EXHIBIT 10.1
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of _______, 2000, by
and between XXXXXXXXXXXX.XXX, INC., a California corporation (the "Company") and
SANTA XXXXXXX BANK & TRUST, as escrow agent (the "Escrow Agent"), with reference
to the following facts.
A. The Company is proposing to issue to the public up to 1,500,000
shares of its Common Stock (the "Offering") pursuant to a Registration Statement
on Form SB-2 (the "Registration Statement") filed with the Securities and
Exchange Commission. Pursuant to the Offering, the Company would realize
proceeds of up to $14,250,000.
B. As part of the Offering, the Company has agreed to deposit into
escrow (the "Escrow") the proceeds received from subscriptions for shares until
it has received acceptable subscriptions for shares with an aggregate
subscription price of not less than $3,000,000. The Company proposes that it
will terminate the Offering and return to the investors all funds previously
deposited into the Escrow if it has not received acceptable subscriptions for a
total of $3,000,000 within 90 days after the date on which the Registration
Statement is declared effective.
C. The parties desire to enter into this Agreement for purposes of
establishing the Escrow to hold the subscription proceeds until the Company has
received at least $3,000,000 in proceeds received from subscriptions for shares.
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and Escrow Agent agree as follows:
1. Escrow Funds.
1.1 Deposit. During the term of this Agreement, the Company shall
deposit with Escrow Agent the funds (the "Escrow Funds") received from investors
in connection with the Offering. The Company shall use its best efforts to
deposit all Escrow Funds with Escrow Agent by 12:00 noon on the first business
day following the date on which the Company receives the Escrow Funds from the
investors. Escrow Agent shall have no obligation to verify whether or not the
Company has timely delivered any or all of the Escrow Funds and shall be
authorized to accept all Escrow Funds from the Company regardless of the date on
which the Escrow Funds are delivered to the Escrow Agent or the date on which
they were received by the Company from the investors.
1.2 Receipt of Escrow Funds. Escrow Agent shall have no obligation to
accept the Company's delivery of any Escrow Funds unless and until the Company
has delivered to Escrow Agent written notice under Section 5.1 that the
Registration Statement has been declared effective. If any check or wire
transfer for any Escrow Funds does not clear normal banking channels in due
course, Escrow Agent will promptly notify the Company and return such check to
the Company or cancel such wire transfer.
1
1.3 Holding and Investment. Escrow Agent shall hold the Escrow Funds
pursuant to the terms hereof and shall invest the Escrow Funds only in (a)
interest-bearing savings accounts and bank money-market accounts, (b) short-term
certificates of deposit issued by a bank, (c) short-term securities issued or
guaranteed by the U.S. Government or (d) any combination of the foregoing.
Escrow Agent shall retain all interest upon invested Escrow Funds and shall
distribute such accumulated interest to the Company upon distribution of the
Escrow Funds. Escrow Agent shall not be required to set up individual escrow
accounts for each investor's funds, but shall deposit all of the Escrow Funds in
one general escrow account in the name of the Company.
1.4 General Instructions. Escrow Agent shall establish and maintain the
Escrow in accordance with and subject to Escrow Agent's general rules and
regulations applicable to this type of escrow account.
1.5 Stop Order. During the period from and after the date on which the
Company delivers to Escrow Agent written notice under Section 5.1 hereof that a
stop order has been entered with respect to the Registration Statement or the
effectiveness of the Registration Statement otherwise has been suspended and
through the date on which the Company delivers to Escrow Agent written notice
that the stop order or other suspension has been terminated (the "Suspension
Period"), Escrow Agent shall continue to hold any Escrow Funds previously
delivered by the Company, but shall have no obligation to accept the Company's
delivery of any additional Escrow Funds. During the Suspension Period, Escrow
Agent shall hold all Escrow Funds previously delivered to it in accordance with
the terms of this Agreement; provided that Escrow Agent shall not disburse any
of such Escrow Funds except in accordance with the provisions of Section 2.3
hereof.
1.6 Additional Escrow Funds. The parties intend that the Escrow will be
used for purposes of holding the Escrow Funds only until the Company has
received Escrow Funds in the amount of $3,000,000 which are sufficient to
satisfy the minimum offering requirements under the Registration Statement. Even
so, Escrow Agent agrees that Escrow Funds in excess of $3,000,000 may be
deposited into the Escrow and that the Escrow shall continue until terminated in
accordance with the provisions of Section 4 hereof.
