EXHIBIT 1.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT made and entered into this______ day of ________,
199__, by and between the persons named on Schedule A hereto (herein
collectively referred to as "Depositors"); Bank Windsor, a corporate fiduciary
with its principal office in Minneapolis, Minnesota, (hereinafter called the
"Escrow Agent"); Illuminated Media Inc., a Minnesota corporation with its
principal office in Minneapolis, Minnesota (hereinafter called the "Issuer")
and the Commissioner of Commerce for the State of Minnesota (hereinafter
called the "Commissioner");
WITNESSETH THAT:
Each of the depositors is the owner of shares of Common Stock of the Issuer
and each owns the number of shares listed opposite his or her name on Schedule
A, attached hereto and made a part hereof.
The Issuer has applied to the Commissioner for registration of its
securities for sale to residents of Minnesota, and as a condition of
registration the Depositors, the Escrow Agent and the Issuer agree to be
bound by this Agreement and the applicable Rules and Regulations of the
Commissioner.
Each of the Depositors has deposited the securities listed opposite his
name on Schedule A with the Escrow Agent, and the Escrow Agent hereby
acknowledges receipt thereof. These securities are herein collectively
referred to as "escrowed securities".
THEREFORE, the parties agree as follows:
1. The Escrow Agent agrees to hold the escrowed securities until such
time as the Escrow Agent shall receive a written release issued by the
Commissioner permitting the release from escrow of all or a part of the
escrowed securities held under this Agreement. Upon receipt of such release,
the Escrow Agent may release to each Depositor all or a part of his or her
escrowed securities in accordance with the order of the Commissioner.
Subject to the above provisions, the term of escrow under this Agreement
shall run for a period of three years from the date of the Order of
Registration, unless at an earlier date the Issuer shall have demonstrated
annual net earnings, after taxes and excluding extraordinary items,
determined in accordance with generally accepted accounting principles, for any
two consecutive years after the date of the Order of Registration, of at
least five percent (5%) on an amount determined by multiplying the total
number of outstanding shares of the Issuer, including the
escrowed securities, by the average price per share paid by public investors.
The existence of the required annual net earnings shall be demonstrated by a
certificate to that effect furnished to the Commissioner by an independent
certified public accountant or an authorized officer of the Issuer.
In addition, the Issuer and each of the Depositors shall furnish the
Commissioner a written statement that none of the escrowed securities nor any
interest therein have been sold, transferred or otherwise disposed of (except
as permitted by paragraph 4 hereof) as a condition of the release
from escrow.
2. Notwithstanding any provision of paragraph 1, the Commissioner may,
in his discretion, terminate the term of escrow with respect to all or any part
of the escrowed securities of any Depositor before the expiration of the period
of occurrence of the event specified in paragraph 1 and release such
securities if he determines that the release of such securities to the
Depositor(s) will not be detrimental to the Issuer, the public investors or any
other party concerned. At the time of release by the Commissioner of any
securities from escrow, the application of this Agreement shall terminate with
respect to the securities so released.
3. While it is held in escrow pursuant to this Agreement, no escrowed
security nor any interest therein, nor any right or title thereto, may be sold
or transferred, by means of transfer of the security separate from the
certificate representing it or otherwise, without the prior written
release of the Commissioner, except that the release of the Commissioner need
not be obtained to transfer escrowed shares by will or the laws of descent and
distribution or otherwise by order of process of any Court.
4. Upon receipt of such written release from the Commissioner directing
that some or all of the escrowed securities of the Depositors held under this
Escrow Agreement be released for the purpose of transfer to another person
against concurrent deposit of the securities so transferred, the Escrow Agent
may release such securities but only against such deposit under this
Agreement of all of the transferred securities. The Commissioner shall
authorize such transfer of the escrowed securities only upon receipt of a
signed statement by the proposed transferee that he has full knowledge of the
terms of this Escrow Agreement and that he accepts such securities
subject to the conditions of this Escrow Agreement.
5. The Depositors agree that they shall be entitled to receive cash and
property dividends with respect to the escrowed securities while such securities
are held in escrow pursuant to this Agreement to the same extent as other
security holders of the same class of security and
that said cash or property dividends shall be placed under the terms of this
Escrow Agreement.
