xxxxxx Xxxxxxx LU 0202 278,750
Xxxxxx Xxxx LU 0193 9,000
Xxxxxxx Xxxx LU 0195 1,500
Xxxxx Xxxxxx LU 0197 750
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