Exhibit 8
INDEMNIFICATION ESCROW AGREEMENT
THIS INDEMNIFICATION ESCROW AGREEMENT (this "Escrow Agreement") is made
and entered into as of May 3, 2000 by and among COVENTRY PARTNERS FAMILY LIMITED
PARTNERSHIP, a Delaware limited partnership ("Escrower"), HA-LO INDUSTRIES,
INC., an Illinois corporation ("Escrowee"), and AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, as escrow agent ("Escrow Agent").
WHEREAS, in order to induce Escrowee to enter into that certain Agreement
and Plan of Merger and Plan of Reorganization (the "Agreement"), dated January
17, 2000, as amended, among Escrowee and others pertaining to the merger of
Xxxxxxxxx.xxx, Inc., a Delaware corporation f/k/a XxxXxxxx.xxx, Inc. ("SBC"),
with and into HA-LO Industries, Inc., a Delaware corporation, and to secure
Escrowee's rights of indemnification, pursuant to the Agreement (collectively,
the "Indemnification Obligations"), Escrower has agreed to deposit into escrow
with the Escrow Agent those shares of unregistered common stock and/or Series A
Convertible Preferred Stock of Escrowee, owned by Escrower, as more fully
described on Schedule A attached hereto and incorporated herein (collectively,
the "Shares");
NOW, THEREFORE, in consideration of the foregoing, and the mutual
agreements of the parties hereto, Escrower, Escrowee and Escrow Agent hereby
agree as follows:
1. Definitions. All capitalized terms used but not otherwise defined
herein shall have the meanings specified in the Agreement.
2. The Collateral. For the consideration hereinabove set forth and to
secure the payment and performance of all Indemnification Obligations, Escrower
hereby deposits, and agrees to deposit in the future, into the escrow created
hereby the following:
a. The Shares, with stock powers attached thereto, all duly endorsed
in blank, herewith delivered to Escrow Agent;
b. Any and all other securities deposited with Escrow Agent from
time to time in accordance with the provisions hereof (such securities,
together with the Shares, the "Securities"), each of which shall be
deposited with stock powers attached thereto, all duly endorsed in blank;
and
c. Any and all proceeds received by Escrower (or Escrow Agent on
Escrower's behalf) upon the sale or other disposition of any of the
Securities; provided, however, that none of the Securities may be sold or
otherwise disposed of without the prior written consent of Escrowee,
except that, without such consent, Escrower may exercise any right
Escrower may have in the Certificate of Designation Establishing Series of
Series A Convertible Preferred Stock
of HA-LO Industries, Inc. to require Escrowee to redeem all or any part of
the Series A Convertible Preferred Stock comprising a part of the
Securities.
The Escrow Agent will hold the Collateral in accordance with the terms of this
Escrow Agreement.
Escrower shall direct investment of any cash held by the Escrow Agent,
provided that investment shall be limited to institutional money market
accounts, governmental bonds and such other securities as are acceptable to
Escrowee, in Escrowee's reasonable discretion. Unless and until the Escrower
shall give other instructions to the Escrow Agent, monies held hereunder shall
be invested in One Group Prime Money Market Fund-Class-A. The Securities and any
interest, dividends and distributions thereon are hereinafter referred to,
collectively, as the "Collateral." Prior to the termination of this Escrow
Agreement, the (i) holding, (ii) cancellation, (iii) release from the provisions
of this Escrow Agreement (in part or in whole), and (iv) any other actions with
respect to the Collateral shall be governed by the applicable provisions of the
Agreement and this Escrow Agreement.
