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EXHIBIT 10.7
SUBSCRIPTION ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into as of the _____the day of
December, 1999, by and among Austin Xxxxxxx.xxx Corporation, a Nevada
corporation (the "Corporation"); Choice Investments, Inc. (the "Marketing
Agent"); and Compass Bank (the "Escrow Agent").
WITNESSETH:
WHEREAS, the Corporation is conducting a public offering for sale to
investors on a best efforts basis of up to $10,000,000 of its 8% Secured
Subordinated Debentures (the "Debentures") and under which the Corporation and
the Marketing Agent will be soliciting subscription funds in the form of cash,
check, authorized withdrawals or other immediately available funds (the
"Subscription Funds") from subscribers for a minimum $5,000 investment (the
"Offering") in the offering (the "Subscribers");
WHEREAS, on December _____, 1999, the Securities and Exchange
Commission declared effective the Company's Registration Statement on Form SB-2
for the purpose of registering for sale under the Securities Act of 1933, as
amended, the Debentures;
WHEREAS, the subscription period for the initial Offering will expire
at 4:00 p.m., C.S.T. on February 11, 2000, subject to the Corporation's right to
extend the subscription period without notice until __________, 2000, or
terminate the Offering at any time (the "Expiration Date") and subject further
to the right of the Marketing Agent, in its sole discretion, to permit investors
to submit irrevocable orders together with legally binding commitments for
payment for shares of Debentures for which they subscribe at any time prior to
the Expiration Date with payment to be received at any time prior to 24 hours
before completion of the Offering (the "Closing"); and
WHEREAS, the Corporation and the Marketing Agent desire to establish an
escrow account with the Escrow Agent for the purpose of holding the subscription
funds received during the course of the offering (the "Escrow Funds");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements, representations, warranties and dependent promises set
forth herein, the parties agree as follows:
1. Appointment of Escrow Agent. The Corporation and the Marketing Agent
appoint the Escrow Agent to hold the Subscription Funds, and the Escrow Agent
accepts the appointment, all in accordance with the terms and subject to the
conditions of this Escrow Agreement.
(a) Establishment of Escrow Account. On or prior to the date
of commencement of the Offering, the parties shall establish an interest-bearing
escrow account which shall be entitled "Austin Xxxxxxx.xxx Corporation Escrow
Account" (the "Escrow
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Account"). The Marketing Agent will instruct Subscribers to make checks for
subscriptions payable to the order of or wire transfer funds directly to the
Escrow Agent which shall promptly deposit into the Escrow Account in accordance
with the provisions of Rule 15c2-4 of the Securities Exchange Act of 1934, as
amended.
(b) The Escrow Period. The Escrow Period shall begin with the
commencement of the Offering and shall terminate upon the earlier to occur of
the following dates:
(i) The date upon which the Escrow Agent confirms
that it has received in the Escrow Account subscriptions for the Minimum Target
Amount (as hereinafter defined) of the Debentures and subscriptions therefor
have been accepted by the Corporation;
(ii) The Expiration Date (unless extended as
permitted in the Prospectus); or
(iii) The date upon which a determination is made by
the Corporation and the Marketing Agent to terminate the Offering prior to the
sale of the Minimum Target Amount value of the Debentures.
During the Escrow Period, the Corporation is aware and understands that it is
not entitled to any of the Escrow Funds and no amounts deposited in the Escrow
Account shall become the property of the Corporation or any other entity, or be
subject to the debts of the Corporation or any other entity, until such Escrow
Funds are disbursed in accordance with Section 3 below.
2. Deposit of Funds.
(a) 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. As an alternative, the Escrow
Agent may telephone the bank on which the check is drawn to confirm that the
check has been paid.
The Escrow Agent will promptly notify the Corporation of such return.
If the Corporation rejects any subscriptions for which the Escrow Agent
has already collected funds, the Escrow Agent shall promptly issue a refund
check to the rejected Subscriber. If the Corporation rejects any subscription
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 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, the Escrow Agent shall promptly
remit the Subscriber's check directly to the Subscriber.
(b) The Corporation will deposit or cause to be deposited with
the Escrow Agent all proceeds from the sale of the Debentures received from
Subscribers, accompanied by executed Order Forms and Certifications in the form
attached hereto as Exhibits "A" and "B". The
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Escrow Agent shall (i) make copies of all subscription checks, Order Forms and
Certificates received by it, (ii) promptly deposit such checks for collection in
the Escrow Account to be maintained hereunder, (iii) retain a copy of each Order
Form and Certificate for its records and (iv) promptly forward to the
Corporation a copy of each such check and the executed original of each such
Order Form and Certificate if received. The Escrow Agent shall have no
responsibility for proceeds from the sale of the Debentures not received and
collected by it.
The Escrow Agent shall promptly notify the Corporation of any
subscription received without accompanying subscription documents or where the
subscription does not exactly match the subscription document ("Unidentified
Subscriptions"). Any Unidentified Subscriptions and accompanying documents not
identified in writing by the Corporation within three (3) business days of such
notification shall be returned by the Escrow Agent to the Subscriber. All
Unidentified Contributions that are subsequently identified shall be immediately
deposited into escrow.
