STOCK ESCROW AGREEMENT
The parties to this Agreement are PROFORMANCE RESEARCH ORGANIZATION, INC., a
Delaware corporation (the "Company"); _______________________________ (the
"Escrow Agent"); and certain Security Holders of the Company whose names and
Security Holdings are listed on Exhibit "A" attached hereto and made a part
hereof (the "Security Holders").
1. RECITALS. The Security Holders are the owners of certain outstanding
shares of the Company's outstanding securities set forth in Exhibit "A".
The Company desires to make a public offering (the "Offering") of up to
1,000,000 shares of its Common Stock pursuant to an Application to Register
Securities (the "Application") filed with the Securities Division of the
Arizona Corporation Commission (the "Commission"). As a condition to the
effective registration of the Offering, the Commission has required that
the Security Holders provide for the escrow of certain of their respective
securities. The purpose of this Agreement is to provide for such an
escrow.
2. PROPERTY SUBJECT TO ESCROW
2.1 SECURITIES. The shares of the Common Stock, $.0001 par value, and
other securities of the Company which are subject hereto, are those
listed on Exhibit "A", attached hereto, respectively owned and held by
the Security Holders identified thereon.
2.2 OTHER PROPERTY. In addition to the securities, any stock or cash
dividend paid thereon during the term of this Agreement and any stock
issued through, or by reason of, any stock split, exchange of shares,
merger, consolidation, recapitalization, reorganization, or similar
business combination or subdivision with respect to the shares or in
substitution for or in lieu of any securities subject to this
Agreement, shall be paid to the Escrow Agent forthwith and become
subject to this AGREEMENT.
3. TERMINATION
3.1 TERM. The term of this AGREEMENT and of the escrow provided herein
(the "Escrow") shall commence on the date that the offering is
declared effective by the Commission, provided that the certificates
evidencing the securities are deposited with the Escrow Agent to be
held pursuant hereto, for a period up to four years, unless released
earlier in accordance with the terms of this Agreement.
3.2 PUBLIC TRADING PRICE. If for ninety (90) consecutive trading days at
any time during the term of this Agreement commencing twelve (12)
months after the ate of the commencement of the term of the escrow,
the Company's shares have traded in a public market at a price of not
less than ($5.50) 110% of the initial offering price per share, then
the escrow shall terminate, and all of the securities shall be
released to the person, persons, or entities then entitled thereto.
3.3 EARNINGS DURING TWO CONSECUTIVE FISCAL YEARS. If, at the end of any
two consecutive fiscal years within the escrow period the Company has
had earnings per share equal to not less than ($.25) 5% of the initial
public offering price per common share for each of such two years,
then the escrow shall terminate and all of the securities all be
released and delivered to the person, persons, or entities entitled
thereto.
3.4 PHASED RELEASE OF ESCROWED SECURITIES. If there has not been a
release of escrowed securities pursuant to sections 3.2 or 3.3 above
by the end of the second year of the escrow, the Commission shall
release one eighth of the escrowed securities over each of the next
eight calendar quarters.
3.5 RIGHTS OF PARTICIPANTS. It is agreed that:
3.5.1 The securities held pursuant to this Agreement shall not
have any right, title, interest, or participation in the
assets of the Company in the event of dissolution,
liquidation, merger, consolidation, reorganization, sale of
assets, exchange or any transaction or proceeding which
contemplates or results in the distribution of the assets of
the Company, until the holders of all shares not escrowed
have been paid, or have had irrevocably set aside for them
an amount equal to one hundred (100%) of the purchase price
per share in the public offering, adjusted for stock splits
and stock dividends. Subsequently, the escrowed securities
shall be entitled to receive an amount per share equal to
one hundred percent (100%) paid to or set aside for the
non-escrowed securities and thereafter, all shares shall
participate on a pro rata basis. A merger, consolidation,
or reorganization may proceed on terms and conditions
different than those stated above if a majority of shares
held by persons other than promoters approve the terms and
conditions by vote at a meeting held for such purpose.
3.5.2 The securities held pursuant to this Agreement shall
continue to have all voting rights to which those securities
are entitled. Any dividends paid on such securities shall
be paid to the Escrow Agent and held pursuant to the terms
of this Agreement. The Escrow Agent shall treat such
dividends as assets of the corporation available for
distribution under the provisions of Section 3.5.1 above.
