PROMOTIONAL SHARES ESCROW AGREEMENT
THIS PROMOTIONAL SHARES ESCROW AGREEMENT (this "Agreement") made and
entered into this ________________ day of November, 1997, by and between
Advantage Marketing Systems, Inc., an Oklahoma corporation (the "Issuer"), whose
principal place of business is located at 0000 Xxxxxxxxx Xxxxxxxxxx, Xxxxx
0000X, Xxxxxxxx Xxxx, Xxxxxxxx 00000-0000, and Xxxx X. Xxxx ("Hail"), Xxxxxx X.
Xxxxxx, Xx. ("X. Xxxxxx"), Xxxx Xxxxxx ("X. Xxxxxx"), Xxxxx X. Xxxxxxx ("X.
Xxxxxxx"), Xxxxxx X. Xxxxxxx ("X. Xxxxxxx"), R. Xxxxxx Xxxxxx ("Xxxxxx"), Pre-
Paid Legal Services, Inc. ("Pre-Paid"), and (Hail, X. Xxxxxx, X. Xxxxxx, X.
Xxxxxxx, J. Baresel, Dunlap, and Pre-Paid are collectively referred to as the
"Depositors") and Liberty Bank and Trust Company of Oklahoma City, N.A. (the
"Escrow Agent"), whose principal place of business is located at 000 Xxxxxxxx,
Xxxxxxxx Xxxx, Xxxxxxxx 00000 (all of whom are collectively referred to as
"Signatories").
RECITALS
WHEREAS, the Issuer has filed an application with the Securities
Administrator of the Oklahoma Department of Securities (the "Administrator") to
register the Issuer's offering of (i) 1,495,000 shares of Common Xxxxx, x.0000
par value, and 1,495,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") in units of one share of Common Stock and one Warrant (the "Units")
and 1,495,000 shares of Common Stock underlying the Warrants for sale to public
investors some of whom may be residents of the State of Oklahoma, (ii) 130,000
shares of Common Stock and 130,000 Warrants in units of one share of Common
Stock and one Warrant underlying the warrants granted to Xxxxxxx Investment
Company, Inc. and Xxxxxx Xxxxxxx & Assoc., Inc. the representatives of the
underwriters of the Issuer's offering and (iii) 1,625,000 shares of Common Stock
underlying the Warrants (the "Equity Securities");
WHEREAS, Hail is the owner of 241,641 shares of Common Stock and stock
options exercisable for the purchase of 250,000 shares of Common Stock; X.
Xxxxxx is the owner of 15,607 shares of Common Stock and stock options
exercisable for the purchase of 250,000 shares of Common Stock; X. Xxxxxx is the
owner of 4,338 shares of Common Stock; X. Xxxxxxx and X. Xxxxxxx are the owners
of 11,500 shares of Common Stock and 1997-A Warrants exercisable for the
purchase of 2,000 shares of Common Stock, and X. Xxxxxxx is the owner of stock
options exercisable for the purchase of 35,000 shares of Common Stock; X.
Xxxxxxx is the owner of 20,828 shares of Common Stock, stock option exercisable
for the purchase of 87,500 shares of Common Stock, and the custodian holder for
the benefit of the children of X. Xxxxxxx and X. Xxxxxxx of stock options
exercisable for the purchase of 12,500 shares of Common Stock; Xxxxxx is the
owner of stock options exercisable for the purchase of 37,500 shares of Common
Stock; and Pre-Paid is the owner of 80,768 shares of Common Stock (the shares of
Common Stock, 1997-A Warrants and stock options are referred to herein as the
"Promotional Securities");
WHEREAS, as a condition to registering the Issuer's Equity Securities, the
Depositors, who are security holders of the Issuer and who, for the purposes of
this Agreement, are deemed to be Promoters of the Issuer, have agreed to deposit
the Promotional Securities with the Escrow Agent; and
WHEREAS, the Signatories have agreed to be bound by the terms of this
Agreement.
