ESCROW AND CONTRIBUTION AGREEMENT
THIS ESCROW AND CONTRIBUTION AGREEMENT ("AGREEMENT") is made and entered
into effective on the 12th day of November, 2003 (the "EFFECTIVE DATE") by and
among:
RAPIDTRON, INC., a Nevada corporation ("RAPIDTRON"),
XXXX XXXXX, an individual and President, Chairman of the Board of Directors
and shareholder of Rapidtron ("XXXXX");
XXXXX XXXXXXX, an individual and Secretary, Treasurer, General Manager,
Director and shareholder of Rapidtron ("MEINEKE");
XXXXX XXXXXXX, an individual and Executive Vice President and shareholder
of Rapidtron ("DERMUTZ");
Ceres Financial Limited, a BVI company ("LEAD INVESTOR"); and
XXX & XXXXXXX, LLP, a California limited liability partnership (the "ESCROW
AGENT").
Collectively, Xxxxx, Meineke and Dermutz are referred to in this Agreement as
the "PRINCIPALS." Rapidtron, the Principals, the Lead Investor and the Escrow
Agent are sometimes hereinafter referred to collectively as the "PARTIES."
RECITALS
WHEREAS, concurrently with the execution and delivery of this Agreement
Rapidtron has completed a private placement of Units to certain investors,
including the Lead Investor (collectively, the "INVESTORS"), to raise a minimum
of $1,600,000 and a maximum of $2,000,000 (the "PRIVATE PLACEMENT"), pursuant to
the terms and conditions set forth in that certain Unit Purchase Agreement among
the Company, the Principals and the Investors (the "PURCHASE AGREEMENT");
WHEREAS, each of the Investors, severally and not jointly, agreed to
purchase its pro rata portion of Units at the Purchase Price in accordance with
the schedule set forth in Section 1.1 of the Purchase Agreement for a cumulative
investment of $1,600,000 in the following manner (i) $720,000 in Tranche 1,
which closed on the date of this Agreement, (ii) $520,000 in "TRANCHE 2"
scheduled to close thirty (30) days after the date of the first Closing and
(iii) $360,000 in "TRANCHE 3" scheduled to close on December 31, 2003
(collectively, the "INVESTMENT COMMITMENT");
WHEREAS, in connection with the Private Placement, the Principals have made
certain representations and warrants in the Purchase Agreement to the Investors
related to financial forecasts of Rapidtron contained in Section 4.1 (ii)
related to gross revenues for the fifteen month period beginning October 1, 2003
and ending December 31, 2004;
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WHEREAS, pursuant to Section 4.3(b) of the Purchase Agreement, unless the
Lead Investor has otherwise consented, Rapidtron and each of the Principals have
agreed to limit the number of shares of common stock issued or options (or other
securities exercisable to acquire shares of common stock) granted by Rapidtron
under all employee or consultant compensatory arrangements to 400,000 or fewer
common shares beginning on the Effective Date and ending on termination of the
Escrow (defined below) and (i) the exercise price or deemed issue price of any
such shares shall be in excess of $1.25 per share, (ii) options granted and
shares issued shall vest yearly on a pro rata basis over a period of not less
than three (3) years and (iii) options granted and the right to receive shares
shall terminate 90 days after termination of such employee's employment or
consultant's relationship with Rapidtron (the "MAXIMUM COMPENSATORY COVENANT");
WHEREAS, under Section 4.3 of the Purchase Agreement, each of the
Principals have agreed to enter into this Agreement, and the execution and
delivery of this Agreement is a condition to closing the Private Placement;
WHEREAS, each Principal has determined that it is in the best interest of
Rapidtron and the Principal that Rapidtron complete the Private Placement; and
WHEREAS, the board of directors of Rapidtron has determined that it is in
the best interest of Rapidtron and its shareholders to complete the Private
Placement and accept the contribution (if any) of the Escrowed Shares, subject
to the terms and conditions set forth in this Agreement,
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements set forth herein, and intending to be legally bound hereby, the
Parties agree as follows:
