EXHIBIT 10.3
Escrow Agreement
PROMOTIONAL SHARE ESCROW AGREEMENT
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This Promotional Shares Escrow Agreement (the "Agreement"), which was entered
into on the 3rd day of December , 2001, by and between Xxxxxx Coffee, Inc. (the
"Issuer"), whose principal place of business is located in Bellevue, Washington,
and Mr. Xxxxx Xxxxxx, (the "Depositor") and Nevada Agency and Trust, (the
"Escrow Agent"), whose principal place of business is located in Reno, Nevada,
and which is domiciled in Nevada; (all of whom are herein collectively referred
to as "Signatories") witnesses that:
A. The Issuer has filed an application with the Securities
Administrator of the State of Washington (the "Administrator") to
register certain of its Equity Securities for sale to public
investors who are residents of that state;
B. The Depositor is the owner of shares of 902,100 shares of common
stock of the Issuer (the "Equity Securities");
C. As a condition to registering the Issuer's Equity Securities, the
Depositor, who is a security holder of the Issuer and who, for
the purposes of this Agreement is deemed to be a Promoter of the
Issuer, has agreed to deposit 603,898 Equity Securities (the
"Promotional Shares"), which is attached hereto and made a part
hereof, with the Escrow Agent; and
D. The Signatories have agreed to be bound by the terms of this
Agreement.
THEREFORE, the Signatories agree as follows:
1. DEPOSIT OF PROMOTIONAL SHARES. The Depositor's Promotional Shares
have been deposited into an Escrow Account ("Escrow") with the
Escrow Agent, and the Escrow Agent hereby acknowledges the
receipt thereof.
2. EXERCISE OR CONVERSION OF PROMOTIONAL SHARES. If the Promotional
Shares have exercise rights or conversion rights, the Escrow
Agent shall, upon receipt of the Issuer's written request,
provide the documents that evidence and/or which are necessary to
execute the exercise rights or conversion rights. The exercised
or converted Promotional Shares shall remain in escrow subject to
the terms of this Agreement. (NOT APPLICABLE)
3. TERM. The Term of this Agreement and the escrow shall begin on
the date that the public securities offering relating thereto
("public offering") is declared effective by the Administrator.
The Promotional Shares shall be held by the Escrow Agent until
they are released in accordance with paragraph 4., below.
4. RELEASE OF PROMOTIONAL SHARES
a. Subject to the documentation requirements in paragraph 5.,
below, the Escrow Agent shall release the Promotional Shares
in the following manner.
(1) Beginning two years from the completion date of the
public offering, two and one-half percent (2 1/2%) of
Promotional Shares held in escrow may be released each
quarter. All remaining Promotional Shares shall be
released from escrow on the anniversary of the fourth
year from the completion date of the public offering.
(2) One hundred percent (100%) of the Promotional Shares
shall be released from escrow if:
(a) The public offering has been
terminated, and no securities were
sold pursuant thereto; or
(b) The public offering has been
terminated, and all of the gross
proceeds that were derived therefrom
have been returned to the public
investors.
b. In the event of a dissolution, liquidation, merger,
consolidation, reorganization, sale or exchange
of the Issuer's assets or securities (including by way of tender
offer), or any other transaction or proceeding with a person who
is not a Promoter, which results in the distribution of the
Issuer's assets or securities ("Distribution"), while this
Agreement remains in effect, the Depositor agrees that:
(1) All holders of the Issuers 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 for their Equity Securities (provided
that the Administrator has accepted the value of the other
consideration), until the shareholders who purchased the
Issuer's Equity Securities pursuant to the public offering
("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 pursuant to the public offering of Equity
Securities that they purchased pursuant to the public
offering and which they still hold at the time of the
Distribution, adjusted for stock splits, stock dividends
recapitalizations and the like; and (2) All holders of the
Issuer's Equity Securities shall thereafter participate on
an equal, per share basis times the number of shares of
Equity Securities they hold at the time of the Distribution,
adjusted for stock splits, stock dividends,
recapitalizations and the like.
