ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made as of the 6th day of June,
1997, by and between Dauphin Technology, Inc., an Illinois corporation
("Dauphin"); Xxxxxxx X. Xxxxxxx, ("Xxxxxxx")individually and on behalf of
Xxxxxxxxx Xxxxxxxxx and Xxxxxx Kick (sometimes hereinafter referred to
individually by name or as " Minor Shareholder," and collectively as "Minor
Shareholders"); and Wm. Xxxx Xxxxxxx ("Escrowee").
RECITALS OF THE PARTIES
X. Xxxxxxx is in the business of designing, developing, manufacturing and
marketing leading technology equipment including, but not limited to, mobile
computers and industrial computers products.
B. The Principal Shareholder is President, a Director, and together with
the Minor Shareholders are owners of all of the issued and outstanding shares of
voting common stock in X. X. Xxxxxxx & Associates, Inc., an Illinois corporation
("Company") engaged in the business of providing engineering, development and
contract manufacturing services to its clients within the electronics industry
(the "Business") from its offices located in leased premises at 0000 Xxxxx Xxxxx
00, XxXxxxx, Xxxxxxxx (the "Premises").
C. Shareholders desire to exchange and transfer to Dauphin, and Dauphin
desires to exchange and acquire from Shareholders, all issued and outstanding
shares of voting common stock in Company ("Shares") solely for and in
consideration of shares of voting common stock in Dauphin, as provided herein
and in accordance with the terms and conditions of the tax-free reorganization
provisions of Section 368 (a) (1) (B) of the Internal Revenue Code of 1986, as
amended, and a certain Stock Exchange Agreement of even date herewith ("Stock
Exchange Agreement").
D. The parties have executed this Agreement, and made the hereinafter
described deposits, pursuant to the terms and conditions of the Stock Exchange
Agreement, the terms, conditions, representation, warranties and agreements of
which are incorporated herein and made a pad hereof including, but not limited
to, the irrevocable power of attorney contained therein and authorizing
Xxxxxxx'x execution hereof as attorney-in-fact for Xxxxxxxxx and Kick.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Deposits. Dauphin hereby deposits with Escrowee a certificate
representing 105,000 registered shares of voting common stock in Dauphin
("Dauphin Shares"). The Escrowee agrees to hold the Dauphin Shares in a
separate and distinct account (the "Escrow Fund") subject to the terms and
conditions of this Agreement.
2. Voting and Dividends. Escrowee shall send to Xxxxxxx any proxy
material or other documents concerning the voting rights with respect to the
Dauphin Shares held in the Escrow Fund. Xxxxxxx shall have the sole right to
vote or direct the voting of such Shares on behalf of each Shareholder and shall
be solely responsible for any action taken, required to be taken or omitted with
respect to such proxy materials or other documents. Xxxxxxx also shall be
entitled to receive on behalf of each Shareholder dividends, if any, declared
and attributable to the Shares.
3. Release of Shares. The release of Dauphin Shares from the Escrow Fund
shall be based on Company operations and pretax income, and performance criteria
as follows:
A. 35,000 Dauphin Shares shall be released from the Escrow Fund if
Company operations result in $400,000 of pretax income in the first
twelve months after the Closing Date;
B. 35,000 Dauphin Shares shall be released from the Escrow Fund if
Company operations result in $500,000 of pretax income in the second
twelve months after the Closing Date;
C. 35,000 Dauphin Shares shall be released from the Escrow Fund if
Company operations result in $600,000 of pretax income in the third
twelve months after the Closing Date.
For purpose hereof, "pre-tax income" is defined as pre-tax accounting
income of Company, as a subsidiary of Dauphin, determined on an accrual method
of accounting under generally accepted accounting principles which includes any
necessary and customary adjustment pursuant to accounting procedures (See
schedule 3 for examples of performance criteria calculation). "Closing Date" has
the meaning set forth in the Stock Exchange Agreement.
"Pre-tax income" shall be determined by Dauphin's certified public
accountant within 60 days following the end of each twelve month period and a
copy of such determination shall be provided to Xxxxxxx within 10 days following
Dauphin's receipt. Said determination shall be conclusive binding upon the
parties unless Xxxxxxx provides Dauphin a written objection to such
determination within 10 days following his receipt of same from Dauphin, in
which case the determination shall be submitted an independent third party
selected by mutual agreement of Dauphin and Xxxxxxx. Escrowee shall release
Shares to Xxxxxxx upon Escrowee's receipt of written notice that "pre-tax
income" has been determined and that such determination has been received by
Xxxxxxx.