2. Payment of Escrow Funds.
2.1 Closing of Offering.
2.1.1 Initial Closing. Subject to the provisions of Section
1.5 and hereof, so long as:
A. the amount of the Escrow Funds, exclusive of any
interest or other amount accrued on the Escrow Funds, is then not less
than Two Million Dollars ($3,000,000); and
B. the written instructions described below are
delivered by the Company to Escrow Agent no later than 90 days after
the effective date of the Registration Statement;
2
Escrow Agent shall disburse to the Company all of the Escrow Funds and all
interest and other amounts accrued thereon within five (5) days after its
receipt of written instructions from the President of the Company or issued by a
court of competent jurisdiction confirming that (i) the Company has accepted the
subscriptions for the Escrow Funds then held by Escrow Agent, (ii) the
Registration Statement is then effective and no stop order or other suspension
is then effective with respect to the Registration Statement or the offering,
and (iii) the other terms and conditions of the Offering relating to such Escrow
Funds have been fully satisfied. Escrow Agent may condition its disbursement of
the Escrow Funds on its receipt of such acknowledgments, receipts and other
documents as it reasonably may request for purposes of confirming compliance
with the terms of this Agreement.
2.2 Abandonment of Offering. In the event that the Company abandons or
otherwise fails to close the Offering, whether because the Company has not
timely raised the minimum investment or otherwise, the Company promptly shall
provide written notice thereof to Escrow Agent and, at Escrow Agent's election,
shall authorize Escrow Agent to disburse the Escrow Funds then held by Escrow
Agent either (a) directly to the investors or (b) to the Company for further
delivery to the investors. If Escrow Agent elects to disburse the Escrow Funds
directly to the investors, the Company shall promptly provide Escrow Agent with
a list of names, addresses and amounts of the investment by the Company's
President to be true, correct and complete. Promptly after its disbursal of the
Escrow Funds to the investors, Escrow Agent shall deliver to the Company a
written statement showing the amount disbursed to each investor. If Escrow Agent
delivers the Escrow Funds to the Company for further delivery to the investors,
the Company shall, within ten (10) business days after its receipt of the Escrow
Funds from Escrow Agent, (x) effect the delivery of the Escrow Funds and (y)
deliver to Escrow Agent written confirmation that the Company has delivered the
Escrow Funds to the investors; provided that Escrow Agent shall have no
obligation to confirm that the Escrow Funds have been delivered to the investors
or to compel the Company to provide the written confirmation to Escrow Agent.
2.3 90-Day Date. Promptly after the Registration Statement has been
declared effective, the Company shall advise Escrow Agent of the date 90 days
after such effective date (the "90-Day Date") by which the Company is obligated
to have received acceptable subscriptions for at least $3,000,000. If, on the
90-Day Date, Escrow Agent has not previously disbursed any of the Escrow Funds
to the Company under Section 2.1.1 above and does not then hold Escrow Funds,
exclusive of interest and other amounts accrued thereon, in the amount of at
least $3,000,000, Escrow Agent may, on five (5) days prior written notice to the
Company, terminate the Escrow and disburse the Escrow Funds to the Company for
the specific purposes of the Company's refund of the Escrow Funds to the
investors. If Escrow Agent delivers the Escrow Funds to the Company for refund
to the investors, the Company shall, within ten (10) business days after the
Escrow Agent's delivery of the Escrow Funds, (x) effect the refund of the Escrow
Funds to the investors and (y) deliver to Escrow Agent written confirmation that
the Company has refunded the Escrow Funds to the investors; provided that Escrow
Agent shall have no obligation to confirm that the Escrow Funds have been
delivered to the investors or to compel the Company to provide the written
confirmation to Escrow Agent.
3. Escrow Agent.
3.1 Compensation. The Company shall pay Escrow Agent such compensation
and shall reimburse the Escrow Agent for costs and expenses in accordance with
Escrow Agent's current fee schedule.
3
3.2 Duties of Escrow Agent. Escrow Agent shall have no duties or
responsibilities under this Agreement other than those specifically set forth in
this Agreement, and will act only in accordance with the provisions of this
Agreement. Escrow Agent shall be protected in acting upon any document
reasonably believed by it to be genuine and containing what purports to be the
signature of the President of the Company or a certified copy of a final
nonappealable order issued by a court of competent jurisdiction.
3.3 Indemnity. The Company shall indemnify, defend and hold Escrow
Agent, and each of its officers, directors, employees and agents harmless from
and against any and all claims, costs, demands, judgments, losses, damages,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees and disbursements) arising out of or in connection with any act or failure
to act (other than by reason of such person's willful misconduct or gross
negligence) on the part of such person in connection with any of the duties
required to be performed by Escrow Agent hereunder.
3.4 Interpleader. In the event of any controversy arising hereunder,
Escrow Agent may (but shall not be required to) interplead the Escrow Funds with
a court of competent jurisdiction and, defer the distribution of any of the
Escrow Funds until its receipt of instructions from the court. The costs of such
interpleader shall be borne by the Company.
3.5 Compliance With Instructions. Escrow Agent does not have and shall
not be deemed to have any responsibility in respect of any instruction,
certificate or notice delivered to it other than faithfully to carry out the
obligations undertaken in this Agreement and to follow the directions in such
instruction or notice provided in accordance with the terms hereof.
3.6 Limitation. Escrow Agent is not and shall not be deemed to be
liable for any action taken or omitted by it in good faith and may relay upon,
and act in accordance with, the advice of its counsel without liability on its
part for any action taken or omitted in accordance with such advice. In any
event, its liability hereunder shall be limited to liability for gross
negligence, willful misconduct or bad faith on its part.