c. The Distribution may proceed on lesser terms and conditions than
the terms and conditions stated in paragraph 4.b., above, if a
majority of the Equity Securities that are not held by the
Depositor, officers, directors, or Promoters of the Issuer, or
their associates or affiliates vote, or consent procedure, to
approve the lesser terms and conditions.
d. In the event of a dissolution, liquidation, merger,
consolidation, reorganization sale or exchange of the Issuer's
assets or securities (including by way of tender offer), or any
other transaction or proceeding with a person who is a Promoter,
which results in a Distribution while this Agreement remains in
effect, the Depositor's Promotional Shares shall remain in escrow
subject to the terms of this Agreement.
e. In the event securities in the escrow become "Covered
Securities," as defined by the National Securities Markets
Improvement Act of 1996, all securities held in escrow shall
be released.
5. DOCUMENTATION REGARDING THE RELEASE OF PROMOTIONAL SHARES.
a. A written request for release of the Promotional Shares
("request for release"), based upon paragraph 4., above,
shall be forwarded to the Escrow Agent.
(1) A request for release based upon paragraph 4.a.(2)(a)
or (b), above, shall be accompanied by a certification
from the underwriter (if applicable) and the Issuer's
Chief Executive Officer or Chief Financial Officer
which states that the public offering has been
terminated and the conditions or paragraph 4.a.(2)(a)
or (b), above, have been met.
6. RESTRICTION ON THE TRANSFER, SALE OR DISPOSAL OF PROMOTIONAL
SHARES. While this Agreement is in effect, no Promotional Shares,
any interest therein or any right or title thereto, may be sold,
transferred, hypothecated or otherwise disposed of ("transfer" or
"transferred"), except as noted below, and the Escrow Agent shall
not recognize any transfer that violates the terms of this
Agreement. The Promotional Shares may not be 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 Promotional Shares subject to the terms of
this Agreement, and the transferee realizes that the Promotional
Shares shall remain subject to the terms of the Agreement until
they are released pursuant to paragraph 4., above.
(a) Promotional Shares may be transferred by will, the laws of
descent and distribution, the operation of law, or by order
of any court of competent jurisdiction and proper venue.
(b) Promotional Shares of a deceased Depositor may be
hypothecated to pay the expenses of the deceased Depositor's
estate. The hypothecated promotional Shares shall remain
subject to the terms of this Agreement. Promotional Shares
may not be pledged to secure any other debt.
7. VOTING POWER. With the exception of paragraph 4.b and c., above
the Promotional Shares shall have
the same voting rights as similar, non-escrowed Equity
Securities. If the Promotional Shares are registered in the
Escrow Agents name , the Escrow Agent shall vote those
Promotional Shares in accordance with the Depositor' written
instructions.
8. DIVIDENDS, STOCK SPLITS AND RECAPITALIZATIONS. All certificates
representing stock dividends and shares resulting from stock
splits of escrowed shares, recapitalizations and the like, that
are granted to or received by the Depositor while his Promotional
Shares are held in Escrow shall be deposited with and held in
escrow, and shall be promptly deposited with and held by the
Escrow Agent subject to the terms of this Agreement unless such
cash dividends are approved by a majority of the independent
directors of the Issuer. The Escrow Agent shall invest cash
dividends as directed by the Depositor.
9. ADDITIONAL SHARES. With respect to Equity Securities received by
the Depositor as the result of the conversion of the Depositor's
convertible securities and/or the exercise of Depositor's
options, warrants or rights listed on Exhibit A, while their
Promotional Shares are held in escrow, shall be promptly
deposited with the Escrow Agent as Promotional Shares subject to
the terms of this Agreement. These Promotional Shares shall be
distributed to the Depositor when their Promotional Shares are
released from escrow pursuant to paragraph 4., above. (NOT
APPLICABLE)
10. RELIANCE BY ESCROW AGENT. The Escrow Agent shall be protected if
it acts in good faith upon any statement, certificate, notice,
request, consent, order or other document which believes to be
genuine, conforms with the provisions of the Agreement and is
signed by the proper party. The Escrow Agent's sole
responsibility shall be to act in accordance with the terms
expressly set forth in this Agreement. This Escrow Agent shall be
under no obligation to institute or defend any action, suit or
proceeding in connection with this Agreement unless it receives
reasonable indemnification and advancement of fees and costs. The
Escrow Agent may consult counsel with respect to any question
arising under this Agreement. The Escrow Agent shall not be
liable for any action taken or omitted, in good faith, upon the
advice of counsel. In performing its duties hereunder, the Escrow
Agent shall not be liable to anyone for any damage, loss, expense
or liability other than for that which arises from the Escrow
Agent's failure to abide by the terms of this Agreement.
