SECURITY ESCROW AGREEMENT
THIS ESCROW AGREEMENT made and entered into this 15th day of May 1998,
among Xxxxxxx X. XxXxxxx and Xxxxxx X. Xxxxxx (herein referred to individually
as a "Security Holder" and collectively as the "Security Holders"), Baron
Capital Trust (the "Trust"), and American Stock Transfer & Trust Company (the
"Escrow Agent").
WITNESSETH THAT:
A. Each Security Holder is owner of the number of units of limited
partnership interest ("Units") in Baron Capital Properties, L.P. (the
"Partnership"), an affiliate of the Trust, listed opposite his name on Exhibit A
attached hereto which he acquired in exchange for his initial capital
contribution to the Partnership and other consideration.
B. The Trust has applied to the Securities and Exchange Commission (the
"Commission") for registration of 2,500,000 Common Shares of the Trust pursuant
to a Form SB-2 Registration Statement in connection with a proposed public
offering of Common Shares for cash (the "Offering") and will apply for
registration of 2,500,000 Units in the Partnership (which Units may be exchanged
for an equivalent number of Common Shares as described in the Prospectus
contained in the Form SB-2 Registration Statement), pursuant to a Form S-4
Registration Statement in connection with a proposed public exchange offering of
Units (the "Exchange Offering"). As a condition of such registrations, the
Security Holders, the Escrow Agent, and the Trust agree to be bound by this
Agreement.
C. Each Security Holder has deposited the Units listed opposite his name on
Exhibit A or documents evidencing the ownership of the Units listed on Exhibit A
with the Escrow Agent, and the Escrow Agent hereby acknowledges receipt thereof.
Such Units and/or the documents evidencing the ownership of such Units are
herein collectively referred to as "Escrowed Shares."
NOW THEREFORE, the parties hereto agree as follows:
1. Deposit of Certificates. Simultaneously with the execution of this
Agreement, each Security Holder has deposited with the Escrow Agent, and the
Escrow Agent hereby acknowledges receipt of, the certificates or documents
evidencing the ownership of Units listed on Exhibit A, representing a number of
Units in the Partnership which are exchangeable (subject to the restrictions set
forth below) into 9.5% of the Common Shares of the Trust to be outstanding upon
the completion of the Offering and the Exchange Offering, on a fully diluted
basis assuming all then outstanding Units (other than those to be acquired by
the Trust) have been exchanged into an equivalent number of Common Shares.
Copies of certificates representing the Escrowed Shares are attached hereto as
Exhibits A-1 and A-2.
2. Term. The term of this Agreement and of the escrow provided herein shall
commence on the date that the Offering is declared effective by the Commission.
The certificates or documents evidencing the securities are to be deposited with
the Escrow Agent and are to be held until their release pursuant to paragraph 3
of this Agreement.
2. Release of Shares. The Escrowed Shares owned by each Security Holder
shall be released to such Security Holder as follows:
a. 25% of the Escrowed Shares shall be released from escrow on the sixth,
seventh, eighth, and ninth anniversary dates of the effectiveness of
the Offering; or
b. 100% of the Escrowed Shares shall be released from escrow after the
Trust has had annual net earnings per share according to generally
accepted accounting principles ("GAAP") equal to at least 5% of the
public offering price (after taxes and excluding extraordinary items)
for any two consecutive fiscal years following the date of
effectiveness of the Offering; or
c. 100% of the Escrowed Shares shall be released from escrow after the
Trust has had average annual net earnings per share according to GAAP
(after taxes and excluding extraordinary items) equal to at least 5%
of the public offering price, for any five consecutive fiscal years
following the date of effectiveness of the Offering; or
d. 100% of the Escrowed Shares shall be released from escrow after the
Trust's Common Shares have traded on a national stock exchange at a
price equal to at least 175% of the initial public offering price for
at least 90 consecutive trading days following the first anniversary
of the date of effectiveness of the Offering.