(c) Based upon information set forth in the Order Forms
delivered hereunder, the Escrow Agent shall maintain a written record of names
and addresses of the Subscribers, the amount of the Debentures subscribed for by
each Subscriber and the amounts received from each Subscriber.
(d) All Escrow Funds deposited shall be invested in money
market funds investing solely in United States government and agency securities
(e.g., Federal Money Market Fund), unless other written direction is given by
the Corporation or the Marketing Agent. In any event, Escrow Funds will be
invested in accordance with SEC Rule 15c-4.
3. Disbursement.
(a) The Escrow Agent shall notify the Corporation at such time
as it has received, in payment for the Debentures, cash and subscriptions
aggregating $3,000,000 (the "Minimum Target Amount").
(b) At such time as the Escrow Agent has received in cash and
subscriptions the Minimum Target Amount, the Escrow Agent shall disburse said
amount to the Corporation upon written disbursement instructions outlined in
3(d) below from the Corporation and the Marketing Agent. After the Minimum
Target Amount of cleared funds has been received, the Escrow Agent shall
continue collecting Subscriber's funds, pursuant to the procedure set forth
above, until notified by the Corporation to either disburse such funds to the
Corporation or return the Subscribers' amounts exceeding the Minimum Target
Amount to such Subscribers presenting funds over the Minimum Target Amount, with
interest accrued thereon. The Escrow Agent shall immediately disburse such funds
to the Corporation from time to time upon written notification from the
Corporation that such subscriptions have been accepted by the Corporation.
(c) In the event the Minimum Target Amount has not been
subscribed for by February 11, 2000, or the extended date provided to the Escrow
Agent by the Corporation or the Marketing Agent, the Corporation and the
Marketing Agent shall confirm
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such fact in writing, whereupon the Escrow Agent shall return the full amount of
each Subscriber's deposit with interest accrued thereon to each Subscriber.
(d) Each Disbursement Instruction shall be signed by two
officers of the Corporation and the Marketing Agent and shall contain the
following information: (i) a reference to this Agreement, (ii) the identity of
the person to whom a disbursement of Escrow Funds is to be made, (iii) the
amount of Escrow Funds to be disbursed (including the interest thereon), (iv)
instructions as to the form or method and destination of the disbursement (e.g.,
cashier's, wire transfer instructions) and (v) a summary statement of the event
or condition which has occasioned the delivery of the Disbursement Instruction.
Escrow Agent shall not be responsible for evaluating the truth or sufficiency of
the summary statement or Disbursement Instruction.
4. Confirmation/Discrepancies. The Escrow Agent shall confirm receipt
or investment of Escrow Funds by its monthly account statement delivered to the
Corporation unless otherwise indicated.
5. Taxpayer Information. Prior to any investment of Escrow Funds, the
Corporation shall provide the Escrow Agent with written certification of its
taxpayer identification number, and in any event, with appropriate W-8 or W-9
forms within 30 days from the date hereof. Failure to provide such information
and forms may result in a penalty and require the Escrow Agent to withhold tax
on any interest payable hereunder.
6. Reliance. The Escrow Agent shall be protected in acting in good
faith upon any written notice, request, waiver, consent, certificate, receipt,
authorization or other paper or document which the Escrow Agent believes to be
genuine and what it purports to be.
7. Escrow Agent Liability. The Escrow Agent shall not be liable for
anything which it may do or refrain from doing in good faith in connection with
this Escrow Agreement, except its own gross negligence or willful misconduct.
8. Legal Representation. The Escrow Agent may confer with legal counsel
in the event of any dispute or question as to the construction of any of the
provisions hereof, or its duties hereunder, and it shall incur no liability and
it shall be fully protected in acting in accordance with the opinions of such
counsel.
9. Disputes. In the event of any genuine disagreement resulting in
adverse claims or demands being made in connection with the subject matter of
this Escrow Agreement, or in the event that the Escrow Agent in good faith is in
doubt as to what action it should take hereunder, the Escrow Agent may, at its
option, refuse to comply with any claims or demands on it, or refuse to take any
other action hereunder so long as such disagreement continues or such debt
exists, and in such event, the Escrow Agent shall not be or become liable in any
way or to any person for its failure or refusal to act, and the Escrow Agent
shall be entitled to continue to refrain from acting until (i) the rights of all
parties have been fully and finally adjudicated by a court of competent
jurisdiction or (ii) all differences shall have been adjudged and all doubt
resolved by agreement among all of the interested persons, and the Escrow Agent
shall have been notified
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thereof in writing signed by all such persons. In addition to the foregoing
remedies, the Escrow Agent is hereby authorized in the event of any doubt as to
the course of action it should take under this Escrow Agreement, to petition the
District Court of Xxxxxx County, Texas, or the United States Federal District of
the Western District of Texas, for instructions or to interplead the funds or
asset so held into such court. The parties agree to the jurisdiction of either
of said courts over their persons as well as the Property, waive personal
service of process and agree that service of process by certified or registered
mail, return receipt requested, to the address set forth below each party's
signature to this Escrow Agreement shall constitute adequate service.