11. ESCROW AGENT'S COMPENSATION. The Escrow Agent shall be entitled
to receive reasonable compensation from the Issuer for its
services as set forth in Exhibit B, which is attached hereto and
made a part hereof. If the Escrow Agent is required to render
additional services that are not expressly set forth therein, or
if it is made a party to or intervenes in any action, suit or
proceedings pertaining to this Agreement ("Additional Services"),
it shall be entitled to receive reasonable compensation from the
Issuer and the Depositor. If Additional Services are provided,
the Escrow Agent, after giving written notice to the Depositor
and the Issuer, may deduct reasonable compensation from the cash
dividends, interest and proceeds being held for distribution
pursuant to paragraphs 4.b., c and d., or 8., above.
12. ESCROW AGENT'S INDEMNIFICATIONS. The Issuer and the Depositor
agree to hold the Escrow Agent harmless from, and indemnify the
Escrow Agent for, any cost or liability regarding and
administrative proceeding, investigation, litigation,
interpretation, implementation or interpleading relating to this
Agreement, including the release of Promotional Shares, the
Distribution, and the disbursement of dividends, interest or
proceeds, unless the cost or liability arises from the Escrow
Agent's failure to abide by the terms of this Agreement.
13. INDEPENDENCE OF THE ESCROW AGENT. The Issuer hereby represents
that all of its officers, directors and Promoters are listed on
Exhibit c, which is attached hereto and made a part hereof. The
Escrow Agent hereby represents that it is not affiliated with the
Issuer, the Depositor, or the Issuer's officer, director or
Promoter, Mr. Xxxxx Xxxxxx.
14. SCOPE. This Agreement shall inure the benefit of and be binding
upon the Depositor, their heirs and assignees, and upon the
Issuer, Escrow Agent, and their successors.
15. SUBSTITUTE ESCROW AGENT. The Escrow Agent may, upon not less than
sixty (60) days prior written notice to the Issuer, the
Depositor, and the Administrator, resign as the Escrow Agent. The
Issuer and the Depositor shall before the effective date of the
Escrow Agent's resignation, enter into a new identical Escrow
Agreement with a substitute Escrow Agent. The successor Escrow
Agent must satisfactory to the Administrator. If the Issuer and
the Depositor fail to enter into a new Escrow Agreement and
appoint a successor Escrow Agent within sixty (60) days after the
Escrow Agent has given notice of its resignation, the Escrow
Agent then serving under this Agreement shall retain the
Promotional 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 retaining the
Promotional Shares in escrow for a reasonable time to determine
the proper disposition of those shares.
16. TERMINATION. Except for the compensation and indemnification
provisions of paragraphs 11. and 12., above, which shall survive
until they are satisfied, this Agreement shall terminate in its
entirety when all of the Promotional Shares have been released,
or the Issuers Equity Securities and/or assets have been
distributed pursuant to paragraph 4., above.
17. Pursuant to the requirements of this Agreement, the Signatories
have entered into this Agreement, which may be written in
multiple counterparts and each of which shall be considered an
original. The Signatories have signed the Agreement in the
capacities, and on the dates, indicated.
IN WITNESS WHEREOF, the Signatories have executed this Agreement.
Date
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(Print or type the Depositor's name)
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(Signature)
Issuer
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By
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Xxxxx Xxxxxx, President,
Secretary & Treasurer
Escrow Agent
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By
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