SECURITIES ESCROW AGREEMENT
THIS SECURITIES ESCROW AGREEMENT (the "Agreement") is entered into as of
the ____ day of November 2007, by and among Nine Mile Software, Inc., a Nevada
corporation ("Nine Mile"); the holders of certain securities of Nine Mile
(referred to herein as "Depositors"); and Xxxxxxx X. Xxxxxxx, Attorney at Law
("Escrow Agent").
RECITALS
WHEREAS, the parties hereto desire to establish an escrow account (the
"Escrow") naming Xxxxxxx X. Xxxxxxx, Attorney at Law, as the Escrow Agent;
WHEREAS, the Depositors are the beneficial owners of those shares of Nine
Mile common stock and stock purchase options to acquire shares of Nine Mile
common stock set forth in Attachment No. 1, annexed hereto and by this reference
made a part hereof (the "Nine Mile Securities"), and will deposit the Nine Mile
Securities with the Escrow Agent to be held pursuant to the terms and conditions
set forth herein; and
WHEREAS, the Escrow is being established at the request of the Utah
Division of Securities, in connection with the securities registration statement
filed by Nine Mile with the State of Utah for the public offering of Nine Mile
common stock pursuant to a registration statement filed with the Securities and
Exchange Commission on Form SB-2 (the "Offering").
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, the parties hereto agree as follows:
1. Deposit and Release of Nine Mile Securities. Upon the execution of this
Agreement, each individual Depositor will deposit with the Escrow Agent
certificates representing Nine Mile Securities in the respective amounts
designated in Attachment No. 1. Thereafter, Escrow Agent is instructed to place
and retain said shares in safekeeping. Beginning two years from the date of
completion of the offering, two and one-half percent (2 1/2%) of the Nine Mile
Securities held in Escrow may be released each quarter, pro rata among the
Depositors. All remaining Nine Mile Securities shall be released from Escrow on
the fourth anniversary from the date of completion of the Offering. Upon the
occurrence of any of the following events, the Escrow Agent will return the Nine
Mile Securities to the Depositors:
(a) The Offering has been terminated, and no securities were sold
pursuant thereto;
(b) The Offering has been terminated, and all of the gross proceeds
that were derived therefrom have been returned to the public
investors.
(c) In the event of a dissolution, liquidation, merger,
consolidation, reorganization, sale or exchange of Nine Mile's
assets or securities (including by way of tender offer), or any
other transaction or proceeding with a person who is not a
designated Depositor, which results in the distribution of the
Nine Miles' assets or securities ("Distribution"), while this
Agreement remains in effect, the Depositors' Nine Miles
Securities shall remain in Escrow subject to the terms of this
Agreement and the Depositors agree that:
(i) All holders of Nine Miles' 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
they paid per share of Nine Miles common stock (provided
that the Utah Division of Securities has accepted the value
of the other consideration), until the public shareholders
have received, or have had irrevocably set aside for them,
an amount that is equal to one-hundred percent (100%) of the
public offering's price per share times the number of shares
of Nine Miles common stock that they purchased pursuant to
the Offering and which they still hold at the time of the
Distribution, adjusted for stock splits, stock dividends,
recapitalizations and the like;
Page 1 of 6
(ii) All holders of Nine Miles common stock shall thereafter
participate on an equal, per share basis times the number of
shares of common stock they hold at the time of the
Distribution, adjusted for stock splits, stock dividends,
recapitalizations and the like; and
(iii) A Distribution may proceed on lesser terms and conditions
than the terms and conditions stated in Paragraphs 1(c) (i)
and (ii), above, if a majority of Nine Miles common stock,
not held by Depositors, 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;
(d) In the event the shares of Nine Mile Common Stock held in Escrow
pursuant to this Agreement become "Covered Securities," as defined
in Section 18(b)(1) of the Securities Act of 1933, all securities
in Escrow shall be released; or
(e) The Utah Division of Securities gives its permission to release
the Nine Mile Securities prior to the termination of this
Agreement.