3. Representations and Warranties.
a. Escrower hereby represents and warrants to Escrowee that:
(i) The execution, delivery and performance by Escrower of
this Escrow Agreement will not violate any provision of law, any
order of any court or other agency of government, or any agreement
or other instrument to which Escrower is a party or by which
Escrower is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time, or both) a default
under any such agreement or other instrument, or result in the
creation or imposition of any lien, charge, security interest,
claim, or encumbrance of any nature whatsoever ("Lien") upon any of
Escrower's property or assets, except as contemplated by the
provisions of this Escrow Agreement and the Agreement;
(ii) This Escrow Agreement constitutes a legal, valid and
binding obligation of Escrower; and
(iii) As to such of the Collateral deposited with Escrow Agent
on the date hereof or hereafter: (A) the Escrower is the sole legal
and beneficial owner of such Collateral; (B) the stock transfer
forms attached to each of the certificates representing any of the
Securities have been duly executed and delivered by the Escrower to
Escrow Agent; and (C) none of such
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Collateral is subject to any Lien, other than the interest granted
to Escrowee hereby and in the Agreement.
b. Escrowee hereby represents and warrants to the Escrower that:
(i) The execution, delivery and performance by Escrowee of
this Escrow Agreement will not violate any provision of law, any
order of any court or other agency of government, or any agreement
or other instrument to which Escrowee is a party or by which
Escrowee is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time, or both) a default
under any such agreement or other instrument; and
(ii) This Escrow Agreement constitutes a legal, valid and
binding obligation of Escrowee.
4. Stock Splits, Stock Dividends, Etc.
a. In the event that Escrower, by virtue of Escrower's ownership of
the Collateral, now is, or hereafter becomes, entitled (without additional
consideration) to other or additional securities as the result of any
corporate reorganization, merger or consolidation, stock split or
combination, stock dividend or otherwise, Escrower shall promptly:
(i) deliver to Escrow Agent the certificates evidencing
Escrower's ownership thereof, and agrees if such certificates are
delivered to Escrower, to take possession thereof in trust for
Escrowee and forthwith deliver the same to Escrow Agent;
(ii) deliver to Escrow Agent a stock transfer form with
respect to such securities, executed in blank by Escrower;
(iii) deliver to Escrowee a certificate, executed by Escrower
and dated the date of such delivery, as to the truth and correctness
on such date of the representations and warranties set forth in
Section 3(a)(iii) hereof; and
(iv) deliver to Escrowee such other certificates, forms and
other instruments as Escrowee may reasonably request in connection
with such delivery.
b. Escrower agrees that such securities shall constitute a portion
of the Collateral and be subject to this
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Escrow Agreement in the same manner and to the extent as the Securities
deposited into escrow on the date hereof.
5. Collateral Cancellations and Releases. Except as otherwise provided in
Section 8 hereof, Escrow Agent shall hold and release the Collateral to the
Escrower, free of the escrow created hereby, as follows:
a. Within five (5) business days following the twelve (12) month
anniversary of the Closing Date, Escrow Agent shall automatically, without
further direction, release from escrow and deliver to Escrower one hundred
percent (100%) of the Collateral not previously released, less that number
of shares of the Securities or other investment which are then being held
by the Escrow Agent in respect of any previously asserted claims by
Escrowee or the Surviving Corporation under the Agreement and this Escrow
Agreement which have not been resolved. The Securities which are released
by the Escrow Agent to Escrower shall be registered in the name of and/or
payable to, as the case may be, Escrower.
b. Notwithstanding clause (a) above, any and all cash dividends and
cash interest received by the Escrow Agent during any calendar quarter, if
any, shall be released from escrow and delivered to Escrower promptly
after the end of such quarter or, if applicable, the termination of this
Escrow Agreement.
c. If, for any reason, Escrow Agent fails to release the Collateral,
or any part thereof, as provided in this Escrow Agreement and the
Agreement, Escrower and Escrowee agree to provide joint directions to
Escrow Agent to release the Collateral as provided in this Escrow
Agreement and in the Agreement.
d. Upon release of the Collateral pursuant to this Section 5, the
Collateral shall no longer be subject to the escrow created hereby.
6. Voting Power. Escrower shall be entitled to exercise all voting powers
pertaining to their respective portions of the Collateral for any purpose not
inconsistent with, or in violation of, the provisions of the Agreement or this
Escrow Agreement, in all matters, to the extent such Collateral has not been
released to Escrowee pursuant to this Escrow Agreement.