1. Contribution.
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(a) Each of the Principals agree, in lieu of any obligation to indemnify
the Investors for any breach of representations and warranties contained in
Section 4.1 (ii) of the Purchase Agreement or for any breach of the Maximum
Compensatory Covenant:
(i) upon execution of this Agreement, to place all of the shares of
common stock owned by them (in the number set forth beside such
Principal's name on Schedule A attached hereto subject to
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adjustments pursuant to Section 2(d) of this Agreement)(the
"ESCROWED SHARES"), into escrow (the "ESCROW");
(ii) thereafter, to authorize Rapidtron to deliver to the Escrow Agent
for deposit into the Escrow any cash and non-cash dividends and
other property at any time received or otherwise distributed on,
in respect of, or in exchange for, any or all of the foregoing,
all securities hereafter issued in substitution for any of the
foregoing, all certificates and instruments representing or
evidencing such securities, all cash and non-cash proceeds of all
of the foregoing
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property and all rights, titles, interest, privileges and
preferences appertaining or incident to the Escrowed Shares
(each, a "DISTRIBUTION", together with the Escrowed Shares, the
"ESCROW PROPERTY");
(iii) subject to Section 4(h) below, to contribute such Principal's
pro rata amount (based upon such Principal's proportionate share
of the Escrowed Shares) of the total number of Escrowed Shares
and a pro rata percentage of any Distribution (if any) to
Rapidtron, as an additional capital contribution and without
further consideration (the "PRINCIPAL CONTRIBUTION"), in an
amount equal to one (1) Escrow Share and a pro rata percentage of
any Distribution (if any) for:
(A) each $1.00 Rapidtron's Gross Revenue for the 15 month period
beginning October 1, 2003 and ending December 31, 2004 (as
determined in accordance with Section 4.1(ii) of the
Purchase Agreement) falls below the Principals' projected
gross revenue forecast of $10,880,000 for such 15 month
period, subject to the terms, conditions and adjustments set
forth in this Agreement; and
(B) (i) each share of common stock issued and each option (or
other securities exercisable to acquire a share of common
stock) granted by Rapidtron under all compensatory or other
arrangements in excess of the Maximum Compensation Issuance
and (ii) each share of common stock issued and each option
(or other securities exercisable to acquire a share of
common stock) granted by Rapidtron which fails to satisfy
all of the following criteria (a) the exercise price or
deemed issue price of such shares shall be greater than
$1.25 per share, (b) options granted and shares issued shall
vest yearly on a pro rata basis over a period of not less
than three (3) years or (c) options granted and the right to
receive shares shall terminate 90 days after termination of
such employee's employment or consultant's relationship (as
applicable) with the Company, subject to the terms and
conditions set forth in this Agreement.
For the purposes of this Agreement, "GROSS REVENUE" is defined as the total
revenue reported in the financial statements included in Rapidtron's annual
reports on Form 10-KSB or Form 10-K for the relevant periods. For greater
certainty and by way of example in Section 1(a)(iii)(A), if Rapidtron's actual
Gross Revenue for the 15 month period beginning October 1, 2003 and ending
December 31, 2004 is $10,000,000, then the Principals in aggregate shall
contribute a total of 800,000 Escrow Shares ($10,880,000
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minus $10,000,000 = 880,000) to Rapidtron as additional capital contributions.
For greater certainty and by way of example in Section 1(a)(iii)(B), if
Rapidtron, under one or more compensation arrangements, issues 1,000,000 shares
of common stock and grants options exercisable to acquire 500,000 shares of
common stock, then the Principals in aggregate shall contribute a total of
1,000,000 shares of common stock (1,500,000 minus 500,000 = 1,000,000) to
Rapidtron as additional capital contributions.
(b) Rapidtron agrees to accept any Principal Contribution as an additional
capital contribution from the Principal. The Principal Contributions shall be
made from Escrow pursuant to the procedures and the adjustments set forth in
Section 4 this Agreement.
2. Escrow Deposit and Term.
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(a) Deposit of Escrow Property. Each of the Parities agrees and
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acknowledges that (i) concurrent with the execution and delivery of this
Agreement each of the Principals shall deliver to the Escrow Agent (A)
certificates representing that number of Escrowed Shares set forth beside such
Principal's name on Schedule A and (B) an executed Stock Power to transfer such
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shares to the Company in substantially the form attached hereto as Schedule B,
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and (ii) thereafter, Rapidtron shall be authorized and shall deliver to the
Escrow Agent for deposit into the Escrow any Distribution.
(b) Delivery Receipt. Upon each deposit of Escrow Property, the Escrow
Agent shall acknowledge receipt of stock certificates or other instruments
representing the Escrowed Shares and any Distributions. The Escrow Agent shall
hold the Escrow Property and shall administer the same in accordance with the
terms of this Agreement.
(c) Escrow Term. The Escrow shall commence on the date of this Agreement
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and continue until terminated in accordance with Section 4(g) hereof.
(d) Adjustments. In the event of any change in Escrowed Shares by reason
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of a stock dividend, split-up, subdivision, consolidation, recapitalization,
combination, exchange of shares, or similar transaction or any other
extraordinary change in the corporate or capital structure of Rapidtron
(including the declaration or payment of an extraordinary dividend of cash,
securities or other property), the type and number of shares or securities to be
contributed to the Company by the Principals shall be adjusted appropriately,
and proper provision shall be made in the agreements governing such transaction,
including but not limited to the Stock Power, so that Rapidtron shall receive
upon such distribution the number and class of shares and/or other securities
and/or cash and/or property that Rapidtron would have received in respect of
Escrowed Shares if the distribution had been made immediately prior to such
event, or the record date therefor, as applicable, and to the fullest extent
Rapidtron would have been entitled to receive such securities, cash or other
property.
3. Investors' Representative; Principal Representative.
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(a) In accordance with Section 4.3(f) of the Purchase Agreement, the Lead
Investor shall be the representative of the Investors and the Investors shall be
bound by any and all actions taken by the Lead Investor on their behalf. The
Lead Investor has been appointed and constitutes the true and lawful
attorney-in-fact of each Investor, with full power in his/her/its name and on
his/her/its behalf to act according to the terms of this Agreement in the
absolute discretion of the Lead Investor, and in general to do all things and to
perform all acts including, without limitation, executing and delivering all
agreements, certificates, receipts, instructions and other instruments
contemplated by or deemed advisable in connection with this Agreement. The
Parties agree and acknowledge that (i) the Lead Investor shall not be liable for
any act done or omitted hereunder as agent for the Investors while acting in
good faith and in the exercise of reasonable judgment and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith and (ii) the Investors have agreed to severally indemnify the Lead
Investor and hold it harmless against any loss, liability or expense incurred
without gross negligence or bad faith on the part of the Lead Investor and
arising out of or in connection with the acceptance or administration of his
duties hereunder.
