1
EXHIBIT 99.1
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made and entered into as of
_________________, 1996, by and among __________________________, having its
principal place of business at
______________________________________________________ and Cragar Industries,
Inc. (the "COMPANY"), having its principal place of business at 0000 X. 00xx
Xxxxxx, Xxxxxxx, Xxxxxxx 00000.
RECITALS
A. The Company proposes to offer for sale (the "OFFERING") up to
1,000,000 shares of its Common Stock, $0.01 par value (the "COMMON STOCK"), and
up to 1,000,000 Warrants to Purchase Common Stock (the "WARRANTS"). The Common
Stock and the Warrants offered (hereinafter collectively referred to as the
"UNITS") may only be purchased pursuant to the Offering together, as one share
of Common Stock and one Warrant, at a price of $6.00 per Unit. The Units are
being offered by the Company on a "best efforts, all or none" basis with respect
to the first 666,667 Units (the "MINIMUM OFFERING"), and on a "best efforts"
basis with respect to sales of the remaining 333,333 Units. The maximum number
of Units that may be sold in the Offering is 1,000,000 (the "MAXIMUM OFFERING").
B. Although the Units may be offered directly by the Company, the
Company anticipates that it will also engage independent broker-dealers who are
members of the National Association of Securities Dealers, Inc. ("PARTICIPATING
DEALERS") to sell the Units. All Participating Dealers will agree to conduct the
Minimum Offering subject to and in compliance with the terms and conditions of
this Agreement.
C. The Company desires to establish an escrow account in which funds
received from subscribers for the Units will be deposited pending completion of
the escrow period. __________________________ agrees to serve as Escrow Agent
(together with its successors and assigns hereunder, the "Escrow Agent") in
accordance with the terms and conditions set forth herein and subject to the
approval of the state securities administrators set forth on the list attached
hereto as Exhibit A (hereinafter referred to as the "STATE ADMINISTRATORS"). The
Escrow Agent must be satisfactory to the State Administrators and it is not
affiliated with the Company.
D. The purpose of this Agreement is to comply with the provisions of
Rules 10b-9 and 15c2-4 promulgated under the Securities Exchange Act of 1934, as
amended, and with the applicable securities laws of all states in which the
Offering of Units is made.
NOW, THEREFORE, in consideration of the respective covenants,
agreements, representations, and warranties contained herein, the parties hereto
agree as follows:
2
AGREEMENT
1. ESTABLISHMENT OF ESCROW ACCOUNT. Effective as of the date of the
commencement of the Offering, the parties hereby establish an escrow account
with the Escrow Agent, which escrow account shall be entitled "Cragar
Industries, Inc./_____________________ Escrow Account #____________" (the
"ESCROW ACCOUNT"). Escrow Agent, by its signature hereon, accepts the escrow
agency created by this Agreement, and agrees to carry out its duties as Escrow
Agent hereunder pursuant to the terms and conditions contained herein.
2. DEPOSITS INTO THE ESCROW ACCOUNT. All monies received from
subscribers of the Units prior to disbursement of the Escrow Account as provided
herein will be deposited with the Escrow Agent by twelve o'clock noon of the
next business day after receipt of said monies from subscribers, together with
or followed promptly by a written account of each sale (each a "Sale Account"),
which Sale Accounts shall set forth, among other things, the subscriber's name
and address, Social Security or taxpayer identification number, the number of
Units purchased, the amount paid therefor, the form of subscription payment such
as whether the subscription payment was in the form of a check, draft, or money
order, the date of said check, draft, or money order, and the date received and
delivered to the Escrow Agent. All monies so deposited in the Escrow Account are
hereinafter referred to as the "ESCROW AMOUNT." The Company and any
Participating Dealers will instruct subscribers to the Units to make
subscription payments in the form of checks, drafts or money orders payable to
__________________________, AS ESCROW AGENT FOR CRAGAR INDUSTRIES, INC." Any
such payments received that are made payable to a party other than the Escrow
Agent shall be promptly returned by the Escrow Agent to the Company or the
Participating Dealer who submitted the payment. With the approval of the Company
and the Escrow Agent, subscription payments may also be tendered by wire
transfer to the Escrow Account pursuant to instructions given by the Escrow
Agent to the Company or the Participating Dealer. The Escrow Agent will promptly
deposit all subscription payments received by it and cleared for payment as good
funds into the Escrow Account. Subscription funds received by the Company and
any Participating Dealer during the pendency of the Offering will continue to be
deposited with the Escrow Agent in accordance with this Agreement
notwithstanding the sale of the Minimum Offering and the disbursement of funds
constituting the Minimum Offering.
