ESCROW AGREEMENT
THIS AGREEMENT, dated as of this ____ day of February, 1999, by and among
EVANS & MULLINIX, P.A. (hereafter called the "Escrow Agent"), SEQUOIA COMPANY,
PIPER JAFFRAY, INC., custodian for the benefit of Terrence P. Dunn, JMO GROUP,
MARK P. OFFILL, Trustee of the Jean Offill Grandchildren's Irrevocable Trust,
DAVID W. OFFILL, and LARRY DAVIS and CONSTANCE DAVIS, husband and wife
(hereinafter collectively and individually referred to as "Shareholders") and
ADVANCED FINANCIAL, INC., a Delaware corporation (hereinafter referred to as
"AFI").
W I T N E S S E T H:
WHEREAS, Shareholders, AFI and Cannon Financial Company ("Corporation")
have entered into an Agreement of Reorganization dated February 5, 1999
("Reorganization Agreement"), whereby Shareholders have agreed to sell and AFI
has agreed to buy, all of the issued and outstanding stock of Corporation (the
"Shares"); and
WHEREAS, pursuant to Section 1.03 of the Reorganization Agreement,
Shareholders have placed in escrow the shares received by them from the payment
of the Purchase Price with Escrow Agent to secure Shareholders' obligation to
disgorge shares in the event that the Closing Owner's Equity is less than Six
Hundred Thousand Dollars ($600,000) as set forth in Sections 1.03(b) and (c);
and
WHEREAS, pursuant to Section 8 of the Reorganization Agreement,
Shareholder have also agreed to place in escrow the shares received by them for
the payment of the Purchase Price with Escrow Agent to secure Shareholders'
indemnity obligations pursuant to Section 8.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
1. Definitions.
"Authorized Representative" means any person or persons empowered to
authorize, approve or direct actions under this Escrow Agreement, on behalf of
one (1) of the parties hereto, as established from time to time by resolution of
the Board of Directors of the party represented thereby.
"Escrow Account" means the escrow account created by Paragraph 2 of this
Escrow Agreement.
"Escrow Agent" means the agent at the time serving under this Escrow
Agreement.
"Escrow Agreement" or "Agreement" means this Escrow Agreement.
"Escrowed Shares" means all shares deposited with Escrow Agent pursuant to
Paragraph 3 of this Escrow Agreement.
2. Creation of the Escrow Account. There is hereby created and established
with Escrow Agent the Escrow Account, to be held in the custody of Escrow Agent
in accordance with this Escrow Agreement.
3. Deposit to the Escrow Account. Shareholders hereby deposit with Escrow
Agent all shares received by them pursuant to the Reorganization Agreement, with
properly endorsed stock powers attached thereto, appointing Escrow Agent as the
agent to transfer said shares to AFI in the event the shares, or any part
thereof, are forfeited pursuant to the terms and conditions of this Escrow
Agreement.
4. Ownership of the Escrowed Shares. The Escrowed Shares shall be the
property of Shareholders, subject to the terms and conditions of this Agreement.
5. Payment of Escrowed Shares. The Escrowed Shares shall be held in escrow
pending compliance with Section 7 of the Agreement.
6. Income on Escrow Assets. All income earned on or stock dividends or
stock splits in connection with the Escrowed Shares shall be added to the Escrow
Account for use as set forth in connection with Paragraph 5 above.
7. Termination. This Escrow Agreement shall continue until the satisfaction
of the following events:
(a) In the event that a disgorgement of shares is to occur by
Shareholders pursuant to the terms and conditions of Section 1.03(b) of the
Reorganization Agreement, the accounting firm or firms that, pursuant to
Section 1.03(d), are to make the decision on the number of shares to be
disgorged by Shareholders, pursuant to Section 1.03(b), shall calculate the
number of shares to be disgorged by Shareholders in total, pursuant to
Section 1.03(b), and provide notice of that amount to AFI, Shareholders and
Escrow Agent. Upon receipt of that notice, Escrow Agent shall send the
shares to be disgorged by Shareholders to AFI. Any shares not disgorged to
AFI, pursuant to Section 1.03(b) of the Reorganization Agreement, shall be
retained by Escrow Agent to be held in escrow pending satisfaction of
subsection (c) hereof.
(b) In the event that, pursuant to Section 1.03(c) of the
Reorganization Agreement, a disgorgement of shares by Shareholders is
applicable, the accounting firm or firms that, pursuant to Section 1.03(d),
are to make the decision on the number of shares to be disgorged by
Shareholders, pursuant to Section 1.03(c), shall calculate the number of
shares to be disgorged by Shareholders in total, pursuant to Section
1.03(c), and provide notice of that amount to AFI, Shareholders and Escrow
Agent. Upon receipt of that notice, Escrow Agent shall send the shares to
be disgorged by Shareholders to AFI. Any shares not disgorged to AFI,
pursuant to Section 1.03(c) of the Reorganization Agreement, shall be
retained by Escrow Agent to be held in escrow pending satisfaction of
subsection (c) below.
