ESCROW AGREEMENT
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AGREEMENT, dated as of the th day of ________, 1996, by and among
Continental Stock Transfer & Trust Company, a New York corporation (hereinafter
referred to as the "Escrow Agent"), THINK New Ideas, Inc., a Delaware
corporation (the "Company"), and the stockholders of the Company who have
executed this agreement (hereinafter collectively called the "Stockholders").
WHEREAS, the Company contemplates a public offering ("Public
Offering") of shares of its Common Stock, par value $.0001 per share (the
"Common Stock") through Commonwealth Associates as underwriter (the
"Underwriter") pursuant to a Registration Statement on Form SB-2 to be filed
with the Securities and Exchange Commission (the "Registration Statement"); and
WHEREAS, the Stockholders have agreed to deposit in escrow an
aggregate of 825,000 shares of Common Stock, $.0001 par value, upon the terms
and conditions set forth herein.
In consideration of the mutual covenants and promises herein
contained, the parties hereto agree as follows:
1. The Stockholders and the Company hereby appoint Continental Stock
Transfer & Trust Company as Escrow Agent and agree that the Stockholders will,
prior to the filing of the Registration Statement (as hereinafter defined)
relating to the Public Offering deliver to the Escrow Agent to hold in
accordance with the provisions hereof, certificates representing an aggregate of
825,000 shares of Common Stock owned of record by the Stockholders in the
respective amounts set forth on Exhibit A hereto (the "Escrow Shares"), together
with stock powers executed in blank. The Escrow Agent, by its execution and
delivery of this Agreement
hereby acknowledges receipt of the Escrow Shares and accepts its appointment as
Escrow Agent to hold the Escrow Shares in escrow, upon the terms, provisions and
conditions hereof.
2. This Agreement shall become effective upon the date on which the
Securities and Exchange Commission declares effective the Registration Statement
("Effective Date") and shall continue in effect until the earlier of (i) the
date specified in paragraph 4(e) hereof or (ii) the distribution by the Escrow
Agent of all of the Escrow Shares in accordance with the terms hereof (the
"Termination Date"). The period of time from the Effective Date until the
Termination Date is referred to herein as the "Escrow Period."
3. During the Escrow Period, the Escrow Agent shall receive all of
the money, securities, rights or property distributed in respect of the Escrow
Shares then held in escrow, including any such property distributed as dividends
or pursuant to any stock split, merger, recapitalization, dissolution, or total
or partial liquidation of the Company, such property to be held and distributed
as herein provided and hereinafter referred to collectively as the "Escrow
Property."
4. (a) The Escrow Shares are subject to release to the
Stockholders only in the event the conditions set forth herein are met. The
Escrow Agent, upon notice to such effect from the Company as provided in
paragraph 5 hereof, shall deliver the Escrow Shares, together with stock powers
executed in blank, and the Escrow Property deposited in escrow with respect to
such Escrow Shares, to the respective Stockholders, if, and only if, one of the
following conditions is met:
(i) The Company's net income before provision for income taxes (the
"Minimum Pre-Tax Income") equals or exceeds $1.15 per share of
the Company's Common Stock for any of the fiscal years ending
June 30, 1997, 1998 or 1999; or
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(ii) The Closing Price (as defined herein) of the Company's Common
Stock shall average in excess of $30 per share for any 40
consecutive business days during the period commencing on the
Effective Date and ending 36 months from the Effective Date; or
(iii) The Company is acquired by or merged into another entity in a
transaction in which stockholders of the Company receive per
share consideration at least equal to the level set forth in
(ii) above.
(b) As used in this Section 4, the term "Closing Price" shall be subject
to adjustments in the event of any stock dividend, stock distribution,
stock split or other similar event and shall mean:
(1) If the principal market for the Common Stock is a national
securities exchange or the Nasdaq National Market, the closing
sales price of the Common Stock as reported by such exchange or
market, or on a consolidated tape reflecting transactions on
such exchange or market; or
(2) if the principal market for the Common Stock is not a national
securities exchange or the Nasdaq National Market and the Common
Stock is quoted on the Nasdaq SmallCap Market, the closing bid
price of the Common Stock as quoted on the Nasdaq SmallCap
Market; or
(3) if the principal market for the Common Stock is not a national
securities exchange or the Nasdaq National Market and the Common
Stock is not quoted on the Nasdaq SmallCap Market, the closing
bid for the Common Stock as reported by the National Quotation
Bureau, Inc. ("NQB") or at least two market makers in the Common
Stock if quotations are not available from NQB but are available
from market makers.
(c) The determination of Minimum Pre-Tax Income shall be (i) calculated
exclusive of any extraordinary earnings or charges (including any charges
incurred by the Company in connection with the release from escrow of the Escrow
Shares and any Escrow Property in respect thereof pursuant to the provisions of
this paragraph 4); and (ii) determined by the Company's independent public
accountants in accordance with U.S. generally accepted accounting principles.