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7. Escrow Agent.
a. Escrowee shall pay the Escrow Agent reasonable compensation for
its services hereunder, in accordance with Schedule B, and shall reimburse
the Escrow Agent for all reasonable expenses, disbursements and advances
incurred or made by the Escrow Agent in performance of its duties
hereunder. Notwithstanding the foregoing, in the event of any dispute
hereunder between Escrower and Escrowee, the non-prevailing party in any
such dispute shall pay the prevailing party's and the Escrow Agent's
reasonable expenses (including without limitation reasonable attorney's
fees and court costs) incurred in such dispute.
b. The Escrow Agent may resign and be discharged from its duties
hereunder at any time by giving notice of such resignation to Escrowee and
Escrower specifying a date when such resignation shall take effect. Upon
such notice, a successor Escrow Agent shall be appointed with the mutual
consent of Escrowee and Escrower, such successor Escrow Agent to become
Escrow Agent hereunder upon the receipt of the Collateral. If Escrowee and
Escrower are unable to agree upon a successor Escrow Agent within thirty
(30) days after such notice, the Escrow Agent shall be entitled to appoint
its successor or to petition a court of competent jurisdiction to appoint
a successor. The Escrow Agent shall continue to act until its successor
accepts the escrow and receives the Collateral. Escrowee and Escrower
shall have the right at any time upon mutual consent to substitute a new
Escrow Agent by giving notice thereof to the Escrow Agent then acting.
c. The Escrow Agent undertakes to perform such duties as are
specifically set forth herein and may conclusively rely, and shall be
protected in acting or refraining from acting, on any written notice,
instrument or signature believed by it to be genuine and to have been
signed or presented by the proper party or parties duly authorized to do
so. The Escrow Agent shall have no responsibility for the contents of any
writing contemplated herein and may rely without any liability upon the
contents thereof.
d. The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized hereby or
within the rights or powers conferred upon it hereunder, nor for action
taken or omitted by it in good faith, and in accordance with advice of
counsel (which counsel may be of the Escrow Agent's own choosing), and
shall not be liable for any mistake of fact or error of judgment or for
any acts or omissions of any kind unless caused by willful misconduct or
gross negligence.
e. Each of Escrower and Escrowee agrees to indemnify
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the Escrow Agent and hold it harmless against any and all liabilities
incurred by it hereunder as a consequence of such party's wrongful action,
and Escrower and Escrowee agree jointly to indemnify the Escrow Agent and
hold it harmless against any and all liabilities incurred by it hereunder
that are not a consequence of Escrower's or Escrowee's wrongful action,
except in either case for liabilities incurred by the Escrow Agent
resulting from its own willful misconduct or gross negligence. The
obligations of the Escrower and the Escrowee under this clause (e) shall
survive the termination of this Agreement and the resignation or removal
of the Escrow Agent.
f. No assignment of the interest of any of the parties hereto shall
be binding upon the Escrow Agent unless and until written evidence of such
assignment in form satisfactory to the Escrow Agent shall be filed with
and accepted by the Escrow Agent.
g. In the event that any escrow property shall be attached,
garnished, or levied upon by any court order, or the delivery thereof
shall be stayed or enjoined by an order of a court, or any order, judgment
or decree shall be made or entered by any court order affecting the
property deposited under this Escrow Agreement, or any part thereof, the
Escrow Agent is hereby expressly authorized, in its sole discretion, to
obey and comply with all writs, orders or decrees so entered or issued,
which it is advised by legal counsel of its own choosing is binding upon
it, whether with or without jurisdiction, and in the event that the Escrow
Agent obeys or complies with any such writ, order or decree, it shall not
be liable to any of the parties hereto or to any other person, firm or
corporation, by reason of such compliance notwithstanding such writ, order
or decree be subsequently reversed, modified, annulled, set aside or
vacated.
h. If the Escrow Agent becomes involved in litigation on account of
this Escrow Agreement, it shall have the right to retain counsel. The
parties hereto (other than the Escrow Agent), jointly, agree to pay to the
Escrow Agent on demand its reasonable attorney's fees, disbursements and
expenses in connection with any such litigation.
