FUND ESCROW AGREEMENT
THIS AGREEMENT is made and entered into effective as of May __, 1998 by and
among the following:
(a) FAN ENERGY INC. (the "Company"), a Nevada corporation, whose
address is 0000 Xxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000;
(b) THE BANK OF DENVER, a state-chartered bank (the "Escrow Agent"),
whose address is 0000 Xxxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxx 00000; and
(c) Each selected broker-dealer which participates in the offering by
the Company as an authorized agent of the Company and who signs a copy of
this Agreement (a "Selected Dealer").
RECITALS
A. Pursuant to a Registration Statement No. 333-47699, including a
Prospectus dated May __, 1998 (the "Prospectus"), the Company intends to offer
and sell up to 3,000,000 shares of its common stock, $0.001 par value (the
"Shares"). The Shares will be offered on a 300,000 Share minimum, 3,000,000
Share maximum "best efforts, part or none" basis at a price of $1.00 per Share.
The minimum purchase is $20,000; however, the Company reserves the right to
accept a lesser minimum purchase.
B. The Company may enter into appropriate agreements with one or more
entities which are brokers-dealers, registered as such and which are members of
the National Association of Securities Dealers, Inc. ("Selected Dealers") and
any Selected Dealer who participates in the offering by the Company shall become
a party to this Agreement and subject to the terms and conditions hereof.
C. Pursuant to the terms of the Prospectus, this Agreement is being made to
escrow for certain periods commencing upon the date of the Prospectus
("Effective Date") and for the benefit of subscribers in the offering, the gross
proceeds from the sale of the Shares; and
D. The Company desires to enter into this Agreement with the Escrow Agent
for the purpose of fulfilling the escrow requirements as described in the
Prospectus.
NOW THEREFORE, in consideration of the forgoing recitals, the mutual
promises and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties agree as follows:
1. The Company and each Selected Dealer shall deliver to the Escrow Agent,
by noon on the first business day following receipt, all proceeds from the sale
of the Shares being offered, together with the original, executed Subscription
Agreement in the form attached hereto as Exhibit A. A copy of the Subscription
Agreement shall be retained by the Company, or, if the deposit is made by a
Selected Dealer, the Selected Dealer shall retain a copy and promptly transmit a
copy of the Subscription Agreement to the Company.
2. All funds or remittances delivered to the Escrow Agent pursuant hereto
shall be deposited immediately by the Escrow Agent in a noninterest-bearing
escrow accounted designated substantially as follows: The Bank of Denver, Fan
Energy Inc., Escrow Account (the "Escrow Account"). The Escrow Account shall be
created and maintained subject to the customary rules and regulations of the
Escrow Agent pertaining to such accounts. Funds deposited with the Escrow Agent
shall be by check or bank draft only; wire transfers shall not be permitted
without the prior approval of the Escrow Agent.
3. During the Escrow Period (as hereinafter defined), none of the amounts
deposited in the Escrow Account shall become the property of the Company or any
other entity, or subject to the debts of the Company or any other entity, and,
except as expressly provided herein with respect to payments by the Escrow Agent
to the Company and others, the Escrow Agent shall make or permit no
disbursements from the Escrow Account. The Escrow Agent, in its sole discretion,
shall be entitled to place a hold on any funds deposited into the Escrow Account
for up to 10 business days to ensure that such funds are cleared and collected
prior to an any disbursement by the Escrow Agent.
4. The Escrow Period shall begin on the Effective Date and, subject to the
provisions of paragraph 6 below, shall terminate on the earlier to occur of:
(a) The date which is 120 days after the Effective Date (provided that
upon the written notification from the Company to the Escrow Agent
delivered to the Escrow Agent on or prior to such date, the Company may
extent the offering for up to an additional sixty (60) days), provided that
if on or prior to such date, there has been deposited with the Escrow Agent
at least $300,000 from subscribers representing the purchase of 300,000
shares of Company common stock in the offering, then the offering may be
extended by the Company until the earlier to occur of the time specified in
subparagraph 4(b) or (c) below; or
(b) The date on which $3,000,000 has been delivered to the Escrow
Agent representing the purchase by subscribers of 3,000,000 shares of
Company common stock and all checks have cleared and been collected, but
not longer than one hundred and eighty (180) days from the Effective Date;
or
(c) The date specified in a written notice delivered to the Escrow
Agent from the Company stating the election of the Company to terminate the
offering.
