EXHIBIT 10.12
PROMOTIONAL SHARES LOCK-IN AGREEMENT
This Promotional Shares Lock-In Agreement ("Agreement") was entered into January
31, 2003, between Quest Group International, Inc. (the "Company"), a Nevada
corporation, and party listed on the signature page hereto (the "Security
Holder"). Together, the Company and Security Holder are referred to as
"Signatories" in this Agreement.
The Company has applied to register its Equity Securities with the Securities
Administrator of the State of Utah (the "Administrator"), and if applicable,
with the Securities Administrators of other states. The Administrator believes
the Security Holder is a Promoter of the Company and owns the following Equity
Securities issued by the Company that are Promotional Shares as defined in the
Statement of Policy Regarding Corporate Securities Definitions (the "Definitions
SOP") adopted by the North American Securities Administrators Association, Inc.
("NASAA") on April 27, 1997 and amended September 28, 1999. The Security Holder
owns 5,000,000 shares of common stock and 666,000 shares of preferred stock (the
"Promotional Shares").
Other capitalized terms in this Agreement that are not defined within the
Agreement have the meanings specified in the Definitions SOP.
As a condition to Registering the Company's Equity Securities, the Signatories
agree as follows:
Promotional Shares are Restricted Securities
1. The Security Holder agrees not to sell, pledge, hypothecate, assign, grant
any option for the sale of, or otherwise transfer or dispose of, whether or
not for consideration, directly or indirectly, the Promotional Shares and
all certificates representing stock dividends, stock splits,
recapitalizations, and the like, that are granted to, or received by the
Security Holder during the term of this Agreement (the "Restricted
Securities"), except as allowed by this Agreement.
Exercise or Conversion of Restricted Securities
2. If the Restricted Securities under this Agreement have exercise or
conversion rights, the Security Holder may execute the rights, but the
exercised or converted Equity Securities will also be Restricted Securities
and subject to Lock-In during the term of this Agreement.
Term
3. This Agreement became effective on the date the Agreement was entered into
as indicated above and will terminate when the release conditions of
paragraph 4 are satisfied.
Release of Restricted Securities
4. a. Subject to the documentation requirements in paragraph 5 below, the
Restricted Securities may be released from Lock-In provisions of this
Agreement in the following manner:
(1) Beginning two years after the completion date of the
registered offering, two and one-half percent (2 1/2%) of the
Restricted Securities may be released at the beginning of each
quarter pro rata among all Security Holders subject to Lock-In
Agreements. All remaining Restricted Securities will be
released on the fourth anniversary of the completion date of
the registered offering; or
(2) One hundred percent (100%) of the Restricted Securities will
be released if:
(A) The registered offering has been terminated, and no
securities were sold; or
(B) The registered offering has been terminated, and all
of the gross proceeds that were received have been
returned to investors; or
(C) The Equity Securities did not qualify to be
registered by the Administrator; or
(D) Upon approval by the Administrator.
b. If the Company enters into any merger, reorganization, liquidation,
dissolution or other transaction or proceeding with a person who is not
a Promoter that results in the distribution of the Company's assets or
securities ("Distribution") while this Agreement remains in effect, the
Security Holder agrees that:
(1) All holders of the Company's 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
Company's Equity Securities in the registered offering have
received, or have had irrevocably set aside for them, an
amount that is equal to one hundred percent (100%) of the
offering price per share times the number of shares of Equity
Securities that they purchased in the registered offering and
which they still hold at the time of the Distribution,
adjusted for stock splits, stock dividends recapitalizations
and the like;
(2) After a Distribution, all holders of the Company's Equity
Securities will participate on an equal, per share basis times
the number of shares of Equity Securities they held at the
time of the Distribution, adjusted for stock splits, stock
dividends, recapitalizations and the like; and
(3) A Distribution may proceed on lesser terms and conditions than
the terms and conditions stated in paragraphs 4.b(1) and (2)
above if a majority of the Equity Securities that are not held
by Promoters, 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.
c. If the Company enters into any merger, reorganization, liquidation,
dissolution or other transaction or proceeding with a Promoter that
results in a Distribution while this Agreement remains in effect, the
Security Holder's Restricted Securities will remain subject to the
terms of this Agreement.
d. If the Restricted Securities under this Agreement become "Covered
Securities," as defined in Section 18(b)(1) of the Securities Act of
1933, the Restricted Securities will be released.
