EXHIBIT 4.(e)
RULE 419 ESCROW AGREEMENT
Letter of Escrow Instructions
Frontier Bank
Corporate Trust Group
000 Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Re: Broad Street Investment III, Inc. - Rule 419 escrow,
Frontier Bank Escrow No. ___________
This Letter of Escrow Instructions to Frontier Bank, hereinafter called
Escrow Agent, shall immediately and automatically become operative and effective
upon the commencement of a public distribution of certain securities of Broad
Street Investment III, Inc. (the "Company") which is described more fully in the
Company's Form SB-2 Registration Statement under the Securities Act of 1933
(Registration No. 333-_____).
The Company will deliver the papers, stock certificates, money and other
property hereinafter described to the Escrow Agent. All such papers, stock
certificates, money and other property are to be held and disposed of by the
Escrow Agent in accordance with the following instructions and upon the terms
and conditions hereinafter set forth, to which the undersigned agree:
ARTICLE 1. ESCROW PURPOSE
1.1 This Escrow Agreement describes clearing and holding escrow that will be
established by Broad Street Investment III, Inc., of Chattanooga,
Tennessee, (the "Company") and all current stockholders of the Company
(the "Selling Stockholders") in accordance with the requirements of
Securities and Exchange Commission Rule 419, adopted pursuant to the
provisions of Section 7(b) of the Securities Act of 1933. The Company,
the Selling Stockholders and the Escrow Agent are the only parties to
this Escrow Agreement.
1.2 In connection with the distribution described in the Company's Form SB-2
Registration Statement (the "Distribution"), the Selling Stockholders
intend to transfer certain shares of the Company's $.001 par value common
stock (the "Common Stock") to certain classes of transferees described in
the definitive prospectus filed as part of t he Company's Form SB-2
Registration Statement.
1.3 The purpose of the escrow shall be to hold and ultimately distribute the
following stock certificates in accordance with the terms of Sections 4
through 6 this Escrow Agreement,
(a) Stock certificates evidencing the ownership of 310,000 presently
issued and outstanding shares of Common Stock (the "Gift Shares")
that will be transferred to certain individuals and organizations
selected by the Selling Stockholders (the "Donees"), registered in
the names of the Donees and delivered to the Escrow Agent upon
issuance; and
(b) Stock certificates evidencing the ownership of up to 1,240,000
presently issued and outstanding shares of Common Stock (the
"Founders' Shares") that have been registered for resale by the
Selling Stockholders.
1.4 This Escrow Agreement constitutes an essential element of the Company's
proposed public offering of securities and is required by Securities and
Exchange Commission Rule 419. The parties to this Escrow Agreement shall,
at all times, conduct all of their activities relating to the Rule 419
escrow created hereby in strict compliance with the letter and the spirit
of Rule 419. In the event of any inconsistency between the terms of this
Escrow Agreement and the requirements of Rule 419, the requirements of
Rule 419 shall have priority.
ARTICLE 2. ESCROW DEPOSITS
2.1 The Escrow Agent shall accept deposits to the Escrow Account from time to
time during the entire term of this Agreement. All stock certificates
delivered to the Escrow Agent shall, upon delivery, automatically become
subject to the provisions of this Escrow Agreement.
2.2 The initial Escrow Deposits will be in the form of individual stock
certificates representing the ownership of Gift Shares. All stock
certificates representing Gift Shares shall be registered in the name of
individual Donee and contain complete information respecting the Donee's
name, mailing address and taxpayer identification number. Upon completion
of the Gift Share Distribution, the Selling Stockholders shall jointly
execute and deliver to the Escrow Agent a schedule that identifies the
specific Gift Share transfers made by each Selling Stockholder. When the
Escrow Agent receives the stock certificates and other information
specified in this Paragraph, it shall promptly examine the stock
certificates to confirm that the stockholder information printed on the
stock certificates complies in all particulars with the stockholder
information in the supporting schedules. The Company shall promptly
correct any errors, omissions or inconsistencies noted by the Escrow
Agent.