5. In the event that proceeds of at least $300,000 are received and
collected in the Escrow Account prior to the events specified in paragraph 4(a),
(b) or (c) above, the Escrow Agent shall immediately provide written notice to
the Company and to any participating Selected Dealer that cleared and collected
funds deposited in the Escrow Account total at least $300,000. Upon the written
request from the Company and any participating Selected Dealer delivered to the
Escrow Agent following sending of the notice by the Escrow Agent, the Escrow
Agent shall disburse the amount of collected funds then held in the Escrow
Account as set forth below and the escrow arrangements for deposit and
collection of subscriptions from investors in the offering shall continue. All
collected funds accumulated in the Escrow Account at the time of this Closing
shall be disbursed and paid by the Escrow Agent as follows:
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(a) To any Selected Dealer who has (i) become subject to the terms of
this Fund Escrow Agreement by signing a counterpart hereof and (ii) who has
transmitted subscriber's funds and Subscription Agreement to the Escrow
Agent in accordance with the terms of this Agreement, a commission equal to
10% of all amounts deposited in the Escrow Account by such Selected Dealer
and collected by the Escrow Agent.
(b) To the Company, the remainder of all collected amounts deposited
in the Escrow Account less amounts, if any, due and payable to the Escrow
Agent for unpaid fees or expenses as provided for herein. The Company shall
make appropriate arrangements with its stock transfer agent for the
issuance and delivery to persons who purchased Shares in the offering of
certificates representing Shares purchased, at the time of receipt of
proceeds from the Escrow Agent or within two business days thereof.
However, the Escrow Agent shall have no obligation or responsibility to
assure the issuance or delivery of the certificates.
6. After conclusion of the first closing as described in paragraph 5 above,
the Escrow Account shall continue through one or more additional closings until
the occurrence of the earlier of the events specified in paragraph 4(b) or (c)
above, provided that no more than one such closing shall be held in any week. At
each such closing, disbursements shall be made in the same manner as provided in
paragraph 5 above.
7. In the event the Escrow Period terminates pursuant to paragraph 4(a) or
(c) because less than $300,000 was delivered to the Escrow Agent or collected in
the Escrow Account, then the Escrow Agent, as promptly as possible, shall remit
directly to those persons on whose behalf the funds were deposited and whose
funds were collected (such persons shall be deemed to be the persons whose
names, addresses and subscription amounts are set forth on Subscription
Agreements delivered to the Escrow Agent at the time of each deposit into
escrow), the amount paid by each such person (and collected by the Escrow Agent)
without interest and without any deductions whatsoever. The amount paid or
payable to each subscriber pursuant to this paragraph shall be deemed to be the
property of such subscriber free and clear of any and all claims of the Company
or any of its creditors or of any Selected Dealer, and the respective agreement
to purchase the Shares made and entered pursuant to the Prospectus and the
Subscription Agreement thereupon shall be deemed to be canceled, without any
further liability of said subscriber to pay for the Shares purchased. The Escrow
Agent shall be required to make such payment only to the person named in the
Subscription Agreement at the address specified therein. Any funds payable to
subscribers of Shares which the Escrow Agent cannot disburse to said subscriber
because the address given in the Subscription Agreement is defective or which
the Escrow Agent cannot disburse for any other reason to said purchaser shall be
retained by the Escrow Agent and dealt with in accordance with applicable
Colorado law. At such time as the Escrow Agent shall have made all payments and
remittances provided for in this paragraph, the Escrow Agent shall be completely
discharged and released of any and all further liabilities and responsibilities
hereunder.
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8. The Company shall give the Escrow Agent appropriate written notice of
any extension of the offering period as described in paragraph 4(a).
9. The Escrow Agent, in its actions pursuant to this Agreement, shall be
fully protected and indemnified by the Company in every reasonable exercise of
its discretion (but not for its negligence or misconduct) and shall have no
obligations hereunder to the Company, or to any other party, except as expressly
set forth herein and for matters relating to the Escrow Agent's negligence or
misconduct.
10. As compensation for services of the Escrow Agent under this Agreement,
the Company shall pay the Escrow Agent a fee of $2,000 at the time this
Agreement is executed, which fee shall cover the services of the Escrow Agent
regardless of whether this Agreement terminates pursuant to paragraph 4(a), (b)
or (c) above. The Company shall pay an additional fee of $7.00 per check issued
by the Escrow Agent hereunder in the event that the Escrow Agent is required to
remit amounts to subscribers in accordance with paragraph 7 above.
11. The Escrow Agent shall have no obligation to invest any of the
deposited funds or to pay interest thereon.
12. The Escrow Agent shall not issue any certificates of deposit, stock
certificates, or any other instrument or document representing any interest in
the deposited funds, but written notice acknowledging receipt of the deposited
funds will be delivered by facsimile on Friday of every week by the Escrow Agent
to the Company. Facsimile notice shall be addressed as set forth on the
signature pages of this Agreement. The Escrow Agent shall give the Company
prompt written notice when funds deposited in the Escrow Account total $300,000.
The Escrow Agent shall make an accounting to the Company and any participating
Selected Dealer when and if it pays Escrow Funds to the Company or any other
specified recipient pursuant to paragraphs 5, 6 or 7 hereof. The Escrow Agent
shall not be responsible for fees and other costs and expenses in conjunction
with the issuance or transfer of securities.
