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EXHIBIT 2
ESCROW AGREEMENT
ESCROW AGREEMENT, effective as of the 20th day of October, 1999, by and
among certain of the shareholders listed on Exhibit A to this Escrow Agreement
(the "Shareholders" or "Shareholder") of PENTASTAR COMMUNICATIONS, INC., a
Delaware corporation, (the "Company"), XXXXXXXXX SECURITIES, INC. (the
"Representative") and AMERICAN SECURITIES TRANSFER & TRUST, INC. (the "Escrow
Agent").
WHEREAS, the Shareholders are the record and beneficial owners of
certain of the Company's $0.0001 par value common stock ("Common Stock") all as
more fully reflected on Exhibit A to this Escrow Agreement;
WHEREAS, the Company and the Representative of the several underwriters
(the "Underwriters") intend to enter into an underwriting agreement (the
"Underwriting Agreement") pursuant to which the Company will sell Common Stock
in a public offering pursuant to the registration provisions of the Securities
Act of 1933, as amended (the "1933 Act");
WHEREAS, as a condition to closing the proposed public offering of the
Company (the "Offering"), the Representative has required the Shareholders to
deposit an aggregate of 200,000 shares of Common Stock owned by such
Shareholders in Escrow with the Escrow Agent as reflected on Exhibit A (the
"Escrow Shares"); and
WHEREAS, the Shareholders wish to deposit the Escrow Shares in Escrow
in order to fulfill the requirements of the Underwriting Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, terms and conditions hereinafter set forth, the parties to this
Escrow Agreement agree as follows:
SECTION 1. DESIGNATION AND DEPOSIT OF ESCROW SHARES.
a. The Escrow Shares to be deposited in Escrow pursuant to
this Escrow Agreement consist of 200,000 shares of Common Stock of the
Company and are owned of record as of the date of this Escrow Agreement
by the Shareholders identified on Exhibit A.
b. On the date on which the Securities and Exchange Commission
declares the Company's Registration Statement on Form SB-2 (Reg. No.
333- 85281) effective under the 1933 Act (the "Effective Date"), the
Shareholders shall deliver to the Escrow Agent any and all certificates
representing the Escrow Shares and a stock power endorsed in blank with
a medallion guarantee. Promptly after the Effective Date, the Escrow
Agent shall deliver a receipt therefor and, if requested by a
Shareholder, a new certificate representing each
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Shareholder's shares of Common Stock represented by the certificates
delivered but which are not subject to this Escrow Agreement.
SECTION 2. TITLE OF ACCOUNT. All certificates representing the Escrow
Shares delivered to the Escrow Agent pursuant to this Agreement shall be
deposited on the Effective Date by the Escrow Agent in an account designated
substantially as follows: "PentaStar Communications, Inc. Escrow Share Account"
(the "Escrow Account").
SECTION 3. TRANSFER OF ESCROW SHARES DURING ESCROW PERIOD.
a. During the Escrow Period (as defined below) none of the
Escrow Shares deposited in the Escrow Account shall be sold, pledged,
hypothecated or otherwise transferred or delivered out of the Escrow
Account except:
i. transfers by operation of law; and
ii. transfers of ownership of certificates
representing the Escrow Shares, certificates for which have
been deposited to the Escrow Account, shall remain subject to
the restrictions imposed hereby, including those persons, if
any, who become holders, by any means provided herein, of the
Escrow Shares during the Escrow Period.
SECTION 4. DURATION OF ESCROW PERIOD.
a. The Escrow Period shall commence on the Effective Date and
shall terminate on the earlier of the date on which all Escrow Shares
have been returned to the Shareholders pursuant to Sections 6(a), 6(b),
6(c) or 6(d) below.
b. This Agreement shall be of no force or effect in the event
the Underwriting Agreement is not executed on the Effective Date in
accordance with its terms.