2.3 Additional Escrow Deposits in the form of individual stock certificates
representing the ownership of Founders' Shares may be made from time to
time during the term of this Agreement. When any of the Selling
Stockholders enter into an agreement to sell all or any part of the
Founders' Shares, the Selling Stockholder shall promptly deliver stock
certificates representing the ownership of the transferred Founders'
Shares to the Escrow Agent. All such certificates shall be registered in
the name of the Selling Stockholder and duly endorsed for transfer to the
purchaser. All certificates for Founders' Shares delivered to the Escrow
Agent shall be accompanied by a copy of the associated stock purchase
agreement and such additional documentation as the Company, the Selling
Stockholder and the Escrow Agent deem necessary or desirable to comply
with the requirements of Rule 419, or otherwise provide for the efficient
performance of the Escrow Agent's duties hereunder.
2.4 All stock certificates delivered to the Escrow Agent pursuant to the
provisions of this Section 2 shall be held and disposed of by Escrow Agent
in accordance with the following instructions and upon the terms and
conditions set forth herein.
ARICLE 3. TERMINATION AND DISBURSEMENTS
3.1 If the Company has not negotiated a business combination, filed a
post-effective amendment to its registration statement, successfully
completed a reconfirmation offering meeting the requirements of Rule 419
and closed on the business combination agreement within 18 months after
the effective date of its registration statement (the "Final Termination
Date"), the Escrow Agent shall:
(a) Return all stock certificates representing Gift Shares to the
Selling Stockholders; and
(b) Return all stock certificates representing Founders' Shares to the
Selling Stockholders.
When all stock certificates have been returned to the Selling Stockholders
in accordance with the provisions of this Paragraph 3.1, this Escrow
Agreement will terminate.
3.2 If the Company negotiates a business combination, files a post-effective
amendment to its registration statement and conducts a reconfirmation
offering meeting the requirements of Rule 419; and the terms of such
offering are not accepted by the number of Gift Share Donees specified in
the definitive prospectus included in the Company's post-effective
amendment, the Company shall immediately notify the Escrow Agent that the
terms of its reconfirmation offering have been rejected by the Gift Share
Donees and the Escrow Agent shall:
(a) Return all stock certificates representing Gift Shares to the
Selling Stockholders; and
(b) Return all stock certificates representing Founders' Shares to the
Selling Stockholders.
When all stock certificates have been returned to the Selling Stockholders
in accordance with the provisions this Paragraph 3.2, this Escrow
Agreement will terminate.
3.3 If the Company negotiates a business combination, files a post-effective
amendment to its registration statement and completes a reconfirmation
offering meeting the requirements of Rule 419 on or before the Final
Termination Date, the Company shall promptly deliver, or cause to be
delivered, to the Escrow Agent:
(a) A copy of the definitive prospectus included in its post-effective
amendment and used in connection with the reconfirmation offering;
(b) A schedule setting forth the identity of each Gift Share Donee who
has approved the terms of the reconfirmation offering in writing;
and
(c) A schedule setting forth the identity of each Gift Share Donee who
has rejected the terms of the reconfirmation offering in writing or
otherwise failed to execute a reconfirmation agreement within the
time limits specified in the definitive prospectus.
Upon receipt of the foregoing documentation, the Escrow Agent shall return
to the Selling Stockholders all stock certificates registered in the names
of Gift Share Donees who received Gift Shares in connection with the
Distribution and ultimately refused or failed to execute a reconfirmation
agreement within the time limits specified in the definitive prospectus
3.4 If the Company satisfies the conditions of Paragraph 3.3, actually closes
the business combination described in the post-effective amendment to its
registration statement and delivers to the Escrow Agent a Certificate
signed by the President and Secretary that all conditions precedent to the
final release of stock certificates set forth in Rule 419(e)(3) have been
satisfied, the Escrow Agent shall:
(a) Mail stock certificates to each Gift Share Donee who received Common
Stock in connection with the Distribution and subsequently executed
a reconfirmation agreement; and
(b) Deliver stock certificates for the Founders' Shares to the closing
agents specified in the associated stock purchase agreements; but
only if a closing agent was specified in the purchase agreement
delivered to the Escrow Agent pursuant to Paragraph 2.3 of this
agreement. In the event that a closing agent was not so specified,
the Escrow Agent shall retain possession of the stock certificates
pending its receipt of joint instructions from the Selling
Stockholder and purchaser.
