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EXHIBIT 10.2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, made and entered into as of this 5th day
of August, 1999 (the "Agreement"), by and among XXXXX X. XXXXX (the "Global
Representative"), as the representative of the former stockholders (the "Global
Stockholders") of GLOBAL NETWORK, INC., a New York corporation ("Global"),
XXXXXXX X. XXXXXX (the "Company Representative"), as the representative of
certain of the former controlling stockholders (the "Company Stockholders") of
BARGAIN BROKERS, INC., a Nevada corporation (the "Company"), and Xxxxxx X.
Xxxxxxx, P.C., as escrow agent (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Company, Global and the Global Stockholders have
entered into that certain Agreement and Plan of Reorganization, dated as of
August 5, 1999 (the "Reorganization Agreement") attached hereto as Exhibit A,
pursuant to which the Global Stockholders are exchanging the shares (the "Global
Shares") of the common stock of Global owned by them for shares of common stock
(the "Company Shares") of the Company on the terms and subject to the conditions
set forth in the Reorganization Agreement; and
WHEREAS, in order to provide for certain additional Company
Shares to be issued to the Global Stockholders pursuant to the Reorganization
Agreement (the "Escrowed Shares"), the Company, Global and the Global
Stockholders have agreed that the Escrowed Shares specified in Section 3.1 of
this Agreement shall be delivered to the Escrow Agent to be deposited in the
Escrow Fund, as hereinafter defined, pending the completion of the conditions
contemplated under Section IV of this Agreement; and
WHEREAS, the Company, Global, the Global Stockholders and the
Escrow Agent desire to set forth the terms, conditions and provisions pursuant
to which the Escrow Fund will be held by the Escrow Agent and (i) disbursed to
the Global Stockholders and/or (ii) returned to the Company for cancellation.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
SECTION I DEFINITIONS
Except as otherwise provided herein, all capitalized terms
contained herein shall have the same meanings as provided in the Reorganization
Agreement, provided, however, that for purposes hereof, the term "Escrow Fund"
shall mean the Escrowed Shares deposited with the Escrow Agent on the date this
Agreement is executed as provided in the Reorganization Agreement, together with
all dividends thereon, if any, less releases (including returns to the Company)
from time to time made therefrom.
SECTION II TERM OF THE AGREEMENT
The term (the "Term") of this Agreement shall commence on the
date hereof and shall continue in effect for three years thereafter, unless
earlier terminated because all of the Escrowed Shares deposited pursuant to
Section 3.1 below have been released.
SECTION III ESTABLISHMENT OF THE ESCROW FUND
Section 3.1 Delivery of Escrow Fund. The Escrow Fund shall
initially consist of 21,732,934 shares of the Company's Common Stock (the
"Escrowed Shares"), which shall be comprised of 12,000,000 Earnout Shares and
9,732,934 Penalty Shares. Certificates representing the Escrowed Shares are to
be issued at the Closing pro rata in the names of the Global Stockholders and
shall be delivered, together with stock
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powers duly endorsed in blank, by the Global Representative to the Escrow Agent
upon the signing of this Agreement.
Section 3.2 Receipt of Escrow Fund. The Escrow Agent agrees,
after receipt of the Escrowed Shares as provided in Section 3.1 above, to hold
and dispose of the Escrow Fund in accordance with the terms, conditions and
provisions of this Agreement.
Section 3.3 Voting and Dividends. During the Term, the Global
Stockholders shall have the right to vote the Escrowed Shares, other than
Escrowed Shares returned to the Company for cancellation in accordance with
Section IV below, registered in their respective names. Dividends, if any, paid
on the Escrowed Shares during the Term will be added to the Escrow Fund and will
be released from the Escrow Fund at the same time, and in the same manner, as
the respective Escrowed Shares on which such dividends were paid.
SECTION IV DISPOSITION OF ESCROW FUND DURING TERM OF AGREEMENT
Section 4.1 Direction Letter. Should an event occur that requires
the release of Escrowed Shares from the Escrow Fund pursuant to Sections 4.2 and
4.3 below, the Global Representative and the Company Representative shall send
to the Escrow Agent a direction letter, in the form set forth in Exhibits C and
D, as applicable; provided, however, that a notice to return all of the Escrowed
Shares to the Company for cancellation need only be signed by the Global
Representative. The Escrow Agent shall release the Escrowed Shares as so
instructed pursuant to such direction letter or notice, without further notice
or consent by the other parties hereto. Notwithstanding any provisions of
Sections 4.2 and 4.3 below, the Escrow Agent is only obligated to release the
Escrowed Shares in accordance with a direction letter issued pursuant to this
Section 4.1 or pursuant to an award in arbitration as set forth in Section 6.2
below.