(c) The Escrowed Shares shall be held pending any claim for damages
being
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made by AFI against Shareholders pursuant to the terms of the indemnity set
forth in Section 8 of the Reorganization Agreement. In the event that AFI
has a claim for damages against Shareholders, it shall provide notice to
Shareholders pursuant to the terms and conditions of Section 8, with a copy
to Escrow Agent. Shareholders shall have thirty (30) days from receipt of
the notice in order to notify AFI and Escrow Agent of their objection to
the alleged damages. In the event that Shareholders do not object to said
damages, Escrow Agent shall turn over to AFI, to compensate AFI for the
damages, an amount of Escrowed Shares equal to the total damages claimed by
AFI divided by the per share selling price of AFI common stock on its then
applicable stock exchange on the date prior to distribution by Escrow Agent
to AFI. In the event that Shareholders object to the damages alleged by
AFI, Escrow Agent shall continue to hold said shares until a court of
competent jurisdiction has made a final, non-appealable decision concerning
the damages alleged to have been suffered by AFI and Shareholders'
liability therefor. Upon a final, non-appealable decision rendered with
respect to said damages, upon notice to Escrow Agent by AFI, accompanied
with a copy of the decision, Escrow Agent will turn over to AFI a number of
Escrowed Shares equal to the final damage award divided by the per share
selling price of AFI common stock on its then applicable stock exchange on
the date prior to the distribution by Escrow Agent to AFI. Any Escrowed
Shares remaining after said judicial determination shall continue to be
retained in the Escrow Account, subject to Paragraph 7(d) below, until the
period of time of Shareholders' indemnification responsibilities, as set
forth in Section 8 of the Reorganization Agreement, has run and there are
no damage claims outstanding by AFI against Shareholders.
(d) Subject to compliance with and completion of Paragraphs 7(a), 7(b)
and 7(c) above, the parties hereto agree that the Escrowed Shares shall be
released by Escrow Agent to Shareholders in the following percentages at
the following times:
(i) One-third (1/3) of the then-existing Escrowed Shares on the
date ten (10) months from the Closing Date under the Reorganization
Agreement;
(ii) One-half (1/2) of the then-existing Escrowed Shares on the
date eighteen (18) months from the Closing Date under the
Reorganization Agreement; and
(iii)The remaining one-third (1/3) of the Escrowed Shares on the
latter to occur of (A) twenty-four (24) months from the Closing Date
under the Reorganization Agreement, or (B) if outstanding claims
exist under this Escrow Agreement on the date twenty-four (24) months
from the Closing Date under the Reorganization Agreement, the date
the Escrowed Shares are determined by a non-appealable judgment in an
applicable court to be distributable to either AFI or Shareholders
hereunder.
The parties agree and understand that to the extent claims have been made
pursuant to Paragraphs 7(a), 7(b) or 7(c) above, the total of which
outstanding claims in existence at the date of a scheduled release of
shares under this Paragraph 7(d) exceeds the amount of shares that would
have been remaining after the scheduled release, Escrow Agent will
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only release the number of shares that are in excess of the total amount
of shares that would be necessary in order to cover the then existing
claims.
(e) Upon completion of Escrow Agent's responsibilities under
subparagraphs (a), (b), (c) and (d) above, any Escrowed Shares remaining in
the Escrow Account shall be returned to Shareholders. Each time that a
determination is made pursuant to subparagraphs (a), (b) and (c) above that
Escrowed Shares held by Escrow Agent are to be disgorged to AFI, the
Escrowed Shares shall be divided among Shareholders and disgorged
accordingly based upon the percentage of stock that each of them owned in
Corporation as of the date of Closing under the Reorganization Agreement.
8. Fees and Expenses. Any fees and expenses charged by Escrow Agent in
connection with carrying out its duties hereunder shall be split equally between
AFI and Shareholders. Otherwise, all parties shall pay their own expenses in
connection with this Escrow Agreement.
9. Duties of Escrow Agent.
(a) Escrow Agent shall be liable as a depository only with its duties
being only those specifically provided herein and which are ministerial in
nature and not discretionary. Escrow Agent shall not be liable for any
mistake of fact or error in judgment, or for any acts or provisions of any
kind taken in good faith and believed by it to be authorized or within the
rights or powers conferred by this Escrow Agreement, unless there be shown
willful misconduct or gross negligence.