When all stock certificates and all Escrow Funds deposited with the Escrow
Agent have been disbursed in accordance with the provisions of this
Paragraph 3.4, this Escrow Agreement will terminate.
ARTICLE 4. NO MODIFICATION
4.1 After the effective date of the Company's Registration Statement, these
instructions shall not be modified, rescinded or amended without the
written consent of each Gift Share Donee and each purchaser of Founders'
Shares who may be adversely affected by such modification, rescission or
amendment.
ARTICLE 5. GENERAL PROVISIONS
5.1 All parties understand and agree that Escrow Agent is not a principal,
participant, or beneficiary of the underlying transaction that
necessitates this Escrow Agreement. The Escrow Agent shall be obligated
only for the performance of such duties as are specifically set forth
herein and may rely and shall be protected in acting or refraining from
acting on any instrument believed by it to be genuine and to have been
signed or presented by the proper party or parties, their officers,
representatives or agents. 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, nor for action taken or omitted by it in accordance
with the advice of its counsel. Escrow Agent shall be responsible for
holding, investing and disbursing the Escrowed Assets pursuant to the
Escrow Agreement, but in no event shall be liable for any exemplary or
consequential damages in excess of Escrow Agent's fee hereunder.
5.2 Unless otherwise provided herein, the Escrow Agent shall accept the
Escrowed Assets pursuant to the Escrow Agreement and invest such assets at
the written request of the parties hereto specifying with particularity or
by accompanying schedule the type and identity of the assets to be
deposited. Acceptance of the Escrowed Assets shall be communicated by
Escrow Agent to parties by account statement or otherwise in writing as
soon as practicable after receipt, and any discrepancies shall be noted to
Escrow Agent by the parties in writing within forty five (45) days of
receiving such communication. Failure to note any discrepancies shall be
deemed confirmation of the description of Escrowed Assets listed on the
report regardless of any variations from the original schedule. Any
request to invest assets shall be in writing or facsimile and specify the
type of investment to be made, the maturity date, and the principal amount
to be invested. The Escrow Agent shall not be liable for delay or failure
to invest funds without written instructions or for losses on any
investments made by it pursuant to and in compliance with such
instructions.
5.3 Should any controversy arise between the undersigned with respect to this
Escrow Agreement or with respect to the right to receive the Escrowed
Assets, Escrow Agent shall have the right to consult counsel and/or to
institute a xxxx of interpleader in any court of competent jurisdiction to
determine the rights of the parties. In the event it is a party to any
dispute, Escrow Agent shall have the additional right to refer such
controversy to binding arbitration. Should such actions be necessary, or
should Escrow Agent become involved in litigation in any manner whatsoever
on account of this Escrow Agreement of the Escrowed Assets made hereunder,
the undersigned hereby bind and obligate themselves, their heirs and legal
representatives to pay Escrow Agent, in addition to any charge made
hereunder for acting as Escrow Agent, reasonable attorney's fees incurred
by Escrow Agent, and any other disbursements, expenses, losses, costs and
damages in connection with and resulting from such actions.
5.4 The Escrow Agent shall have no liability under, or duty to inquire beyond
the terms and provisions of the Escrow Agreement, and it is agreed that
its duties are purely ministerial in nature, and that the Escrow Agent
shall incur no liability whatsoever except for willful misconduct or gross
negligence so long as it has acted in good faith. The Escrow Agent shall
not be bound by any modification, amendment, termination, cancellation,
rescission or supersession of this Escrow Agreement unless the same shall
be in writing and signed by all of the other parties hereto and, if its
duties as Escrow Agent hereunder are affected thereby, unless it shall
have given prior written consent thereto.
5.5 The Escrow Agent may at any time resign hereunder by giving written notice
of its resignation to the other parties hereto, at their address set forth
herein, at least ten (10) days prior to the date specified for such
resignation to take effect, and upon the effective date of such
resignation, the Escrowed Assets hereunder shall be delivered to such
person as may be designated in writing by the appropriate parties
executing this Escrow Agreement, whereupon all the Escrow Agent's
obligations hereunder shall cease and terminate. The Escrow Agent's sole
responsibility until such termination shall be to keep safely all Escrowed
Assets and to deliver the same to a person designated by the appropriate
parties executing this Escrow Agreement or in accordance with the
directions of a final order or judgment of a court of competent
jurisdiction.
