Exhibit 3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of December 27, 1996 by
and among a Xxxxx Corporation, Delaware corporation ("Xxxxx"), First Trust of
California, National Association (the "Escrow Agent"), and Xxxxxx X. Xxxxx (the
"Shareholder Representative") for and on behalf of the shareholders (the
"Shareholders") and option holders (the "Option Holders" or, collectively with
the Shareholders, the "Securityholders") of CompCore Multimedia, Inc., a
California corporation ("CompCore").
R E C I T A L S
A. Pursuant to that certain Amended and Restated Agreement and Plan of
Reorganization dated as of November 27, 1996 (the "Plan of Reorganization"),
Xxxxx will issue to the Shareholders shares of Xxxxx Common Stock, $.001 par
value ("Xxxxx Common Stock), pursuant to the merger (the "Merger") of See
Acquisition Corporation, a California corporation and wholly-owned subsidiary of
Xxxxx ("Sub"), with and into CompCore and may issue additional shares of Xxxxx
Common Stock to the Option Holders upon exercise of Assumed Options (as defined
in the Plan of Reorganization);
B. Pursuant to Article IX of the Plan of Reorganization, a copy of which
is attached hereto as APPENDIX I and incorporated herein by reference, the
Shareholders have agreed to indemnify Xxxxx and other members of the Xxxxx Group
(as therein defined) with respect to inaccuracies in or breaches of
representations, warranties or covenants made by CompCore in the Plan of
Reorganization and certain other matters; and
C. In accordance with the Plan of Reorganization, the parties desire to
establish an escrow for the purpose of providing a fund against which Xxxxx (on
behalf of itself and other members of the Xxxxx Group) may seek indemnification
under the Plan of Reorganization.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
obligations herein, the parties agree as follows:
1. ESTABLISHMENT OF ESCROW. At the Closing (as defined in the Plan of
Reorganization), or as soon thereafter as practicable, Xxxxx shall deliver to
the Escrow Agent for deposit into escrow (the "Escrow") certificates
representing an aggregate of 195,732 shares of Xxxxx Common Stock otherwise
distributable to the Shareholders in the Merger (the "Initial Escrow
Shares"). In addition, from time to time, upon the exercise (if any) of any
Assumed Options prior to the Termination Date (as defined in the Plan of
Reorganization), Xxxxx will deliver to the Escrow
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Agent for deposit into the Escrow an additional certificate or certificates
representing 10% of the shares of Xxxxx Common Stock otherwise issuable to
the Option Holders upon exercise of such Assumed Options (the "Option Escrow
Shares"). The Initial Escrow Shares and the Option Escrow Shares are herein
referred to collectively as the "Escrow Shares." The Escrow Shares so
delivered to the Escrow Agent and any other securities, cash or other
property from time to time held by the Escrow Agent pursuant to the terms
hereof is herein referred to as the "Escrow Fund." The Escrow Agent agrees
to accept the Escrow Shares and to hold the Escrow Fund in escrow subject to
the terms and conditions of this Agreement.
2. MAINTENANCE OF THE ESCROW. The Escrow Agent shall establish a
separate account for each Securityholder showing the number of Escrow Shares and
the amount and type of other property, if any, held in the Escrow for such
Securityholder on the basis of a list of the Securityholders' respective
ownership percentage provided to the Escrow Agent by the Shareholder
Representative. The Escrow Agent shall maintain records showing each
Securityholder's Proportionate Interest in the Escrow Fund and shall adjust each
Securityholder's account to reflect distributions from, and additions or
substitutions to, the property held for the account of such Securityholder in
the Escrow. For purposes of this Agreement, each Securityholder's
"Proportionate Interest" in the Escrow Fund as of a specific date shall be equal
to the percentage that the value of the Escrow Shares and other property held
for the account of such Securityholder in the Escrow bears to the value of all
property held for the account of all Securityholders in the Escrow as of such
date. For purposes of the provisions of this Agreement relating to
indemnification and claims, the Escrow Shares shall be deemed to have a value
equal to the average closing sale price of Xxxxx Common Stock (as quoted on the
Nasdaq National Market and reported in THE WALL STREET JOURNAL) for the ten (10)
trading days preceding the Effective Time (as defined in the Plan of
Reorganization). The Escrow Agent is hereby granted the power to effect any
transfer of Escrow Shares required by this Agreement. Xxxxx shall cooperate
with the Escrow Agent in promptly issuing, or causing its transfer agent to
promptly issue, such stock certificates as shall be required to effect such
transfers. All Escrow Shares and any other securities from time to time held in
the Escrow Fund shall be registered in the name of the Escrow Agent or its
nominee.