(b) The Principals, Rapidtron and the Escrow Agent shall be entitled to
rely upon any communication or writing given or executed by the Lead Investor.
All communications or writings to be sent to the Investors pursuant to this
Agreement may be addressed to the Lead Investor and any communication or writing
so sent shall be deemed notice to all of the Investors hereunder.
(c) Each of the Principals hereby appoints Xxxx Xxxxx (the "PRINCIPAL
REPRESENTATIVE") as his the representative and his true and lawful
attorney-in-fact with full power, in his name and on his behalf, to act
according to the terms of this Agreement in the Principal Representative's
absolute discretion, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with this Agreement. Notwithstanding the
foregoing, the Principal Representative shall inform each Principal of all
notices received, and of all actions, decisions, notices and exercises of any
rights, power or authority proposed to be done, given or taken by him in
connection with the Escrow Property. The Principal Representative shall not be
liable for any act done or omitted hereunder as agent for the Principals while
acting in good faith and in the exercise of reasonable judgment and any act done
or omitted pursuant to the advice of counsel shall be conclusive evidence of
such good faith. The Principals shall severally indemnify the Principal
Representative and hold Principal Representative harmless against any loss,
liability or expense incurred without gross negligence or bad faith on the part
of the Principal Representative and arising out of or in connection with the
acceptance or administration of his duties hereunder.
(d) The Investors, Rapidtron and the Escrow Agent shall be entitled to
rely upon any communication or writing given or executed by the Principal
Representative. All communications or writings to be sent to the Principals
pursuant to this Agreement may be addressed to the Principal Representative and
any communication or writing so sent shall be deemed notice to all of the
Principals hereunder.
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4. Transfers from Escrow.
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(a) Rapidtron shall immediately provide written notification to the Lead
Investor, the Principal Representative and the Escrow Agent on the date
Rapidtron has filed its annual report on Form 10-KSB or Form 10-K containing the
audited financial statements for the year ended December 31, 2004. Rapidtron
shall also notify the Lead Investor prior to any issuance of shares of common
stock or grants of options (or other securities exercisable to acquire shares of
common stock) under any employee or consultant compensatory arrangement.
(b) The Lead Investor shall, by giving written notice to the Principal
Representative, Rapidtron and the Escrow Agent (a "CLAIM NOTICE"), make a claim
against the Escrow Property for (i) any amounts claimed under Section
1(a)(iii)(A) of this Agreement, no later than FIFTEEN (15) DAYS following the
date Rapidtron has filed its annual report on Form 10-KSB or Form 10-K
containing the audited financial statements for the year ended December 31, 2004
or (ii) any amounts claimed under Section 1(a)(iii)(B) at any time prior to the
Escrow Termination Date set forth in Section 4(g) (each such claim a
"CONTRIBUTION CLAIM"). Such Claim Notice shall contain such facts and
information as are then reasonably available and the specific basis for the
Contribution Claim. In the event that the Lead Investor fails to give an Claim
Notice to the Principal Representative, Rapidtron and the Escrow Agent within
FIFTEEN (15) DAYS following the date Rapidtron has filed its annual report on
Form 10-KSB or Form 10-K containing the audited financial statements for the
year ended December 31, 2004, the Escrow Agent shall promptly transfer the
Escrow Property to the Principals in accordance with Section 4(d).
(c) In the event that the Principal Representative, after receiving a
Claim Notice shall give written notice to the Lead Investor, Rapidtron and the
Escrow Agent that it objects on behalf of the Principals to the Contribution
Claim in respect of said claim(s) within SEVEN (7) DAYS following the date on
which the Claim Notice regarding such claim(s) is delivered to the Principal
Representative, then the Principal Representative and the Lead Investor shall
endeavor to settle and compromise the claims subject to the Claim Notice. The
Principal Representative and the Lead Agent shall promptly provide Rapidtron and
the Escrow Agent notice of any settlement and compromise of the claims subject
to the Claim Notice, and the Escrow Agent shall promptly transfer to Rapidtron
that number of Escrow Shares or other property from the Escrow Property (to the
extent that the Escrow Property is sufficient therefor) as directed by such
settlement and compromise.
(d) If the Principal Representative and the Lead Investor are unable to
settle and compromise the claims within FIVE (5) DAYS, then Rapidtron shall
cause the public accounting firm that audited the financial statements of
Rapidtron contained in its annual report on Form 10-KSB or Form 10-K for the
year ended December 31, 2004 to calculate the amount of the Principal
Contribution based on Rapidtron's audited the financial statements for the years
ended December 31, 2003 and 2004 and the provisions of Section 4.1(ii) of the
Purchase Agreement for Contribution Claims under Section 1(a)(iii)(A) or the
provisions of Section 4.3(c) of the Purchase Agreement for
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Contribution Claims under Section 1(a)(iii)(B). The determination of
Rapidtron's public accounting firm shall be in writing and certified by the
auditors and such determination shall be final and binding on the Parties.