NOW, THEREFORE, the Signatories agree as follows:
1. DEPOSIT OF PROMOTIONAL SHARES. The Depositors' Promotional Securities have
been deposited into an escrow account (the "escrow") with the Escrow Agent, and
the Escrow Agent hereby acknowledge the receipt thereof.
2. EXERCISE OR CONVERSION OF PROMOTIONAL SHARES. To the extent the
Promotional Shares have or represent exercise rights or conversion rights, the
Escrow Agent shall, upon receipt of the Issuer's written request, provide the
documents that evidence and/or which are necessary to cause exercise of the
rights or conversion rights. The shares of Common Stock or other securities of
the Issuer issued upon exercise or
PROMOTIONAL SHARES ESCROW AGREEMENT Page 1
conversion of the Promotional Securities shall become and remain in escrow
subject to the terms of this Agreement.
3. TERM. The term of this Agreement and the escrow shall begin on the date
that the public securities offering relating thereto (the "public offering") is
declared effective by the Administrator and shall continue for a period of 36
months thereafter. The Promotional Securities shall be held by the Escrow Agent
pursuant to this Agreement until they are released in accordance with paragraph
4 of this Agreement.
4. RELEASE OF PROMOTIONAL SECURITIES.
(a) In the event of a dissolution, liquidation, merger, consolidation,
reorganization, sale or exchange of the Issuer's assets or securities
(including by way of tender offer), or any other transaction or proceeding
with a person who is not a Promoter, which results in the distribution of
the Issuer's assets or securities ("Distribution"), while this Agreement
remains in effect, the Depositors agree that:
(i) All holders of the Issuer's Equity Securities will initially
share on a pro rata, per share basis in the Distribution, in
proportion to the amount of cash or other consideration that they
paid per share for their Equity Securities (provided that the
Administrator has accepted the value of the other consideration),
until the shareholders who purchased the Issuer's Equity Securities
pursuant to the public offering (the "Public Shareholders") have
received, or have had irrevocably set aside for them, an amount
that is equal to 100 percent of the public offering's price per
share times the number of shares of Equity Securities that they
purchased pursuant to the public offering and which they still hold
at the time of the Distribution, adjusted for stock splits, stock
dividends, recapitalization and the like; and
(ii) All holders of the Issuer's Equity Securities shall thereafter
participate on an equal, per share basis times the number of shares
of Equity Securities they hold at the time of the Distribution,
adjusted for stock splits, stock dividends, recapitalization and
the like.
(b) The Distribution may proceed on lesser terms and conditions than the
terms and conditions in paragraph 4(a) of this Agreement if a majority of
the Equity Securities that are not held by Depositors, officers, directors,
or Promoters of the Issuer, or their associates or affiliates vote, or
consent by consent procedure, to approve the lesser terms and conditions.
(c) In the event of a dissolution, liquidation, merger, consolidation,
reorganization, sale or exchange of the Issuer's assets or securities
(including by way of tender offer), or any other transaction or proceeding
with a person who is a Promoter, which results in a Distribution while this
Agreement remains in effect, the Depositors' Promotional Securities shall
remain in escrow subject to the terms of this Agreement.
(d) The Depositors' Promotional Securities shall be released from escrow if
(i) the public offering has been terminated, and no securities were sold
pursuant thereto, or (ii) the public offering has been terminated, and all
of the gross proceeds that were derived therefrom have been returned to the
public investors, or (iii) the term of this Agreement shall have expired in
accordance with and pursuant to paragraph 3 of this Agreement.
5. NOTICE OF TERMINATION. Upon expiration of the term of this Agreement, the
Escrow Agent shall notify the Administrator in writing of such termination and
shall not be required to provide the Administrator with any other documentation
of such termination or release of the Promotional Securities.
