ESCROW AGREEMENT, dated as of April 1, 2003, between ▇▇▇▇▇ ▇. ▇▇▇▇,
Attorney at Law, as Escrow Agent, and International Test Systems, Inc., as the
issuer.
PRELIMINARY STATEMENT
The Company is making a public offering of its common stock and
warrants pursuant to a registration statement on Form SB-1 filed with the
Securities and Exchange Commission. The Company wishes the Escrow Agent to act
as escrow agent and the Escrow Agent wishes so to act in connection with the
Offering, on the terms and conditions set forth below.
Accordingly, the parties hereto agree as follows:
1. Definitions.
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The following capitalized terms have the indicated meanings when used in this
Agreement.
"Business Day" shall mean a day on which banks in the City of Houston, Texas are
not authorized to close.
"Company" shall mean International Test Systems, Inc., a Delaware corporation.
"Escrow Account" shall mean the Escrow Account designated by ▇▇▇▇▇ ▇. ▇▇▇▇ at
First Bank & Trust in Houston, Texas.
"Escrow Agent" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇, Attorney at Law, in its capacity as
Escrow Agent hereunder.
"Escrow Interest Share" shall mean, with respect to any subscriber, such
subscriber's pro rata share of the excess, if any, of (a) the total interest
earned on funds held in the Escrow Accounts and invested by the Escrow Agent in
accordance with section 6 hereof less (b) all amounts of compensation and
reimbursement which the Escrow Agent is entitled to receive in accordance with
section 9 hereof. A subscriber's pro rata share, as that term is used in the
preceding sentence, shall be based on the proportion of the total interest
earned on funds held in the Escrow Accounts represented by the interest earned
on funds deposited in the Escrow Accounts on behalf of such subscriber.
"Offering" shall mean the offering by the Company of the Common Stock and
Warrants.
"Offering Termination Date" shall mean the earlier of (1) a date as may be
determined by the Company and (2) one year after the effective date of the
offering.
2. Appointment of the Escrow Agent.
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The Company hereby appoints the Escrow Agent as escrow agent, and the Escrow
Agent hereby accepts such appointment, in accordance with the terms and
conditions set forth herein.
3. Deposit of funds into the Escrow Accounts.
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3.1. The Escrow Agent shall establish an escrow account for the funds
deposited with it by the Escrow Agent pursuant to section 3.2 hereof
3.2. Funds shall be received by the Escrow Agent from checks received by the
Escrow Agent or the Company and shall promptly be deposited by the Escrow Agent
in the Escrow Account and held by the Escrow Agent in escrow in accordance with
the terms of this Agreement.
3.3. The Escrow Agent shall treat all subscriber information provided to it
by each of the Company as its confidential proprietary information, and in no
event will the Escrow Agent disclose such information other than as contemplated
by this Agreement.
4. Collection procedure.
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If any check deposited for collection is returned unpaid to the Escrow Agent,
the Escrow Agent shall promptly so notify, and promptly return such check to,
the Company.
5. Disbursement of funds from the Escrow Accounts.
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5.1. If a subscriber's subscription is rejected by a Placement Agent and/or
the Company in whole or in part, if all or any portion of the deposit made on
behalf of any subscriber remains on deposit after the Offering Termination Date,
or the offering is terminated, the Company shall deliver to the Escrow Agent a
notice (a "Refund Notice") identifying such rejected subscriber or the
subscriber whose funds remain on deposit following the Offering Termination
Date, as the case may be. By noon of the Business Day following the later of the
day on which the Escrow Agent has received the Refund Notice or the day on which
such subscriber's funds are collected by the Escrow Agent, the Escrow Agent
shall return such subscriber's cash deposit, without interest thereon, to the
subscriber, and shall, as soon as practicable, mail (by first class mail) to the
subscriber at such subscriber's address as furnished to the Escrow Agent by the
Company less any applicable withholding taxes or fees.
5.2. Prior to the disbursement of funds to the Company by the Escrow Agent,
the Company shall deliver to the Escrow Agent a notice (a "Closing Notice and
Payment Instruction") containing the following information:
With respect to each such subscriber:
(a) The name and address of such subscriber,
(b) The social security or tax identification number of such subscriber and,
(c) The number of securities to be purchased by such subscriber,
(d) The amount of funds (including the subscriber's notes) on deposit with the
Escrow Agent to be delivered to the Company at such closing in payment or
partial payment of the purchase price of such securities.