Section 4.2 Earnout Shares.
(a) Some or all of the Earnout Shares shall be released
(pro rata in accordance with the percentages set forth opposite each Global
Stockholder's name on Exhibit B hereto if not all Escrowed Shares are to be
released) to the Global Stockholders in the following circumstances:
(i) All of the Earnout Shares are to be released to
the Global Stockholders upon the Company having during any four consecutive
quarters during the Term aggregate net income before taxes of not less than
$1,000,000, as determined by generally accepted accounting principles and as
reported to the public in accordance with applicable periodic reporting rules
under the Securities Exchange Act of 1934.
(ii) If all or any percentage of the Penalty Shares
are released to the Global Stockholders under Section 4.3 of this Agreement, all
or the same percentage of the Earnout Shares shall simultaneously be released to
the Global Stockholders.
(b) Any Earnout Shares not released to the Global
Stockholders, or for which a notice has not been sent to the Escrow Agent
requesting release to the Global Stockholders as provided above in this Section
and in Section 4.1, as of the end of the Term shall be returned by the Escrow
Agent to the Company for cancellation.
Section 4.3 Penalty Shares.
(a) Some or all of the Penalty Shares shall be released
(pro rata in accordance with the percentages set forth opposite each Global
Stockholder's name on Exhibit B hereto if not all Escrowed Shares are to be
released) to the Global Stockholders in the following circumstances:
(i) 25% of the Penalty Shares (2,433,233 Penalty
Shares) are to be released to the Global Stockholders if Warrants having an
aggregate exercise price of at least $200,000 are not exercised, and the
aggregate exercise price thereof is not delivered to the Company, on or before
30 days following the Closing; an additional 37 1/2% of the Penalty Shares
(3,649,850 Penalty Shares) are to be released to the Global
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Stockholders if Warrants having an aggregate exercise price of at least an
additional $300,000 are not exercised, and the aggregate exercise price thereof
is not delivered to the Company, on or before 60 days following the Closing; and
the remaining 37 1/2% of the Penalty Shares (3,649,851 Penalty Shares) are to be
released to the Global Stockholders if Warrants having an aggregate exercise
price of at least an additional $300,000 are not exercised, and the aggregate
exercise price thereof is not delivered to the Company, on or before 90 days
following the Closing.
(ii) All of the Penalty Shares are to be released to
the Global Stockholders if a claim is asserted against the Company by
stockholders who purchased their securities from the Company pursuant to the
private offering of 100,000 shares for an aggregate purchase price of $200,000
described in Section 6.2(a) of the Reorganization Agreement and such claim is
related to (x) any action taken by or on behalf of the Company prior to the
Closing or (y) any action taken after the Closing by any person, other than an
officer or director of the Company, without written authorization by the
Company, in each case unless satisfactory indemnity reasonably acceptable to the
Global Stockholders is provided within 30 days after the Global Representative
notifies the Company Representative of such claim.
(b) Any Penalty Shares not released to the Global
Stockholders, or for which a notice has not been sent to the Escrow Agent
requesting release to the Global Stockholders as provided above in this Section
and in Section 4.1, prior to the end of the Term shall be returned by the Escrow
Agent to the Company for cancellation.
Section 4.4 Notice to the Escrow Agent. Notice to the Escrow
Agent shall be (i) joint written instructions of the Global Representative and
the Company Representative, directing the release of a number of the Escrowed
Shares from the Escrow Fund, in the form of Exhibits C and D attached hereto,
(ii) with respect to the return all of the Escrowed Shares to the Company for
cancellation, a notice signed by the Global Representative in the form of
Exhibit D attached hereto, or (iii) an award in arbitration, pursuant to Section
6.2 below, directing the release of Escrowed Shares from the Escrow Fund.
SECTION V THE ESCROW AGENT
Section 5.1 Responsibility and Liability of the Escrow Agent.