3. SHAREHOLDER REPRESENTATIVE. From and after the establishment of the
Escrow as provided in Section 1 hereof, the Shareholders shall be represented by
the Shareholder Representative, or his successor appointed in accordance with
Section 9.7 of the Plan of Reorganization, who shall have the duties and
authority set forth in said section.
4. DIVIDENDS, VOTING AND RIGHTS OF OWNERSHIP. Except for tax-free
dividends paid in stock declared with respect to the Escrow Shares pursuant to
Section 305(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
which
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shall be treated in the manner set forth in Section 1 hereof, any cash
dividends, dividends payable in securities or other distributions of any kind
made in respect of the Escrow Shares will be distributed currently to the
Securityholders and, if distributed to the Escrow Agent, shall promptly be
paid over to the Securityholders. Each Securityholder will have voting
rights with respect to the Escrow Shares deposited in the Escrow with respect
to such Securityholder so long as such Escrow Shares are held in escrow, and
Xxxxx shall take all reasonable steps necessary to allow the exercise of such
rights. While the Escrow Shares remain in the Escrow Agent's possession
pursuant to this Agreement, the Securityholders will retain and will be able
to exercise all other incidents of ownership of said Escrow Shares which are
not inconsistent with the terms and conditions of this Agreement. Subject to
the rights of Xxxxx and the other members of the Xxxxx Group under the Plan
of Reorganization and this Agreement, all beneficial interest in the Escrow
Fund shall be the property of the Securityholders from and after the Closing,
and Xxxxx shall have no interest therein. None of the rights of the
Securityholders hereunder shall be transferable except as otherwise provided
by law. Each of the Securityholders shall be obligated for all federal,
state or local taxes applicable to such Securityholder's interest in the
Escrow Fund.
5. CLAIMS FOR INDEMNIFICATION; DISPOSITION THEREOF.
(a) If an Indemnitee (as defined in the Reorganization Agreement)
shall have any claim (a "Claim") for indemnification pursuant to Article IX of
the Plan of Reorganization, the Indemnitee or Xxxxx shall promptly deliver to
the Shareholder Representative and the Escrow Agent an Indemnification Claim in
accordance with Section 9.3 of the Plan of Reorganization Agreement.
(b) If the Shareholder Representative shall not have notified Xxxxx
and the Escrow Agent objecting to the delivery of any of the Escrow Fund out of
the Escrow to Xxxxx for application to such Claim within thirty (30) calendar
days after delivery of such Indemnification Claim (determined in accordance with
Section 14(d)), the Escrow Agent shall, as promptly as practicable following the
expiration of such period, deliver out of the Escrow to Xxxxx the number of
whole Escrow Shares having an aggregate value most nearly equal to the amount of
such Claim.
(c) If the Shareholder Representative gives notice to the Escrow
Agent and Xxxxx objecting to the delivery of any of the Escrow Fund out of
the Escrow to Xxxxx for application to a Claim (a "Contested Claim") within
the 30-day period specified in Section 5(b) hereof, the Escrow Agent shall
make no delivery to Xxxxx out of the Escrow Fund with respect to such
Contested Claim until the rights of the Securityholders and the Indemnitee
with respect thereto have been agreed upon between the Shareholder
Representative and Xxxxx or until such rights are finally determined by
arbitration pursuant to Section 13 hereof. If the arbitrator in such
proceeding shall determine that the Escrow Fund, or any part thereof, is to
be
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delivered out of the Escrow to Xxxxx to satisfy such Contested Claim, the
Escrow Agent shall, as promptly as practicable following receipt of such
determination, deliver out of the Escrow to Xxxxx the number of whole Escrow
Shares having an aggregate value most nearly equal to the amount of such
Contested Claim.
6. DISTRIBUTION OF ESCROW FUND; TERMINATION OF ESCROW. The portion of
the Escrow Fund not previously distributed in accordance with the terms of
Section 5 hereof shall be held by the Escrow Agent until ten (10) business days
following the Termination Date (the "Release Date"). Notwithstanding the
foregoing, there shall be retained in the Escrow the lesser of (i) the number of
Escrow Shares having an aggregate value equal to 100% of the amount of all
pending Claims asserted pursuant to Section 5 hereof and expenses reasonably
estimated by Xxxxx to be necessary for the disposition of all such Claims, and
(ii) the entire remaining Escrow Fund. The Escrow Fund not so distributed shall
be retained by the Escrow Agent until all such pending Claims are resolved and
the remaining Escrow Fund deliverable to any Xxxxx as a result thereof, if any,
shall have been delivered to Xxxxx. Thereafter, the Escrow Agent shall, as
promptly as practicable, deliver the remaining Escrow Fund to the Shareholders
in accordance with their Proportionate Interests.
