EXHIBIT 10.1
ESCROW AGREEMENT
GEN-NET LEASE INCOME TRUST, INC.
This Agreement is entered into this ________ day of __________________,
2002, by and among Citizens First Savings Bank (the "Escrow Agent") and Gen-Net
Lease Income Trust, Inc., a Michigan corporation (the "Company") and Investors
Capital Corporation ("ICC" or the "Placement Agent").
W I T N E S S E T H :
WHEREAS, the Company has arranged for the offer for sales to investors
through Placement Agent and possibly other registered broker-dealers (the
"Selected Dealers") of a minimum of $3,000,000 of the common stock ("Shares") of
the Company at a price of $10.00 per Share (the "Proceeds"); and
WHEREAS, the Shares are being offered pursuant to the Prospectus of the
Company filed with the Securities and Exchange Commission on ______________ (the
"Prospectus"); and
WHEREAS, the Company and the Placement Agent, to conform to the provisions
of SEC Rules 10b-9 and 15ca-4, desire to establish an escrow account into which
funds received from subscribers will be deposited pending completion of the
escrow period and/or minimum amount whichever first occurs, Escrow Agent agrees
to serve as escrow agent in accordance with the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter contained, the parties hereby agree as follows:
1. Establishment of Escrow Account. After the date hereof, the parties
shall establish one special deposit account which is an interest-bearing, money
market escrow accounts with or under the name of the Escrow Agent, which escrow
account or accounts shall be entitled "Gen-Net Lease Income Trust, Inc.
Special Escrow Account" (collectively, the "Escrow Account"). The Placement
Agent and any Selected Dealers will instruct its subscribers to make their
checks for subscriptions payable to the order of "Gen-Net Special Escrow
Account". The Placement Agent and the Selected Dealers will promptly send such
checks along with the Written Account (as defined herein) to the Escrow Agent.
Any checks received that are made payable to a party other than as specifically
set forth above shall be returned by the Escrow Agent to the Placement Agent or
any selected dealer who submitted the check. The Escrow Agent shall return to
such Placement Agent or any selected dealer who submitted the check any checks
that are not submitted along with the Written Account. If any checks are
received by the Escrow Agent from a party other than the Placement Agent or any
selected dealer, the Escrow Agent shall return such check to the person
submitting the same.
2. Escrow Period. The escrow period (the "Escrow Period") shall begin on
the date the Escrow Account is opened and shall terminate upon the earlier to
occur of the following:
a. The Escrow Account contains a minimum of $3,000,000 of collected
funds (the "Minimum Conditions");
b. The date that is 120 calendar days from the date of the Order of
Effectiveness applicable to the Prospectus as issued by the
Securities and Exchange Commission; or
c. The effective date in the written notification which the Escrow
Agent receives from Company and Placement Agent of its
determination to terminate the offering prior to the satisfaction
of the Minimum Conditions.
During the Escrow Period, the Company is aware and understands that it is
not entitled to any funds received into escrow and no amounts deposited in the
Escrow Account shall be withdrawn or subject to check or otherwise used by it or
any other entity, except as herein provided, or be subject to the debts of the
Company or any other entity.
2
3. Deposits into the Escrow Account. The Placement Agent and any of the
Selected Dealers shall deliver directly to the Escrow Agent by noon of the next
business day following receipt thereof all monies received from subscribers for
the payment of the Shares to the Escrow Agent for deposit into the Escrow
Account together with a written account of each sale (the "Written Account"),
which account shall set forth, among other things, the subscriber's name and
address, social security number, the number of Shares purchased, the amount paid
therefor, whether the consideration received was in the form of a check draft or
money order and the Placement Agent's or the Selected Dealer's name and address.