3.7 Reliance. Escrow Agent may conclusively rely upon and act in
accordance with any certificate, instruction, notice, letter, facsimile, or
other written instrument believed by it to be genuine and to have been signed by
the proper party or parties.
3.8 Legal Action. Escrow Agent shall not be required to defend any
legal proceeding which may be instituted against it in respect of the subject
matter of this Agreement unless requested to do so by the Company and
indemnified by the Company to Escrow Agent's satisfaction against the cost and
expense of such defense by the party requesting such defense. If any such legal
proceeding is instituted against it, Escrow Agent shall promptly give notice
thereof to the Company. Escrow Agent shall not be required to institute legal
proceedings of any kind.
4
3.9 No Waiver. Escrow Agent shall not, by act, delay, omission or
otherwise, be deemed to have waived any right or remedy it may have either under
this Agreement or generally, unless such waiver be in writing, and no waiver
shall be valid unless it is in writing, signed by Escrow Agent, and only to the
extent expressly therein set forth. A waiver by Escrow Agent under any term of
this Agreement shall not be construed as a bar to, or waiver of, the same or any
other such right or remedy which it would otherwise have on any other occasion.
3.10 Resignation. Escrow Agent may resign as such hereunder by giving
thirty (30) days written notice thereof to the Company. Within twenty (20) days
after receipt of such notice, the Company shall furnish to Escrow Agent written
instructions for the release of the Escrow Funds to a substitute Escrow Agent
which (whether designated by written instructions from the Company or, in the
absence thereof, by instructions to Escrow Agent from a court of competent
jurisdiction) shall be a bank or trust company organized and doing business
under the laws of the United States or any state thereof. Such substitute Escrow
Agent shall thereafter hold any Escrow Funds received by it pursuant to the
terms of this Agreement and otherwise act hereunder as if it were Escrow Agent
originally named herein. Escrow Agent's duties and responsibilities hereunder
shall terminate upon the release of all of the Escrow Funds then held in escrow
according to such written instruction or upon such delivery as herein provided.
This Agreement shall not otherwise be assignable by Escrow Agent without the
prior written consent of the Company.
4. Miscellaneous Provisions.
4.1 Registration Statement. The Company shall promptly notify Escrow
Agent in writing of the date on which the Registration Statement has been
declared. The Company acknowledges that Escrow Agent has not participated in the
preparation of the Registration Statement. The Company shall promptly notify
Escrow Agent of the entry of any stop order or any other notion which suspends
the effectiveness of the Registration Statement. Escrow Agent may conclusively
rely on any such notice from the Company and shall have no obligation to
independently confirm the effectiveness of the Registration Statement or the
entry of any stop order or suspension.
4.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when actually received or on the
second business day after being mailed by certified or registered United States
mail, return receipted, addressed to the party to be notified at the address set
forth on the signature page of this Agreement or such other address as the party
may provide for such purpose.
4.3 Partial Invalidity. Each term and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law. If any term or
provision of this Agreement or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, then the
remainder of this Agreement or the application of such term or provision to
persons or circumstances other than those to which it is held invalid or
unenforceable, shall not be affected thereby.
4.4 Arbitration. Unless the relief sought requires the exercise of the
equity powers of a court of competent jurisdiction, any dispute arising in
connection with the interpretation or enforcement of the provisions of this
Agreement, or the application or validity thereof, shall be submitted to
arbitration.
5
Such arbitration proceedings shall be held in Santa Barbara, California, in
accordance with the rules then obtaining of the American Arbitration
Association. This agreement to arbitrate shall be specifically enforceable. Any
award rendered in any such arbitration proceedings shall be final and binding on
each of the parties hereto, and judgment may be entered thereon in any court of
competent jurisdiction.
4.5 Governing Law. All questions with respect to the construction of
this Agreement and the rights and liabilities of the parties with respect
thereto shall be governed by the laws of the State of California applicable to
contracts made and to be fully performed in the State of California.
4.6 Entire Agreement. This Agreement contains the entire understanding
between the parties relating to the subject matter of this Agreement, and
supersedes any prior written or oral agreements between them respecting the
subject matter contained herein. There are no representations, agreements,
arrangements, or understandings, either oral or written, between or among any of
the Owners relating to the subject matter of this Agreement which are not fully
expressed herein.
4.7 Binding Nature. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns, provided that Escrow Agent
may not assign its obligations hereunder without the written consent of Company.
4.8 Reports. Escrow Agent shall, on a monthly basis or otherwise as
reasonable requested by the Company, provide the Company with a report as to the
balance of the Escrow Funds and the interest earned thereon.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first-above written.
SANTA XXXXXXX BANK & TRUST XXXXXXXXXXXX.XXX, INC.
By: ________________________________ By:_______________________________
Xxx X. Xxxxx, President
6