(a) As escrow agent hereunder, the Escrow Agent shall have
no duties or responsibilities, including, without limitation, any duty or
responsibility to determine whether any release is proper under any provision
hereof, except those duties and responsibilities expressly set forth herein.
Without limitation, the Escrow Agent shall have no obligation hereunder except
as to Escrowed Shares actually received by it. It is understood and agreed that
the duties of the Escrow Agent hereunder are purely ministerial in nature and
that it shall not be liable for any error of judgment, fact or law, or any act
done or omitted to be done, except for its own gross negligence or willful
misconduct. The determination of the Escrow Agent as to whether an event or
condition has occurred, been met or satisfied, or as to whether a provision of
the Reorganization Agreement or this Agreement has been complied with, or as to
whether sufficient evidence of the event, condition or compliance with the
provision has been furnished to the Escrow Agent, shall not subject such Escrow
Agent to any claim, liability or obligation whatsoever, even if it shall be
found that such determination was improper or incorrect, provided only that such
Escrow Agent shall not have been guilty of gross negligence or willful
misconduct in making such determination. The Escrow Agent may execute any papers
hereunder and perform any duties hereunder through employees, or attorneys, or
agents or servants.
(b) The Escrow Agent shall not be responsible for the
genuineness or validity of any document or item deposited with it or any notice
or instruction given to it hereunder, and the Escrow Agent shall be fully
protected in acting in accordance with any written instruction or instrument
given to it hereunder, and believed by it to have been signed by the proper
person or persons. The Escrow Agent may assume that any person purporting to
give any notice or instruction in accordance with the provisions of this
Agreement has been duly authorized to do so and may assume the authenticity of
any signature it receives.
(c) If at any time the Escrow Agent shall receive
conflicting notices, claims, demands or instructions with respect to the Escrow
Fund or any part thereof or if for any other reason it shall in
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good faith be unable to determine the party or parties entitled to receive the
Escrow Fund or any part thereof, or shall otherwise be uncertain as to its
duties or rights hereunder, the Escrow Agent may refuse to make any release and
retain the Escrow Fund or part thereof in its possession until either receiving
written instructions from both the Global Representative and the Company
Representative or as directed pursuant to an order as set forth in Section 6
below whereupon the Escrow Agent shall make disposition of the disputed Escrowed
Shares or take action in accordance with such written instructions or such
order.
(d) The Global Stockholders [and the Company
Representative] shall jointly and severally indemnify and hold harmless the
Escrow Agent from and against any claim, demand, deficiency, tax, loss or
liability and related costs or expenses in connection therewith, including,
without limitation, reasonable attorneys' fees and costs of investigation, and
any costs or expenses incurred in connection with any arbitration or judicial
proceedings, incurred for any reason other than the gross negligence or willful
misconduct of such Escrow Agent and arising out of or in connection with such
Escrow Agent's acceptance of, the exercise of its rights under, or the
performance of its duties and obligations under this Agreement. The terms of
this Section shall survive the termination of this Agreement and shall apply
with respect to claims arising out of or in connection with the Escrow Agent's
duties while acting as Escrow Agent and the resignation of the Escrow Agent.
(e) If the Global Representative and the Company
Representative shall be in disagreement about the interpretation of this
Agreement, or about the rights and obligations, or the propriety, of any action
contemplated by Escrow Agent hereunder, Escrow Agent may, in its sole
discretion, submit such disagreement to arbitration to resolve such
disagreement, as set forth in Section 6.2 below. Escrow Agent shall be
indemnified by the Global Stockholders for all costs, including reasonable
attorneys' fees, in connection with the foregoing submission and shall be fully
protected in suspending all or part of its activities under this Agreement until
a final judgment in the arbitration action is received.
Section 5.2 Compensation of the Escrow Agent. The Escrow Agent
shall receive fees for its services hereunder as set forth on Schedule A hereto
for which the Global Stockholders shall be jointly and severally liable. The
Escrow Agent shall have a first lien on the Escrow Fund with respect to the
indemnity afforded it hereunder.
Section 5.3 Completion of the Escrow Agent's Duties. The Escrow
Agent shall, upon release of the Escrow Fund, be released and discharged from
any liability or obligation with respect thereto.
Section 5.4 Removal or Resignation of Escrow Agent: Successor
Escrow Agent.