All collected funds so deposited in the Escrow Account prior to satisfaction of
the Minimum Conditions are herein referred to as the "Escrow Amount", except for
interest earned thereon. Notwithstanding anything to the contrary contained
herein, after (i) satisfaction of the Minimum Conditions and (ii) written
notification from the Company and the Placement Agent, Selected Dealers shall
continue to promptly transmit such checks, drafts and money orders, along with
the appropriate subscription documents, to the Escrow Agent and Escrow Agent
shall thereafter collect the funds and promptly thereafter remit such funds
(less commission payments deducted from the non-U.S. sales of Shares per written
instructions from the Company) to the Company.
4. Disbursements from the Escrow Account. In the event that the Escrow
Period terminates without satisfaction of the Minimum Conditions, the Escrow
Agent shall promptly refund directly to each subscriber, at the address
indicated on the Written Account or such other address that Escrow Agent can
determine, the amount received from the subscriber with interest actually earned
thereon, without deduction, penalty or expense to the subscriber, and the Escrow
Agent shall notify the Company and the Placement Agent and any Selected Dealer
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.
Before the Escrow Agent shall be properly authorized and empowered pursuant
to this Agreement to release the Escrow Amount the following conditions (the
"Minimum Conditions") must be satisfied as determined by the Escrow Agent:
a. The Escrow Amount contains a minimum of $3,000,000 (the "Minimum
Escrow Amount");
b. The aforementioned minimum Escrow Amount was achieved prior to
the earlier of the dates set forth in Section 2B above;
c. The Company has certified in a written notification to the Escrow
Agent that the Escrow Amount constitutes the proceeds from valid
subscriptions of the Shares pursuant to the terms of the
Prospectus; and
3
d. Counsel for the Company as named in the Prospectus issues to the
Escrow Agent a confirmation letter stating that, to its
knowledge, neither the Company nor the Company's offering of
Shares is subject to any outstanding cease and desist order or
stop order issued by the Securities and Exchange Commission or
any state securities regulatory agency.
Subscriptions received after satisfaction of the Minimum Conditions shall
be held by the Escrow Agent until such time, and from time to time, as the
Company requests the release thereof. At such time as the Company requests the
release of the escrowed funds, the Company shall designate to the Escrow Agent,
in writing, the names of the subscribers whose funds are being withdrawn and the
entity or account to which such funds are to be paid. 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. If the Escrow Amount is released to the Company, subscribers will not
receive any interest. Likewise, with respect to subscribed funds received by the
Escrow Agent after the Minimum has been released to the Company, said funds
shall not earn any interest.
5. Collection Procedure. The Escrow Agent is hereby authorized to forward
each check for collection and, upon collection of the proceeds of each check,
deposit the collected proceeds in the Escrow Account.
Any check returned unpaid to the Escrow Agent shall be returned to either
the Placement Agent or the Selected Dealer that submitted the check, at the
address indicated on the Written Account or such other address that Escrow Agent
can determine. In such cases, the Escrow Agent will promptly notify the Company
of such return.
If the Company rejects any subscription for which the Escrow Agent has
already collected funds and upon written notice of such rejection to the Escrow
Agent from the Company and the Placement Agent, the Escrow Agent shall promptly
issue a refund
4
check to the rejected subscriber in the amount of the subscriber's check plus
any interest credited thereon. If the Company rejects any subscription for which
the Escrow Agent has not yet collected funds but has submitted the subscriber's
check for collection and upon written notice of such rejection to Escrow Agent
from the Company, the Escrow Agent shall issue a check in the amount of the
subscriber's check to the rejected subscriber after the Escrow Agent is
satisfied that such uncollected funds are collected. If the Escrow Agent has not
yet submitted a rejected subscriber's check for collection and upon written
notice to Escrow Agent from the Company is rejecting such subscription, the
Escrow Agent shall promptly return the subscriber's check directly to
subscriber.
6. Compensation of Escrow Agent. The Company shall pay the Escrow Agent
compensation for its escrow services as set forth in the attachment to this
Escrow Agreement, said attachment being incorporated herein by reference. If it
is necessary for the Escrow Agent to return funds to the subscribers or to the
Placement Agent or any Selected Dealer or if Escrow Agent does any other act or
provides any other service as requested by the Company, the Company shall pay to
the Escrow Agent an additional amount sufficient to reimburse it for its actual
cost in disbursing such funds or in doing such acts or providing such services.