3. Documentation to Escrow Agent Regarding Release of Escrowed Shares. A
request for termination of the escrow, based on the satisfaction of either
paragraph 3.a, 3.b, 3.c or 3.d above, shall be forwarded by each Security Holder
to the Escrow Agent. A request for termination of the escrow based upon
paragraph 3.b or 3.c. shall be accompanied by an earnings per share calculation
audited and reported on by an independent certified public accountant retained
by the Trust. A request for termination of the escrow based upon paragraph 3.d
shall be accompanied by evidence of the stock price conditions provided therein.
4. Terminated or Partial Offering. The foregoing notwithstanding, the
Escrowed Shares will be released by the Escrow Agent:
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a. If the Offering and the Exchange Offering have been terminated and no
securities were sold or exchanged thereunder; or
b. If the Offering is terminated without sale of the minimum offering
amount required to complete the Offering and all proceeds have been
returned to investors in such offering.
5. Restriction on Transfer. The Escrowed Shares may be transferred by will,
or pursuant to the laws of descent and distribution, or through appropriate
legal proceedings, but in all cases the Escrowed Shares shall remain in escrow
and subject to the terms of this Agreement until released pursuant to paragraph
3 above. Upon the death of the holder of any Escrowed Shares, the Escrowed
Shares of the deceased holder may be hypothecated, subject to all of the terms
of this Agreement, to the extent necessary to pay the expenses of the estate.
The Escrowed Shares in escrow may be transferred by gift to family members,
provided that the Escrowed Shares shall remain subject to the terms of this
Agreement. The Escrowed Shares may not be pledged to secure a debt except as
noted above.
6. Voting Power. The Security Holders shall be entitled to exercise all
voting rights in respect of the Escrowed Shares to which the non-escrowed Units
are entitled.
7. Dividends. Any dividends paid on the Escrowed Shares while they are held
in escrow hereunder shall be paid to the Escrow Agent by checks of the
Partnership made payable to the Escrow Agent with a notation of this Agreement
thereon, and any such dividends shall be held pursuant to the terms of this
Agreement. The Escrow Agent shall treat such dividends as assets of the
Partnership, available for distribution under the terms of paragraph 11 below,
except as provided herein. The Escrow Agent shall place the dividends in an
interest-bearing account. The dividends and the interest earned thereon (less
the amount of any fees payable to the Escrow Agent under paragraph 13 below)
will be disbursed in proportion to the number of Escrowed Shares released from
the escrow at the time the Escrowed Shares are released pursuant to paragraph 3
above.
8. Stock Dividends or Splits. Stock dividends on, and shares resulting from
stock splits of, the Escrowed Shares shall be delivered to the Escrow Agent and
shall be held pursuant to this Agreement as if they were original shares of
Escrowed Shares deposited hereunder. In the event of any stock dividend, stock
split or recapitalization of the Partnership, the per share requirements set
forth in paragraph 3 hereof shall be adjusted appropriately.
9. Additional Shares. Upon the exercise by a Security Holder of his
conversion rights, warrants or options to acquire additional Units in the
Partnership pursuant to the documents listed on Exhibit A, the additional Units
received from the exercise of such warrants or options shall forthwith be
deposited in escrow with the Escrow Agent and shall be subject to the terms and
conditions of this Agreement.
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10. Dissolution Preference. Each Security Holder agrees that in the event
of dissolution, liquidation, merger, consolidation, sale of assets, exchange, or
any transaction or proceeding that results in the distribution of the assets of
the Partnership, the Security Holder hereby waives all his right, title,
interest and participation in the assets of the Partnership until the holders of
all non-escrowed Units have been paid, or have had irrevocably set aside for
them an amount equal to 100% of the initial public offering price per Common
Share, adjusted for stock splits and stock dividends. Thereafter, the Escrowed
Shares shall be entitled to receive an amount per Unit equal to 100% paid to, or
set aside for, the non-escrowed Units. Thereafter, the Security Holder shall
participate on a pro rata basis with all Unitholders of the Partnership.
Mergers, consolidations, or reorganizations may proceed on terms and conditions
different than those stated above if the holders of at least of a majority of
Units, other than the Security Holders, approve the terms and conditions by vote
at a meeting held for such purpose.
