EXHIBIT 4.2
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement") is made by and between City
National Bank, a national banking association, with its principal office located
at 000 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 (the
"Escrow Agent"), and SRKP 3, Inc., a Delaware corporation, with its principal
office located at 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxxxxxxx
00000 (the "Issuer").
W I T N E S S E T H :
WHEREAS, the Issuer has filed with the Securities and Exchange Commission
(the "Commission"), Washington, D.C., an SB-2 Registration Statement, as amended
(the "Registration Statement"), and related Prospectus, File No. 333-126441, in
connection with an initial public offering of the Issuer's securities,
comprising 700,000 shares of the Issuer's common stock to be sold at a price of
$0.17 per share (the "Securities");
WHEREAS, the Issuer proposes to offer the Securities to the public on a
"best efforts, all or none" basis as set forth in the Registration Statement;
WHEREAS, the Issuer proposes to establish an escrow account (the "Escrow
Account"), to which subscription funds which are received by the Escrow Agent in
connection with such public offering are to be credited, and the Escrow Agent is
willing to establish the Escrow Account on the terms and subject to the
conditions hereinafter set forth; and
WHEREAS, the Escrow Agent will establish an Escrow Account into which the
subscription funds, which are received by the Escrow Agent and credited to the
Escrow Account, are to be deposited.
NOW, THEREFORE, for and in consideration of the promises and mutual
covenants herein contained, and other valuable consideration, the parties hereto
hereby agree as follows:
1.0 THE REGISTRATION STATEMENT.
1.1 The Issuer has filed the Registration Statement with the Commission
and is included herein as Exhibit A to this Agreement, and is made a
part hereof.
2.0 ESTABLISHMENT OF THE ESCROW ACCOUNT.
2.1 The Issuer shall initially establish a non-interest bearing Escrow
Account at the Escrow Agent. The purpose of the Escrow Account is
for (a) the deposit of all subscription funds (checks or wire
transfers) which are received by the Issuer from prospective
purchasers of the Securities and are delivered by the Issuer to the
Escrow Agent; (b) the holding of amounts of subscription funds which
are collected through the banking system; and (c) the disbursement
of collected funds, all as described herein. The Escrow Agent will
hold all monies and other property in the Escrow Account free from
any lien, claim or offset, except as set forth herein, and such
monies and other property shall not become the property of the
Company, nor subject to the debts thereof, unless the conditions set
forth in these instructions to disbursement of such monies to the
Company have been fully satisfied.
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2.2 On or before the date of the initial deposit in the Escrow Account
pursuant to this Agreement, the Issuer shall notify the Escrow Agent
in writing of the effective date (the "Effective Date") of the
Registration Statement, and the Escrow Agent shall not be required
to accept any amounts for credit to the Escrow Account or for
deposit in the Escrow Account prior to its receipt of such
notification.
2.3 The offering period (the "Offering Period"), which shall be deemed
to commence on the Effective Date, shall be for a period of up to
180 days. The Offering Period shall be less than 180 days if the
Issuer sells all Securities for a total consideration of $119,000.
The last day of the Offering Period, which is either 180 days from
the Effective Date or the date on which the Issuer sells all
Securities for a total consideration of $119,000, whichever occurs
first, is also referred to herein as the "Termination Date." Except
as provided in Section 4.3 hereof, after the Termination Date, the
Issuer shall not deposit, and the Escrow Agent shall not accept, any
additional amounts representing payments by prospective purchasers.
2.4 If the Escrow Account remains open following the Termination Date in
accordance with Article 4 below, the Fund (as defined in Section 3.5
below) shall be placed in a money market investment account bearing
interest at the Escrow Agent's then applicable rate; provided,
however, that no interest shall accrue until the Escrow Agent has
received an IRS Form W-9 completed and executed by the Company.
