ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of the 26th day of May,
1999, by and among xxxxxx-xxxxxxxxxxxx.xxx, inc., a Delaware corporation (the
"Company"), Rockcrest Securities L.L.C. (the "Underwriter"), and Firstar Bank of
Minnesota, N.A. (the "Escrow Agent").
WHEREAS, the Underwriter intends to publicly offer not less than $5,000,000
nor more than $9,000,000 of common stock of xxxxxx-xxxxxxxxxxxx.xxx, inc. (the
"Securities"), at a price per share of $5.00, pursuant to that certain
Underwriting Agreement between the Company and the Underwriter (the
"Underwriting Agreement"); and
WHEREAS, it has been determined that the proceeds to be received from the
offering should be placed in escrow until such time as subscriptions for
$5,000,000 of shares of the Securities (the "Minimum Amount"), have been
deposited into escrow, at which time such Minimum Amount shall be disbursed and
the remaining proceeds shall continue to be placed in escrow to be disbursed
from time to time until the Termination Date (as defined below);
WHEREAS, the Escrow Agent is willing to accept appointment as Escrow Agent
for the expressed duties outlined herein.
NOW, THEREFORE; in consideration of the premises and agreements set forth
herein, the parties hereto agree as follows:
1. PROCEEDS TO BE ESCROWED. All funds received prior to the Termination
Date (as defined below) in payment for Securities will be delivered to the
Escrow Agent by noon next business day following the day upon which such
proceeds are received by the Underwriter (or any co-underwriter, selected-dealer
or other agent of the Underwriter) and shall be retained in escrow by the Escrow
Agent and invested as stated below. During the term of this Agreement, the
Underwriter shall cause all checks received by and made payable to it in payment
for such Securities to be endorsed as follows: xxxxxx-xxxxxxxxxxxx.xxx, inc.
Escrow Account.
2. IDENTITY OF SUBSCRIBERS. The Underwriter shall furnish to the Escrow
Agent with each delivery of funds, as provided in paragraph 1 hereof, a list of
the persons who have paid money for the purchase of Securities showing the name,
address, tax ID number and amount of Securities subscribed for the amount of
money paid. All proceeds so deposited shall remain the property of the
subscriber until the Initial Closing Date (as defined below) and not be subject
to any liens or charges by the Company, or the Escrow Agent, or judgments or
creditor's claims against the Company until released to the Company as
hereinafter provided.
3. DISBURSEMENT OF FUNDS. From time to time, and at the end of the third
business day following the Termination Date (as defined in paragraph 4 hereof),
the Escrow Agent shall notify the Company and the Underwriter of the amount of
the funds received hereunder. If the Minimum Amount has been raised
($5,000,000), prior to the Termination Date then the Escrow Account funds will
be released upon joint instruction from the Company and the Underwriter into the
custody of the Company and the Underwriter on or before the fifth business day
following notification from the Escrow Agent to the Company and the Underwriter
of the receipt of such Minimum Amount. The date of such release of funds shall
be referred to as the Initial Closing Date and shall occur within the five day
period referred to above unless the Company and the Underwriter shall agree upon
a later date and so notify the Escrow Agent. On the Initial Closing Date, the
Escrow Agent shall release $4,475,000 of the funds to the Company and $525,000
of the funds to the Underwriter. Any interest earned on such funds through such
date shall be remitted to the Company.
During the period of time, if any, following the Initial Closing Date and
preceding the Termination Date, the Company and the Underwriter may at any time
or from time to time instruct the Escrow Agent of their intention to have
additional closings. Upon receipt of notice of such a closing signed by both
the Underwriter and the Company, the Escrow Agent shall disburse at such closing
any proceeds received in respect of the Securities during the period of time
from the Initial Closing to such closing (i) 89% to the Company and (ii) 11% to
the Underwriters. The final additional closing, if any, shall occur on a date
specified by the Company and the Underwriter to the Escrow Agent which shall be
as soon as practicable following the Termination Date. At such final additional
closing the Escrow Agent shall disburse any remaining proceeds, together with
interest earned thereon, 89% to the Company and 11% to the Underwriter. Any
interest earned on such funds through such date shall be remitted to the
Company.
If the Minimum Amount of proceeds has not been delivered prior to the
Termination Date, the Escrow Agent shall, within a reasonable time following the
Termination Date, but in no event more than thirty (30) days after the
Termination Date, refund to each subscriber at the address appearing on the list
of subscribers, or at such other address as furnished to the Escrow Agent by the
subscriber in writing, all sums paid by the subscriber for Securities, together
with the interest earned on such funds in the escrow account, and shall then
notify the Company in writing of such refunds.
4. TERMS OF ESCROW. The "Termination Date" shall be the earlier of (i)
180 days from the effective date of the registration statement filed by the
Company with the Securities and Exchange Commission in connection with the
offering of the Securities; or (ii) the date the Escrow Agent has received
written notice from the Company that it is abandoning the sale of the
Securities.
5. DUTY AND LIABILITY OF THE ESCROW AGENT. The sole duty of the Escrow
Agent, other than as herein specified, shall be to receive said funds and hold
them subject to release, in accordance herewith, and the Escrow Agent shall be
under no duty to determine whether the Underwriter is complying with
requirements of this Agreement in tendering to the Escrow Agent said proceeds of
the sale of said Securities. The Escrow Agent may conclusively rely upon and be
protected in acting upon any statement, certificate, notice, request, consent,
order or other documents believed by it to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall have no duty
or liability to verify any such statement, certificate, notice, request,
consent, order or other document, and its sole responsibility shall be to act
only as 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 first indemnified to its satisfaction.