11. Reliance by Escrow Agent. The Escrow Agent may conclusively rely on,
and shall be protected, when its acts in good faith upon, any statement,
certificate, notice, request, consent, order or other document which it believes
to be genuine and signed by the proper party. 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 it is indemnified to its reasonable
satisfaction. The Escrow Agent may consult counsel with respect to any question
arising under this Agreement and the Escrow Agent shall not be liable for any
action taken, or omitted, in good faith upon advice of counsel. In performing
any of its duties hereunder, the Escrow Agent shall not incur any liability to
anyone for any damages, losses or expenses except those which arise out of the
Escrow Agent's willful default or negligence, and it shall accordingly not incur
any such liability with respect to: (i) any action taken or omitted in good
faith upon advice of its counsel or counsel of the Trust given with respect to
any questions relating to the duties and responsibility of the Escrow Agent
under this Agreement, or (ii) any action taken or omitted in reliance upon any
instrument, including 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. All Escrowed Shares and funds held pursuant to this Agreement
shall constitute trust property. The Escrow Agent shall not be liable for any
interest on the Escrowed Shares.
12. Compensation to Escrow Agent. The Escrow Agent shall be entitled to
receive from the Trust reasonable compensation for its services as set forth in
Exhibit B attached hereto. In the event that the Escrow Agent renders any
additional services not provided for herein, or if any controversy arises
hereunder, or if the Escrow Agent is made a party to, or intervenes in any
action, suit or proceeding pertaining to this Agreement, it shall be entitled to
receive from the Security Holders or at the option of the Escrow Agent, the
Trust, reasonable compensation for such additional services. Upon notice to the
Security Holders, the Escrow Agent may deduct its
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compensation from any cash dividends or distributions held pursuant to paragraph
8 above.
13. Qualification and Independence of Escrow Agent. The Trust and each of
the Security Holders hereby represent that a complete list of its respective
officers and members of the Board of the Board is attached hereto as Exhibit C.
Based thereon, the Escrow Agent hereby represents and warrants that it is not
affiliated with the Trust, the Security Holders or any of their respective
officers or directors.
14. Indemnification. The Trust and each Security Holder agrees to hold the
Escrow Agent harmless from, and indemnify the Escrow Agent for, any and all
costs of investigation or claims, costs, expenses, reasonable attorney fees or
other liabilities or disbursements arising out of any administrative
investigation or proceeding or any litigation, commenced or threatened, relating
to this Agreement, including without limitation, the implementation of this
Agreement, the distribution of stock or funds, the investment of funds, the
interpretation of this Agreement or similar matters, provided that the Escrow
Agent shall not be indemnified for any costs of investigation or claims, costs,
expenses, attorney fees or other liability arising from its bad faith or
negligence or that of any of its employees, officers, directors or agents.
15. Scope. This Agreement shall be binding upon, and inure to the benefit
of, the parties hereto, their heirs, successors and assigns.
16. Termination. Except for the indemnification provisions of paragraph 15
above, which shall survive in any event, this Agreement shall terminate in its
entirety when all the Escrowed Shares have been released as provided in
paragraph 3 above.
17. Substitute Escrow Agent. The Escrow Agent may, upon not less than 60
days prior written notice to the Trust and the Security Holders, resign as the
Escrow Agent. The Trust and the Security Holders shall, before the effective
date of the Escrow Agent's resignation, enter into a new identical Escrow
Agreement with a substitute Escrow Agent. If the Trust and the Security Holders
fail to enter into a new Escrow Agreement and appoint a successor Escrow Agent
within 60 days after the Escrow Agent has given notice of its resignation, the
Escrow Agent then serving under this Agreement shall retain the Escrowed Shares
in escrow until a new, identical Escrow Agreement has been executed and a
successor Escrow Agent has been appointed. The Escrow Agent shall not be liable
for such retention of the Escrowed Shares in escrow.