No Dauphin Shares shall be released from the Escrow Fund until and unless
the minimum pretax income levels specified above for each period are attained.
However, pretax income will be carried over from the previous period and
combined with the current period's pretax income for determination of the amount
of Dauphin Shares, if any, to be released from the Escrow Fund until and only if
pretax income attained in a current period equals or exceeds the minimum pretax
income for the current period and a combined sum of the current and preceding
years' actual pretax incomes attained exceeds the sum of the minimum levels, as
set forth in the table above, for the two periods. Otherwise, all rights to
release of any Dauphin Shares from the Escrow Fund not released as of the end of
the respective periods, will be forfeited. All pretax income above the minimum
required levels will be automatically credited towards the following period for
determination of satisfaction of the foregoing conditions to release from the
Escrow Fund.
All shares released from escrow hereunder shall be reissued by Dauphin in
the name of the persons, and in the respective percentages, set forth on Exhibit
A, and shall be delivered to such persons; provided, however, that if any of the
persons on Exhibit A (other than Xxxxxxx X. Xxxxxxx, Xxxx Xxxxxxx, Xxxxxxxxx
Xxxxxxxxx, or Xxxxxx Kick) are not employed by the Company as of the date of
release, then such unemployed persons shall not be issued shares, and the shares
that would other wise be allocated to them shall be issued and delivered to
Xxxxxxx X. Xxxxxxx.
Distribution of Shares shall be made from time to time upon joint written
direction to Escrowee by Dauphin and Xxxxxxx stating that "pre-tax income"
determination has been accepted as binding and conclusive and directing Escrowee
to release Shares from Escrow and within 10 days following such direction
Escrowee shall release Shares in number and to personas as set forth in the
joint written direction of the parties.
4. Distribution and Termination. As soon as practicable after the third
anniversary of the Closing Date, Escrowee shall deliver to Dauphin any Dauphin
Shares then remaining in the Escrow Fund and not subject to release in manner
described in Section 3 above, whereupon the Escrow Fund shall terminate and
Escrowee shall be released from further duties and obligations hereunder.
5. Escrowee Conduct and Fees. (a) The obligations and duties of Escrowee
are confined to those specifically enumerated in this Agreement. Escrowee shall
not be subject to, nor be under any obligation to ascertain or construe the
terms and conditions of; any other instrument, whether now or hereafter
deposited with or delivered to Escrowee or referred to in this Agreement, nor
shall Escrowee be obliged to inquire as to the form, execution, sufficiency or
validity of any such instrument as to the identity, authority, or rights of the
person or persons executing or delivering the same.
(b) Escrowee shall not be personally liable for any act which he may do
or omit to do hereunder in good faith and in the exercise of his own
best judgment. Any act done or omitted by Escrowee pursuant to the
advice of his attorneys shall be deemed conclusively to have been
performed or omitted in good faith by Escrowee. Escrowee shall not
be held liable for any losses that may occur as the result of the
investment, reinvestment, purchase or sale of; or non-investment of
any permissible investment of the Escrow Fund.
(c) If Escrowee should receive or become aware of any conflicting
demands or claims with respect to this Agreement, or the rights of
any of the parties hereto, or any money, property, or instruments
deposited herein or affected hereby, Escrowee shall have the right
in his sole discretion, without liability for interest or damages,
to discontinue any or all further acts on its part until such
conflicts are resolved to his satisfaction and/or to commence or
defend any action or proceeding for the determination of such
conflicts.
(d) Dauphin and each Shareholder agrees, jointly and severally, to
reimburse and to indemnify and hold Escrowee harmless from and
against all costs, damages, judgments, attorney's fees (whether such
attorneys shall be regularly retained or specially employed),
expenses, obligations, and liabilities of every kind and nature
which Escrowee may incur, sustain or be required to pay in
connection with or arising out of this Agreement and his performance
as Escrowee hereunder, and to pay to Escrowee on demand the amount
of all such costs, damages, judgments, attorney's fees, expenses,
obligations, and liabilities. To secure said indemnification and to
satisfy its compensation hereunder, Escrowee is hereby given a first
lien upon and the rights, titles, and interests of each of said
parties in all Dauphin Shares and Xxxxxxx Shares or other
properties, if any, from time to time deposited hereunder as part of
the Escrow Fund.