i. In the event that conflicting demands are made upon the Escrow
Agent for any situation not addressed in this Escrow Agreement, the Escrow
Agent may withhold performance of the terms of this Escrow Agreement until
such time as said conflicting demands shall have been withdrawn or the
rights of the respective parties shall have been settled by court
adjudication, arbitration, joint order or otherwise.
j. Any corporation or association into which the Escrow Agent may be
converted or merged, or with which it may
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be consolidated, or to which it may sell or transfer its corporate trust
business and assets as a whole or substantially as a whole, or any
corporation or association resulting from any such conversion, sale,
merger, consolidation or transfer to which it is a party, shall be and
become the successor Escrow Agent hereunder and vested with all of the
title to the whole property or trust estate and all of the trusts, powers,
immunities, privileges, protections and all other matters as was its
predecessor, without the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
8. Delivery of Collateral to Escrowee. From time to time, Escrowee may, to
the extent Escrowee believes in good faith that it is entitled to
indemnification under Article IX of the Agreement, deliver to Escrow Agent and
Escrower a certification signed by a duly authorized officer of Escrowee (i)
certifying that, pursuant to the terms of the Agreement, Escrowee is entitled to
receive a specified portion of the Collateral (e.g., a number of shares) as is
identified in any such certificate, and that a copy of the certification has
been deliver to Escrower in the manner set forth in Section 10(e) hereof, (ii)
describing in reasonable detail the basis of the claim and the amount and
calculation of Damages arising from such claim, and (iii) acknowledging
Escrower's responsibility only for its "Percentage Interest" (as set forth on
Schedule A) of such Damages (a "Default Certification"). In the event that
Escrow Agent does not receive a notice from Escrower, within twenty (20)
calendar days of receipt of such a Default Certification, disputing Escrowee's
right to indemnification, then Escrow Agent shall promptly deliver to Escrowee
the portion of the Collateral identified in such Default Certification;
provided, however, that to the extent a partial release of the Collateral can
only be effected through release of shares represented by a stock or other
ownership certificate representing shares in addition to those released, stock
or other ownership certificates representing as large a portion of the entire
partial release as possible will be released to the Escrowee or Escrower, as
applicable, and a certificate in excess of the balance will be delivered to the
Escrowee (in which event (a) Escrowee shall cause a new certificate in the
amount of such balance to be promptly issued and delivered to Escrowee or
Escrower, as applicable, (b) Escrowee shall cause new certificates to be issued
in the amount of any such excess and promptly deposited with Escrow Agent
hereunder, (c) Escrower shall execute stock powers endorsed in blank and deliver
the same to Escrow Agent to be attached to such new certificates, and (d) such
new certificates, together with such stock powers, shall constitute a part of
the Collateral and be subject to this Escrow Agreement in the same manner and to
the extent as the Securities deposited into escrow on the date hereof). Any
portion of the Collateral as is not the subject of any particular Default
Certification delivered
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by Escrowee pursuant to this Section 8 shall continue to be held by Escrow Agent
in accordance with the terms hereof. In the event that Escrow Agent receives a
notice from Escrower, within twenty (20) calendar days of receipt of such a
Default Certification, disputing Escrowee's right to indemnification, then
Escrow Agent shall continue to hold the disputed portion of the Collateral
identified in such Default Certification, shall release such non-disputed
portion to Escrowee (in the manner stated earlier in this Section 8) and shall
release such disputed portion upon receiving either a joint written direction
signed by Escrower and Escrowee or as directed by court order resolving the
dispute in accordance with the terms of the Agreement and this Escrow Agreement.
The Escrow Agent shall have no liability with respect to the issuance of the new
certificates evidencing excess shares after a partial distribution, which shall
be the sole responsibility of the Escrowee and its transfer agent, if any. The
Escrow Agent's sole responsibility shall be to deliver the certificates on
deposit with it hereunder as directed by the Escrowee and/or Escrower, as
applicable. If Escrowee fails to deliver a new certificate to Escrower for the
balance of any partial distribution within 10 days of release of the certificate
to Escrowee, then upon notice from Escrower the Escrow Agent shall promptly
deliver to Escrower the smallest certificate in excess of the balance then held
by the Escrow Agent. Escrower shall be obligated to redeposit the shares in
excess of those to be otherwise released in the same manner as Escrowee was so
obligated and upon release to Escrower of such certificate Escrowee may
redeposit the certificate released to it with respect to the balance.