The Escrow AGENT shall place the dividends in an
interest-bearing account. The dividends and interest earned
thereon will be disbursed in proportion to the number of
securities released from the escrow. All certificates
representing stock dividends and shares resulting from stock
splits from escrowed securities shall be delivered to the
Escrow Agent to be held pursuant to this Agreement.
Stock Escrow Agreement page 2
3.6 RELEASE OF SECURITIES IN ESCROW. Petitions requesting release of
securities in escrow will be considered if:
3.6.1 The terms and conditions of Section 3.2 have been
satisfactorily demonstrated to have been met or;
3.6.2 The terms and conditions of Section 3.3 have been satisfied
and the petition is accompanied by financial statements
prepared in accordance with generally accepted accounting
principles applied on a consistent basis and reported upon
by an independent certified public accountant.
3.6.3 Petitions may be submitted pursuant to Section 3.4.
3.6.4 The requirements of 3.6.1, 3.6.2, and 3.6.3 above do not
apply if there is an order of a court of competent
jurisdiction which orders release of such securities.
4. FURTHER AGREEMENTS
4.1 BY THE SECURITY HOLDERS. Each of the Security Holders agree, jointly
and severally, that:
4.1.1 Upon the execution and delivery of this Agreement, and prior
to the effective date of the Registration Statement, he/she
or it will deposit a certificate or certificates evidencing
the securities owned by him/her or it with the Escrow Agent.
4.1.2 The Escrow Agent is hereby granted all authority necessary
to permit the Escrow AGENT to act in conformance with this
Agreement.
4.1.3 During the term of the Escrow, the securities in escrow may
be transferred by will or pursuant to the laws of descent
and distribution or through appropriate legal proceedings
but in all cases the securities shall remain in escrow and
subject to the terms of this Agreement. In addition, upon
the death of a promoter, such promoter's escrowed securities
may be hypothecated, subject to all of the terms of this
Agreement, to the extent necessary to pay the expenses of
the estate. The securities in escrow may be transferred by
gift to family members, provided the securities remain
subject to the terms of this Agreement. Securities in
escrow may not be pledged to secure a debt.
4.2 BY THE COMPANY. The Company agrees that:
Stock Escrow Agreement page 3
4.2.1 No attempted sale or other transfer of any of the securities
shall be recognized by the Company during the term hereof.
4.2.2 Issuance of any additional shares, options, warrants, or
other evidence or participation in the Company to any of the
Security Holders will be at a price reasonably related to
fair market value.
4.2.3 No changes in the Company's method of accounting shall be
made without the prior approval of the Commission.
4.2.4 A summary of the terms of the escrow shall be included in
the offering documents and in subsequent annual reports to
Security Holders.
4.2.5 The Escrow AGENT must be satisfactory to the Commission and
the Escrow AGENT may not be affiliated with any promoter.
4.3 BY THE ESCROW AGENT. The Escrow AGENT agrees that:
4.3.1 It shall accept the securities delivered by the Security
Holders or delivered or contemplated hereof for deposit
pursuant to the terms of this Agreement.
4.3.2 It shall issue to each Security Holder a safekeeping receipt
or other similar instrument reflecting the name and address
of the Security Holder, the number of securities deposited
and the certificate number(s).
4.3.3 It will hold the securities pursuant to the terms of this
Agreement.
5. ADMINISTRATIVE PROVISIONS
5.1 AMENDMENT. This Escrow Agreement shall not be terminated other than
as provided herein and shall not be modified or amended without the
prior approval of the Commission.
5.2 PROTECTION OF ESCROW AGENT. The Escrow AGENT shall not be held to
take notice of any terms of any agreement or any rights with respect
to the securities unless expressly set forth in this Agreement; and
the Escrow Agent shall be relieved of all liability under this
Agreement upon the delivery of the securities to the Security Holders
after the Agreement has been properly terminated.
5.3 GENERAL PROVISIONS. Notwithstanding anything to the contrary
contained herein, for purposes of this Agreement, the definitional
sections contained in R14-4-105(A) shall govern.
Stock Escrow Agreement page 4
The Company, the Security Holders, and the Escrow Agent have entered into this
Agreement on this _____ day of February, 1999 in multiple counterparts, each of
which shall be considered an original.
"SECURITY HOLDERS"
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"COMPANY"
PROFORMANCE RESEARCH ORGANIZATION, INC.
By:
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Xxxxxxx X. Xxxxx, President
ATTEST:
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Its Secretary
"ESCROW AGENT"
By:
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Its:
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Stock Escrow Agreement page 5