6. ESCROW AGENT FEE. The Escrow Agent shall be entitled to compensation
for its services as stated in the fee schedule attached hereto as Exhibit A,
which compensation shall be paid by the Company in advance. The fee agreed upon
for the services rendered hereunder is intended as full compensation for the
Escrow Agent's services as contemplated by this Agreement; provided however,
that in the event that the conditions for the disbursement of funds under this
Agreement are not fulfilled, or the Escrow Agent renders any material service
not contemplated in this Agreement, or there is any assignment of interest in
the subject matter of this Agreement, or any material modification hereof, or if
any material controversy arises hereunder, or the Escrow Agent is made a party
to any litigation pertaining to this agreement, or the subject matter hereof,
then the Escrow Agent shall be reasonably compensated for such extraordinary
services and reimbursed for all cost and expenses, including reasonable
attorney's fees, occasioned by any delay, controversy, litigation or event, and
the same shall be recoverable from the Company.
7. INVESTMENT OF PROCEEDS. All funds held by the Escrow Agent pursuant
to this Agreement shall constitute trust property for the purposes for which
they are held. The Escrow Agent shall invest all funds received from
subscribers in the Dreyfus Prime Treasury Money Market Fund and/or Firstar
Funds.
8. ISSUANCE OF CERTIFICATES. Until the funds hereunder received from
subscriptions for Securities have been released to the Company, the Company may
not issue any stock certificates or other evidence of Securities.
9. NOTICES. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) on the date of service if served personally on the party to whom
notice is to be given, (b) on the day of transmission if sent by facsimile
transmission to the facsimile number given below, along with a hard copy to
follow through the mail, and telephonic confirmation of receipt promptly after
completion of transmission, (c) on the day after delivery to Federal Express or
similar overnight courier or the Express Mail service maintained by the United
States Postal Service, or (d) on the fifth day after mailing, if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed, return receipt requested, to
the party as follows:
If to Company: xxxxxx-xxxxxxxxxxxx.xxx, inc.
0000 Xxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Phone: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxx Xxxxxxxxxx, Chief Executive Officer
If to Underwriter: Rockcrest Securities L.L.C.
0000 Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Phone: 000-000-0000
Fax: 000-000-0000
Attention: Xxxxx X. Xxxxxx
If to Escrow Agent: Firstar Bank of Minnesota, N.A.
000 Xxxx 0xx Xxxxxx
Corporate Trust, 00xx Xxxxx
Xx. Xxxx, XX 00000-0000
Phone: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxx X. Xxxxxxx-XxXxxxx
Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.
10. INDEMNIFICATION OF ESCROW AGENT. Each of the Company and the
Underwriter hereby indemnifies and holds harmless the Escrow Agent from and
against any and all loss, liability, cost, damage and expense, including,
without limitation, reasonable counsel fees, which the Escrow Agent may suffer
or incur by reason of any action, claim or proceeding brought against the Escrow
Agent arising out of or relating in any way to this Agreement or any transaction
to which this Agreement relates unless such action, claim or proceeding is the
result of the willful misconduct of the Escrow Agent. The Escrow Agent may
consult counsel in respect of any question arising under the Escrow Agreement
and the Escrow Agent shall not be liable for any action taken or omitted in good
faith upon advice of such counsel.
11. SUCCESSOR AND ASSIGNS. Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other parties
hereto and any such attempted assignment without such prior written consent
shall be void and of no force and effect. This Agreement shall inure to the
benefit of and shall be binding upon the successors and permitted assigns of the
parties hereto.
12. GOVERNING LAW; JURISDICTION. This Agreement shall be construed,
performed, and enforced in accordance with, and governed by, the internal laws
of the State of Minnesota, without giving effect to the principles of conflicts
of laws thereof. Each party consents to the personal jurisdiction and venue of
any United States District Court for the District of Minnesota located in
Hennepin County, Minnesota.
13. SEVERABILITY. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
14. AMENDMENTS; WAIVERS. This Agreement may be amended or modified, and
any of the terms, covenants, representations, warranties, or conditions hereof
may be waived, only by a written instrument executed by the parties hereto, or
in the case of a waiver, by the party waiving compliance. Any waiver by any
party of any condition, or of the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, in any one or more
instances, shall not be deemed to be nor construed as a further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation, or warranty of this Agreement.
15. ENTIRE AGREEMENT. This Agreement contains the entire understanding
among the parties hereto with respect to the escrow contemplated hereby and
supersedes and replaces all prior and contemporaneous agreements and
understandings, oral or written, with regard to such escrow.
16. SECTION HEADINGS. The section headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
17. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first set forth above.
COMPANY:
xxxxxx-xxxxxxxxxxxx.xxx, inc.
By: /s/ Xxxxxx Xxxxxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Chief Executive Officer
UNDERWRITER:
ROCKCREST SECURITIES L.L.C.
By: /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
ESCROW AGENT:
FIRSTAR BANK OF MINNESOTA, NA
Corporate Trust Division
By: /s/ Xxxxxx X. Xxxxxxx-XxXxxxx
---------------------------------------
Xxxxxx X. Xxxxxxx-XxXxxxx
Assistant Vice President
SCHEDULE "A"
ESCROW FEE SCHEDULE
Initial Escrow Fee $ 750
Administration Fee $ 1,100
Activity Fees (if needed) $ 15 per subscriber
(This includes check issuance and 1099 reporting.)
Outside Counsel Fees At cost
(We do not anticipate using outside counsel.)