Rapidtron shall immediately provide the Lead Investor, the Principal
Representative and the Escrow Agent notice of the written determination by the
auditors and the Escrow Agent shall promptly transfer to Rapidtron that number
of Escrow Shares or other property from the Escrow Property (to the extent that
the Escrow Property is sufficient therefor) as directed in such determination.
(e) In the event that the Principal Representative fails to give written
notice to the Lead Investor, Rapidtron and the Escrow Agent that it objects on
behalf of the Principals to the Contribution Claim in respect of said claim(s)
within SEVEN (7) DAYS following the date on which the Principal Representative
receives the Claim Notice regarding such claim(s), at the end of such period,
the Escrow Agent shall promptly transfer to Rapidtron that number of Escrow
Shares or other property from the Escrow Property (to the extent that the Escrow
Property is sufficient therefor) as directed by such Claim Notice.
(f) The Escrow Property transferred under any Contribution Claim shall be
drawn from each Principal on a pro rata basis (based upon such Principal's
proportionate share of the Escrowed Property), rounded up to the nearest whole
share.
(g) Thirty (30) days following the date on which Rapidtron has filed its
annual report on Form 10-KSB or Form 10-K containing the audited financial
statements for the year ended December 31, 2004 (the "ESCROW TERMINATION DATE"),
the remaining Escrow Property, if any, shall be transferred to the Principals in
accordance with their respective interests if (i) all Escrow Property has not
previously been transferred to Rapidtron in accordance with any of Section 4(b),
(c), (d) or (e) hereof or (ii) no Claim Notice has been given by the Lead
Investor in accordance with Section 4(b) hereof; provided however, that if the
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Lead Investor has made any claim against the Escrow Property to which the
Principal Representative has timely objected and which remains outstanding as of
the Escrow Termination Date, then no Escrow Property shall be transferred to the
Principals until such time as any such claim has been resolved in accordance
with the provisions of Section 4(d); provided, however, that if the amount of
-----------------
the claim is not disputed by the Lead Investor, and if such amount is less than
the balance then remaining of the Escrow Property, then the balance of the
Escrow Property not subject to such claim shall be transferred as provided in
the first sentence of this Section 4(g).
(h) In the event the Investors fail to make the Investment Commitment in
any of Tranche 2 or Tranche 3 as required under Section 1.1 of the Purchase
Agreement, Rapidtron shall provide a written notice of default to the Principal
Representative and the Escrow Agent ("DEFAULT NOTICE"), and the Investors shall
have SEVEN (7) DAYS to make the Investment Commitment; provided the Investment
Commitment is not otherwise required as a result of an a material breach of the
Purchase Agreement by Rapidtron or any of the Principals. The Default Notice
shall demand tender of the Investment Commitment and provide (A) the total
amount invested by the Investors under Section 1.1 of the Purchase Agreement
("TOTAL INVESTMENT"), and (B) a certification that neither the Principals nor
Rapidtron have otherwise materially breached any material covenant in
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the Purchase Agreement. Notwithstanding the other provisions of this Section 4,
if the Investors fail to cure the default within SEVEN (7) DAYS after delivery
of the Default Notice to the Lead Investor, then Escrow Agent shall deliver to
the Principals their respective portion of Escrow Property in an amount equal to
the percentage of the Investment Commitment the Investors failed to invest bears
to such Principal's Escrow Property (the "RELEASE AMOUNT"); provided that such
Principal is employed by Rapidtron at the time of such Default Notice. For the
purposes of this Section 4(h) the Release Amount shall be calculated as follows:
Release Amount equals Escrow Property multiplied by((Investment Commitment minus
------ ------------- -----
Total Investment) divided by Investment Commitment). By way of example, if the
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Investors make all investments except for the investment in Tranche 3 and the
Escrow Property consists of 1,000,000 shares, then the Release Amount shall be
240,625 shares calculated as follows: 240,625 shares = 1,000,000 shares X
($1,600,000 - 1,215,000)/ $1,600,000).
(i) Notwithstanding the other provisions of this Section 4, including
Section 4(h), the Parties hereby acknowledge and agree that if the Investors
breach the Purchase Agreement by failing to make the Investment Commitment in
any of Tranche 2 or Tranche 3 as required under Section 1.1 of the Purchase
Agreement, and Rapidtron and each of the Principals have satisfied all
conditions under Section 2.3 of the Purchase Agreement and are not otherwise in
material breach of any representation, warranty or covenant under the Purchase
Agreement or any agreement contemplated in the Purchase Agreement, then the
Principal Representative shall give the Lead Investor and the Escrow Agent
written notice of default of the Investors' Investment Commitment (an "NOTICE OF
NON-EXCUSABLE DEFAULT"), which Notice of Non-Excusable Default shall demand
tender of the Investment Commitment and provide (A) a certification that all
conditions under Section 2.3 of the Purchase Agreement have been satisfied, (B)
neither the Principals nor Rapidtron are in material breach of any
representation, warranty or covenant under the Purchase Agreement or any
agreement contemplated in the Purchase Agreement, and (C) a demand for release
of Escrow Property if the default is not cured within SEVEN (7) DAYS. If the
Investors fail to cure the default within SEVEN (7) DAYS after delivery of the
Notice of Non-Excusable Default to the Lead Investor, then Escrow Agent shall
deliver the Escrow Property to the Principals in accordance with their
respective interests; provided that such Principal is employed by Rapidtron at
the time of such Notice of Intentional Default.