(e) In performing his duties hereunder, Escrowee may rely on statements
furnished to him by Dauphin and Xxxxxxx or on any other evidence
deemed by Escrowee to be reliable. Escrowee shall not be entitled
to any compensation for services provided hereunder.
(f) If, by its terms, this escrow shall not have previously terminated,
then it shall terminate on your receipt of a joint written direction
of Dauphin and Xxxxxxx or their respective attorneys, and directing
your delivery of the Shares and any other documents then in your
possession.
6. Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given if: (a) delivered personally; or
(b) mailed by certified mail (return receipt requested), postage prepaid; or (c)
sent by overnight courier; or (d) transmitted by telefacsimile; to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice, provided that notices of a change of address shall be
effective only upon receipt thereof):
(a) If to Shareholders to: Xx. Xxxxxxx X. Xxxxxxx
X .X. Xxxxxxx & Associates, Inc.
0000 Xxxxx Xxxxx 00
XxXxxxx, Xxxxxxxx 00000
Telephone Number: 000-000-0000
Facsimile Number: 000-000-0000
With a copy to: Xxxxxx X. Xxxxxxxxxxx, Esq.
XxXxxxx Xxxxx & Xxxxx
000 Xxxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone Number: 000-000-0000
Facsimile Number: 000-000-0000
(b) If to Dauphin, to: Xx. Xxxxxx X. Xxxxxxxxxx
Dauphin Technology, Inc.
000 Xxxx Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Telephone Number: 000-000-0000
Facsimile Number: 000-000-0000
With a copy to: Xxxxxx X. Xxxxxxx, Esq.
Xxxxx and Xxxxxx, P.C.
00 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone Number: 000-000-0000
Facsimile Number: 000-000-0000
7. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party, nor is this Agreement
intended to confer upon any other person except the parties hereto any rights or
remedies hereunder.
8. Governing Law. This Agreement shall be governed by the laws of the
State of Illinois as to all matters including, but not limited to, matters of
validity, construction, effect, performance and remedies, and, as partial
consideration for the other party's execution and performance hereunder each
party waives personal service of any and all process upon it, to the extent
permitted by law, and consents that all such service of process be made by upon
such party at the address and in the manner set forth in Section 7 of this
Agreement and service so made shall be deemed to be completed upon the earlier
of actual receipt or three days after the same shall have been posted to such
party's address.
9. Binding Effect and Benefit. The provisions hereof shall be binding
upon, and shall inure to the benefit of; the parties, and their respective
heirs, executors, administrators, its successors, and assigns.
10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11. Severability. Whenever possible, each of the provisions of this
Agreement shall be construed and interpreted in such a manner as to be effective
and valid under applicable law. If any provisions of this Agreement or the
application of any provision of this Agreement to any party or circumstance
shall be prohibited by, or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition without invalidating the remainder
of such provision, any other provision of this Agreement, or the application of
such provision to other parties or circumstances.
12. Interpretation. The Section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement. Capitalized terms used and undefined in this Agreement shall have the
meaning ascribed to them in the Stock Exchange Agreement.
IN WITNESS WHEREOF, Dauphin, Xxxxxxx and Escrowee have executed this
Agreement the date first set forth above.
XXXXXXX:
________________________________
Xxxxxxx X. Xxxxxxx
DAUPHIN:
Dauphin Technology, Inc.
By:_____________________________
Xxxxxx X. Xxxxxxxxxx,
Chairman of the Board
ESCROWEE:
By:_____________________________
Wm. Xxxx Xxxxxxx
EXHIBIT A
Name Percentage
Xxxxxxx X. Xxxxxxx 74.468
Xxxxxxxxx Xxxxxxxxx 2.0
Xxxxxx Kick 2.0
Xxxx Xxxxxxx 2.0
Xxxxxxx X. Xxxxxxx 2.0
X. Xxxxxx 6.0
X. Xxxxxxx 1.0
X. Xxxxxxx .532
X. Xxxxxxxxxx 1.0
X. Xxxxxxxxx 6.0
X. Xxxxxx 1.0
J. St Xxxx 1.0
