EXHIBIT 10.12
ESCROW AGREEMENT
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This Agreement is made as of September 27, 1996 by and between NeoMagic
Corporation, a California corporation with the head office at 0000 Xxx Xxxxxx,
Xxxxx Xxxxx, Xxxxxxxxxx 00000 (hereinafter referred to as "NMC") and Mitsubishi
International Corporation, a New York corporation acting through its Palo Alto
branch office at 000 Xxxxxx Xxx, Xxxxx 000, Xxxx Xxxx, Xxxxxxxxxx 00000
(hereinafter referred to as "MIC").
WITNESSETH:
WHEREAS, NMC and MIC has entered into an agreement ("Agreement") dated
November 20, 1995, whereby MIC will provide trade financing service to NMC in
NMC's purchasing semiconductors from its manufacturers, and
WHEREAS, in providing financial services, upon request by NMC, MIC
agrees to set-up a credit line in an amount exceeding US$ 10 Million but not
exceeding US$ 13 Million for a period of 5 months commencing on July 1, 1996,
and
WHEREAS, as a security for such a credit line that exceeds US$ 10
Million, NMC agrees to establish a money market account with Xxxxxx Xxxxxxx
("Account") in such a manner and terms as hereinbelow set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreement,
herein contained, the parties hereto agree as follows:
1. ACCOUNT
a. NMC shall establish and open a money market account with Xxxxxx Xxxxxxx
Bank at 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX ("Account") in the name of
NeoMagic Escrow Account by October 1, 1996.
b. The Account shall at least include, but not be limited to the following
terms.
(1) Any withdrawal from, drawing out of money transfer or any payment
through the Account shall not be permitted unless the authorized signers
representing NMC and MIC respectively co-sign the documents required for such
release of Deposit Money, as defined in Section 2.b. below.
(2) NMC shall be entitled to earn any interest accrued to the Account
2. DEPOSIT
a. On each day of 10th, 20th, and the end of every month (each date an
"Estimation Date")(if such day falls on non-business day, next business day),
commencing on October 1, 1996, NMC and MIC shall confer to estimate and
determine the amount ("Estimated Excess Amount") by which MIC financing exceeds
US$ 10 Million by giving due consideration on scheduled shipments and
prospective payments being made during next following 10 days.
b. Forthwith after such mutual agreement upon the Estimated Excess Amount,
NMC shall deposit a sum equal to the Estimated Excess Amount (the "Deposit
Money") into the Account. NMC shall send the voucher evidencing such Deposit
Money to MIC as soon as practicable. Nothing in this Escrow Agreement shall
obligate NMC to deposit money into the Account insofar as MIC's financing will
not exceed US$ 10 Million.
3. WITHDRAWAL
a. Subject to Subsections 3.b and 3.c, whenever NMC desires to withdraw a
certain amount of money from the Account, NMC shall give a written request (the
"Withdrawal Request") to MIC, stating its reason, the amount and date of
withdrawal (the "Withdrawal Date").
b. MIC shall agree to the withdrawal by NMC of the amount equal to the
difference between US$ 10 Million and outstanding balance of trade financing
then in effect (the "Trade Financing Balance"), if and when all of the following
conditions is fulfilled to the satisfaction of MIC:
(1) The outstanding Trade Financing Balance on the proposed Withdrawal
Date is less than US$ 10 Million and in MIC's reasonable judgment there is no
forecasting that it will cause the Trade Financing Balance to exceed US$ 10
Million as of the next Estimation Date; and
(2) No default either in payment or under the Agreement and/or other
contracts with any third party has occurred on the part of NMC.
c. NMC is permitted to give such Withdrawal Request, once during each of
first, second, and third 10 day period of each month. NMC shall be limited to 3
Withdrawal Requests per month.
4. COLLATERAL
a. NMC shall intend to hold the Account in trust for the sole and exclusive
benefit of MIC, and the Account shall constitute a part of the collateral under
that certain General Security Agreement dated November 15, 1995, between NMC and
MIC, therefore in no
even shall NMC enter into any contract, agreement or undertaking of whatsoever
nature with any third party or take any action or procedure, which by operation
of law or otherwise result in granting a first priority security interest in the
Account to such third party.
b. In the event that NMC fails to make payment to MIC pursuant to the
Agreement, upon request of MIC, NMC agrees to sign any documents
reasonably necessary in order for MIC to receive money for applying it
to the repayment of outstanding debt owed to MIC.
5. COST, EXPENSE AND TAX
a. NMC shall be responsible for any costs, expenses, charges and taxes (if
any) of any nature whatsoever which may be incurred due to any transaction in
respect of the Account.
b. NMC shall hold MIC harmless against any claim, changes (including
attorney fees), or liabilities (including tax liability) which MIC may incur in
connection with operation of the Account under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed in duplicate, each duplicate to serve as an original as of the day and
year first above written.
NEOMAGIC CORPORATION
By: /s/ Xxxxxxx Xxxxxxx
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Name: Xxxxxxx Xxxxxxx
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Title: President/CEO
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MITSUBISHI INTERNATIONAL CORPORATION
By: /s/ Junji Inque
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Name: Junji Inque
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Title: GENERAL MANAGER - PALO ALTO OFFICE
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