2. Terms of the Escrow.
-------------------
(a) For purposes of this Agreement, associate includes:
(i) Corporations or legal entities, other than the Issuer or
majority-owned subsidiaries of the Issuer, of which a person
is an officer, director, partner, or a direct or indirect,
legal or beneficial owner of five percent (5%) or more of
any class of equity securities;
(ii) Trusts or other estates in which a person has a substantial
beneficial interest or for which a person serves as a
trustee or in a similar capacity; and
(iii) A persons's spouse and relatives, by blood or by marriage,
if the person is a promoter of the Issuer, its subsidiaries,
its affiliates, or its parent:
(b) Except as set forth in Paragraph 1(c) above, Depositors shall have
the same voting rights as shareholders who purchased shares in the
Offering.
(c) All certificates representing stock dividends and shares resulting
from stock splits of Nine Mile Securities, recapitalizations and
the like, that are granted to or received by Depositors while
their Nine Mile Securities are held in Escrow, shall 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
Depositors while their Nine Mile Securities are held in Escrow,
shall be deposited with and be held by the Escrow Agent subject to
the terms of this Agreement, unless such cash dividends are
approved by a majority of independent directors of the Nine Mile
Board of Directors. The Escrow Agent shall invest such cash
dividends as directed by the Depositors. The cash dividends and
any interest earned thereon will be disbursed in proportion to the
number of shares released from the Escrow.
(d) All equity securities that are received by Depositors as the
result of the conversion or exercise of convertible securities,
warrants, options or rights to purchase common stock or similar
securities, while their Nine Mile Securities are in Escrow, shall
be deposited with and held by the Escrow Agent subject to the
terms of this Agreement.
3. Restrictions on Transfer.
-------------------------
(a) The Nine Mile Securities held in Escrow pursuant to this Agreement
may be transferred by will, the laws of descent and distribution,
the operation of law, or by any court of competent jurisdiction
and proper venue.
Page 2 of 6
(b) The Escrowed Nine Mile Securities of a deceased Depositor may be
hypothecated to pay the expenses of the deceased Depositor's
estate; provided that the hypothecated Nine Mile Securities shall
remain subject to the terms of the Agreement.
(c) No Nine Mile Securities may be transferred, sold or disposed of
("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 Nine Mile Securities subject
to the terms of this Agreement and the transferee realizes that
the Nine Mile Securities shall remain in Escrow until they are
released pursuant to Paragraph 1, above.
(d) With the exception of Paragraph 3(b) above, Nine Mile Securities
held in Escrow may not be pledged to secure a debt.
(e) Nine Mile Securities held in Escrow may be transferred by gift to
the Depositors's family members, provided that the transferred
Nine Mile Securities shall remain subject to the terms of this
Agreement.
(f) With the exception of Paragraphs 3(a), (b), (c) and (e) above, no
Escrowed Nine Mile Securities, any interest therein or any right
or title thereto, may be transferred.
(g) Depositors shall be prohibited from selling any of their Nine Mile
Securities that are not subject to Escrow during the time that
Nine Mile is offering its securities to the public in a
self-underwritten offering.
4. Delivery of Nine Mile Securities and Termination of Escrow.
-----------------------------------------------------------
(a) Within five (5) days from the occurrence of any of the events set
forth in Paragraph 1 above and without further instructions, the
Escrow Agent will deliver to the Depositors certificates
representing the respective Nine Mile Securities that are eligible
for release from Escrow. In the event the Offering is canceled or
abandoned without the sale of any Nine Mile shares and
appropriately withdrawn from registration with the Securities and
Exchange Commission and Utah Division of Securities, the Escrow
agent will immediately return to Depositors all certificates
representing the Nine Mile Securities;
(b) A request for the release of any of the Nine Mile Securities from
Escrow shall be in writing and be forwarded to the Escrow Agent;
(c) The Issuer shall provide to the Escrow Agent the documentation
showing that the requirements of Paragraph 1 above have been met;
and
(d) The Escrow Agent shall terminate the Agreement and/or release some
or all of the Nine Mile Securities from Escrow if all the
applicable provisions of this Agreement have been satisfied. The
Escrow Agent shall maintain all records relating to this Agreement
for a period of three (3) years following the termination of the
Agreement. Copies of all records retained by the Escrow Agent
shall be forwarded to the Utah Division of Securities promptly
upon written request.