7. TERM OF ESCROW AGREEMENT. This Agreement shall terminate upon the
distribution by the Escrow Agent of all property held in the Escrow Fund.
8. FEES OF THE ESCROW AGENT. The fees of the Escrow Agent, including (i)
the normal costs of administering the Escrow as set forth on the Fee Schedule
attached hereto as APPENDIX II and (ii) all fees and costs associated with the
administration of Claims, shall be paid by Xxxxx. In the event that the Escrow
Agent renders any service hereunder not provided for herein or there is any
assignment of any interest in the subject matter of the Escrow or modification
hereof, the Escrow Agent shall be reasonably compensated for such extraordinary
services by the party that is responsible for or requests such services.
9. LIABILITY OF THE ESCROW AGENT. In performing any of its duties under
this Agreement, the Escrow Agent shall not be liable to any party for damages,
losses or expenses, except in the event of gross negligence or willful
misconduct on its part. The Escrow Agent shall not incur any such liability for
(i) any act or failure to act made or omitted in good faith, or (ii) any action
taken or omitted in reliance upon any instrument, including any written
statement or affidavit provided for in this Agreement that the Escrow Agent
shall in good faith believe to be genuine; nor will the Escrow Agent be liable
or responsible for forgeries, fraud, impersonations, or determining the scope of
any agent's authority. In addition, the Escrow Agent may consult with legal
counsel in connection with its duties under this Agreement and shall be fully
protected in any act taken, suffered, or permitted by it in good faith in
accordance with the advice of counsel. The Escrow Agent is not responsible for
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determining and verifying the authority of any person acting or purporting to
act on behalf of any party to this Agreement.
10. CONTROVERSIES. If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of the Escrow,
its terms or conditions, the Escrow Agent will not be required to determine the
controversy or to take any action regarding it. The Escrow Agent may hold all
documents and funds and may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in the Escrow Agent's
discretion, it may require, despite what may be set forth elsewhere in this
Agreement. In such event, the Escrow Agent will not be liable for interest or
damage. Furthermore, the Escrow Agent may at its option, file an action of
interpleader requiring the parties to answer and litigate any claims and rights
among themselves. The Escrow Agent is authorized to deposit with the clerk of
the court all documents and funds held in the Escrow, except all costs,
expenses, charges and reasonable attorneys' fees incurred by it due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of the
Escrow.
11. INDEMNIFICATION OF ESCROW AGENT. Xxxxx and the Securityholders and
their respective successors and assigns agree jointly and severally to indemnify
and hold the Escrow Agent harmless against any and all losses, claims, damages,
liabilities and expenses, including reasonable costs of investigation, counsel
fees, including allocated costs of in-house counsel, and disbursements that may
be imposed on the Escrow Agent, or incurred by it in connection with the
performance of its duties under this Agreement, including but not limited to any
arbitration or litigation arising from this Agreement or involving its subject
matter. Nothing contained in this Section 11 shall impair the rights of the
Securityholders and Xxxxx, as between themselves, including without limitation,
their rights to enforce the provisions of Section 8 hereof with respect to the
allocation of the Escrow Agent's fees.
12. RESIGNATION OF ESCROW AGENT. The Escrow Agent may resign at any
time upon giving at least thirty (30) days written notice to the other
parties; PROVIDED, HOWEVER, that no such resignation shall become effective
until the appointment of a successor Escrow Agent which shall be accomplished
as follows: Xxxxx and the Shareholder Representative shall use their best
efforts to agree on a successor Escrow Agent within thirty (30) days after
receiving such notice. If the parties fail to agree on a successor Escrow
Agent within such time, the Escrow Agent shall have the right to appoint a
successor Escrow Agent authorized to do business in the State of California.
The successor Escrow Agent shall execute and deliver to the Escrow Agent an
instrument accepting such appointment, and the successor Escrow Agent shall,
without further acts, be vested with all the estates, property rights,
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powers, and duties of the predecessor Escrow Agent as if originally named as
Escrow Agent herein. The predecessor Escrow Agent then shall be discharged
from any further duties and liability under this Agreement.