(i) In the event that the Lead Investor, after receiving either a Default
Notice or a Notice of Non-Excusable Default, shall give written notice to the
Principal Representative, Rapidtron and the Escrow Agent that it objects on
behalf of the Investors to the Default Notice or Notice of Non-Excusable
Default, as applicable, in respect of said claim(s) within said SEVEN (7) DAYS
following the date on which the Default Notice or Notice of Non-Excusable
Default, as applicable, regarding such claim(s) is delivered to the Lead
Investor, then the Principal Representative and the Lead Investor shall endeavor
to settle and compromise the claims subject to the notice. The Principal
Representative and the Lead Agent shall promptly provide Rapidtron and the
Escrow Agent notice of any settlement and compromise of the claims, and the
Escrow Agent shall promptly transfer that number of Escrow Shares or other
property from the Escrow Property to the Principals in accordance with their
respective interests (provided that such
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Principal is employed by Rapidtron at such time) as directed by such settlement
and compromise.
(j) Notwithstanding the other provisions of this Section 4, the Escrow
Agent shall release and distribute the Escrow Property to (i) Rapidtron pursuant
to any written instructions executed by all of the Principals, (ii) to the
Principals pursuant to any written instructions executed by the Lead Investor or
(iii) in accordance with any non-appealable order or decree by a court of
competent jurisdiction to do so.
(d) The Escrow Agent may deliver the certificates representing the Escrow
Property to Rapidtron, with appropriate instructions, whenever necessary to
effectuate a contribution of the Escrowed Shares in accordance with the terms
hereof: Rapidtron, Inc., 0000 Xxxxxx Xxx., Xxxx. X, Xxxxx Xxxx, XX 00000
5. Dividends; Voting; Contribution.
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(a) Dividends. Any dividends declared and paid, and any distributions
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made with respect to, the Escrowed Shares shall be delivered to the Escrow Agent
and shall be held and transferred by the Escrow Agent in the same manner that
the Escrowed Shares are held and transferred hereunder. All such dividends and
distributions made in shares of the common stock of Rapidtron shall be deemed to
be Escrowed Shares (allocated on the basis of the pro rata interest represented
by such Escrowed Share) for any and all purposes hereunder.
(b) Voting. Each of the Principals shall be entitled to vote the Escrowed
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Shares held by the Escrow Agent as its nominee in accordance with its interests
therein on all matters submitted to a vote of the stockholders of Rapidtron
during the term of this Agreement but shall not be entitled to exercise any
investment or dispositive powers over the Escrowed Shares.
6. Fees of Escrow Agent.
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(a) Ordinary Escrow Service Fees. Rapidtron shall pay the Escrow Agent,
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as compensation for its services hereunder: (a) a $500 non-refundable start-up
fee, payable upon the Escrow Agent's execution of this Agreement; and (b) a $100
escrow processing fee for each receipt and disbursement of Escrow Shares and
funds upon the Escrow Agent's demand.
(b) Extraordinary Service Fees. If the conditions of this Agreement are
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not promptly fulfilled, or if Escrow Agent renders any service not provided for
in this Agreement at the request of the Lead Investor, Rapidtron and the
Principals, or if the Lead Investor, Rapidtron and the Principals request a
substantial modification of its terms, or if any controversy arises, or if the
Escrow Agent is made a party to, or intervenes in, any litigation pertaining to
the Escrow or its subject matter (each case, an "EXTRAORDINARY SERVICE"), then
the Escrow Agent shall be reasonably compensated for such Extraordinary Services
and reimbursed for all costs, reasonable attorney's fees, including allocated
costs of in-house counsel, and expenses occasioned by such default, delay,
controversy or litigation, and the Escrow Agent shall have the right to retain
all
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documents and/or other things of value at any time held by the Escrow Agent in
the Escrow until such compensation, fees, costs, and expenses are paid. Each of
Rapidtron and the Principals, jointly and severally, promise to pay to Escrow
Agent these sums in connection with Extraordinary Services upon demand by Escrow
Agent, which sums shall be borne equally by Rapidtron and the Principals.
7. Rights and Duties of the Escrow Agent.
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(a) The Escrow Agent shall have no implied duties and no obligation to
take any action hereunder except for any action specifically provided by this
Agreement to be taken by the Escrow Agent. The Escrow Agent shall have no
responsibility or obligation of any kind in connection with this Agreement or
the Escrowed Shares, and shall not be required to deliver the same or any part
thereof or take any action with respect to any matters that might arise in
connection therewith, other than to receive, hold, and make delivery of the
Escrowed Shares as herein provided or by reason of any non-appealable order of a
court of competent jurisdiction. The Escrow Agent shall not be liable to any
party for any action taken or omitted to be taken hereunder or in connection
herewith except for its own gross negligence or willful misconduct or breach of
the specific provisions of this Agreement. The Escrow Agent may execute any of
its duties hereunder by or through employees, agents and attorneys-in-fact.