19. Notice of Non-liability. Under the Delaware Business Trust Act and
Sections 3.3 and 3.4 of the Declaration, neither the Shareholders, the Trustees
nor any other members of the Board of the Trust shall be personally liable
hereunder, and the Security Holders and the Escrow
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Agent shall look solely to the Trust's property for the satisfaction of any
claims hereunder against the Trust.
IN WITNESS WHEREOF, the Security Holders, the Trust and the Escrow Agent
have entered into this Agreement as of the date first above written, in multiple
counterparts, each of which shall be considered an original.
SECURITY HOLDERS:
/s/ Xxxxxxx X. XxXxxxx
-------------------------------
Xxxxxxx X. XxXxxxx
/s/ Xxxxxx X.Xxxxxx
-------------------------------
Xxxxxx X. Xxxxxx
TRUST:
BARON CAPITAL TRUST
/s/ Xxxxxxx X.XxXxxxx
By:___________________________
Xxxxxxx X. XxXxxxx
Chief Executive Officer
ESCROW AGENT:
AMERICAN STOCK TRANSFER
& TRUST COMPANY
/s/ Xxxxxxx X. Xxxxxx
By:___________________________
Xxxxxxx X. Xxxxxx
Vice President
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EXHIBIT A
---------
Name of Security Holder Number of Units Owned
----------------------- ---------------------
Xxxxxxx X. XxXxxxx A number of Units in the Partnership which are
exchangeable (subject to the restrictions set forth
below) into 9.5% of the Common Shares of the Trust to
be outstanding upon the completion of the Offering and
the Exchange Offering, on a fully diluted basis
assuming all then outstanding Units (other than those
to be acquired by the Trust) have been exchanged into
an equivalent number of Common Shares.
Xxxxxx X. Xxxxxx A number of Units in the Partnership which are
exchangeable (subject to the restrictions set forth
below) into 9.5% of the Common Shares of the Trust to
be outstanding upon the completion of the Offering and
the Exchange Offering, on a fully diluted basis
assuming all then outstanding Units (other than those
to be acquired by the Trust) have been exchanged into
an equivalent number of Common Shares.
================================================================================
Exhibit A-1
NON-NEGOTIABLE, NON-TRANSFERABLE, NON-ASSIGNABLE
BARON CAPITAL PROPERTIES, L.P.
The undersigned hereby acknowledges that Units in Baron Capital Properties,
L.P. (the "Partnership"), organized under the Revised Uniform
Limited Partnership Act of the State of Delaware, are registered on the records
of said Partnership in the amount and in the name set forth below:
Certificate Number: 000001
Name and Address: Xxxxxxx X. XxXxxxx
0000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Social Security Number: ###-##-####
Number and Class of Units: A number of Units in the Partnership which are
exchangeable (subject to escrow restrictions described in the Prospectus of
Baron Capital Trust dated May 15, 1998) into 9.5% of the Common Shares of Baron
Capital Trust (the "Trust") outstanding after the completion of the Offering and
the proposed Exchange Offering, on a fully diluted basis assuming that all then
outstanding Units (other than those acquired by the Trust) have been exchanged
into an equivalent number of Common Shares.
This document has been issued solely to evidence that the above number of
Units stands in the name of such holder of Units, as of the date appearing
hereon, in the Partnership's Agreement of Limited Partnership, as amended (the
"Partnership Agreement"), pursuant to Article IV of the Partnership Agreement,
and does not grant or carry with it any rights to the income, profits or assets
of the Partnership, such rights being derived solely from the Partnership
Agreement. This document is NON-NEGOTIABLE, NON-TRANSFERABLE and NON-ASSIGNABLE.
Assignment of Units can only be accomplished in accordance with the procedure
set forth in the Partnership Agreement, and such assignment is subject to
certain limitations contained in Articles IV and XI of the Partnership
Agreement. Subject to Section 8.6 of the Partnership Agreement, a holder of
Units has the right to exchange Units for Common Shares of the General Partner
as provided in Section 4.2 of the Partnership Agreement. THIS DOCUMENT IS NOT A
SECURITY UNDER THE APPLICABLE PROVISIONS OF THE UNIFORM COMMERCIAL CODE, AND
NEGOTIATION, TRANSFER OR ASSIGNMENT OF INTERESTS CANNOT BE ACCOMPLISHED BY ANY
ATTEMPT TO NEGOTIATE, TRANSFER OR ASSIGN THIS DOCUMENT. Copies of the
Partnership Agreement may be obtained from the General Partner by contacting
Baron Capital Trust, 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxx, Attention: Secretary.