However, no such fee, reimbursement for costs and expenses, indemnification for
any damages incurred by the Escrow Agent, or any monies whatsoever shall be paid
out of or chargeable to the funds on deposit in the Escrow Account.
7. Miscellaneous. The Escrow Agent represents that it is not affiliated
with the Company. In receiving items for deposit or collection, the Escrow Agent
acts only as the collecting agent for the Company, and assumes no responsibility
beyond the exercise of ordinary care. All items received by the Escrow Agent for
the purposes of deposit or collection and all credit for items are provisional
and subject to final payment. Monies received by Escrow Agent shall be invested
only in investments permissible under SEC Rule 15c 2-4. No withdrawals shall be
permitted from the Escrow Account except as provided herein or as required by
law or court order. The Escrow Agent may not at any time set off any sums
credited to the Escrow Account against any indebtedness owed to the Escrow Agent
by any party. The Escrow Agent will not be liable for default or negligence of
its duly selected correspondents, nor for losses in transit, and each
correspondent so selected shall not be liable except for its own negligence. The
Escrow Agent or its correspondents may send any item, directly or indirectly, to
any bank including the payor, and accept its draft or credit as conditional
payment in lieu of cash, it may charge back any item at any time before final
payment, whether returned or not, or any item drawn on the Escrow Agent which is
not good at the close of business on the date deposited.
All notices, communications or transmissions required or permitted by this
Agreement shall be mailed by United States mail, first class. All notices,
5
communications or transmissions sent by Escrow Agent to a subscriber or Selected
Dealer shall be sent to the address indicated on the Written Account or such
other address that Escrow Agent can determine.
As to all checks, drafts and other items for the payment of money, which
now or hereafter constitute, or which are intended to constitute, any part of
(or which are attempted to be deposited in) the Escrow Account, the Escrow Agent
shall have the right (and is hereby authorized) to endorse the same in the name
of any party hereto and deposit the same in the Escrow Account. In general,
Escrow Agent shall have all of the rights afforded a collecting bank or
presenting bank under the Uniform Commercial Code in effect in the State of
Michigan; provided, however, that Escrow Agent shall not have the right of
set-off.
All of the terms and conditions in connection with the Escrow Agent's
duties and responsibilities, and the rights of the undersigned or anyone else,
with respect to the Escrow Account, are contained solely in this Agreement and
in any signature card required by the Escrow Agent pertaining to the Escrow
Account, and the Escrow Agent is not expected or required to be familiar with
the provisions of any other writing, understanding or agreement, and shall not
be charged with any responsibility or liability in connection with the
observance or non-observance of the provisions of any such other writing,
understanding or agreement, and no implied covenant or obligation on the part of
the Escrow Agent shall be read into this Agreement; and the Escrow Agent shall
not be responsible in any manner for any depreciations in the value of the
Escrow Account or any of the items attempted to be deposited therein or the
proceeds thereof, nor shall the Escrow Agent have any duty or responsibility
whatsoever to take any necessary steps to preserve any rights or enforce
collection of any of the items attempted to be deposited in the Escrow Account
or the proceeds thereof by legal proceedings or otherwise.
The Escrow Agent may act or refrain from acting in respect of any matter
referred to herein in full reliance upon any by any with the advice of counsel
which may be selected by it, and shall be fully protected in so acting or in
refraining from acting upon the advise of such counsel.
The Escrow Agent may rely and shall be protected in acting upon any writing
which may be submitted to it in connection with its duties hereunder and which
is believed by it to be genuine and to have been signed or presented by the
proper party or parties and shall have no liability or responsibility with
respect to the form, content, execution or validity thereof.