Notwithstanding anything to the contrary contained herein, Escrowee shall
not be entitled to receive from the Collateral, nor is Escrower obligated
hereunder for, more than Escrower's "Percentage Interest" of the Damages with
respect to any claim. Escrower shall not have any liability with respect to
aggregate Damages in excess of the Collateral.
9. Termination of Escrow Agreement. This Escrow Agreement shall be
terminated when no Collateral remains subject hereto. In addition, upon proper
release of any Collateral to Escrower or Escrowee in accordance with the terms
of this Escrow Agreement, such released Collateral shall no longer be subject to
this Escrow Agreement.
10. Tax Consequences.
Notwithstanding anything to the contrary contained in this Escrow
Agreement, all income tax consequences with respect to this Escrow Agreement and
escrow and any transactions in connection therewith, including, without
limitation, sales, purchases, forfeitures and releases, shall be borne out of,
and by, the Collateral itself and Escrower shall not suffer any adverse tax
consequences as a result thereof; and to the extent any such tax consequences
are nonetheless payable by Escrower, there shall be
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released to Escrower, if available and upon request, sufficient Collateral to
satisfy such tax consequence in such amount as is certified in good faith by
Escrower to Escrowee and the Escrow Agent. Under no circumstances shall Escrowee
have any liability or responsibility for taxes arising out of the matters
covered in the immediately preceding sentence, except as may otherwise be
required by law. The Escrow Agent shall be under no obligation to return any
interest or earnings on the Escrow Funds to Escrower until it has received a
Form W-9 from such party, regardless of whether such party is exempt from
reporting or withholding requirements under the Internal Revenue Code of 1986,
as amended. As and to the extent required by law, the Escrow Agent shall report
to the Internal Revenue Service, as of each calendar year-end, all income earned
from the investment of any sum held in the Escrow Funds. The Escrow Agent shall
be responsible for the preparation and/or filing of any tax return with respect
to any income earned by the Escrow Funds (Form 1099-Int). The Escrow Agent shall
have no obligation to pay any taxes or estimated taxes.
11. Miscellaneous.
a. Should Escrowee at any time assign any of its rights under this
Escrow Agreement, the assignee shall thereupon have all of the rights of
Escrowee hereunder.
b. Each and every right, remedy and power granted to a party
hereunder shall be cumulative and in addition to any other right, remedy
or power herein specifically granted or now or hereafter existing in
equity, at law, by virtue of statute or otherwise and may be exercised by
such party, from time to time, concurrently or independently and as often
and in such order as such party may deem expedient, subject to the
limitations set forth in the Agreement. Any failure or delay on the part
of such party in exercising any such right, remedy or power, or
abandonment or discontinuance of steps to enforce the same, shall not
operate as a waiver thereof or affect such party's right thereafter to
exercise the same, and any single or partial exercise of any such right,
remedy or power shall not preclude any other or further exercise thereof
or the exercise of any other right, remedy or power.
Notwithstanding anything to the contrary contained in this Escrow
Agreement, as between Escrower and Escrowee, the escrow created hereby
will be treated as a pledge such that Escrowee shall be entitled to all
the rights, remedies and powers as if a pledgee under applicable law in
addition to any other rights, remedies and powers Escrowee may have.
c. Any modification or waiver of any provision of this Escrow
Agreement, or any consent to any departure by Escrowee or Escrower
therefrom, shall not be effective in any event unless the same is in
writing and signed by Xxxxxx
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Xxxxx, Xxxxxxxx and Escrower, and then such modification, waiver or
consent shall be effective only in the specific instance and for the
specific purpose given. Any notice to or demand on Escrower or Escrowee in
any event not specifically required of the other party hereunder shall not
entitle the receiving party to any other or further notice or demand in
the same, similar or other circumstances unless specifically required
hereunder.
d. Each party agrees that at any time, and from time to time, after
the execution and delivery of this Escrow Agreement, it will, upon the
request of the other party, execute and deliver such further documents and
do such further acts and things as the other party may reasonably request
in order to fully effect the purpose of this Escrow Agreement.
e. Any notice, request, demand, consent, approval, certification or
other communication provided or permitted hereunder shall be in writing
and be given by personal delivery or courier service, addressed to the
party for whom it is intended, as follows:
If to Escrowee:
HA-LO Industries, Inc.