Terms used herein have the meanings ascribed to such terms in the Partnership
Agreement.
Date: May 15, 1998 /s/ Xxxxxxx X. XxXxxxx
----------------------
Chief Executive Officer of
Baron Capital Trust,
General Partner
================================================================================
================================================================================
Exhibit A-2
NON-NEGOTIABLE, NON-TRANSFERABLE, NON-ASSIGNABLE
BARON CAPITAL PROPERTIES, L.P.
The undersigned hereby acknowledges that Units in Baron Capital Properties,
L.P. (the "Partnership"), organized under the Revised Uniform Limited
Partnership Act of the State of Delaware, are registered on the records of said
Partnership in the amount and in the name set forth below:
Certificate Number: 000002
Name and Address: Xxxxxx X. Xxxxxx
0000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxx 00000
Social Security Number: ###-##-####
Number and Class of Units: A number of Units in the Partnership which are
exchangeable (subject to escrow restrictions described in the Prospectus of
Baron Capital Trust dated May 15, 1998) into 9.5% of the Common Shares of Baron
Capital Trust (the "Trust") outstanding after the completion of the Offering and
the proposed Exchange Offering, on a fully diluted basis assuming that all then
outstanding Units (other than those acquired by the Trust) have been exchanged
into an equivalent number of Common Shares.
This document has been issued solely to evidence that the above number of
Units stands in the name of such holder of Units, as of the date appearing
hereon, in the Partnership's Agreement of Limited Partnership, as amended (the
"Partnership Agreement"), pursuant to Article IV of the Partnership Agreement,
and does not grant or carry with it any rights to the income, profits or assets
of the Partnership, such rights being derived solely from the Partnership
Agreement. This document is NON-NEGOTIABLE, NON-TRANSFERABLE and NON-ASSIGNABLE.
Assignment of Units can only be accomplished in accordance with the procedure
set forth in the Partnership Agreement, and such assignment is subject to
certain limitations contained in Articles IV and XI of the Partnership
Agreement. Subject to Section 8.6 of the Partnership Agreement, a holder of
Units has the right to exchange Units for Common Shares of the General Partner
as provided in Section 4.2 of the Partnership Agreement. THIS DOCUMENT IS NOT A
SECURITY UNDER THE APPLICABLE PROVISIONS OF THE UNIFORM COMMERCIAL CODE, AND
NEGOTIATION, TRANSFER OR ASSIGNMENT OF INTERESTS CANNOT BE ACCOMPLISHED BY ANY
ATTEMPT TO NEGOTIATE, TRANSFER OR ASSIGN THIS DOCUMENT. Copies of the
Partnership Agreement may be obtained from the General Partner by contacting
Baron Capital Trust, 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxxx, Attention: Secretary.
Terms used herein have the meanings ascribed to such terms in the Partnership
Agreement.
Date: May 15, 1998 /s/ Xxxxxxx X. XxXxxxx
----------------------
Chief Executive Officer of
Baron Capital Trust,
General Partner
================================================================================
EXHIBIT B
---------
COMPENSATION OF ESCROW AGENT
----------------------------
One-time only fee of $1,000.00.
EXHIBIT C
---------
LIST OF OFFICERS AND MEMBERS OF THE BOARD OF THE TRUST
------------------------------------------------------
Name of Officer and
Member of the Board Position
------------------- --------
Xxxxxxx X. XxXxxxx Chief Executive Officer
Xxxxxx X. Xxxxxx Chief Operating Officer
Baron Advisors, Inc. Member of the Board
Xxxxx X. Xxxxxx Member of the Board
Xxxxx X. Xxxxxxx Member of the Board