(b) Rapidtron, the Investors and the Principals hereby agree to jointly
and severally indemnify, hold harmless and defend the Escrow Agent and its
directors, officers, agents and employees (collectively, the "INDEMNITEES") from
and against any and all claims, liabilities, losses, damages, fines, penalties
and expenses, including out-of-pocket and incidental expenses and legal fees and
expenses ("LOSSES"), that may be imposed on, incurred by or asserted against,
the Indemnitees or any of them for following any instructions or other
directions upon which they are authorized to rely pursuant to the terms of this
Agreement. In addition to and not in limitation of the immediately preceding
sentence, Rapidtron, the Investors and the Principals also agree to indemnify
and hold the Indemnitees and each of them harmless from and against any and all
Losses that may be imposed on, incurred by or asserted against the Indemnitees
or any of them in connection with or arising out of the Escrow Agent's
performance under this Agreement, provided the Indemnitees have not acted with
gross negligence or engaged in willful misconduct. The provisions of this
Section 7(b) shall survive the termination of this Agreement and the resignation
or removal of the Escrow Agent for any reason.
(c) The Escrow Agent shall have the right to resign after first having
given Rapidtron, the Lead Investor and the Principal Representative notice in
writing of its intent to resign at least thirty (30) days in advance. At the
expiration of such thirty (30) days, the Escrow Agent shall deliver the
remaining Escrowed Shares to a successor Escrow Agent designated in writing by
Rapidtron, the Lead Investor and the Principal Representative. If Rapidtron,
the Lead Investor and the Principal Representative fail to designate a successor
to the Escrow Agent within such time, the Escrow Agent shall, at the expense of
Rapidtron and the Principals, institute a xxxx of interpleader as contemplated
by Section 7(e)(ii) hereof. Any corporation or association into which the
Escrow Agent in its individual capacity may be merged or converted or with which
it
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may be consolidated, or any corporation or association resulting from any
merger, conversion or consolidation to which the Escrow Agent in its individual
capacity shall be a party, or any corporation or association to which all or
substantially all the corporate trust business of the Escrow Agent in its
individual capacity may be sold or otherwise transferred, shall be the Escrow
Agent under this Agreement without further act.
(d) The Escrow Agent shall be entitled to rely upon the accuracy, act in
reliance upon the contents and assume the genuineness of any notice which is
given to the Escrow Agent in proper form pursuant to this Agreement and
reasonably believed by it to be genuine and correct and to have been signed or
sent by the proper person, without the necessity of the Escrow Agent verifying
the truth or accuracy thereof. The Escrow Agent shall not be obligated to
investigate or in any way determine whether the Investors are entitled to
indemnification under the Purchase Agreement or the proper amount of any such
indemnification.
(e) Should any controversy arise between or among Rapidtron, the Investor,
the Principals and/or any other person, firm or entity with respect to this
Agreement, the Escrowed Shares or any part thereof, or the right of any party or
other person to receive the Escrowed Shares, or should Rapidtron, the Lead
Investor and the Principal Representative fail to designate another Escrow Agent
as provided in Section 7(c) hereof, or if the Escrow Agent should be in doubt as
to what action to take, the Escrow Agent shall have the right (but not the
obligation) to (i) withhold delivery of the Escrowed Shares until the
controversy is resolved and/or (ii) institute a xxxx of interpleader in any
court of competent jurisdiction to determine the rights of the parties hereto
(the right of the Escrow Agent to institute such xxxx of interpleader shall not,
however, be deemed to modify the manner in which Escrow Agent is entitled to
make transfers from the Escrowed Shares as hereinabove set forth other than to
tender the Escrowed Shares into the possession and control of such court).
8. Legal Counsel.
-------------
(a) The Escrow Agent may consult with its counsel or other counsel
satisfactory to it with respect to any question relating to its duties or
responsibilities hereunder or otherwise in connection herewith and shall not be
liable for any reasonable action taken, suffered or omitted by the Escrow Agent
in good faith upon the advice of such counsel. Each of Lead Investor, Rapidtron
and the Principals acknowledge and agree that Escrow Agent is acting as legal
counsel to Rapidtron in connection with this Agreement and related transactions
and will continue to represent Rapidtron and/ or the Principals in connection
with this Agreement and related transactions. Each of Rapidtron, the
Principals, and the Lead Investor, for itself and on behalf of all Investors,
hereby waives any conflict of interest that may exist as a result of Escrow
Agent providing such legal services to Rapidtron and/ or the Principals and
hereby waives any right to cause a substitute Escrow Agent to be appointed
solely as a result of such conflict of interest.
(b) Each Party acknowledges that it has been advised by the other and the
Escrow Agent to seek independent legal and financial (including tax) advice with
respect
11
to this Agreement and that it has not relied on the other party for any advice,
whether legal or otherwise, with respect to this Agreement. Specifically, each
of the Principals has had the opportunity, and has been strongly advised, to
consult with its counsel or other counsel satisfactory to it with respect to any
question relating to its duties or responsibilities hereunder. Each of the
Principals understands that entering into this Agreement has or may have
material legal and tax consequences on such Principal, and neither the Investors
nor Rapidtron has given any opinion or representation with respect to the legal
or tax consequences to the Principals.
(c) Subject to Rapidtron's requirement to pay the Investor's Legal Fee
pursuant to the Purchase Agreement, each party shall be responsible for its
legal expenses incurred by it, in connection with the transactions contemplated
by this Agreement.