3.0 DEPOSITS TO THE ESCROW ACCOUNT.
3.1 The Issuer shall promptly deliver to the Escrow Agent all funds
which it receives from prospective purchasers of the Securities,
which funds shall be in the form of checks or wire transfers. Upon
the Escrow Agent's receipt of such funds, they shall be credited to
the Escrow Account. All checks delivered to the Escrow Agent shall
be made payable to the "City National Bank/SRKP 3, Inc.'s Escrow
Account." Any checks payable other than to the Escrow Agent as
required hereby shall be returned to the prospective purchaser.
3.2 Promptly after receiving subscription funds as described in Section
3.1, the Escrow Agent shall deposit the same into the Escrow
Account. Amounts of funds so deposited are hereinafter referred to
as "Escrow Amounts." The Escrow Agent shall cause to process all
Escrow Amounts for collection through the banking system.
Simultaneously with each deposit to the Escrow Account, the Issuer
shall inform the Escrow Agent in writing of the name, address and
social security number of the prospective purchaser, the amount of
Securities subscribed for by such purchaser, and the aggregate
dollar amount of such subscription (collectively, the "Subscription
Information").
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3.3 The Escrow Agent shall not be required to accept for credit to the
Escrow Account checks which are not accompanied by the appropriate
Subscription Information. Wire transfers and cash representing
payments by prospective purchasers shall not be deemed deposited in
the Escrow Account until the Escrow Agent has received in writing
the Subscription Information required with respect to such payments.
3.4 The Escrow Agent shall not be required to accept in the Escrow
Account any amounts representing payments by prospective purchasers,
whether by check, or wire, except during the Escrow Agent's regular
business hours.
3.5 Only those Escrow Amounts, which have been deposited in the Escrow
Account and which have cleared the banking system and have been
collected by the Escrow Agent, are herein referred to as the "Fund."
3.6 If the proposed offering is terminated before the Termination Date,
the Escrow Agent shall refund any portion of the Fund prior to
disbursement of the Fund in accordance with Article 4 hereof upon
instructions in from the Issuer.
4.0 DISBURSEMENT FROM THE ESCROW ACCOUNT.
4.1 Subject to Section 4.3 below, if by the close of regular banking
hours on the Termination Date the Escrow Agent determines that the
amount in the Fund is less than $119,000, then the Escrow Agent
shall promptly refund to each prospective purchaser the amount of
payment received from such purchaser which is then held in the Fund
or which thereafter clears the banking system, without interest
thereon or deduction therefrom, by drawing checks on the Escrow
Account for the amounts of such payments and mail them to the
purchasers. In such event, the Escrow Agent shall promptly notify
the Issuer of its distribution of the Fund. If the Fund is equal to
$119,000, the Escrow Account shall remain open beyond the
Termination Date in accordance with Section 4.2 below.
4.2 If the Escrow Account remains open beyond the Termination Date, the
Issuer must satisfy the following conditions:
within five (5) business days after the effective date of the
post-effective amendment, the Issuer shall send by first class mail to each
purchaser of securities held in escrow, a copy of the prospectus contained in
the post-effective amendment and any amendment or supplement thereto;
each purchaser shall have no fewer than twenty (20) business days and no
more than forty-five (45) business days from the effective date of the
post-effective amendment to notify the Issuer in writing that the purchaser
elects to remain an investor. If the Issuer has not received such written
notification by the forty-fifth (45th) business day following the Effective Date
of the post-effective amendment, funds held in escrow shall be sent by first
class mail or other equally prompt means to the purchasers within five (5)
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business days, and interest held in escrow shall be sent to the Issuer within
two (2) business days; an acquisition described in the post-effective amendment
will be consummated if a sufficient number of purchasers confirm their
investment with the Issuer; and if an acquisition has not been consummated by
the Issuer within eighteen (18) months after the Effective Date of the
Registration Statement, funds held in escrow shall be returned by first class
mail to the purchasers within five (5) business days, and interest held in
escrow shall be sent to the Issuer within two (2) business days, following that
date. It shall be the responsibility of the Issuer to notify the Escrow Agent if
any of the above conditions are not timely satisfied. Additionally, it shall be
the Issuer's responsibility to timely provide instructions to the Escrow Agent
with respect to interest calculations prior to release of funds and interest to
the purchasers in accordance with the terms of this Section 4.2.