6. RESTRICTIONS ON TRANSFER, SALE OR DISPOSAL OF PROMOTIONAL SECURITIES.
While this Agreement is in effect, no Promotional Securities, any interest
therein or any right or title thereto, may be sold, transferred,
PROMOTIONAL SHARES ESCROW AGREEMENT Page 2
pledged, assigned, hypothecated or otherwise disposed of ("transfer" or
"transferred"), except as provided below, and the Escrow Agent shall not
recognize any transfer that violates the terms of this Agreement. The
Promotional Securities may not be transferred until the Escrow Agent has
received a written statement, signed by the proposed transferee ("transferee"),
which states that the transferee has full knowledge of the terms of this
Agreement, the transferee accepts the Promotional Securities subject to the
terms of this Agreement, and the transferee realizes that the Promotional
Securities shall remain subject to the terms of the Agreement until they are
released pursuant to paragraph 4 of this Agreement. Notwithstanding the
foregoing, (a) Promotional Securities may be transferred by will, the laws of
decent and distribution, operation of law, or by order of any court of competent
jurisdiction and having proper venue and (b) Promotional Securities of a
deceased Depositor may be hypothecated to pay the expenses of the deceased
Depositor's estate. The hypothecated Promotional Securities shall remain subject
to the terms of this Agreement. Promotional Securities may not be pledged to
secure any other debt.
7. VOTING POWER. The Promotional Securities shall have the same voting rights
as similar, non-escrowed Equity Securities. If the Promotional Securities are
registered in the Escrow Agent's name, the Escrow Agent shall vote those
Promotional Securities in accordance with the Depositors' written instructions.
8. DIVIDENDS. Cash dividends and stock dividends, that are granted to the
Depositors, shall be promptly deposited with the Escrow Agent subject to the
terms of this Agreement. The Escrow Agent shall place the cash dividends in an
interest bearing account. The Escrow Agent shall treat the stock dividends,
cash dividends and the interest earned thereon as assets of the Issuer which are
available for distribution pursuant to paragraphs 4(a) and (b) of this
Agreement, or as assets of the Issuer available for distribution to the
Depositors, upon release of their Promotional Securities pursuant to paragraph 4
of this Agreement, unless they are to be used as compensation to the Escrow
Agent, pursuant to paragraph 10 of this Agreement.
9. STOCK SPLITS AND ADDITIONAL SHARES. Equity Securities received by the
Depositors as a result of stock splits, recapitalization of the Issuer, or the
conversion of the Depositors' convertible securities while their Promotional
Securities are held in escrow, shall be promptly deposited with the Escrow Agent
as Promotional Securities subject to the terms of this Agreement. These
Promotional Securities shall be distributed to the Depositors when their
Promotional Securities are released from escrow pursuant to paragraph 4 of this
Agreement.
10. RELIANCE BY ESCROW AGENT. The Escrow Agent shall be protected if it acts
in good faith upon any statement, certificate, notice, request, consent, order
or other document which it believes to be genuine, conforms with the provisions
of this Agreement and is signed by the proper party. The Escrow Agent's sole
responsibility shall be to act in accordance with the terms expressly set forth
in this Agreement. The Escrow Agent shall be under no obligation to institute
or defend any action, suit or proceeding in connection with this Agreement
unless it receives reasonable indemnification and advancement of fees and costs.
The Escrow Agent may consult counsel with respect to any question arising under
this Agreement. The Escrow Agent shall not be liable for any action taken or
omitted, in good faith, upon the advice of counsel. In performing its duties
hereunder, the Escrow Agent shall not be liable to anyone for any damage, loss,
expense or liability other than for that which arises from the Escrow Agent's
failure to abide by the terms of this Agreement.
11. ESCROW AGENTS COMPENSATION. The Escrow Agent shall be entitled to receive
reasonable compensation from the Issuer for its services. If the Escrow Agent
is required to render additional services that are not expressly set forth
therein, or if it is made a party to or intervenes in any action, suit or
proceeding pertaining to this Agreement ("Additional Services"), it shall be
entitled to receive reasonable compensation from the Issuer and the Depositors.
If Additional Services are provided, the Escrow Agent may deduct reasonable
compensation from the cash dividends, interest and proceeds being held for
distribution pursuant to this Agreement.