Documentation Regarding the Release of Restricted Securities
5. Except as otherwise described in this paragraph, the following will be
required as evidence of compliance with the conditions for release of
Restricted Securities from this Lock-In Agreement under paragraph 4 above:
a. A written notice to the Administrator with a copy of this Agreement
to advise that the release conditions have been satisfied;
b. Appropriate supporting documents that demonstrate compliance with
paragraph 4 above will be maintained for a period of three (3) years
after termination of the Agreement and will be sent to the
Administrator promptly upon request; and
c. If the Administrator does not request additional documents or object
to the release of Restricted Securities within ten (10) business days
after the notice specified above has been filed, this Agreement will
terminate and the Restricted Securities will be released.
Notwithstanding the foregoing, no notice shall be required with respect to the
release of Restricted Securities pursuant to paragraph 4.a.(1).
Exceptions from Restrictions
6. The following types of transfer, hypothecation or disposition of Restricted
Securities are allowable under this Agreement:
a. Restricted Securities 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. The Restricted Securities of a deceased Security Holder may be
hypothecated to pay the expenses of the deceased Security Holder's
estate, provided that the hypothecated Restricted Securities will
remain subject to the terms of this Agreement. Restricted Securities
may not be pledged to secure any other debt.
c. Restricted Securities may be transferred by gift to the Security
Holder's family members or by private sale, provided that the
Restricted Securities will remain subject to the terms of this
Agreement.
Voting Rights
7. With the exception of paragraph 4.b above, the Security Holder will have
the same voting rights as holders of Equity Securities that are not
Restricted Securities.
Restrictive Legends on Stock Certificates
8. a. A notice will be placed on the face of each stock certificate of the
Restricted Securities covered by the terms of this Agreement stating
that the transfer of the stock evidenced by the certificate is
restricted in accordance with the conditions set forth on the reverse
side of the certificate; and
b. A typed legend will be placed on the reverse side of each stock
certificate of the Restricted Securities covered by this Agreement
which states that: the sale or transfer of the shares evidenced by the
certificate is subject to certain restrictions pursuant to an agreement
between the Security Holder (whether beneficial or of record) and the
Company; the agreement is on file with the Company and the stock
transfer agent; and a copy of the agreement is available upon request
without charge.
Modifications of Agreement
9. This Agreement may be modified only with the written approval of the
Administrator.
Other Requirements of the Company
10. The Company will:
a. File an executed copy of this Agreement with the Administrator
before the effective date of the registered offering;
b. Provide copies of this Agreement and a statement of the initial
public offering price to the Company's stock transfer agent;
c. Place appropriate stock transfer orders with the Company's stock
transfer agent against the sale or transfer of the shares covered by
this Agreement, except as otherwise provided in this Agreement;
d. Place the stock restriction legends described above on the periodic
statement sent to the registered owner if the securities subject to
this Agreement are uncertificated securities.
The Signatories have entered into this Agreement, which may be written in
multiple counterparts and each of which will be considered an original, and have
signed the Agreement in the capacities, and on the dates, indicated below.
Date
Xxxxxxx Dynasty, LC January 31, 2003
By /s/ Xxxx Xxxxxxx, Manager January 31, 2003
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(Signature)
Company
By /s/ Xxxxx X. Xxxxx January 31, 2003
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President
By /s/ Xxxxxx Xxxxxxxx January 31, 2003
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Secretary