The State Administrators shall have the authority to inspect
the Escrow Account without obtaining any further permission from the Company
and/or the Escrow Agent.
Unless and until all of the State Administrators order the
release of funds constituting the Minimum Offering to the Company and such funds
are disbursed to the Company hereunder, such funds shall not be, nor shall such
funds be considered to be, assets of the Company. Following the disbursement of
funds constituting the Minimum Offering, until funds held in the Escrow Account
are disbursed to the Company in accordance with the terms hereof, such funds
shall not be, nor shall such funds be considered to be, assets of the Company.
2
3
3. ESCROW PERIOD. The period for the existence of the escrow (the
"ESCROW PERIOD") shall begin with the commencement of the Offering and shall
terminate upon Escrow Agent's disbursement of all funds in the Escrow Account in
accordance with Section 4 hereof following the earlier to occur of the following
dates:
A. The expiration of one hundred twenty (120) days from the
date of commencement of the Offering, unless extended one or more times as
permitted in the Registration Statement on Form SB-2 filed by the Company with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended, in connection with the Offering (the "REGISTRATION STATEMENT") for
up to a total additional one hundred twenty (120) days at the sole discretion of
the Company, with a copy of each such extension to the Escrow Agent and the
State Administrators (the "MINIMUM OFFERING PERIOD"), unless subscriptions for
at least Four Million Two and No/100 Dollars ($4,000,002) (the "MINIMUM OFFERING
AMOUNT") have been received within the Minimum Offering Period;
B. The sale of the maximum amount of Units being offered
pursuant to the Offering (1,000,000 Units) in accordance with this Agreement;
C. The date upon which a determination is made by the Company
pursuant to Section 6 hereof to withdraw or terminate the Offering with notice
of such determination being given to the Escrow Agent, and if such determination
is made prior to the sale of the Minimum Offering and disbursement of the
Minimum Offering Amount, to the State Administrators (the "COMPANY TERMINATION
DATE").
Without further agreement between the Company and the Escrow
Agent, the Escrow Period will not extend beyond ________________, (two years
after the commencement of the Offering).
The Company is aware and understands that, during the Escrow
Period, it is not entitled to any funds received into escrow except upon
disbursement of such amounts to the Company as provided in this Agreement, and
except as so provided, no amounts deposited in the Escrow Account shall become
the property of the Company or any other entity, or be subject to the debts of
the Company or any other entity.
4. DISBURSEMENTS FROM THE ESCROW ACCOUNT.
Escrow Agent will disburse monies from the Escrow Account as
follows:
A. In the event the Escrow Agent does not receive deposits
totalling the Minimum Offering Amount within the Minimum Offering Period or in
the event that the Escrow Agent has received written notice from the Company of
the Company Termination Date prior to the sale of the Minimum Offering and
disbursement of the Minimum Offering Amount, the Escrow Agent shall promptly
notify the State Administrators by telephone, confirmed in writing, of such fact
3
4
and shall, upon approval by the State Administrators, promptly thereafter refund
to each subscriber the amount received from the subscriber, without deduction,
penalty, or expense to the subscriber, together with a proportionate share of
the interest earned in the Escrow Account allocable to such subscriber, taking
into account the amount received from the subscriber and the length of time
held, and the Escrow Agent shall notify the Company (who shall notify any
Participating Dealers) of its distribution of the funds. The purchase money
returned to each subscriber shall be free and clear of any and all claims of the
Company or any of its creditors.