12. ESCROW AGENTS INDEMNIFICATION. The Issuer and the Depositors agree to hold
the Escrow Agent harmless from, and indemnify the Escrow Agent for, any cost or
liability regarding any administrative
PROMOTIONAL SHARES ESCROW AGREEMENT Page 3
proceeding, investigation, litigation, interpretation or implementation relating
to this Agreement, including release of Promotional Securities, the
Distribution, and the disbursement of dividends, interest or proceeds, unless
the cost or liability arises from the Escrow Agent's failure to abide by the
terms of this Agreement.
13. INDEPENDENCE OF THE ESCROW AGENT. The Issuer hereby represents that all of
its officers, directors and Promoters are listed on Exhibit A attached hereto
and made a part hereof. The Escrow Agent hereby represents that it is not
affiliated with the Issuer, the Depositors, or the Issuer's officers, directors
or Promoters who are named in Exhibit A. For purposes of this Agreement, the
Escrow Agent is not disqualified to act as Escrow Agent merely because the
Issuer, its officers, directors and Promoters are customers of the Escrow Agent.
14. SCOPE. This Agreement shall inure to the benefit of and be binding upon
the Depositors, their heirs and assignees, and upon the Issuer, Escrow Agent,
and their successors.
15. SUBSTITUTE ESCROW AGENT. The Escrow Agent may, upon not less than 60 days
prior written notice to the Issuer, Depositors, and the Administrator, resign as
the Escrow Agent. The Issuer and the Depositors shall, before the effective
date of the Escrow Agent's resignation, enter into a new identical Escrow
Agreement with a substitute Escrow Agent. If the Issuer and the Depositors fail
to enter into a new Escrow Agreement and appoint a successor Escrow Agent within
60 days after the Escrow Agent has given notice of its resignation, the Escrow
Agent then serving under this Agreement shall retain the Promotional Securities
in escrow until a new, identical Escrow Agreement has been executed and a
successor Escrow Agent has been appointed. The Escrow Agent shall not be liable
for retaining the Promotional Securities in escrow.
16. TERMINATION. Except for the compensation and indemnification provisions of
paragraphs 11 and 12, above, which shall survive until they are satisfied, this
Agreement shall terminate in its entirety when all of the Promotional Securities
have been released, or the Issuer's Equity Securities and/or assets have been
distributed pursuant to paragraph 4 of this Agreement..
17. MISCELLANEOUS PROVISIONS. Pursuant to the requirements of this Agreement,
the Signatories have entered into this Agreement, which may be executed and
written in multiple counterparts and each of which shall be considered an
original.
PROMOTIONAL SHARES ESCROW AGREEMENT Page 4
IN WITNESS WHEREOF, the Signatories have executed this Agreement in the
capacities set for and effective as of the date first above written.
"Issuer" ADVANTAGE MARKETING SYSTEMS, INC.
By:
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Xxxx X. Xxxx, Chief Executive Officer
Attest:
---------------------------
Xxxxx X. Xxxxxxx, Secretary
"Depositors"
"Hail" -------------------------------------------------
Xxxx X. Xxxx
"X. Xxxxxx" -------------------------------------------------
Xxxxxx X. Xxxxxx, Xx.
"X. Xxxxxx" -------------------------------------------------
Xxxx Xxxxxx
"X. Xxxxxxx" -------------------------------------------------
Xxxxx X. Xxxxxxx
"X. Xxxxxxx" -------------------------------------------------
Xxxxxx X. Xxxxxxx
"Xxxxxx" -------------------------------------------------
R. Xxxxxx Xxxxxx
"Pre-Paid" PRE-PAID LEGAL SERVICES, INC.
By:
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Xxxxxxx X. Xxxxxxxxxxx, Chief Executive Officer
Attest:
--------------------------
Secretary
"Escrow Agent"
LIBERTY BANK AND TRUST COMPANY OF
OKLAHOMA CITY, N.A.
By:
----------------------------------------------
Name:
---------------------------------------------
Title:
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PROMOTIONAL SHARES ESCROW AGREEMENT Page 5