SECTION 5. RECEIPT OF DISTRIBUTIONS AND DIVIDENDS. During the term of
the Escrow Period, if the Company issues any distributions, dividends, rights or
other property with respect to the Common Stock, then, in such event, the
Company shall be authorized to send evidence of such distributions, dividends,
rights or other property directly to the Escrow Agent, which is hereby
authorized to hold and retain possession of all such evidences of distributions,
dividends, rights or other property until termination of the Escrow Period in
accordance with Section 6 below. In the event the Escrow Shares are distributed
to the Shareholders pursuant to Sections 6(a), 6(b), 6(c), 6 (d), 6(e) or 6(f)
below, then the Escrow Agent will distribute evidences of such distributions,
dividends, rights, or other property in the form the Escrow Agent received such
distributions, dividends, rights or other property from the
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Company. If the Company recapitalizes, splits or combines its shares, such
shares shall be substituted, on a pro rata basis for the Escrow Shares. The
Company will notify the Escrow Agent of the occurrence of the events listed in
this section.
SECTION 6. RELEASE AND DELIVERY OF ESCROW SHARES.
a. In the event the Escrow Agent receives written notice from
the Representative and the Company confirming that the Company had pro
forma (based on a full 12-month period for all acquired operations,
giving effect to such acquisitions as if they had occurred on the first
day of fiscal year 2000 and giving retroactive effect for the period
from the first day of fiscal year 2000 to the date of acquisition to
prospective changes to salaries, bonuses, benefits, lease payments and
other expenses in a manner consistent with that used in the preparation
of the Unaudited Pro Forma Condensed Combined Financial Information of
the Company set forth in the prospectus used in connection with the
Offering) diluted earnings per share of $0.50 in fiscal year 2000, the
Escrow Agent shall return to each Shareholder a certificate for its
share of the Escrow Shares as are listed on Exhibit A. The Escrow Agent
shall return the Escrow Shares only to the entity named as the holder
of record in Exhibit A to this Escrow Agreement, as modified by any
transfers made pursuant to Section 3 above.
b. In the event the Escrow Agent receives written notice from
the Representative and the Company confirming the Company had pro forma
(based on a full 12-month period for all acquired operations, giving
effect to such acquisitions as if they had occurred on the first day of
fiscal year 2001 and giving retroactive effect for the period from the
first day of fiscal year 2001 to the date of acquisition to prospective
changes to salaries, bonuses, benefits, lease payments and other
expenses in a manner consistent with that used in the preparation of
the Unaudited Pro Forma Condensed Combined Financial Information of the
Company set forth in the prospectus used in connection with the
Offering) diluted earnings per share of $1.25 in fiscal year 2001, the
Escrow Agent shall return to each Shareholder a certificate for its
share of the Escrow Shares as are listed on Exhibit A. The Escrow Agent
shall return each certificate only to the entity named as the holder of
record in Exhibit A hereto, as modified by any transfers made pursuant
to Section 3 above.
c. In the event the Escrow Agent receives written notice from
the Representative and the Company confirming that the Company has been
merged or consolidated, or has executed a share exchange, with another
company which is the survivor to the transaction or in which the
stockholders of the Company own less than 50% of the outstanding
capital stock of the surviving entity, or that the Company has sold all
or substantially all of its assets and the relevant transaction was
approved by the holders of a majority of the Company's outstanding
voting
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securities exclusive of the Escrow Shares held hereunder, the Escrow
Agent shall contemporaneously with the closing of any such transaction
return to each Shareholder a certificate for its share of the Escrow
Shares as are listed on Exhibit A. The Escrow Agent shall return each
certificate only to the person named as the holder of record in Exhibit
A hereto, as modified by any transfers made pursuant to Section 3
above.
