EXHIBIT 10.14
Xxxxx Dead, Inc.
FORM OF PROMOTIONAL SHARES ESCROW AGREEMENT
This Promotional Shares Escrow Agreement ("Agreement") was entered into
[effective date of Registration Statement]____________, 2003, among Xxxxx Dead,
Inc. (the "Company"), and Xxxxxxx X. Xxxx, III, Xxxxx Xxxx and Xxxxx Xxxxxx,
(the "Depositors"), and _________ (the "Escrow Agent"). The Company is located
at 0000 Xxxxxxx Xx., Xxx Xxxxxxx, Xxxxxxxxxx 00000. The Escrow Agent is located
at _______________________. The Company, Depositors and Escrow Agent are
collectively referred to as "Signatories" in this Agreement.
The Company has applied to register its Equity Securities with the Securities
Administrators of all fifty states of the United States (the "Administrators").
The Depositors are the owners of the shares of common stock or similar
securities and/or convertible securities, warrants, options or rights which may
be converted into, or exercised to purchase shares of common stock or similar
securities of the Company ("Equity Securities") listed opposite their names on
Exhibit A to this Agreement. As a condition to registering the Company's Equity
Securities, the Depositors, who are security holders of the Company and who, for
the purposes of this Agreement, are deemed to be Promoters of the Company, have
agreed to deposit the Equity Securities listed opposite their names on Exhibit A
to this Agreement ("Promotional Shares") with the Escrow Agent.
This Agreement is subject to the provisions of the Statement of Policy Regarding
Corporate Securities Definitions adopted by the North American Securities
Administrators Association, Inc. ("NASAA") on April 27, 1997 and amended
September 28, 1999, and the Statement of Policy Regarding Promotional Shares
adopted by NASAA as amended November 17, 1997 and September 28, 1999.
The Escrow Agent represents that it is not affiliated with the Company or any
Depositors and that it is willing to serve as Escrow Agent and hold the
Promotional Shares according to this Agreement.
The Signatories further agree as follows:
Deposit of Promotional Shares
1. The Depositors' Promotional Shares have been deposited into an Escrow Account
("Escrow") with the Escrow Agent, and the Escrow Agent acknowledges receipt of
the Promotional Shares as of the date of this Agreement.
Exercise or Conversion of Promotional Shares
2. If the Promotional Shares have exercise rights or conversion rights, the
Escrow Agent will, upon receipt of the Company's written request, provide the
documents that evidence and/or which are
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necessary to execute the exercise rights or conversion rights. The exercised or
converted Promotional Shares will remain in Escrow subject to the terms of this
Agreement.
Term
3. This Agreement and the Escrow begin on the date this Agreement was entered
into as indicated above. The Escrow Agent will hold the Promotional Shares until
the release conditions of paragraph 4 below are satisfied.
Release Of Promotional Shares
4. a. Subject to the documentation requirements in paragraph 5 below, the Escrow
Agent will release the Promotional Shares in the following manner:
(1) (A) If the Company's Aggregate Revenues are less than $500,000:
beginning two years after the completion date of the registered
offering, two and one-half percent (2 1/2%) of Promotional Shares
held in Escrow may be released each quarter pro rata among the
Depositors. All remaining Promotional Shares will be released from
Escrow on the fourth anniversary of the completion date of the
registered offering; or
(B) If the Company's Aggregate Revenues are $500,000 or more and
there is no statement in the Company's financial statements or its
auditors' report regarding the Company's ability to continue as a
going concern: beginning one year after the completion date of the
registered offering, two and one-half percent (2 1/2%) of
Promotional Shares held in Escrow may be released each quarter pro
rata among the Depositors. All remaining Promotional Shares will be
released from Escrow on the second anniversary of the completion
date of the registered offering; or
(2) One hundred percent (100%) of the Promotional Shares will be
released from Escrow if:
(A) The registered offering has been terminated, and no securities
were sold; or
(B) The registered offering has been terminated, and all of the
gross proceeds that were received have been returned to investors;
or
(C) The Equity Securities did not qualify to be registered by the
Administrator.