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(d) The Minimum Pre-Tax Income shall be calculated assuming conversion
and/or exercise of all outstanding equity securities of the Company convertible
into or exchangeable for Common Stock, whether or not convertible or
exchangeable at the time of computation (and after adjustment for any stock
dividends, stock splits or similar events); provided that the 200,000 warrants
to be issued to the Underwriter in connection with the Public Offering shall be
excluded for purposes of the calculation of Minimum Pre-Tax Income.
(e) If the Escrow Agent has not received the notice provided for in
Paragraph 5 hereof and delivered all of the Escrow Shares and related Escrow
Property in accordance with the provisions of this Paragraph 4 on or prior to
September 30, 1999, the Escrow Agent shall deliver the certificates representing
all or the remaining Escrow Shares, together with stock powers executed in
blank, and any related Escrow Property to the Company to be placed in the
Company's treasury for cancellation thereof as a contribution to capital. After
such date, the Stockholders shall have no further rights as a stockholder of the
Company with respect to any of the cancelled Escrow Shares.
5. Upon the occurrence or satisfaction of any of the events or
conditions specified in Paragraph 4 hereof, the Company shall promptly give
appropriate notice to the Escrow Agent, the Underwriter (and if the transfer
agent of the Company's Common Stock is different from the Escrow Agent, such
transfer agent) and present such documentation as is reasonably required by the
Escrow Agent to evidence the satisfaction of such conditions.
6. It is understood and agreed by the parties to this Agreement as
follows:
(a) The Escrow Agent is not and shall not be deemed to be a trustee
for any party for any purpose and is merely acting as a depository and in a
ministerial capacity hereunder with the limited duties herein prescribed.
(b) The Escrow Agent does not have and shall not be deemed to have any
responsibility in respect of any instruction, certificate or notice delivered to
it or of the
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Escrow Shares or any related Escrow Property other than faithfully to carry out
the obligations undertaken in this Agreement and to follow the directions in
such instruction or notice provided in accordance with the terms hereof.
(c) The Escrow Agent is not and shall not be deemed to be liable for
any action taken or omitted by it in good faith and may rely upon, and act in
accordance with, the advice of its counsel without liability on its part for any
action taken or omitted in accordance with such advice. In any event, its
liability hereunder shall be limited to liability for gross negligence, willful
misconduct or bad faith on its part.
(d) The Escrow Agent may conclusively rely upon and act in accordance
with any certificate, instruction, notice, letter, telegram, cablegram or other
written instrument believed by it to be genuine and to have been signed by the
proper party or parties.
(e) The Company agrees (i) to pay the Escrow Agent's reasonable fees
and to reimburse it for its reasonable expenses including attorney's fees
incurred in connection with duties hereunder and (ii) to save harmless,
indemnify and defend the Escrow Agent for, from and against any loss, damage,
liability, judgment, cost and expense whatsoever, including counsel fees,
suffered or incurred by it by reason of, or on account of, any misrepresentation
made to it or its status or activities as Escrow Agent under this Agreement
except for any loss, damage, liability, judgment, cost or expense resulting from
gross negligence, willful misconduct or bad faith on the part of the Escrow
Agent. The obligation of the Escrow Agent to deliver the Escrow Shares to
either the Stockholders or the Company shall be subject to the prior
satisfaction upon demand from the Escrow Agent, of the Company's obligations to
so save harmless, indemnify and defend the Escrow Agent and to reimburse the
Escrow Agent or otherwise pay its fees and expenses hereunder.
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(f) The Escrow Agent shall not be required to defend any legal
proceeding which may be instituted against it in respect of the subject matter
of this Agreement unless requested to do so by the Stockholders and indemnified
to the Escrow Agent's satisfaction against the cost and expense of such defense
by the party requesting such defense. If any such legal proceeding is instituted
against it, the Escrow Agent agrees promptly to give notice of such proceeding
to the Stockholders and the Company. The Escrow Agent shall not be required to
institute legal proceedings of any kind.
(g) The Escrow Agent shall not, by act, delay, omission or otherwise,
be deemed to have waived any right or remedy it may have either under this
Agreement or generally, unless such waiver be in writing, and no waiver shall be
valid unless it is in writing, signed by the Escrow Agent, and only to the
extent expressly therein set forth. A waiver by the Escrow Agent under the term
of this Agreement shall not be construed as a bar to, or waiver of, the same or
any other such right or remedy which it would otherwise have on any other
occasion.
(h) The Escrow Agent may resign as such hereunder by giving 30 days
written notice thereof to the Stockholders and the Company. Within 20 days
after receipt of such notice, the Stockholders and the Company shall furnish to
the Escrow Agent written instructions for the release of the Escrow Shares and
any related Escrow Property (if such shares and property, if any, have not yet
been released pursuant to Paragraph 4 hereof) to a substitute Escrow Agent which
(whether designated by written instructions from the Stockholders and the
Company jointly or in the absence thereof by instructions from a court of
competent jurisdiction to the Escrow Agent) shall be a bank or trust company
organized and doing business under the laws of the United States or any state
thereof. Such substitute Escrow Agent shall thereafter hold any Escrow Shares
and any related Escrow Property received by it pursuant to the terms of this
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Agreement and otherwise act hereunder as if it were the Escrow Agent originally
named herein. The Escrow Agent's duties and responsibilities hereunder shall
terminate upon the release of all shares then held in escrow according to such
written instruction or upon such delivery as herein provided. This Agreement
shall not otherwise be assignable by the Escrow Agent without the prior written
consent of the Company.