9. Miscellaneous.
-------------
(a) Time Periods. For purposes of computing time periods hereunder, all
------------
references to "days" shall mean regular business days of the Escrow Agent.
Whenever under the terms hereof the time for giving a notice or performing an
act falls upon a Saturday, Sunday or bank holiday, such time shall be extended
to the Escrow Agent's next business day.
(b) Further Assurances. The parties will sign and deliver all further
------------------
documents and instruments and do all things that may, either before or after the
signing of this Agreement, be reasonably required to carry out the full intent
and meaning of this Agreement.
(c) Severability. If one or more of the provisions contained herein shall
------------
for any reason be held to be invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions hereof, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) Survival of Indemnification. Notwithstanding termination of this
---------------------------
Agreement, the provisions of Sections 7 and 8(a) shall remain in full force and
effect for so long as the Escrow Agent may have any liability.
(e) Default. Waiver of any default shall not constitute waiver of any
-------
other or subsequent default.
(f) Notices. All notices and other communications hereunder shall be in
-------
writing (including wire, telefax or similar writing) and shall be delivered,
addressed or telefaxed as follows:
If to Rapidtron:
Rapidtron, Inc.
0000 Xxxxxx Xxxxxx, #X
Xxxxx Xxxx, XX 00000-0000
12
Attn: Xxxx Xxxxx, CEO
With a required copy to:
Xxx & Xxxxxxx, LLP
00000 Xxx Xxxxxx Xxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxx
If to the Principal Representative:
Xxxx Xxxxx
0000 Xxxxxx Xxxxxx, #X
Xxxxx Xxxx, XX 00000-0000
If to the Lead Investor:
Ceres Financial Limited
Walkers Xxxxxxxx
P.O. Box 92
Mill Mall
Road Town, Tortola
British Virgin Islands
If to the Escrow Agent:
Xxx & Xxxxxxx, LLP
00000 Xxx Xxxxxx Xxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxx
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 9(f) (or in accordance with the latest
unrevoked written direction from such party); (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 9(f)
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
(g) Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be deemed one and the same agreement.
(h) Amendment. This Agreement may not be amended or modified except by a
---------
written agreement signed by each of the parties hereto.
13
(i) Governing Law. This Agreement shall be construed, enforced, and
-------------
administered in accordance with the laws of the State of California, without
giving effect to any provision thereof that would compel the application of the
substantive laws of any other jurisdiction.
(j) Construction; Defined Terms. This Agreement shall be interpreted
---------------------------
neutrally and no construction against the drafter shall be permitted. All
defined terms used herein shall have the meanings herein defined or, if not
defined herein, shall have the meanings ascribed to such terms in the Purchase
Agreement.
(k) Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement, constitutes the entire agreement and understanding among Rapidtron,
the Principals, the Lead Investor and the Escrow Agent and supersedes any prior
agreement and understanding relating to the subject matter of this Agreement.
Any capitalized term not otherwise defined herein shall have the same meaning
ascribed to such term in the Purchase Agreement.
* * *
14
IN WITNESS WHEREOF, this Escrow and Contribution Agreement has been
executed by the parties as of the date first above written.
RAPIDTRON, INC. PRINCIPALS:
Xxxx Xxxxx
By: /s/ Xxxx Xxxxx By: /s/ Xxxx Xxxxx
---------------------------- ----------------------------
Name: Name: Xxxx Xxxxx
Title: President Address:
ESCROW AGENT: Xxxxx Xxxxxxx
Xxx & Xxxxxxx, LLP By: /s/ Xxxxx Xxxxxxx
-------------------
Name: Xxxxx Xxxxxxx
Address:
By: /s/ Xxxxxxx X. Xxx
---------------------------- ----------------------------
Name: Xxxxxxx X. Xxx
----------------------------
Title: Partner
---------------------------
LEAD INVESTOR: Xxxxx Xxxxxxx
By: /s/ X. Xxxxx By: /s/ Xxxxx Xxxxxxx
---------------------------- ----------------------------
Name: Newbury Limited Name: Xxxxx Xxxxxxx
----------------------------
Title: Director Address:
---------------------------
15
CONSENTS OF SPOUSES:
CONSENT OF SPOUSE
The undersigned is the spouse of Xxxx Xxxxx, a Principal (as such term is
defined therein) in the foregoing Escrow and Contribution Agreement (the
"AGREEMENT") dated as of November __, 2003. Capitalized terms used herein but
not otherwise defined herein shall have the meanings ascribed thereto in the
Agreement.
I hereby acknowledge that I have carefully reviewed the Agreement and such other
documents as I have deemed appropriate. I have had an opportunity to consult
with legal counsel and have discussed the contents of the Agreement with legal
counsel. I understand fully the transactions described in the Agreement, and I
hereby approve of and consent to all such transactions. I am aware that by the
provisions of the Agreement, my spouse agrees, among other things, to escrow and
contribute all of his outstanding shares (the "COMMON SHARES") of common stock
of Rapidtron, including my community property interest therein, if any, in
accordance with the Agreement. I hereby agree, on behalf of myself and all
persons who may claim on my behalf, that upon any legal separation from or
dissolution of my marriage to my present spouse, or upon the death of my spouse,
neither I nor anyone claiming on my behalf will seek to partition my or my
spouse's community property interest in Common Shares or the Shares and that in
any such event I shall be entitled only to the value of my interest in such
Common Shares or Shares, if any, and that I shall have no claim or right to
Common Shares or Shares themselves.