Funds held in the Escrow Account may be released to the Issuer and
Securities may be delivered to the purchasers only at the same time as or after:
the Escrow Agent has received a signed representation from the Issuer that
the requirements of paragraphs (e)(1) and (e)(2) of Rule 419 have been met; and
the Escrow Agent has received a signed representation from the Issuer that
the requirements of paragraph (e)(2)(iii) of Rule 419 have been met.
The Issuer shall be liable for any misrepresentations made to the Escrow
Agent with respect to this Section 4.2 and the Issuer agrees to indemnify the
Escrow Agent for any claims made by purchasers with respect to this Section 4.2
in accordance with Article 5 below; provided, however, the Issuer shall not be
responsible for the Escrow Agent's failure to timely release funds to the
purchasers upon receipt of instructions from the Issuer.
4.3 If the Escrow Agent has on hand at the close of business on the
Termination Date any uncollected amounts which when added to the
Fund would raise the amount in the Fund to the minimum offering
amount, and result in the Fund representing the sale of the minimum
offering amount, consisting of the number of business days set forth
in the Registration Statement, shall be utilized to allow such
uncollected funds to clear the banking system.
4.4 Upon disbursement of the Fund pursuant to the terms of this Article
4, the Escrow Agent shall be relieved of all further obligations and
released from all liability under this Agreement. It is expressly
agreed and understood that in no event shall the aggregate amount of
payments made by the Escrow Agent exceed the amount of the Fund.
5.0 RIGHTS, DUTIES AND RESPONSIBILITIES OF THE ESCROW AGENT; INDEMNIFICATION.
5.1 The Escrow Agent shall notify the Issuer on a regular basis of the
escrow amounts which have been deposited in the Escrow Account and
of the amounts, constituting the Fund, which have cleared the
banking system and have been collected by the Escrow Agent.
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5.2 The Escrow Agent shall not be responsible for or be required to
enforce any of the terms or conditions of the Agreement with respect
to the Issuer.
5.3 The Escrow Agent shall not be required to accept from the Issuer any
subscription information pertaining to prospective purchasers unless
such Subscription Information is accompanied by checks or wire
transfers meeting the requirement of Section 3.1, nor shall the
Escrow Agent be required to keep records of any information with
respect to payments deposited by the Issuer, except as to the amount
of such payments; however, the Escrow Agent shall notify the Issuer
within a reasonable time of any discrepancy between the amount set
forth in any subscription information and the amount delivered to
the Escrow Agent therewith. Such amount need not be accepted for
deposit in the Escrow Agent until such discrepancy has been
resolved.
5.4 The Escrow Agent shall be under no duty or responsibility to enforce
collection of any check delivered to it hereunder. The Escrow Agent,
within a reasonable time, shall return to the Issuer any check
received which is dishonored, together with the Subscription
Information which accompanied such check.
5.5 The Escrow Agent shall be entitled to rely upon the accuracy, act in
reliance upon the contents, and assume the genuineness of any
notice, instruction, certificate, signature, instrument or other
document which is given to the Escrow Agent by the Issuer pursuant
to this Agreement without the necessity of the Escrow Agent
verifying the truth or accuracy thereof. The Escrow Agent shall not
be obligated to make any inquiry as to the authority, capacity,
existence or identity of any person purporting to give any such
notice or instructions or to execute any such certificate,
instrument or other document.