5. Escrow Agent. Xxxxxxx X. Xxxxxxx, Attorney at Law, is hereby designated
by this Agreement to act in the capacity of Escrow Agent pursuant to the terms
and conditions set forth herein. By executing this Agreement, Escrow Agent
acknowledges the receipt from Depositors of the Nine Mile Securities.
6. Representations of Depositors. Depositors hereby represent that they are
the registered and beneficial owner of the Nine Mile Securities set forth in
Attachment No. 1 and delivered to Escrow Agent and each individual Depositor
represents that he is empowered to enter into and fulfill the terms and
conditions set forth in this Agreement.
7. Amendment. This Agreement may be amended only upon the approval and
consent of all the parties hereto and any such amendment shall be made by an
instrument, in writing, and signed on behalf by all of the parties hereto and
the Utah Division of Securities.
Page 3 of 6
8. Indemnification of Escrow Agent. The Issuer and the Depositors shall
hold the Escrow Agent harmless from and indemnify it for, any cost or liability
regarding administrative proceeding, investigation, litigation, interpretation,
implementation, or interpleading relating to this Agreement, including the
release of Nine Mile Securities and the disbursement of dividends, interest or
proceeds, unless the cost or the liability arises from the Escrow Agent's
failure to abide by the terms of the Agreement. The Escrow Agent shall have no
responsibility other than to receive, hold and disperse the Nine Mile Securities
pursuant to the terms and conditions set forth herein.
9. Arbitration. The parties hereto agree that they shall resolve any
dispute arising hereunder before a panel of arbitrators selected pursuant to and
run in accordance with the rules of the American Arbitration Association. The
arbitration shall be held in Salt Lake City, Utah or in such other location to
be mutually agreed upon by all of the parties hereto. Each party shall bear
their own attorney's fees and respective costs of such arbitration.
10. Termination. This Agreement shall terminate by its terms four (4) years
from the date hereof, unless previously terminated by terms and conditions
stated herein. Upon termination of the Agreement as per the terms set forth
herein, the Escrow Agent shall immediately deliver to Depositors Nine Mile
Securities being held by Escrow Agent. If the Escrow Agent approves the
termination of the Agreement prior to the termination date provided herein, the
Escrow Agent shall immediately inform the Utah Division of Securities in writing
that termination has occurred and shall describe the facts and circumstances of
the terminating event or events.
11. Governing Law. This Agreement shall be governed by the laws of the
State of Utah.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and together shall
constitute one document. The delivery by facsimile or an executed counterpart of
this Agreement shall be deemed to be an original and shall have the full force
and effect of an original executed copy.
13. Assignment. This Agreement may not be assigned in any manner, in whole
or in part, by any of the parties hereto without the express prior written
consent by all the parties and the Utah Division of Securities.
IN WITNESS WHEREOF, this Securities Escrow Agreement is hereby executed and
delivered in a manner legally binding as of the date first written above.
[Signatures on Following Page]
Page 4 of 6
SIGNATURE PAGE
"Nine Mile"
Nine Mile Software, Inc.
By:
-----------------------------------------
Its:
"Depositors"
--------------------------------------------
Xxxxx Xxxx
--------------------------------------------
Xxxxxx Xxxxxxx
--------------------------------------------
Xxxxx Xxxx
--------------------------------------------
Xxxxx Xxxx
--------------------------------------------
Xxxxxxx Xxxxxxxxxxx
"Escrow Agent"
--------------------------------------------
Xxxxxxx X. Xxxxxxx
ATTACHMENT NO. 1
------------------
NINE MILES SOFTWARE, INC. SECURITIES SUBJECT TO SECURITIES ESCROW AGREEMENT
Name of Depositor Nine Mile Software, Inc. Securities Deposited into Escrow
Xxxxx Xxxx 600,000 shares of Common Stock
----------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 600,000 shares of Common Stock
----------------------------------------------------------------------------------------------------------
Xxxxx Xxxx 200,000 shares of common stock
----------------------------------------------------------------------------------------------------------
Stock Purchase Options* to acquire 400,000 shares of Common Stock
Xxxxx Xxxx 120,000 shares of common stock
----------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxxxxx 30,000 shares of common stock
Stock Purchase Options* to acquire 100,000 shares of Common Stock
----------------------------------------------------------------------------------------------------------
* Includes underlying shares of Common Stock