10. Indemnity. The Escrow Agent shall not be liable for anything which
it may do or refrain from doing in connection with this Escrow Agreement,
provided it acts in good faith, including its own negligence, except for its own
gross negligence or willful misconduct. The parties hereto agree to indemnify
the Escrow Agent for, and to hold it harmless against, any loss, liability or
expense (including, without limitation, reasonable attorneys' fees) incurred by
it without gross negligence or willful misconduct on its part arising out of or
in connection with its entering into this Escrow Agreement and the carrying out
of its duties hereunder, including the costs and expenses of defending itself
against any claim of liability in the premises.
11. Resignation of Escrow Agent. The Escrow Agent may resign for any
reason, upon 30 days written notice to the parties to the Escrow Agreement. Upon
expiration of such 30-day notice period, the Escrow Agent may deliver all cash
or property in its possession under this Escrow Agreement to any successor
Escrow Agent appointed by the Corporation, or if no successor Escrow Agent has
been appointed, to any court of competent jurisdiction in Xxxxxx County, Texas.
Upon either such delivery, the Escrow Agent shall be released from any and all
liability under this Escrow Agreement. A termination under this paragraph shall
in no way change the terms of paragraphs 9, 10 and 12 affecting reimbursement of
expenses, indemnity and fees. The Escrow Agent shall have the right to deduct
from Escrow Funds transferred to any successor Escrow Agent any outstanding and
unpaid expenses or fees.
12. Escrow Agent Fee. Simultaneous with the execution of this
Agreement, the Corporation has paid the Escrow Agent a fee of $5,000.00. The
Corporation shall pay Escrow Agent additional fees due, as incurred and
invoiced, in accordance with Exhibit "C" attached hereto and incorporated herein
by reference.
13. Notices. All notices and communications hereunder shall be in
writing, and shall be deemed to be duly given if sent registered or certified
mail, return receipt requested, to the prospective address set forth below. The
Escrow Agent shall not be charged with knowledge of any fact, including but not
limited to performance or non-performance of any condition, unless it has
actually received written notice thereof from all of the parties hereto of their
authorized representative clearly referring to this Escrow Agreement.
If to the Corporation: Austin Xxxxxxx.xxx Corporation
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
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Attn: Xxxxx X. XxXxxxxx
With a copy to: Xxxxxx Xxxxxx & Xxxxxx, P.C.
000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxxx
If to the Escrow Agent: Compass Bank
Attn: Xxx Xxxxxxx
0000 Xxxxx Xxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000
If to the Marketing Agent: Choice Investments, Inc.
Attn: Xxxxx Xxxxxx
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
14. Successors. The rights created by this Escrow Agreement shall inure
to the benefit of, and the obligations created hereby shall be binding upon, the
successor and assigns of the Escrow Agent and the parties hereto.
15. Choice of Law. This Escrow Agreement shall be construed and
enforced according to the laws of the State of Texas.
16. No Interest Created in Fund. The Escrow Agent shall not issue any
certificate of deposit, stock certificates or any other instrument or document
representing any interest in the Escrow Account.
17. Termination. This Escrow Agreement shall terminate and the Escrow
Agent shall be discharged of all responsibility hereunder at such time as the
Escrow Agent shall have completed its duties hereunder.
18. Counterparts. This Escrow Agreement may be executed in several
counterparts, or by separate instruments, and all such counterparts and
instruments shall constitute one agreement, binding on all of the parties
hereto.
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19. Entire Agreement. This Escrow Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and transactions described herein and supersedes all prior
agreements of understandings, written or oral, between the parties with respect
thereto.
20. Severability. If any provision of this Escrow Agreement is declared
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect
without being impaired or invalidated in any way.
21. Collection of Funds. It is strictly understood that the Escrow
Agent has no duty to disburse any funds, to any party, until such funds have
been collected by the Escrow Agent, and those funds are available. It is hereby
acknowledged by the parties that funds deposited with the Escrow Agent in the
form of a cashier's check shall be deemed to be immediately available funds for
the purpose of disbursements.
22. Agents. The following persons are authorized to direct the Escrow
Agent regarding any transactions to this Escrow including, but not limited to,
disbursements and investments:
Xxxxx X. XxXxxxxx
IN WITNESS WHEREOF, the Escrow Agent and the Corporation have executed
this Escrow Agreement on the day and year first written above.
ESCROW AGENT:
COMPASS BANK
By:
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Xxx Xxxxxxx, Vice President
CORPORATION:
AUSTIN XXXXXXX.XXX CORPORATION
By:
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Xxxxx X. XxXxxxxx, President
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MARKETING AGENT:
CHOICE INVESTMENTS, INC.
By:
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Name:
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Title:
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