EXECUTED this 12 day of November, 2003.
/s/ Xxxxxx Xxxxx
----------------------------------------
16
CONSENT OF SPOUSE
The undersigned is the spouse of Xxxxx Xxxxxxx, a Principal (as such term is
defined therein) in the foregoing Escrow and Contribution Agreement (the
"AGREEMENT") dated as of November __, 2003. Capitalized terms used herein but
not otherwise defined herein shall have the meanings ascribed thereto in the
Agreement.
I hereby acknowledge that I have carefully reviewed the Agreement and such other
documents as I have deemed appropriate. I have had an opportunity to consult
with legal counsel and have discussed the contents of the Agreement with legal
counsel. I understand fully the transactions described in the Agreement, and I
hereby approve of and consent to all such transactions. I am aware that by the
provisions of the Agreement, my spouse agrees, among other things, to escrow and
contribute all of his outstanding shares (the "COMMON SHARES") of common stock
of Rapidtron, including my community property interest therein, if any, in
accordance with the Agreement. I hereby agree, on behalf of myself and all
persons who may claim on my behalf, that upon any legal separation from or
dissolution of my marriage to my present spouse, or upon the death of my spouse,
neither I nor anyone claiming on my behalf will seek to partition my or my
spouse's community property interest in Common Shares or the Shares and that in
any such event I shall be entitled only to the value of my interest in such
Common Shares or Shares, if any, and that I shall have no claim or right to
Common Shares or Shares themselves.
EXECUTED this 12 day of November, 2003.
/s/ Xxxxx Xxxxxxx
----------------------------------------
17
CONSENT OF SPOUSE
The undersigned is the spouse of Xxxxx Xxxxxxx, a Principal (as such term is
defined therein) in the foregoing Escrow and Contribution Agreement (the
"AGREEMENT") dated as of November __, 2003. Capitalized terms used herein but
not otherwise defined herein shall have the meanings ascribed thereto in the
Agreement.
I hereby acknowledge that I have carefully reviewed the Agreement and such other
documents as I have deemed appropriate. I have had an opportunity to consult
with legal counsel and have discussed the contents of the Agreement with legal
counsel. I understand fully the transactions described in the Agreement, and I
hereby approve of and consent to all such transactions. I am aware that by the
provisions of the Agreement, my spouse agrees, among other things, to escrow and
contribute all of his outstanding shares (the "COMMON SHARES") of common stock
of Rapidtron, including my community property interest therein, if any, in
accordance with the Agreement. I hereby agree, on behalf of myself and all
persons who may claim on my behalf, that upon any legal separation from or
dissolution of my marriage to my present spouse, or upon the death of my spouse,
neither I nor anyone claiming on my behalf will seek to partition my or my
spouse's community property interest in Common Shares or the Shares and that in
any such event I shall be entitled only to the value of my interest in such
Common Shares or Shares, if any, and that I shall have no claim or right to
Common Shares or Shares themselves.
EXECUTED this ___ day of November, 2003.
/s/ [illegible] Dermutz
----------------------------------------
18
SCHEDULE A
----------
PRINCIPAL SHAREHOLDERS
--------------------------------------------------------------------------------
PRINCIPAL NAME NUMBER OF ESCROW SHARES
--------------------------------------------------------------------------------
Xxxx Xxxxx 7,019,498
Xxxxx Xxxxxxx -0-
Xxxxx Xxxxxxx 2,104,894
19
SCHEDULE B
----------
STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
Rapidtron, Inc. , a Nevada corporation, ______________ shares of Common Stock
of Rapidtron, Inc. represented by stock certificate number ___________ and does
hereby irrevocably constitute and appoint _____________ (Escrow Agent), its
attorney to transfer said shares on the books of said corporation with full
power of substitution in the premises in accordance with that certain Escrow and
Contribution Agreement dated effective as of November ___, 2003.
DATED: ________, 2003
SIGNATURE:
Xxxx Xxxxx
----------------------------------------
----------------------------------------
Print or Type Name and Title
20
STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
Rapidtron, Inc. , a Nevada corporation, ______________ shares of Common Stock
of Rapidtron, Inc. represented by stock certificate number ___________ and does
hereby irrevocably constitute and appoint _____________ (Escrow Agent), its
attorney to transfer said shares on the books of said corporation with full
power of substitution in the premises in accordance with that certain Escrow and
Contribution Agreement dated effective as of November ___, 2003.
DATED: ________, 2003
SIGNATURE:
Xxxxx Xxxxxxx
----------------------------------------
----------------------------------------
Print or Type Name and Title
21
STOCK POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
Rapidtron, Inc. , a Nevada corporation, ______________ shares of Common Stock
of Rapidtron, Inc. represented by stock certificate number ___________ and does
hereby irrevocably constitute and appoint _____________ (Escrow Agent), its
attorney to transfer said shares on the books of said corporation with full
power of substitution in the premises in accordance with that certain Escrow and
Contribution Agreement dated effective as of November ___, 2003.
DATED: ________, 2003
SIGNATURE:
Xxxxx Xxxxxxx
----------------------------------------
----------------------------------------
Print or Type Name and Title
22