5.6 The parties agree to indemnify, defend and hold the Escrow Agent harmless
from and against any and all loss, damage, tax, liability and expense that
may be incurred by the Escrow Agent arising out of or in connection with
its acceptance or appointments as Escrow Agent hereunder, including costs
and expenses of defending itself against any claim or liability in
connection with its performance hereunder.
5.7 The parties jointly and severally agree to pay to the Escrow Agent its
fees for the services rendered pursuant to the provisions of this Escrow
Agreement and will reimburse the Escrow Agent for reasonable expenses,
including reasonable attorney's fees incurred in connection with the
negotiations, drafting and performance of such services. Except as
otherwise noted, this fee covers account acceptance, set up and
termination expenses; plus usual and customary related administrative
services such as safekeeping, investment and payment of funds specified
herein or in the exhibits attached. Activities requiring excessive
administrator time or out-of-pocket expenses such as optional substitution
of collateral or securities shall be deemed extraordinary expenses for
which related costs, transaction charges, and additional fees will be
billed at Escrow Agent's standard charges for such items. A fee schedule
has been provided to all parties to this Escrow.
5.8 Escrow Agent is hereby given a lien on all Escrowed Assets for all
indebtedness that may become owing to Escrow Agent hereunder, which lien
may be enforced by Escrow Agent by setoff or appropriate foreclosure
proceedings.
5.9 The parties warrant to the Escrow Agent that there are no Federal, State
or local tax liability or filing requirements whatsoever concerning the
Escrow Agent's actions contemplated hereunder and warrant and represent to
the Escrow Agent that the Escrow Agent has no duty to withhold or file any
report of any tax liability under any Federal of State income tax, local
or State property tax, local or State sales or use taxes, or any other tax
by any taxing authority. The parties hereto agree to jointly and severally
indemnify the Escrow Agent fully for any tax liability, penalties or
interest incurred by the Escrow Agent arising hereunder and agree to pay
in full any such tax liability together with penalty and interest if any
tax liability is ultimately assessed against the Escrow Agent for any
reason as a result of its action hereunder (except for the Escrow Agent's
individual income tax liability arising from its income fees).
5.10 The Escrow Agent shall have no liability for loss arising from any cause
beyond its control, including, but not limited to, the following: (a) the
act, failure or neglect of any agent or correspondent selected by the
Escrow Agent or the parties hereto; (b) any delay, error, omission or
default connected with the remittance of funds; (c) any delay, error,
omission or default of any mail, telegraph, cable or wireless agency or
operator; (d) the acts or edicts of any government or governmental agency
or other group or entity exercising governmental powers.
5.11 This Escrow Agreement shall be governed by and construed in accordance
with the laws of the State of Tennessee. The parties hereto expressly
waive such duties and liabilities, it being their intent to create solely
an agency relationship and hold the Escrow Agent liable only in the event
of its gross negligence or willful misconduct in order to obtain the lower
fee schedule rates as specifically negotiated with the Escrow Agent.
ARTICLE 6. NOTICES
6.1 All notices, demands, requests or payments provided for or given pursuant
to this Escrow must be in writing or facsimile. All such notices shall be
deemed to have been properly given or served by personal delivery or by
depositing the same in the United States mail addressed to the person
entitled to receive such notice at the address set forth below.
To the Company: To the Escrow Agent:
Xxxxxxx X. Xxxx, President Frontier Bank
Broad Street Investment III, Inc. Corporate Trust Group
000 Xxxxx Xxxxxx, Xxxxx 000 000 Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000 Xxxxxxxxxxx, XX 00000
6.2 All notices shall be effective when received.
Approved and accepted by the Parties this 9th day of August 2002.
Broad Street Investment III, Inc. Frontier Bank
By: /s/ By: /s/
--------------------------------- ---------------------------------
Xxxxxxx X. Xxxx, President Xxxxxxx Xxxx, President