B. In the event the Escrow Agent receives the Minimum Offering
Amount within the Minimum Offering Period, the Escrow Amount will not be
released to the Company until such amount is received by the Escrow Agent in
collected funds and the release provisions set forth in Section 4.C below are
complied with. For purposes of this Agreement, the term "collected funds" shall
mean all funds received by the Escrow Agent which have cleared normal banking
channels and are in the form of cash. The Minimum Offering Amount may be met by
funds that are deposited from the effective date of the Offering up to and
including the last day of the Minimum Offering Period. The Escrow Amount will
not be released to the Company and the Offering may not proceed to closing until
subscriber checks have been collected through the normal banking channels in an
aggregate amount sufficient to meet the Minimum Offering Amount. Purchases made
after the Minimum Offering Period may not subsequently be counted to meet the
Minimum Offering Amount should checks tendered during the Minimum Offering
Period fail to clear the banking system. In no event may a Participating Dealer
substitute its own good check for the check of a purchaser that has insufficient
funds nor otherwise purchase Units to satisfy the Minimum Offering Amount unless
purchasing for investment during the Minimum Offering Period and the Offering
document discloses the maximum amount of such potential purchase and such
arrangement has been approved by the State Administrators.
C. In no event will funds be released to the Company until the
State Administrators have entered an Order authorizing the release of funds in
the Escrow Account. Such Order will be entered only after receipt by the State
Administrators of an application that includes the following:
(1) A verified statement duly executed by the Escrow Agent
setting forth the total amount in collected funds on deposit with the Escrow
Agent at the date of such filing, including collected funds on deposit in the
Escrow Account at the conclusion of the Minimum Offering Period and the funds
received prior to the conclusion of the Minimum Offering Period and subsequently
collected as provided in Section 4.B, [and separately stating the amount of any
additional subscription funds received following the conclusion of the Minimum
Offering Period.]
(2) A verified statement duly executed by the Company which
states:
(a) That all required proceeds received by it and, to
the best of its knowledge, received by any Participating Dealer from the sale of
the Units have been placed with the Escrow Agent in accordance with the terms
and conditions of this Agreement and that there have
4
5
been no material omissions or changes in the financial condition of the Company,
or other changes of circumstances, that would render the amount of the proceeds
inadequate to finance the Company's proposed plan of operations, business, or
enterprise;
(b) That the required proceeds are represented by
unconditional subscription agreements which are not loans and are not subject to
rescission or rejection by the subscribers and which have been accepted by
Company and are not subject to further rejection by the Company;
(c) That there have been no material omissions or
changes that would render the representations contained in the Registration
Statement to be fraudulent, false or misleading; and
(d) Such other information as the State
Administrators may require.
D. Following the sale of the Minimum Offering, collected funds
received into the Escrow Account up to the amount of the Maximum Offering shall
be disbursed by the Escrow Agent to the Company from time to time upon receipt
by the Escrow Agent of a statement of the Company to the effect that the
subscriptions of the subscribers who tendered such funds have been accepted and
containing instructions to the Escrow Agent to release such funds.
The Company will cause Units to be issued and delivered to
subscribers promptly following its receipt of the proceeds from the sale of such
Units pursuant to this Agreement. Until the terms of this Agreement with respect
to Units have been met and the funds hereunder received from subscriptions for
Units have been released to the Company, the Company may not issue any
certificates or other evidence of Units.
E. Prior to or concurrently with disbursement of any funds to
the Company hereunder, the proceeds representing the commission of any
Participating Dealer will be disbursed to such Participating Dealer. Escrow
Agent shall not have to calculate the amount of commission to be delivered to a
Participating Dealer hereunder but shall rely on the written instructions of the
Company with respect thereto.
5. COLLECTION PROCEDURE. The Escrow Agent is hereby authorized to
forward each check, draft, and money order or other form of subscription payment
for collection and, upon collection of the proceeds of each such check, draft,
and money order or other form of subscription payment, deposit the collected
proceeds in the Escrow Account.
Any check returned unpaid to the Escrow Agent shall be returned to the
Company or the Participating Dealer that submitted the check. In such cases, the
Escrow Agent will promptly notify the Company of such return and Escrow Agent
will be reimbursed by the Company for any expenses so incurred.