0000 Xxxx Xxxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxx Xxxxxx
Facsimile number: 847/647-4970
with a copy to:
Xxxx, Gerber & Xxxxxxxxx
Two X. XxXxxxx Street
Suite 2100
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile number: 312/269-1747
If to Escrower:
Coventry Partners Family Limited Partnership
c/o Xxxx Xxxxxxxxx
Xxxxxxxxx.xxx, Inc.
0000 X. Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Facsimile number: 773/262-6694
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with a copy to:
Altheimer & Xxxx
00 X. Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxx
Facsimile number: 312/715-4800
If to Escrow Agent:
American National Bank and Trust Company of Chicago
Corporate Trust Department
000 Xxxxx XxXxxxx Xxxxxx
Mail Code IL1-1250
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxx
Facsimile Number: 312/661-6491
provided, however, that each party may change its address for purposes of
receipt of any such communication by giving five (5) days' written notice
of such change to the other party in the manner above prescribed. Notices
shall be deemed to have been given when received.
f. This Escrow Agreement shall be deemed to have been made under,
and shall be governed by, the laws of the State of Illinois in all
respects, including matters of construction, validity and performance.
g. If any provision of this Escrow Agreement is prohibited by, or is
unlawful or unenforceable under, any applicable law of any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the
extent of such prohibition without invalidating the remaining provisions
hereof, provided, however, that any such prohibition in any jurisdiction
shall not invalidate such provision in any other jurisdiction; and
provided, further, that where the provisions of any such applicable law
may be waived, they hereby are waived by Escrower to the full extent
permitted by law to the end that this Escrow Agreement shall be deemed to
be valid and binding in accordance with its terms.
h. This Escrow Agreement shall inure to the benefit of the
successors and permitted assigns of Escrowee and Escrower and shall be
binding upon the heirs, executors, administrators, legal representatives,
successors and assigns of Escrower.
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IN WITNESS WHEREOF, Escrower has executed and the Escrowee and Escrow
Agent have caused to be executed this Escrow Agreement as of the date first
above written.
ESCROW AGENT: ESCROWEE:
AMERICAN NATIONAL BANK AND HA-LO INDUSTRIES, INC.
TRUST COMPANY OF CHICAGO,
AS ESCROW AGENT
By: /s/ Xxxxx X. Xxxx By: /s/ Xxxx Xxxxxx
------------------------- ------------------------------
Name: Xxxxx X. Xxxx Name: Xxxx Xxxxxx
-------------------- -------------------------
Title: Authorized Officer Title: Chief Executive Officer
------------------- ------------------------
ESCROWER:
By: Coventry Partners Family L.P.,
a Delaware limited
partnership
By: Coventry Associates, Inc.,
a Delaware corporation,
its general partner
By: /s/ Xxxx Xxxxxxxxx
------------------------------
Xxxx Xxxxxxxxx
President
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SCHEDULE A
SHARES
====================================================================================================================
Common Stock No. of Preferred Stock No. of Shares
Certificate Shares of Certificate of Preferred Percentage
Escrower No. Common Stock No. Stock Interest
-------- ----------- ------------ --------------- ------------- ----------
Coventry Partners 6077 250,000
Family Limited 6078 250,000
Partnership 6079 216,750
--------------- ------------- ----------
100%
====================================================================================================================
SCHEDULE B
COMPENSATION
Annual Fee $3,500
Any out-of-pocket expenses, or extraordinary fees or expenses such as
attorney fees or messenger costs, are additional and are not included in the
above schedule.
The annual fee is billed in advance and payable prior to that year's
service.