5.6 If the Escrow Agent is uncertain as to its duties or rights
hereunder or shall receive instructions with respect to the Escrow
Account, the escrow amounts of the Fund which, in its sole
determination, are in conflict either with other instructions
received by it or with any provision of this Agreement, it shall be
entitled to hold the escrow amounts, the Fund or a portion thereof,
in the Escrow Account pending the resolution of such uncertainty to
the Escrow Agent's sole satisfaction, by final judgment of a court
of competent jurisdiction or otherwise; or the Escrow Agent, at its
sole option, may deposit with the clerk of a court of competent
jurisdiction in a proceeding to which all parties in interest are
joined. Upon the deposit by the Escrow Agent of the Fund with the
clerk of any court, the Escrow Agent shall be relieved of all
further obligations and released from all liability hereunder.
5.7 The Escrow Agent shall not be liable for any action taken or omitted
hereunder, or for the misconduct of any employee, agent or attorney
appointed by it, except in the case of willful misconduct or gross
negligence. The Escrow Agent shall be entitled to consult with
counsel of its own choosing and shall not be liable for any action
taken, suffered or omitted by it in accordance with the advice of
such counsel.
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5.8 The Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the escrow
amounts, the Fund or any part thereof or to file any financing
statement under the Uniform Commercial Code with respect to the Fund
or any part thereof.
5.9 The Issuer agrees to indemnify the Escrow Agent and its officers,
directors, employees, agents, and shareholders (jointly and
severally, the "Indemnitees") against, and hold them harmless of and
from, any and all losses, liabilities, costs, damages, and expenses,
including, but not limited to, reasonable fees and disbursements for
counsel of its own choosing (collectively, "Liabilities"), that the
Indemnitees may suffer or incur and which arise out of or relate to
this Agreement or any transaction to which this Agreement relates,
unless such Liability is the result of the willful misconduct or
gross negligence of the Indemnitees.
5.10 If the indemnification provided for in this Section 5 is applicable
but is held to be unavailable, the Issuer shall contribute such
amounts as are just and equitable to pay or to reimburse the
Indemnitees for the aggregate of any and all Liabilities actually
incurred by the Indemnitees as a result of or in connection with any
amount paid in settlement of any action, claim, or proceeding
arising out of or relating in any way to any actions or omissions of
the Issuer.
5.11 The provisions of this Section 5 shall survive any termination of
this Agreement, whether by disbursement of the Fund, resignation of
the Escrow Agent, or otherwise.
6.0 INTERPLEADER.
6.1 In the event conflicting demands are made or notices served upon the
Escrow Agent with respect to the Escrow Account, the Escrow Agent
shall have the absolute right at its election to do either or both
of the following: (a) Withhold and stop all further proceedings in,
and performance of, this escrow or (b) File a suit in interpleader
and obtain an order from the court requiring the parties to litigate
their several claims and rights among themselves. In the event such
interpleader suit is brought, the Escrow Agent shall be fully
released from any obligation to perform any further duties imposed
upon it hereunder, and the Company shall pay the Escrow Agent all
costs, expenses and reasonable attorney's fees expended or incurred
by Escrow Holder (or allocable to its in-house counsel), the amount
thereof to be fixed and a judgment thereof to be rendered by the
court in such suit.
7.0 AMENDMENT; RESIGNATION.
7.1 This Agreement may be altered or amended only with the written
consent of the parties hereto. The Escrow Agent may resign for any
reason upon fourteen (14) days' written notice to the Issuer. Should
the Escrow Agent resign as herein provided, it shall not be required
to accept any deposit, make any disbursement or otherwise dispose of
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the escrow amounts, but its only duty shall be to hold the escrow
accounts until they clear the banking system and the Fund for a
period of not more than five (5) business days following the
effective date of such resignation, at which time (a) if a successor
escrow agent shall have been appointed and written notice thereof
shall have been given to the resigning escrow agent by the Issuer
and such successor escrow agent, then the resigning escrow agent
shall pay over to the successor escrow agent the Fund, less any
portion thereof previously paid out in accordance with this
Agreement; or (b) if the resigning escrow agent shall not have
received written notice signed by the Issuer and a successor escrow
agent, then the resigning escrow agent shall promptly refund the
amount in the Fund to each prospective purchaser, without interest
thereon or deduction therefrom, and the resigning escrow agent shall
promptly notify the Issuer of its liquidation and distribution of
the Fund; whereupon, in either case, the Escrow Agent shall be
relieved of all further obligations and released from all liability
under this Agreement. Without limiting the provisions of Section 9.1
hereof, the resigning escrow agent shall be entitled to be
reimbursed by the Issuer for any expenses incurred in connection
with its resignation, transfer of the Fund to a successor escrow
agent or distribution of the Fund pursuant to this Section 7.1.