13. The Company and any participating Selected Dealer agree to provide to
the Escrow Agent all information necessary to facilitate the administration of
this Agreement, and the Escrow Agent may relay upon the information so provided.
In performing any of its duties hereunder, the Escrow Agent shall not incur any
liability to anyone for any claims, damages, losses, costs or expenses, except
for its willful misconduct or gross negligence, and it shall, accordingly, not
incur any such liability with respect to (a) any action taken or omitted to good
faith upon written advice of counsel given with respect to any questions
relating to the duties and responsibilities of the Escrow Agent under this
Agreement, or (b) any action taken or omitted in reliance upon any instrument,
including the written advice provided for herein, not only as to its due
execution and the validity and effectiveness of its provisions, but also as 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 or
presented by a proper person or persons, and to conform with the provisions of
this Agreement.
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14. The Company hereby agrees to indemnify and hold harmless the Escrow
Agent against any and all losses, claims, damages, liabilities, costs and
expenses, including reasonable costs of investigation and attorneys' fees and
disbursements which may be imposed upon the Escrow Agent or incurred by the
Escrow Agent hereunder, or the performance of its duties hereunder, including
any litigation arising from this Agreement or involving the subject matter
hereof, except for those incurred by the Escrow Agent as a result of its gross
negligence or willful misconduct.
15. If at any time a dispute shall exist as to the duties of the Escrow
Agent and the terms hereof, or if funds deposited hereunder are not withdrawn on
or before thirty (30) days after the Escrow Period set forth in paragraph 4, the
Escrow Agent may, in its discretion, deposit said funds with the Clerk of the
District Court for the City and County of Denver, State of Colorado, and may
interplead the parties hereto as to the rights, if any, in such funds. Upon so
depositing such funds and filing its complaint in interpleader, the Escrow Agent
shall be completely discharged and released from all further liability or
responsibility under the terms hereof. The parties hereto, for themselves, their
successors and assigns, do hereby consent to the jurisdiction of said Court and
do hereby appoint the Clerk of said Court as their agent for service of all
process in connection with the proceeding mentioned in this paragraph.
16. All notices, demands, or requests required or authorized hereunder
shall be deemed given sufficiently if in writing and sent by certified mail,
return receipt requested and postage prepaid, with a copy also sent by
facsimile, to the person or his address and facsimile number set forth on the
signature page hereof.
17. The Escrow Agent is hereby expressly authorized and directed to
disregard any and all notices or warnings given by any of the parties hereto,
other than those notices and warnings specifically called for in this Agreement,
or by any other person or corporation, excepting only orders or process of
court, and is hereby expressly authorized to comply with and obey any and all
orders, judgments, or decrees of any court. In the event that Escrow Agent obeys
or complies with any such order, judgment, or decree of any court, it shall not
be liable to any of the parties hereto or to any other person, firm, or
corporation by reason of such compliance, notwithstanding that any such order
judgment or decree may be subsequently reversed, modified, annulled or set aside
or vacated, or found to have been entered without jurisdiction.
18. The Escrow Agent shall have no duty to know or determine performance or
nonperformance of any provision of any agreement between the other parties
hereto, and the original, or a copy, of any such agreement deposited with the
Escrow Agent shall not bind such agent in any manner. The Escrow Agent assumes
no responsibility for the validity or sufficiency of any documents or paper or
payments deposited or called for hereunder except as may be expressly and
specifically set forth in this Agreement in clear and unambiguous language, and
the duties and responsibilities of the Escrow Agent are limited to those
expressly and specially stated in this Agreement in such language.
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19. This Agreement shall be governed and interpreted by the laws of the
state of Colorado and shall be binding upon the parties hereto and their
respective successors and assigns. This Agreement may be executed in
counterparts.
20. This Agreement may be executed in counterparts, any one of which need
not contain the signature of more than one party, but all counterparts taken
together will constitute one and the same Agreement.
IN WITNESS WHEREOF, the Company and the Escrow Agent and each participating
Selected Dealer have executed this Fund Escrow Agreement effective on the date
first written above.
ESCROW AGENT: COMPANY:
THE BANK OF DENVER FAN ENERGY INC.
By By
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Xxxxxx Xxxxxxxx, Senior Vice President Xxxxxx X. Xxxxxxx Xx., Chairman
Duly Authorized Officer 0000 Xxxxxxxx, Xxxxx 000
1534 California Street Denver, Colorado 80202
Xxxxxx, Xxxxxxxx 00000 Facsimile: (000) 000-0000
Facsimile: (000) 000-0000
SELECTED DEALER:
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Name
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Signature of Authorized Officer
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Address
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Facsimile Number
7