(b) Escrow Agent shall not be responsible for the sufficiency or
accuracy of the form, execution or validity of the documents or items
deposited hereunder, nor for any description of property or other matter
noted therein. It shall not be liable for default by any party hereto
because of such party's failure to perform, and shall have no
responsibility to seek performance by any party; nor shall it be liable for
the outlawing of any rights under any statutes of limitation in respect to
any documents or items deposited.
(c) Escrow Agent shall not be liable in any respect on account of the
identity, authority or rights of persons executing or delivering, or
purporting to execute or deliver, any document or item, and may rely
absolutely and be fully protected in acting upon any item, document or
other writing believed by it to be authentic in performing its duties
hereunder. Escrow Agent may, as a condition to the disbursement of money or
property, require from the payee or recipient a receipt therefor, and, upon
final payment or distribution, require a release from any liability arising
out of its execution or performance of this Escrow Agreement.
(d) Escrow Agent may consult with counsel of its own choice and shall
be entitled to reasonable compensation and reimbursement for its services
and out-of-pocket expenses. Escrow Agent shall have the right to reimburse
itself out of any funds in its possession for reasonable costs, expenses,
attorney's fees and its compensation, and shall have a lien on all money
documents or property held in escrow to cover same. Escrow
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Agent retains the right to resign upon giving thirty (30) days' written
notice to all parties hereto.
(e) In accepting any funds, securities or documents delivered
hereunder, it is agreed and understood that, in the event of disagreement
between the parties to this Escrow Agreement, or persons claiming under
them, or any of them, Escrow Agent reserves the right to hold all money,
securities and property in its possession, and all papers in connection
with or concerning this escrow, until a mutual agreement has been reached
between all of said parties, or until delivery is made to court in any
interpleader action, or until as otherwise authorized by final judgment or
decree.
10. Addresses of Parties. Whether payments, instructions, notices,
releases, or any other documents are required to be given by or to the parties
hereto, they shall be sent by certified/registered mail to the following
addresses, which may be changed from time to time by written notice to all
parties:
Escrow Agent:
Evans & Mullinix, P.A.
15301 West 87th Street, Suite 220
Lenexa, Kansas 66219
Shareholders:
Sequoia Company
Attn.: Amy S. Greif, President
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Piper Jaffray, Inc.,
Custodian for the benefit of Terrence P. Dunn
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JMO Group
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Mark P. Offill,
Trustee of the Jean Offill Grandchildren's Irrevocable Trust
c/o _______________
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David W. Offill
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Larry and Constance Davis
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AFI:
Advanced Financial, Inc.
1900 Commerce Tower
911 Main Street
Kansas City, Missouri 64105
11. Successors and Assigns. All of the covenants, promises, and agreements
contained in this Escrow Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and assigns,
whether so expressed or not.
12. Amendment. This Escrow Agreement may be amended or altered at any time
by a writing agreed to by all parties hereto in such form and manner as is
acceptable to Escrow Agent.
13. Severability. If any one (1) or more of the covenants or agreements
provided in this Escrow Agreement should be determined by a court of competent
jurisdiction to be contrary to law, such covenant or agreement shall be deemed
and construed to be severable from the remaining covenants and agreements herein
contained and shall in no way affect the validity of the remaining provisions of
this Escrow Agreement.
14. Governing Law. This Escrow Agreement shall be governed by the laws of
the State of Missouri.
15. Headings. Any headings preceding the text of the several paragraphs
hereof shall be solely for convenience of reference and shall not constitute a
part of this Escrow Agreement, nor shall they affect its meaning construction,
or effect.
16. Counterparts. This Escrow Agreement may be executed in several
counterparts, all or any of which shall be regarded for all purposes as one
original and shall constitute and be but one and the same instrument.
IN WITNESS WHERE0F, this Escrow Agreement is executed as of and from the
date first above written.
ESCROW AGENT: EVANS & MULLINIX, P.A.
By:
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Name:
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Title:
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SHAREHOLDERS: SEQUOIA COMPANY
By: ----------------------------------------
Amy S. Greif, President
PIPER JAFFRAY, INC.,
custodian for the benefit of Terrence P.Dunn
By:
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Name:
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Title:
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JMO GROUP
By:
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Name:
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Title:
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JEAN OFFILL GRANDCHILDREN'S
IRREVOCABLE TRUST
By:
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Mark P. Offill, Trustee
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David W. Offill
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Larry Davis
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Constance Davis
AFI: ADVANCED FINANCIAL, INC.
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By:
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Name:
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Title:
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