(e) Payment instructions (including amount, payee and method of payment (i.e.,
bank cashier's check or wire transfer)) with respect to all amounts to be
disbursed from escrow at such closing in respect of subscriptions, which
payment instructions must include the written or facsimile signature of an
officer of the Company approving such payment instructions.
(f) Within one Business Day after receipt of a Closing Notice and Payment
Instruction, the Escrow Agent shall disburse funds in accordance with the
payment instructions contained in the Closing Notice and Payment
Instruction provided by the Company.
6. Exculpation and indemnification of the Escrow Agent.
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6.1. The Escrow Agent shall have no duties or responsibilities other than
those expressly set forth herein. The Escrow Agent shall have no duty to
enforce any obligation of any person to make any payment or delivery, or to
direct or cause any payment or delivery to be made, or to enforce any
obligation of any person to perform any other act. The Escrow Agent shall be
under no liability to the other parties hereto or to anyone else by reason of
any failure on the part of any party hereto or any maker, guarantor, endorser or
other signatory of any document or any other person to perform such person's
obligations under any such document. Except for amendments to this Agreement
referred to below and except for instructions given to the Escrow Agent by the
other parties hereto relating to the escrow deposits under this Agreement, the
Escrow Agent shall not be obligated to recognize any Agreement between any or
all of the persons referred to herein, notwithstanding that references thereto
may be made herein and whether or not it has knowledge thereof.
6.2. The Escrow Agent shall not be liable to the other parties hereto or to
anyone else for any action taken or omitted by it, or any action suffered by it
to be taken or omitted, in good faith and in the exercise of its own best
judgment, unless such action or omission shall constitute gross negligence.
The Escrow Agent may rely conclusively and shall be protected in acting upon any
order, notice, demand, certificate, opinion or advice of counsel (including
counsel chosen by the Escrow Agent), statement, instrument, report or other
paper or document (not only as to its due execution and the validity and
effectiveness of its provisions, but also as to the truth and acceptability of
any information therein contained) which is believed by the Escrow Agent to be
genuine and to be signed or presented by the proper person or persons. The
Escrow Agent shall not be bound by any notice or demand, or any waiver,
modification, termination or rescission of this Agreement or any of the terms
hereof, unless evidenced by a writing delivered to the escrow Agent signed by
the proper party or parties and, if the duties or rights of the Escrow Agent are
affected, unless it shall give its prior written consent thereto.
6.3. The Escrow Agent shall not be responsible for the sufficiency or
accuracy of the form of, or the execution, validity, value or genuineness of,
any document or property received, held or delivered by it hereunder, or of any
signature or endorsement thereon, or for any lack of endorsement thereon, or for
any description therein, nor shall the Escrow Agent be responsible or liable to
the other parties hereto or to anyone else in any respect on account of the
identity, authority or rights of the persons executing or delivering or
purporting to execute or deliver any document or property or this Agreement.
The Escrow Agent shall have no responsibility with respect to the use or
application of any funds or other property paid or delivered by the Escrow Agent
pursuant to the provisions hereof. The Escrow Agent shall not be liable to the
other parties hereto or to anyone else for any loss which may be incurred by
reason of any investment made in accordance with section 6 hereof of any monies
which it holds hereunder.
6.4. To the extent that the Escrow Agent becomes liable for the payment of
withholding taxes in respect of income derived from the investment of funds held
hereunder, the Escrow Agent may pay such withholding taxes. The Escrow Agent may
withhold from any payment of monies held by it hereunder representing interest
income on funds held in the Escrow Accounts (but not from payment of any monies
held by it hereunder representing deposits made on behalf of subscribers) such
amount as the Escrow Agent estimates to be sufficient to provide for the
payment of withholding taxes required to be withheld and paid by it, and may use
the sum withheld for that purpose. The Escrow Agent shall be indemnified
and held harmless by the Company against any liability for taxes and for any
penalties or interest in respect of taxes, on such investment income or payments
in the manner provided in section 8.5 hereof. The Escrow Agent shall keep
adequate records of all amounts so withheld and paid as withholding taxes and
shall report such information to the Placement Agents and the affected
subscribers.