b. If the Company enters into any merger, reorganization, liquidation,
dissolution or other transaction or proceeding with a person who is not a
Promoter that results in the distribution of the Company's assets or securities
("Distribution") while this Agreement remains in effect, the Depositors agree
that:
(1) All holders of the Company'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
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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 Company's Equity Securities
in the registered offering ("Shareholders") have received, or have
had irrevocably set aside for them, an amount that is equal to one
hundred percent (100%) of the offering price per share times the
number of shares of Equity Securities that they purchased in the
registered offering and which they still hold at the time of the
Distribution, adjusted for stock splits, stock dividends
recapitalizations and the like;
(2) After a Distribution, all holders of the Company's Equity Securities
will participate on an equal, per share basis times the number of
shares of Equity Securities they held at the time of the
Distribution, adjusted for stock splits, stock dividends,
recapitalizations and the like; and
(3) A Distribution may proceed on lesser terms and conditions than the
terms and conditions stated in paragraphs 4.b(1) and (2) above if a
majority of the Equity Securities that are not held by Promoters, or
their Associates or Affiliates, vote, or consent by consent
procedure to approve the lesser terms and conditions at a special
meeting called for that specific purpose.
c. If the Company enters into any merger, reorganization, liquidation,
dissolution or other transaction or proceeding with a person who is a Promoter
that results in a Distribution while this Agreement remains in effect, the
Depositors' Promotional Shares will remain in escrow subject to the terms of
this Agreement.
d. If the securities in Escrow become "Covered Securities," as defined in
Section 18(b)(1) of the Securities Act of 1933, all securities held in Escrow
will be released.
e. Notwithstanding the provisions of this Agreement, the Company may
instruct the Escrow Agent to release some or all of the Promotional Shares owned
by a Depositor to the Company for repurchase by the Company at the price
originally paid for by such Depositor, in accordance with the Company's existing
share repurchase rights under applicable employment or related agreements with
such Depositor; provided, however, that any such released and repurchased
Promotional Shares may only be reissued by the Company to another person if such
person agrees that such reissued Promotional Shares shall become subject to an
agreement similar to this Promotional Shares Escrow Agreement.
Documentation Regarding the Release of Promotional Shares:
5. a. A written request for release of the Promotional Shares ("request for
release"), based upon paragraph 4 above, will be forwarded to the Escrow Agent;
b. The Company will provide appropriate documentation to the Escrow Agent
to show that the requirements of paragraph 4 above have been met; and
c. The Escrow Agent will terminate the Agreement and/or release some or
all of the Promotional Shares from Escrow if all the applicable provisions of
the Agreement have been satisfied. The Escrow Agent will maintain all records
relating to the Agreement for a period of three (3) years
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following the termination of the Agreement. Copies of all records retained by
the Escrow Agent will be forwarded to the Administrator promptly upon written
request.
Restrictions on the Transfer, Sale or Disposal of Promotional Shares.
6. Subject to the provisions of Section 4(e), while this Agreement is in effect,
no Promotional Shares, any interest in Promotional Shares, or any right or title
to Promotional Shares may be sold, transferred, hypothecated or otherwise
disposed of ("transfer" or "transferred"), except as provided below, and the
Escrow Agent will not recognize any transfer that violates the terms of this
Agreement. The Promotional Shares 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 Shares subject to the
terms of this Agreement, and the transferee realizes that the Promotional Shares
will remain in Escrow and subject to the terms of the Agreement until the
Promotional Shares are released pursuant to paragraph 4 above. Depositors are
prohibited from selling any of their Promotional Shares that are not subject to
Escrow during the time that the Company is offering its securities in a
self-underwritten registered offering.
a. Promotional Shares held in Escrow may be transferred by will, the laws
of descent and distribution, the operation of law, or by order of any court of
competent jurisdiction and proper venue.
b. The escrowed Promotional Shares of a deceased Depositor may be
hypothecated to pay the expenses of the deceased Depositor's estate, provided
that the hypothecated Promotional Shares will remain subject to the terms of
this Agreement. Promotional Shares may not be pledged to secure any other debt.
c. Promotional Shares held in Escrow may be transferred by gift to the
Depositor's family members, provided that the Promotional Shares will remain in
Escrow and subject to the terms of this Agreement.
