This Agreement, made and entered into this date by and between [CORPORATION'S NAME], a [STATE] corporation ("Corporation"), [SHAREHOLDER #1], [SHAREHOLDER #2] and [SHAREHOLDER #3], as individuals and as organizers and promoters of the Corporation ("Promoters"), and [ESCROW COMPANY'S NAME] ("Escrow Agent").
WHEREAS, the Corporation will be offering [NUMBER] shares of common stock to certain sophisticated and accredited purchasers at the price of $[AMOUNT] per share, pursuant to exemptions from federal and state registrations; and
WHEREAS, the Promoters have been issued shares of stock in the Corporation in the amounts indicated below ("Escrowed Shares"), for a consideration substantially different from the public offering price or for a consideration other than cash, which shares are deemed to be promotional stock, to be deposited in escrow upon the terms set forth hereinafter as follows:
| Name & Address | Total Shares | Shares Issued | Shares Escrowed |
NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Authority to Amend. This Agreement shall not be terminated, revoked, rescinded, altered or modified in any respect without the prior consent of the parties hereto, and the holders of the public shares after action taken under the following conditions. "Public Shares" means those shares issued and outstanding but excluding all shares held by the Promoters, directly or indirectly, beneficially or otherwise, and regardless of whether free of this escrow or not. Such Public Shares must be permitted to vote as a class, and a majority of such class must have voted in favor of such action at a meeting called for that purpose. If such action is to be voted upon at an annual meeting, the meeting notice shall contain a specific statement describing the matter to be voted upon and the effect of such change, if approved.
Section 2. Shares Non-Transferable. So long as Escrowed Shares remain subject to the terms and conditions hereof, they shall not be sold, pledged, hypothecated, transferred, alienated, assigned or otherwise disposed of, in whole or in part, in any manner whatsoever, without the prior consent of the parties hereto, and the holders of the public shares after action taken under the following conditions. "Public Shares" means those shares issued and outstanding but excluding all shares held by the Promoters, directly or indirectly, beneficially or otherwise, and regardless of whether free of this escrow or not. Such public shares must be permitted to vote as a class, and a majority of such class must have voted in favor of such action at a meeting called for that purpose. If such action is to be voted upon at an annual meeting, the meeting notice shall contain a specific statement describing the matter to be voted upon and the effect of such change, if approved. If any such action is consented to, the consent of the proposed transferees to execute an identical Escrow Agreement must be obtained.
Section 3. Voting Rights. The Escrowed Shares shall be considered to be issued and outstanding shares of the Corporation and shall enjoy all voting rights accorded to all other issued and outstanding shares of the same class.
Section 4. Participation in Dividend. The Escrowed Shares shall be considered to be issued and outstanding shares of the Corporation and shall enjoy all dividend privileges accorded to all other issued and outstanding shares of the same class.
Section 5. Dividends on Dissolution or Liquidation. In the event of dissolution of the Corporation, or the partial or complete liquidation of all or substantially all of its assets, or in the event of bankruptcy or insolvency, the Escrowed Shares shall not participate in any distribution dividend by virtue thereof, and the Promoters do hereby waive any such distribution dividend, until all other issued and outstanding shares shall have received a distribution dividend at least equal to $[AMOUNT] per share. Thereafter, the Escrowed Shares may participate on a pro rata basis with all other shares in any further distribution dividend. This Section shall apply equally in the event of a merger or consolidation, or sale of assets. The amount per share shall be adjusted in the event of a stock split or reclassification of shares.
Section 6. Stock Splits or Other Reclassification. Any shares issued to Promoters pursuant to a stock split or reclassification of shares shall be deposited in this escrow, and such additionally deposited shares shall be subject to the terms and conditions of this Agreement. Similarly, any and all distributions of shares or cash other than from earned surplus, and issued by reason of the ownership of the promotional shares, shall likewise be placed in escrow, subject to the terms and conditions hereof.