The Escrow Agent shall have no responsibility or liability for any act or
omission on its part, notwithstanding any demand or notice to the contrary by
any party hereto or any other person or entity, all subject to the sole
limitation that the Escrow Agent act
6
in good faith, and upon the exercise of its best judgment. Except as herein
expressly provided, none of the provisions of this Agreement shall require the
Escrow Agent to expend or risk its own funds or otherwise incur financial
liability or expense in the performance of any of its duties hereunder.
The Escrow Agent is hereby authorized to comply with and obey all orders,
judgments, decrees or writs entered or issued by any court, and in the event the
Escrow Agent obeys or complies with any such order, judgment, decree or writ of
any court, in whole or in part, it shall not be liable to any of the parties
hereto, nor to any other person or entity, by reason of such compliance,
notwithstanding that it shall be determined that any such order, judgment,
decree or writ be entered without jurisdiction or be invalid for any reason or
be subsequently reversed, modified, annulled, satisfied or vacated.
The Escrow Agent shall not be required to institute or defend any action or
legal process involving any matter referred to herein which in any manner
affects it or its duties or liabilities hereunder to take any other action with
reference to the Escrow Account not specifically agreed to therein, and the
Escrow Agent shall not be responsible for any act or failure to act on its part
except in the case of its own bad faith or gross negligence.
Company promises and agrees to indemnify and save the Escrow Agent from any
and all claims, liabilities, judgments, attorney fees and other expenses of
every kind and nature which may be incurred by the Escrow Agent in any manner
pertaining to, connected with or emanating from the Escrow Agent's acceptance
of, and its performance under, this Agreement.
Should any controversy arise between the undersigned or between any of the
undersigned and any other person or entity with respect to this Agreement, or
with respect to the ownership of or the right to receive any sums from the
Escrow Account, Escrow Agent shall have the right to institute a xxxx of
interpleader in any court of competent jurisdiction to determine the rights of
the parties. Should a xxxx of interpleader be instituted, or should Escrow Agent
become involved in litigation in any manner whatsoever connected with or
pertaining to this Agreement or the Escrow Account, the Company hereby binds and
obligates itself, its heirs and legal representatives, to pay Escrow Agent, on
demand, in addition to any charge made hereunder for acting as escrow agent,
reasonable attorney fees incurred by Escrow Agent, and any other disbursements,
expenses, losses, costs and damages in connection with or resulting from such
litigation.
Escrow Agent may resign as escrow agent by giving all of the parties hereto
not less than 15 days prior written notice of the effective date of such
resignation. If on or prior to the effective date of such resignation, Escrow
Agent has not received joint
7
written instructions from the parties hereto, it will thereupon deposit the
Escrow Amount into the registry of a court of competent jurisdiction. The
parties hereto intend that a substitute escrow agent will be appointed to
fulfill the duties of the Escrow Agent hereunder for the remaining term of this
Agreement in the event of the Escrow Agent's resignation, and if the parties
hereto cannot agree on a substitute escrow agent, they will use their best
efforts to derive a procedure to appoint a substitute escrow agent.
The Escrow Agent is acting solely as an escrow agent hereunder and not as a
trustee, and the Escrow Agent has no fiduciary duties, obligations or
liabilities under this Agreement.
All of the terms, conditions and agreements contained herein shall be
binding on each of the undersigned, jointly and severally, and each of the
undersigned's heirs, successors, legal representatives and assigns.
The name of the Escrow Agent shall not be used in any way which may infer
an association with the Company, other than that of escrow agent.
This Agreement is entered into for the express benefit of the Company and
the subscribers for Shares.
The laws of the State of Michigan shall govern the interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
GEN-NET LEASE INCOME TRUST, INC.
By:_______________________________________
Xxxxx X. Xxxxxxxx, President
INVESTORS CAPITAL CORPORATION
By:_______________________________________
Xxxxxxxx X. Xxxxxxx, Chairman of the
Board
8
Agreed to and accepted this _______ day of
__________________, 2002.
Citizens First Savings Bank
By:____________________________________________
Printed Name:__________________________________
Title:_________________________________________
9