(a) The Global Representative and the Company
Representative, in their sole discretion, may remove the Escrow Agent, and
appoint a successor escrow agent, upon ten (10) days written notice to the
Escrow Agent.
(b) The Escrow Agent, in its sole discretion, may resign
as Escrow Agent upon ten (10) business days' notice to the Global Representative
and the Company Representative.
(c) If the Escrow Agent is removed or resigns, its only
duty shall be to hold and dispose of the Escrow Fund in accordance with the
provisions of this Agreement until a successor escrow agent shall be appointed
and written notice of the name and address of such successor escrow agent shall
be given to the Escrow Agent by the Global Representative and the Company
Representative, whereupon the Escrow Agent's only duty shall be to pay over to
the successor escrow agent the Escrow Fund, less any portion thereof previously
released in accordance with this Agreement.
(d) If the Escrow Agent delivers a notice of its intention
to resign and the Global Representative and the Company Representative are
unable to agree upon a successor escrow agent, a successor escrow agent shall be
determined by arbitration in accordance with the provisions of Section 6.2 of
this Agreement. The Escrow Agent shall remain the Escrow Agent hereunder until
it receives notice of the appointment of a successor escrow agent as a result of
such arbitration. It is understood and agreed that under no circumstances shall
the Escrow Agent be required to take any action with respect to the designation
or appointment of a successor
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escrow agent (including, without limitation, taking any action to initiate
arbitration proceedings for the appointment of such successor escrow agent).
(e) Any such successor escrow agent shall be required to
become a party to this Agreement, and shall thereupon be deemed to be the Escrow
Agent for all purposes hereunder.
SECTION VI MISCELLANEOUS
Section 6.1 Notices. All notices, requests, consents, and other
communications given or served hereunder shall be in writing and shall be duly
sent, given or made by hand, by telecopy, by post office express mail, or by
overnight delivery service (such as Federal Express and its competitors), and in
each case addressed.
in the case of the Global Representative, to him
at:
c/o Global Network Incorporated
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
with a copy to:
Xxxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
in the case of Company Representative, to him at:
Xxxxxxx X. Xxxxxx
0000 Xxxx Xxxxx
Xxx Xxxxx, XX 00000
If to Escrow Agent:
Xxxxxx X. Xxxxxxx, P.C.
000 Xxxx 00xx Xxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
or to such other persons or to such other address as a party hereto may from
time to time specify to the others by notice given in accordance with this
Section. All such notices, requests, consents and other communications, if
mailed, shall be deemed given five (5) days after the mailing thereof, and if
otherwise sent, given or made, upon receipt thereof.
Section 6.2 Arbitration. The parties hereto agree that any
dispute or controversies arising under this Agreement shall be settled by final
and binding arbitration conducted in New York City in accordance with and
subject to the Commercial Arbitration Rules of the American Arbitration
Association in effect at such time by a panel of three (3) arbitrators selected
in accordance with those Rules. Judgment upon the award rendered in any such
arbitration may be entered in any court of competent jurisdiction, or
application may be made to such court for a judicial acceptance of the award and
an enforcement, as the law of such jurisdiction may require or allow.
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Section 6.3 Effect of Headings. The headings of sections of this
Agreement are to facilitate reference only, do not form a part of this
Agreement, and shall not in any way affect or be considered in the
interpretation hereof.
Section 6.4 Governing Law. This Agreement has been negotiated and
is to be performed in the State of New York and shall be governed by and
construed in accordance with the laws applicable to agreements made and to be
performed solely in the State of New York.
Section 6.5 Entire Agreement. This Agreement and the
Reorganization Agreement contain the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not be amended,
supplemented or discharged, and no provision hereof may be modified or waived,
except by an instrument in writing signed by all of the parties hereto. No
waiver of any provision hereof by any party shall be deemed a continuing waiver
of any matter by such party.
Section 6.6 Severability. In the event any one or more of the
provisions of this Agreement shall for any reason be held to be invalid, illegal
or unenforceable, the remaining provisions of the Agreement shall be unimpaired,
and the invalid, illegal or unenforceable provision shall be replaced by a
mutually acceptable provision, which being valid, legal and enforceable, comes
closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
Section 6.7 Waiver. No waiver or modification of any of the terms
of this Agreement shall be valid unless in writing and designated as such. No
waiver of a breach of any provision hereof or a default hereunder shall be
deemed a waiver of such provision or of any subsequent breach or default of any
kind.