8.0 REPRESENTATIONS AND WARRANTIES.
8.1 The Issuer represents and warrants to the Escrow Agent that no party
other than the parties hereto and the prospective purchasers have,
or shall have, any claim or security interest in the Fund or any
part thereof.
8.2 No financing statement under the Uniform Commercial Code is on file
in any jurisdiction claiming a security interest in or describing
the Fund or any part thereof.
8.3 The Subscription Information submitted with each deposit shall, at
the time of submission and at the time of the disbursement of the
Fund, be deemed a representation and warranty that such deposit
represents a bona fide payment by the purchaser described therein
for the amount of Securities set forth in such Subscription
Information.
8.4 All of the information contained in the Registration Statement is,
as of the date hereof, and will be, at the time of any disbursement
of the Fund, true and correct.
9.0 FEES AND EXPENSES.
9.1 The Escrow Agent shall be entitled to an acceptance fee of $2,000
and an annual administrative fee of $2,000, payable upon the
execution of this Agreement. In addition, the Issuer agrees to
reimburse the Escrow Agent for any reasonable fees and expenses
incurred in connection with this Agreement, which shall be in
accordance with the fee schedule set forth on Exhibit B hereto.
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10.0 GOVERNING LAW AND ASSIGNMENT.
10.1 This Agreement shall be construed in accordance with and governed by
the laws of the State of California shall be binding upon the
parties hereto and their respective successors and assigns;
provided, however, that any assignment or transfer by any party of
its rights under this Agreement or with respect to the Fund shall be
void as against the Escrow Agent unless (a) written notice thereof
shall be given to the Escrow Agent; and (b) the Escrow Agent shall
have consented in writing to such assignment or transfer.
11.0 NOTICES.
11.1 All notices required to be given in connection with this Agreement
shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by
Express Mail service offered by the United States Post Office to the
parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to the Escrow Agent:
City National Bank
000 Xxxxx Xxxxxx Xxxxxx, 00xx Xxxxx,
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxx Xxxxxxx
(b) if to the Issuer:
SRKP 3, Inc.
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 000,
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxxx
12.0 SEVERABILITY.
12.1 If any provision of this Agreement or the application thereof to any
person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Agreement or the
application of such provision to persons of circumstances other than
those to which it is held invalid or unenforceable shall not be
affected thereby and shall be valid and enforceable to the fullest
extent permitted by law.
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13.0 EXECUTION IN SEVERAL COUNTERPARTS; ENTIRE AGREEMENT.
13.1 This Agreement may be executed in several counterparts or by
separate instruments, all of such counterparts and instruments shall
constitute one agreement, binding on all of the parties hereto.
13.2 This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, written or oral, of the parties
in connection therewith.
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IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
upon proper legal authority as of the 24th day of August, 2005.
City National Bank,
a national banking association
By: /s/ Xxx Xxxxxxx
---------------------------------------
Xxx Xxxxxxx, Vice President
its Trust Officer
SRKP 3, Inc., a Delaware corporation
By: /s/ Xxxxxxx Xxxxxxxxx
--------------------------------------
Xxxxxxx Xxxxxxxxx,
its Chief Executive Officer
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