5
6
The Company shall have the ability to reject the subscription of any
person in whole or in part for any reason. The Company will certify in writing
to the Escrow Agent the fact of any rejection of any subscription, including the
name of the subscriber whose subscription is rejected in whole or in part, the
amount of funds submitted by the subscriber and the portion thereof that has
been rejected. If the Company rejects any subscription or portion thereof for
which the Escrow Agent has already collected funds, the Escrow Agent shall
promptly issue a refund check to the rejected subscriber for the portion of his
subscription so rejected. If the Company rejects any subscription or portion
thereof for which the Escrow Agent has not yet collected funds but has submitted
the subscriber's check for collection, the Escrow Agent shall promptly issue a
check in the amount of the subscriber's check, or portion thereof so rejected,
to the rejected subscriber after the Escrow Agent has cleared such funds. If the
Escrow Agent has not yet submitted a rejected subscriber's check for collection
and the subscription is rejected in whole, the Escrow Agent shall promptly remit
the subscriber's check directly to the subscriber. If the Escrow Agent has not
yet submitted a rejected subscriber's check for collection and the subscription
is rejected in part only, the Escrow Agent will submit the subscriber's check
for collection and will promptly issue a check for the rejected portion of the
subscriber's subscription to the rejected subscriber after the Escrow Agent has
cleared such funds. All funds returned to a rejected subscriber shall include
interest, calculated based on such subscribers' proportionate share of interest
earned in the Escrow Account, taking into account the amount received from the
subscriber and the length of time held.
6. TERMINATION OF THE OFFERING. The Company may terminate the Offering
for any reason and at any time during the Escrow Period. If the Offering is so
terminated, the Company shall so notify Escrow Agent in writing. In the absence
of any such notification, Escrow Agent shall assume the Offering has not been
terminated.
7. INSTRUCTIONS TO THE ESCROW AGENT. Escrow Agent shall not accept
instructions regarding the funds in the Escrow Account or the Offering other
than from an authorized representative of the Company.
______________________________________ is currently the authorized
representative of the Company. The Company may notify Escrow Agent in writing of
the designation of any substitute or additional authorized representative.
Escrow Agent shall be entitled to rely on the written instructions of any
authorized representative or of any substitute.
8. INVESTMENT OF ESCROW AMOUNT. The Escrow Agent may invest the Escrow
Amount only in such accounts or investments as the Company may specify by
written notice. The Company may only specify investment in (1) bank accounts,
(2) bank money-market accounts, (3) short-term certificates of deposit issued by
a bank, or (4) short-term securities issued or guaranteed by the U.S.
Government. Following the termination of the Escrow Period, Escrow Agent shall
deliver to the Company in a single, lump-sum payment all interest earned on
funds in the Escrow Account and not theretofore paid to subscribers in
accordance with the terms of this Agreement. The amount of interest earned shall
be calculated by the Escrow Agent and provided to the Company at the closing of
the Escrow Account.
6
7
9. COMPLIANCE WITH TAXATION MATTERS. The Company shall provide the
Escrow Agent with a completed Internal Revenue Service ("IRS") Form W-9 upon the
execution of this Agreement. The Escrow Agent may delay accepting escrow funds
until the IRS forms have been provided. The Company shall be responsible for any
requirements for paying taxes or reporting any payments for tax purposes.
10. COMPENSATION OF ESCROW AGENT. The Company shall pay the Escrow
Agent a fee for its escrow services in accordance with the fee schedule attached
hereto as Exhibit B. However, no such fee or any monies whatsoever shall be paid
out of or chargeable to the funds on deposit in the Escrow Account.
11. RESIGNATION OF ESCROW AGENT. Escrow Agent may resign at any time
and be discharged from its duties as escrow agent hereunder by giving all other
parties hereto at least thirty (30) days' notice in accordance with Section
14.A. If a successor escrow agent is not appointed within the 30-day period
following such notice, Escrow Agent may petition any court of competent
jurisdiction to name a successor escrow agent. As soon as practicable after its
resignation, Escrow Agent shall turn over to a successor escrow agent appointed
by the Company and satisfactory to the State Administrators all monies and
property held hereunder (less such amount as Escrow Agent is entitled to retain)
upon presentation to Escrow Agent of the document appointing the new escrow
agent and its acceptance of such appointment and will be released from any
further responsibility or obligation in connection with the Escrow Account on
this Agreement.
