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 1950 Avenue of the Stars, 2nd Floor, Los Angeles, California 90067 (the
"Escrow Agent"), and SRKP 2, 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-___________, 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.
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 2, 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;
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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 and interest held in escrow shall be sent
by first class mail or other equally prompt means to the purchasers within five
(5) 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 and interest held in escrow shall be returned by first class
mail to the purchasers with five (5) 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 and
interest 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.
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.
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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.
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.
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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 shal1 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 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.
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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 addresses set forth in the beginning
of this Agreement or such other address as the parties hereto
may designate.
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.
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 ____ day of __________, 2005.
City National Bank, a national banking association
By:
-------------------------------------
__________________, its Trust Officer
SRKP 2, Inc., a Delaware corporation
By:
--------------------------------------
Xxxx Xxxxxxxxxxxx, its Chief Financial
Officer
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