Section 7. Release of Escrowed Stock. All Escrowed Shares shall be held in escrow until such time as the occurrence of one of the following events:
7.1 The per share net worth of the Corporation on a fully diluted basis under generally accepted accounting principles is at least $[AMOUNT] per share;
7.2 The Corporation has completed a firmly underwritten public offering of at least $[AMOUNT] of its common stock, at a price per share of at least $[AMOUNT] per share;
7.3 There shall exist an established trading market in the Corporation's common stock for a period of at least 90 consecutive days in which the market price per share shall be greater than $[AMOUNT] per share; or
7.4 The Promoters shall pay to the Corporation a price of $[AMOUNT] per share for the Escrowed Shares.
The Escrow Agent shall release the Escrowed Shares to the Promoters upon receipt of an opinion by the Corporation's attorney that one of the above conditions has been met.
Section 8. Duration and Termination; Release. The term of this Agreement is five (5) years, and it will expire on [DATE]. If by such expiration date, the conditions for release have not been met, then the Escrowed Shares shall be returned to the Corporation for cancellation and the Escrow Agent is thereupon relieved of all further obligations hereunder. This Agreement will terminate automatically if the Corporation ceases to exist and no successor becomes a party to this Agreement. In such event, the Escrow Agent shall tender the stock to the Corporation's receiver, trustee in bankruptcy or person in a similar capacity. Should no such person exist, the Escrow Agent shall destroy the Escrowed Shares after 30 days written notice to the Promoters.
Section 9. Inspection of Records. Any shareholder of the Corporation may, at any time, inspect the records of the Corporation for the purpose of making any determination, and may inspect the records of the Escrow Agent or Promoters, insofar as they relate to this Agreement, for the purpose of making any determination hereunder and effecting compliance with the provisions of this Agreement.
Section 10. Additional Requirements. In order to ensure performance hereunder and to implement the provisions of this Agreement, all parties hereto shall take whatever action and do such things as may be required or necessary so to do, which may include, but shall not be limited to, issuance of additional shares, surrender of shares, depositing additional shares in escrow, and making such reports and furnishing such information as shall be deemed advisable or necessary in the premises.
Section 11. Lien of Escrow Agent. The Escrow Agent has the right to retain, and is hereby given a lien upon all documents and other things of value held by it at any time hereunder until all of its compensation, fees, costs and expenses shall have been paid, all of which the Corporation hereby promises and agrees to pay upon demand.
Section 12. Controversy. If any controversy arises between the parties hereto or with any third person, the Escrow Agent shall not be required to determine the same or to take any action, but may await the settlement of any such controversy by final appropriate legal proceedings or otherwise as the Escrow Agent may require. In the alternative, the Escrow Agent may, at its discretion, institute such appropriate interpleader or other proceedings in connection therewith as it may deem proper, notwithstanding anything in this Agreement to the contrary. In any such event, the Escrow Agent shall not be liable for interest or damages to the Corporation or the Promoters.
Section 13. Escrow Agent's Liability. The Escrow Agent's obligations and duties in connection herewith are confined to those specifically stated in this Agreement. The Escrow Agent shall not be in any manner liable or responsible for the sufficiency, correctness, genuineness or validity of any instruments deposited with it or with reference to the form of execution thereof, or the identity, authority or rights of any person executing or depositing same. The Escrow Agent shall not be liable for any loss which may occur, except for its own negligence or willful misconduct.
Section 14. Escrow Agent's Fee and Acknowledgment. The Escrow Agent's fee is set forth in Exhibit A, attached hereto. The receipt of the opening fee, as listed in Exhibit A, by the Escrow Agent, is hereby acknowledged. The Escrow Agent further acknowledges receipt of [NUMBER] shares of common stock in the Corporation. The fee agreed upon for services rendered hereunder is intended as full compensation for the Escrow Agent's services as contemplated by this Agreement. However, if the Escrow Agent is required to render any material service not contemplated in this Agreement, or is involved in any material controversy or litigation hereunder, the Escrow Agent shall be reasonably compensated for such extraordinary services and reimbursed for all costs and expenses occasioned by such event.
Section 15. Binding Agreement and Substitution of Escrow Agent. The terms and conditions of this Agreement shall be binding on the successors or assigns of the parties hereto. If, for any reason, the Escrow Agent named herein should be unable or unwilling to continue as such Escrow Agent, then the other parties to this Agreement may substitute another person to serve as Escrow Agent, provided that such person is a federally chartered bank, or an escrow company licensed by the state of [STATE], and is unaffiliated with any of the parties hereto. Any apportionment of the fees provided for herein will be subject to agreement of the parties.
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