Section 6.8 Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of each of the parties hereto, and their
respective successors and assigns.
Section 6.9 Execution. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
together shall constitute one and the same instrument.
Section 6.10. Waiver of Conflicts. The Global Representative and
the Company Representative have been advised of the Escrow Agent's
representation of Global and the Global Stockholders and they expressly (i)
waive any conflicts that may be created thereby and (ii) consent to the Escrow
Agent's continued representation of Global and the Global Stockholders (and,
following the transactions contemplated by the Reorganization Agreement, the
Company) in any matter, including those relating to the subject matter of this
Escrow Agreement and to the transactions contemplated by the Reorganization
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first above written.
XXXXX X. XXXXX
/s/ Xxxxx X. Xxxxx
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XXXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
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XXXXXX X. XXXXXXX, P.C.
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By:/s/ Xxxxxx X. Xxxxxxx
--------------------------
Xxxxxx X. Xxxxxxx
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EXHIBIT A
REORGANIZATION AGREEMENT
[See Exhibit 10.1 to Global Network, Inc. Form 10-SB]
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EXHIBIT B
GLOBAL STOCKHOLDERS' PERCENTAGE OWNERSHIP INTEREST
Name of Global Stockholder Percentage Ownership Interest
-------------------------- -----------------------------
Xxxxx X. Xxxxx 24.5
Xxxx X. Xxxxx 24.5
Xxxxxx X. Xxxxxxx 18.5
Xxxxx X. Xxxxx 20.0
Xxxxxx Xxxxxxxxx 7.5
Xxxxxx Xxxxxxxxx 5.0
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EXHIBIT C
FORM OF NOTICE TO ESCROW AGENT
_____________________,_____
Xxxxxx X. Xxxxxxx, P.C.
000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Re: Release under the Escrow Agreement
Dear Xx. Xxxxxxx:
We hereby respectfully request that you release to the former
stockholders (the "Global Stockholders") of Global Networks, Inc. set forth on
Annex 1 to this notice, in the denominations set forth opposite each such name
on Annex 1, an aggregate of ________ shares of [Bargain Brokers, Inc.] (the
"Company") Common Stock, comprised of [_____ Earnout Shares and _____ Penalty
Shares], which you are holding pursuant to that certain Escrow Agreement (the
"Escrow Agreement"), dated as of August ____, 1999, by and among Xxxxx X. Xxxxx
(the "Global Representative"), as the representative of the Global Stockholders,
Xxxxxxx X. Xxxxxx (the "Company Representative"), as the representative of
certain of the former controlling stockholders (the "Company Stockholders") of
the Company, and [insert], as escrow agent (the "Escrow Agent"). An event has
occurred which, pursuant to the Escrow Agreement, has given rise to the release
of these shares to the Global Stockholders.
Thank you for your cooperation in this matter.
Very truly yours,
XXXXX X. XXXXX
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XXXXXXX X. XXXXXX
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ANNEX 1
Name of Global Stockholder Number of Shares
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EXHIBIT D
FORM OF NOTICE TO ESCROW AGENT
_____________________,_____
Xxxxxx X. Xxxxxxx, P.C.
000 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Re: Release under the Escrow Agreement
Dear Xx. Xxxxxxx:
We hereby respectfully request that you return to Bargain
Brokers, Inc. (the "Company") the remaining shares of Common Stock of the
Company which you are holding pursuant to that certain Escrow Agreement (the
"Escrow Agreement"), dated as of August ____, 1999, by and among Xxxxx X. Xxxxx
(the "Global Representative"), as the representative of the former stockholders
(the "Global Stockholders") of GLOBAL NETWORKS, INC., a New York corporation
("Global"), Xxxxxxx X. Xxxxxx (the "Company Representative"), as the
representative of certain of the former controlling stockholders (the "Company
Stockholders") of the Company, and [insert], as escrow agent (the "Escrow
Agent"). The term of the Escrow Agreement has expired. The remaining shares
should be returned to the Company for cancellation at the address set forth in
the Escrow Agreement.
Thank you for your cooperation in this matter.
Very truly yours,
XXXXX X. XXXXX
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XXXXXXX X. XXXXXX
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