Voting Rights
7. With the exception of paragraph 4.b above, the Depositors will have the same
voting rights as holders of non-escrowed Equity Securities. If the Promotional
Shares are registered in the Escrow Agent's name, the Escrow Agent will vote
those Promotional Shares in accordance with the Depositors' written
instructions.
Dividends, Stock Splits And Recapitalizations
8. All certificates representing stock dividends and shares resulting from stock
splits of escrowed shares, recapitalizations and the like, that are granted to
or received by Depositors while their Promotional Shares are held in Escrow will
be deposited with and held by the Escrow Agent subject to the terms of this
Agreement. Any cash dividends that are granted to or received by the Depositors
while their Promotional Shares are held in escrow, will be promptly deposited
with and held by the Escrow Agent subject to the terms of this Agreement unless
such cash dividends are approved by a majority of the Independent Directors of
the Company. The Escrow Agent will invest cash dividends as directed by the
Depositors. The cash dividends and any interest earned on the cash dividends
will be disbursed by the
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Escrow Agent in proportion to the number of shares released from the Escrow as
provided by paragraph 4 above.
Additional Shares
9. Equity Securities that are received by the Depositors as the result of the
conversion of the Depositors' convertible securities and/or the exercise of
Depositors' options, warrants or rights listed on Exhibit A, while their
Promotional Shares are held in escrow, will be promptly deposited with the
Escrow Agent as Promotional Shares subject to the terms of this Agreement. These
additional Promotional Shares will be released from Escrow as provided by
paragraph 4 above.
Duty of Escrow Agent.
10. The Escrow Agent's sole responsibility will be to act in accordance with the
terms expressly set forth in this Agreement. In performing its duties under this
Agreement, the Escrow Agent will 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.
Escrow Agent's Compensation.
11. The Escrow Agent will be entitled to receive reasonable compensation from
the Company for its services.
Escrow Agent's Indemnification
12. The Company and the Depositors agree to hold the Escrow Agent harmless from,
and indemnify the Escrow Agent for, any cost or liability regarding any
administrative proceeding, investigation, litigation, interpretation,
implementation or interpleading relating to this Agreement, including the
release of Promotional Shares 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.
Scope
13. This Agreement will be binding upon the Depositors, their heirs and
assignees, and upon the Company, Escrow Agent, and their successors.
Substitute Escrow Agent
14. If, for any reason, the Escrow Agent named in this Agreement is unable or
unwilling to continue to act as Escrow Agent, then the Company may substitute,
with the consent of the Administrator, another person to serve as Escrow Agent
under this Agreement.
Termination
15. Except for the compensation and indemnification provisions of paragraphs 11
and 12 above, which will survive until those provisions are satisfied, this
Agreement will terminate in its entirety when all of the Promotional Shares have
been released, or the Company's Equity Securities and/or assets have been
distributed as provided by paragraph 4 above.
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The Signatories have entered into this Agreement, which may be written in
multiple counterparts and each of which will be considered an original, and have
signed this Agreement in the capacities and on the dates indicated below.
Date
Xxxxxxx X. Xxxx, III
(Print or type the Depositor's name)
-------------------------------- ------------------------
(Signature)
Xxxxx Xxxx
(Print or type the Depositor's name)
-------------------------------- ------------------------
(Signature)
Xxxxx Xxxxxx
(Print or type the Depositor's name)
-------------------------------- ------------------------
(Signature)
Date
XXXXX DEAD, INC.
By ______________________________ ________________________
President
By _______________________________ ________________________
Secretary
Escrow Agent
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-------------------------------
By ________________________________ ________________________
Title: Partner
EXHIBIT A
TO PROMOTIONAL SHARES
ESCROW AGREEMENT
EQUITY SECURITIES OF XXXXX DEAD, INC. PLACED IN ESCROW
Name of Depositor No. Shares of Common Stock of Xxxxx Dead, Inc. Placed in Escrow
Xxxxxxx X. Xxxx, III 258,000
Xxxxx Xxxx 300,000
Xxxxx Xxxxxx 270,000
TOTAL 828,000
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