d. In the event none of the criteria for release specified in
subparagraphs (a), (b) or (c) above is reached by the Company, the
Escrow Shares shall remain in the Escrow Account until a date that is
seven years from the Effective Date. Upon termination of the Escrow
Period pursuant to the provisions of this Section 6(d), the Escrow
Agent shall, as promptly as possible, return to each Shareholder a
certificate for its share of the Escrow Shares as are listed on Exhibit
A. The Escrow Agent shall return each certificate only to the person
named as the holder of record in Exhibit A hereto, as modified by any
transfers made pursuant to Section 3 above.
e. At such time as the Escrow Agent shall have returned all
Escrow Shares as provided in this Section, the Escrow Agent shall be
discharged completely and released from any and all further liabilities
and responsibilities under this Escrow Agreement.
f. The determination of the criteria described above shall be
solely the responsibility of the Company and the Representative, and
the Escrow Agent shall have no liability or responsibility therefor.
SECTION 7. VOTING RIGHTS. During the Escrow Period, each Shareholder,
or any transferee receiving all or a portion of the Escrow Shares of such
Shareholder pursuant to Section 3 of this Escrow Agreement, shall have the right
to vote such Escrow Shares (to the extent the Escrow Shares have voting rights)
in the Escrow Account at any and all shareholder meetings without restriction.
SECTION 8. LIMITATION OF LIABILITY OF ESCROW AGENT. In acting pursuant
to this Escrow Agreement, the Escrow Agent shall be protected fully in every
reasonable exercise of its discretion and shall have no obligation hereunder to
either the Shareholders or to any other party except as expressly set forth
herein. In performing any of its duties hereunder, the Escrow Agent shall not
incur any liability to any person for any damages, losses or expenses, except
for willful default or negligence and it shall, accordingly, not incur any such
liability with respect to (1) any action taken or omitted in good faith upon
advice of its counsel, counsel for the Company or counsel for the Representative
given with respect to any question relating to the duties and responsibilities
of the Escrow Agent under this Agreement, and (2) any action taken or omitted in
reliance upon any instrument, including written notices provided for herein, not
only to its due execution and validity and effectiveness of its provisions,
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but also to the truth and accuracy of any information contained therein, which
the Escrow Agent shall in good faith believe to be genuine, to have been signed
and presented by a proper person or persons and to be in compliance with the
provisions of this Agreement.
SECTION 9. INDEMNIFICATION. The Company, the Representative and the
Shareholders shall indemnify and hold harmless the Escrow Agent against any and
all losses, claims, damages, liabilities and expenses, including reasonable
costs of investigation and counsel fees and disbursements, which may be imposed
upon the Escrow Agent or incurred by the Escrow Agent in connection with its
acceptance of appointment as Escrow Agent or the performance of its duties
hereunder, including any litigation arising from this Escrow Agreement or
involving the subject matter of this Escrow Agreement.
SECTION 10. PAYMENT OF FEES. The Company shall be responsible for all
reasonable fees and expenses of the Escrow Agent incurred by it in the course of
performing under this Escrow Agreement.
SECTION 11. CHANGE OF ESCROW AGENT. In the event the Escrow Agent
notifies the Company and the Representative that its acceptance of the duties of
Escrow Agent has been terminated by the Escrow Agent, or in the event the Escrow
Agent files for protection under the United States Bankruptcy Code or is
liquidated or ceases operations for any reason, the Company and the
Representative shall have the right to jointly designate a replacement Escrow
Agent who shall succeed to the rights and duties of the Escrow Agent hereunder.
Any such replacement Escrow Agent shall be a trust or stock transfer company
experienced in stock transfer, escrow and related matters and shall have a
minimum net worth of $5 million. Upon appointment of such successor Escrow
Agent, the Escrow Agent shall be discharged from all duties and responsibilities
hereunder.
SECTION 12. NOTICES. All notices, demands or requests required or
authorized hereunder shall be deemed given sufficiently if in writing and sent
by registered mail or certified mail, return receipt requested and postage
prepaid and by facsimile or cable:
In the case of the Representative to:
Xxxxxxxxx Securities, Inc.