6. Upon declaration of any dividend in shares of the Issuer or a
subsidiary to which the escrowed securities are entitled pursuant to a share
dividend or split authorized by a vote of the Issuer`s shareholders, the
Depositors and the Escrow Agent shall forthwith enter into a
Supplemental Escrow Agreement, covering such share dividend, which Supplemental
Escrow Agreement shall incorporate all the conditions of escrow contained in
this Agreement. The shares received as a dividend shall be forthwith
deposited in escrow with the Escrow Agent pursuant to
such Supplemental Escrow Agreement, and the Escrow Agent shall deliver to the
Commissioner a receipt for the shares thus escrowed.
7. During the term of escrow, the Depositors shall not be entitled to and
hereby waive all rights to participate in any distribution of assets of the
Issuer in the event of liquidation,dissolution, or winding up, until the public
investors shall have received cash or property in an
amount or value equal to the price paid by public investors for securities
purchased by such public investors; and thereafter the Depositors shall
participate without the public investors until they
shall have received cash or other property in an amount or value equal to the
price paid by the Depositors for the escrowed securities; and thereafter the
public investors and the Depositors shall participate equally according to
the terms of their securities. Any Depositor(s) seeking release
of all or any part of his escrowed securities pursuant to this paragraph 7 shall
furnish the Commissioner a written statement that none of the escrowed
securities nor any interests therein have been sold, transferred (except as
provided in paragraph 4 herein) or otherwise disposed of,
without the consent of the Commissioner, as a condition of the release from
escrow.
8. This Escrow Agreement shall not be construed to prohibit any Depositor
from participating in any distribution of securities of any corporation other
than the Issuer resulting from the sale of assets of the Issuer or a merger or
consolidation of the Issuer with or into any other corporation or
corporations. In the event, of such a transaction the Escrow Agent should
obtain written authorization from the Commissioner prior to the release of any
escrowed securities, and any such distribution payable in securities of any
corporation other than the Issuer paid with respect to the escrowed
securities shall be delivered to the Escrow Agent and held
pursuant to a Supplemental Escrow Agreement prepared and executed as described
in paragraph 7, above. In the event of the merger or consolidation of the
Issuer with or into any other corporation or corporations, any securities
shall be delivered to the Escrow Agent and held pursuant to a Supplemental
Escrow Agreement prepared and executed as described in paragraph
6, above.
9. The Escrow Agent may conclusively rely upon and shall be protected in
acting upon any statement, certificate, notice, request, consent, order or other
document 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 Escrow Agreement. The Escrow Agent shall
be under no obligation to institute or defend any action, suit or proceeding
in connection with this Escrow Agreement unless first indemnified to its
satisfaction. The Escrow Agent may consult counsel in respect of any question
arising under this Escrow Agreement and the Escrow Agent shall not be liable
for any action taken or omitted in good faith upon advice of such counsel. All
securities held by the Escrow Agent pursuant to this Escrow Agreement shall
constitute trust property for the purposes for which they are held and the
Escrow Agent shall not be liable for any interest thereon.
10. The Escrow Agent shall be entitled to receive from the Company
reasonable compensation for its services as contemplated herein. In the event
that the Escrow Agent shall render any additional service not provided for
herein or that any controversy shall arise hereunder or that the Escrow Agent
shall be made a party or shall intervene in any action, suit or proceeding
pertaining to this escrow Agreement, it shall be entitled to receive
reasonable compensation for the Company for such additional services.
11. This Escrow Agreement shall be binding upon and inure to the benefit
of the parties hereto, their heirs, successors and assigns.
12. This Escrow Agreement shall terminate in its entirety when all
escrowed securities covered hereby and by any Escrow Agreements supplemental
hereto have been released as provided in paragraph 1.
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement on the
date first above written.
ESCROW AGENT: DEPOSITORS:
National City Bank of Minneapolis
______________________________
By ___________________________
Its __________________________ ______________________________
ISSUER:
Illuminated Media Inc.
By ___________________________ Accepted for filing:
Its __________________________ ______________________________
Commissioner of Commerce
S C H E D U L E A
Name and Address No. and Type of Securities
Xxxxxx X. Xxxxx 200,000 Shares of Common Stock
Illuminated Media Inc.
00 X. Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