13. ARBITRATION.
(a) Each Contested Claim will be settled by binding arbitration
pursuant to Section 13(c) hereof unless otherwise agreed by the Shareholder
Representative and Xxxxx. Any portion of the Claim which is not contested shall
be resolved as set forth in Section 5(b) hereof. The final decision of the
arbitrator shall be furnished to the Escrow Agent, the Shareholder
Representative and Xxxxx in writing and will constitute a conclusive
determination of the issue in question, binding upon CompCore, the
Securityholders and Xxxxx and shall not be contested or appealed by any of them.
After notice that the Claim is contested by the Shareholder Representative, the
Escrow Agent will continue to hold in the Escrow Fund Escrow Shares having a
value sufficient to cover such Claim, as determined pursuant to Section 2 hereof
(notwithstanding the expiration of the Release Date), until the earlier of
(i) execution of a settlement agreement by Xxxxx and the Shareholder
Representative setting forth a resolution of the Indemnification Claim, or
(ii) receipt of a copy of the final award of the arbitrator.
(b) The number of Escrow Shares to be delivered or held in Escrow
pursuant to a Contested Claim shall be equal to (i) the aggregate dollar amount
of the Contested Claim as determined pursuant to this Section 13 divided by
(ii) the value of the Escrow Shares on the date that the Indemnification Claim
is delivered to the Shareholder Representative, as determined pursuant to
Section 2 hereof.
(c) Any Contested Claim shall be settled by arbitration in Palo Alto,
California and, except as herein specifically stated, in accordance with the
commercial arbitration rules of the American Arbitration Association
("AAA Rules") then in effect. However, in all events, these arbitration
provisions shall govern over any conflicting rules which may now or hereafter be
contained in the AAA Rules. Any judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction over the subject
matter thereof. The arbitrator shall have the authority to grant any equitable
and legal remedies that would be available in any judicial proceeding instituted
to resolve a Contested Claim.
14. MISCELLANEOUS.
(a) ASSIGNMENT; BINDING UPON SUCCESSORS AND ASSIGNS. None of the
parties hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other parties. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
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(b) SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be held to be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. The parties further
agree to replace such invalid or unenforceable provision of this Agreement with
a valid and enforceable provision which will achieve, to the extent possible,
the economic, business and other purposes of the invalid or unenforceable
provision.
(c) ENTIRE AGREEMENT. This Agreement, the Appendices hereto, the
documents referenced herein, and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous agreements
or understandings, inducements or conditions, express or implied, written or
oral, between the parties with respect hereto and thereto. The express terms
hereof control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
(d) NOTICES. No notice or other communication shall be deemed given
unless sent in the manner, and to the persons, specified in this Section 14(d).
All notices and other communications hereunder will be in writing and will be
deemed given (i) upon receipt if delivered personally (or if mailed by
registered or certified mail), (ii) the day after dispatch if sent by overnight
courier, or (iii) upon dispatch if transmitted by facsimile (and confirmed by a
copy delivered in accordance with clause (i) or (ii)), addressed to the parties
at the following addresses:
To the Escrow Agent: First Trust of California, National Association
Global Escrow Depository Services
Xxx Xxxxxxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxx
To Xxxxx: Xxxxx Corporation
0000 Xxxxxxx Xxxxxxx Xxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
with a copy to: Xxxx Xxxx Xxxx & Freidenrich
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
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To the Shareholder Representative: Xxxxxx X. Xxxxx
CompCore Multimedia, Inc.
0000 Xxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
with a copy to: Cooley Godward LLP
Five Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Any party may change its address for such communications by giving notice
thereof to the other parties.
(e) OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy shall not preclude the exercise of any other.
(f) AMENDMENT AND WAIVERS. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
(g) FURTHER ASSURANCES. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
(h) ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, partner of any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof shall be solely between the parties to this
Agreement.
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(i) GOVERNING LAW. It is the intention of the parties hereto that
the internal laws of the State of California (irrespective of its choice of law
principles) shall govern the validity of this Agreement, the construction of its
terms, and the interpretation and enforcement of the rights and duties of the
parties hereto.
(j) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
XXXXX CORPORATION SHAREHOLDER REPRESENTATIVE:
By:
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Xxxxxx X. Xxxxx
Title:
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FIRST TRUST OF CALIFORNIA,
National Association
By:
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Title:
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