The Chancery
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. X'Xxxxxx, President
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With a copy to (which shall not constitute notice):
Xxxxxx X. Xxxxxx, Esq.
Berliner Xxxxxx Xxxxxx & Xxxxxxxx, P.C.
One Norwest Center, Suite 4700
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
In the case of the Escrow Agent to:
American Securities Transfer & Trust, Inc.
00000 Xxxx Xxxxxxx Xxxxxxx, Xxxxx X-0
Xxxxxxxx, Xxxxxxxx 00000
Attn: Corporate Trust Department
In the case of the Company to:
PentaStar Communications, Inc.
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
With a copy to (which shall not constitute notice):
B. Xxxxx Xxxxxxx, Esq.
Xxxxxxx & Xxxxxx L.L.C.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
In the case of the Shareholders to:
BACE Investments, LLC
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Black Diamond Capital, LLC
0000 XxXxxxx Xxxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
SECTION 13. DISPUTES. In the event of any disputes between the parties
hereto as to the facts of default, the validity of the instructions contained
herein or any other fact or matter relating to this Agreement, the Escrow Agent
is instructed as follows:
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a. No Obligation to Act. That it shall be under no obligation
to act, except under process or order of court, or until it has been
adequately indemnified to its full and complete satisfaction, and shall
sustain no liability for its failure to act pending such process or
court order or indemnification.
b. Interpleader. That it may, in its sole and absolute
discretion, deposit the property described herein or so much thereof as
remains in its hands with the then Clerk, or acting Clerk, of the
District Court of the City and County of Denver, State of Colorado, and
interplead the parties thereto, and upon so depositing such property
and filing its complaint in interpleader it shall be relieved of all
liability under the terms hereof as to the property so deposited and
shall be entitled to recover in such interpleader action, from the
other parties thereto, its reasonable attorney fees and related costs
and expenses incurred in commencing such action and furthermore, the
parties hereto for themselves, their successors and assigns do hereby
submit themselves to the jurisdiction of said court and do hereby
appoint the then Clerk, or acting Clerk, of said court as their Agent
for the Service of all process in connection with such proceedings. The
institution of any such interpleader action shall not impair the rights
of the Escrow Agent as provided under the terms of this Agreement.
SECTION 14. OTHER AGREEMENTS. The termination of this Escrow Agreement
pursuant to Section 6 shall not affect any other agreement, contract, lock-up
arrangement, etc., that the Company has executed with the Representative. Such
other agreements shall continue in full force and effect pursuant to such
agreement's terms.
SECTION 15. COUNTERPARTS. This Escrow Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Escrow Agreement. Facsimile signatures shall
be accepted as original signatures for all purposes.
SECTION 16. GOVERNING LAW. The validity, interpretation and
construction of this Escrow Agreement and of each part hereof shall be governed
by the laws of the State of Colorado.
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IN WITNESS WHEREOF, the Shareholders, the Company, the Representative
and the Escrow Agent have executed this Escrow Agreement to be effective as of
the day and year first above written.
AMERICAN SECURITIES TRANSFER &
TRUST, INC.
By: /s/ Xxxxxxxx Xxxxx
--------------------------------
Title: Corporate Trust Officer
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By: /s/ Xxxxx Xxxxxx
--------------------------------
Title: Marketing Officer
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PENTASTAR COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Title: President
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XXXXXXXXX SECURITIES, INC.
By: /s/ Xxxxxx X. X'Xxxxxx
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Title: President
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THE SHAREHOLDERS:
BACE INVESTMENTS, LLC
By: /s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
BLACK DIAMOND CAPITAL, LLC
By: /s/ Xxxxx X. XxXxx
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Xxxxx X. XxXxx
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EXHIBIT A
TO ESCROW AGREEMENT
NAME TOTAL SHARES
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BACE INVESTMENTS, LLC 140,000
BLACK DIAMOND CAPITAL, LLC 60,000