7. The Stockholders shall have the sole power to vote the Escrow
Shares and any securities deposited in escrow under this Agreement while they
are being held pursuant to this Agreement.
8. (a) Each of the Stockholders agrees that during the term of this
Agreement he will not sell, transfer, hypothecate, negotiate, pledge, assign,
encumber or otherwise dispose of any or all of the Escrow Shares set forth
opposite his name on Exhibit A hereto, unless and until the Company shall have
given the notice as provided in Paragraph 5. This restriction shall not be
applicable to transfers upon death, by operation of law, to family members of
the Stockholders or to any trust for the benefit of the Stockholders, provided
that such transferees agree to be bound by the provisions of this Agreement.
(b) The Stockholders will take any action necessary or
appropriate, including the execution of any further documents or agreements, in
order to effectuate the transfer of the Escrow Shares to the Company if required
pursuant to the provisions of this Agreement.
9. Each of the certificates representing the Escrow Shares will bear
legends to the following effect, as well as any other legends required by
applicable law:
(a) "The sale, transfer, hypothecation, negotiation, pledge,
assignment, encumbrance or other disposition of the shares
evidenced by this certificate are restricted by and are subject
to all of the terms,
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conditions and provisions of a certain Escrow Agreement entered
into among Commonwealth Associates, THINK New Ideas, Inc. and its
Stockholders, dated as of _________, 199_, a copy of which may be
obtained from the Secretary of THINK New Ideas, Inc. No transfer,
sale or other disposition of these shares may be made unless
specific conditions of such agreement are satisfied.
(b) "The shares evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended. No transfer, sale or
other disposition of these shares may be made unless a
registration statement with respect to these shares has become
effective under said act, or the Company is furnished with an
opinion of counsel satisfactory in form and substance to it that
such registration is not required."
Upon execution of this Agreement, the Company shall direct the
transfer agent for the Company to place stop transfer orders with respect to the
Escrow Shares and to maintain such orders in effect until the transfer agent and
the Underwriter shall have received written notice from the Company as provided
in Paragraph 5.
10. Each notice, instruction or other certificate required or
permitted by the terms hereof shall be in writing and shall be communicated by
personal delivery, fax or registered or certified mail, return receipt
requested, to the parties hereto at the addresses set forth below, or at such
other address as any of them may designate by notice to each of the others:
(i) If to the Company, to:
THINK New Ideas, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(ii) If to the Stockholders to their respective addresses as set
forth on Exhibit A hereto.
(iii) If to the Escrow Agent, to:
Continental Stock Transfer & Trust Company
Two Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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(iv) If to the Underwriter, to:
Commonwealth Associates
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
All notices, instructions or certificates given hereunder to the Escrow Agent
shall be effective upon receipt by the Escrow Agent. All notices given
hereunder by the Escrow Agent shall be effective and deemed received upon
personal delivery or transmission by fax or, if mailed, five (5) calendar days
after mailing by the Escrow Agent.
A copy of all communications sent to the Company, the Stockholders or
the Escrow Agent shall be sent by ordinary mail to DeMartino, Finkelstein, Xxxxx
& Xxxxx, 0000 X. Xxxxxx, X.X. Xxxxxxxxxx, X.X. 00000, Attention: Xxxxx
XxXxxxxxx. A copy of all communications sent to the Underwriter shall be sent
by ordinary mail to Bachner, Tally, Xxxxxxx & Xxxxxx LLP, 000 Xxxxxxx Xxxxxx,
Xxx Xxxx, XX 00000, Attention: Xxxxxxx Xxxxxx, Esq.
11. Except as set forth in paragraph 12 hereof, this Agreement may
not be modified, altered or amended in any material respect or cancelled or
terminated except with the prior consent of the holders of all of the
outstanding shares of Common Stock of the Company.
12. In the event that the Public Offering is not consummated within
twenty-five (25) days of the Effective Date of the Registration Statement, this
Agreement shall terminate and be of no further force and effect and the Escrow
Agent, upon written notice from both the Company and the Underwriter in
accordance with paragraph 10 hereof of such termination, will return the Escrow
Shares and any Escrow Property in respect thereof to the Stockholders.
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13. This Agreement shall be governed by and construed in accordance
with the laws of New York and shall be binding upon and inure to the benefit of
all parties hereto and their respective successors in interest and assigns.
14. This Agreement may be executed in several counterparts, which
taken together shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers on the day and year first above
written.
THINK New Ideas, Inc.
By: ______________________
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By: __________________________
STOCKHOLDERS:
_________________________________
__________________________________
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EXHIBIT A
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STOCKHOLDERS' LIST
Name and Address Stock
of Stockholder (1) Certificate No. Number of Escrow Shares
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