12. DUTY AND LIABILITY OF THE ESCROW AGENT; INDEMNIFICATION. The sole
duty of the Escrow Agent, other than as herein specified, shall be to receive
funds hereunder and hold them subject to release, in accordance herewith, and
the Escrow Agent shall be under no duty to determine whether the Company or any
Participating Dealer is complying with the requirements of this Agreement in
tendering to the Escrow Agent subscription funds tendered by subscribers to the
Units. The Escrow Agent may conclusively rely upon and shall be protected in
acting upon any statement, certificate, notice, request, consent, order, or
other document believed by it to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall have no duty or liability
to verify any such statement, certificate, notice, request, consent, order, or
other document, and its sole responsibility shall be to act only as expressly
set forth in this Agreement. The Escrow Agent shall be under no obligation to
institute or defend any action, suit, or proceeding in connection with this
Agreement unless first indemnified to its satisfaction. The Escrow Agent may
consult with counsel in respect of any question arising under this Agreement and
the Escrow Agent shall not be liable for any action taken or omitted in good
faith upon advice of such counsel.
The Company hereby indemnifies and holds harmless the Escrow
Agent from and against, any and all loss, liability, cost, damage, and expense,
including, without limitation, reasonable counsel fees, which the Escrow Agent
may suffer or incur by reason of any action, claim, or proceeding brought
against the Escrow Agent arising out of or relating in any way to this Agreement
or any transaction to which this Agreement relates unless such action, claim, or
proceeding is the result of the [gross negligence or] willful misconduct of the
Escrow Agent. The
7
8
Escrow Agent may consult with counsel in respect of any question arising under
this Agreement and the Escrow Agent shall not be liable for any action taken or
omitted in good faith upon advice of such counsel. Within fifteen (15) days
following the receipt by Escrow Agent of notice of any demand or claim or the
commencement of any action, suit, or proceeding relating to this Agreement for
which indemnification will be claimed hereunder, the Escrow Agent shall notify
the Company in writing in accordance with the notification provisions of this
Agreement. The Company may defend Escrow Agent with counsel reasonably
satisfactory to it against any such demand or claim if it so notifies Escrow
Agent within fifteen (15) days following receipt of a notice from Escrow Agent
as described above.
13. MAINTENANCE OF RECORDS. The Escrow Agent shall maintain the Sale
Accounts provided to the Escrow Agent pursuant to Section 2 hereof and a record
of all payments returned and disbursements made from the Escrow Account as
provided in this Agreement. The Escrow Agent shall also provide the Company on
request, and otherwise from time to time in accordance with its normal
procedures, a report stating the balance in the Escrow Account and the interest
earned therein. At the written request of the Company, the Escrow Agent will
provide such information regarding the Escrow Account as may be requested from
time to time by the State Administrators.
14. MISCELLANEOUS.
A. NOTICES. All notices, reports, instructions, requests, and
other communications given under this Agreement ("NOTICES") shall be in writing,
delivered by hand, by facsimile with confirmation of receipt, by receipted
mailed, or by delivery service, and shall be deemed given when received. Notices
shall be addressed to the parties hereto at their addresses or facsimile numbers
listed on the signature pages hereof. A party may change its address or numbers
for Notices by giving notice to all other parties in accordance with this
paragraph.
B. GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of Arizona
(without taking into consideration its choice of law provisions).
C. ENTIRE AGREEMENT. This Agreement, together with any
exhibits and/or schedules referred to herein, constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior and contemporaneous agreements and undertakings of the parties in
connection herewith.
D. ASSIGNMENT. All of the terms, covenants, conditions, and
provisions of this Agreement shall bind and inure to the benefit of the parties
hereto and to their respective representatives, successors, and assigns.
E. AMENDMENTS; WAIVERS. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties, or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party
8
9
waiving compliance. Any waiver by any party of any condition, or of the breach
of any provision, term, covenant, representation, or warranty contained in this
Agreement, in any one or more instances, shall not be deemed to be nor construed
as a further or continuing waiver of any such condition, or of the breach of any
other provision, term, covenant, representation, or warranty of this Agreement.
F. SEVERABILITY. The invalidity of any provision hereof shall
in no way affect the validity of any other provision hereof. Each of the parties
shall at the request of the other party, deliver to the requesting party all
further documents or other assurances as may reasonably be necessary or
desirable in connection with this Agreement.
G. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the Company and the Escrow Agent have
entered into this Agreement on the date first set forth above.
COMPANY
Cragar Industries, Inc.
By:_____________________________________
Xxxxxxx X. Xxxxxxxxx, President
Address for Notices:
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
ESCROW AGENT
By:_____________________________________
Authorized Officer
Address for Notices:
Facsimile:
9