6.5. The Escrow Agent shall be indemnified and held harmless by the Company
from and against any and all expenses, including counsel fees and disbursements,
or loss suffered by the Escrow Agent in connection with any action, suit or
other proceeding involving any claim, or in connection with any claim or
demand, which in any way, directly or indirectly, arises out of or relates to
this Agreement, the services of the Escrow Agent hereunder, the monies or
other property held by it hereunder or any income earned from investment of
such monies. Promptly after the receipt by the Escrow Agent of notice of any
demand or claim or the commencement of any action, suit or proceeding, the
Escrow Agent shall, if a claim in respect thereof is to be made against the
Company, notify the Company thereof in writing; but the failure by the Escrow
Agent to give such notice shall not relieve the Company from any liability
which such party may have to the Escrow Agent hereunder to the extent that
the position of the Company is not materially prejudiced thereby. Under no
circumstances may the Escrow Agent retain or hold for any time in a manner
inconsistent with the requirements of section 7 hereof any amount of monies or
property to indemnify itself for any such loss or expense. For the purposes
hereof, the term "expense or loss" shall include all amounts paid or payable to
satisfy any claim, demand or liability, or in settlement of any claim, demand,
action, suit or proceeding settled with the express written consent of the
Escrow Agent and the Company, and all costs and expenses, including, but not
limited to, counsel fees and disbursements, paid or incurred in investigating or
defending against any such claim, demand, action, suit or proceeding.
7. Compensation of the Escrow Agent.
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7.1. The Escrow Agent shall be entitled to compensation in the amount of
$100.00 for services rendered by it hereunder. The Escrow Agent shall also be
entitled to reimbursement for all reasonable expenses paid or incurred by it
in the administration of its duties hereunder, including, but not limited to,
all reasonable counsel, advisors' and agents' fees and disbursements.
7.2. All amounts to which the Escrow Agent shall be entitled under section
9.1 hereof as compensation or reimbursement shall be paid first out of funds on
deposit in the Escrow Accounts and then, to the extent any such amounts
are unpaid after application of all such interest income, by the Company.
The Escrow Agent shall be entitled to pay to itself out of such funds prior
to the disbursement of funds to the Company. Concurrently with making such
payment, the Escrow Agent shall provide the Company with a statement showing
such expenses and the calculation thereof in reasonable detail.
8. Further assurances.
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From time to time on and after the date hereof, the other parties hereto shall
deliver or cause to be delivered to the Escrow Agent such further documents and
instruments and shall do and cause to be done such further acts as the Escrow
Agent shall reasonably request (it being understood that the Escrow Agent
shall have no obligation to make any such request) to carry out more
effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected in acting
hereunder.
9. Termination of Agreement and resignation of the Escrow Agent.
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9.1. The agency established by this Agreement shall terminate on the final
disposition in accordance with this Agreement of the monies and property held
in escrow hereunder, provided that the rights and obligations of the Escrow
Agent and each of the Placement Agents and the Company under sections 8, 9, 10
and 12 hereof shall survive the termination of such agency.
9.2. The Escrow Agent may resign at any time and be discharged from its
duties as Escrow Agent hereunder by giving the other parties hereto at least 30
days' notice thereof. As soon as practicable after its resignation, the Escrow
Agent shall turn over to a successor Escrow Agent appointed by the Placement
Agents all monies and property held hereunder (less such amount as the agent is
entitled to retain pursuant to section 9.2 hereof) upon presentation of the
document appointing the new Escrow Agent and its acceptance thereof. If no new
agent is so appointed within the 60-day period following such notice of
resignation, the Escrow Agent may deposit the aforesaid monies and property with
any court it deems appropriate.
10. Consents to jurisdiction and service of process.
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Each of the parties hereto hereby irrevocably consents to the jurisdiction of
the courts of the State of Texas and of any Federal court located in such State
in connection with any action, suit or other proceeding arising out of or
relating to this Agreement or any action taken or omitted hereunder, and waives
personal service of any summons, complaint or other process and agrees that the
service thereof may be made by certified or registered mail directed to such
person at such person's address for purposes of notices hereunder. Should the
person so served fail to appear or answer within the time prescribed by law,
that person shall be deemed in default and judgment may be entered by the Escrow
Agent against that person for the amount or other relief as demanded in any
summons, complaint or other process so served.
11. Notices.
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All notices, requests, demands and other communications provided for herein
shall be in writing, shall be delivered by hand or by first-class mail, shall be
deemed given when received and shall be addressed to the parties hereto at
their respective addresses listed below or to such other persons or addresses as
the relevant party shall designate as to itself from time to time in writing
delivered in like manner:
if to: Escrow Agent
▇▇▇▇▇ ▇. ▇▇▇▇, Attorney at Law
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
if to: the Company,
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ Birmingham
12. Miscellaneous.
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12.1. All amounts referred to herein are expressed in United States Dollars
and all payments by the Escrow Agent shall be made in such dollars.
12.2. If for any reason the escrow deposit is not received by the Escrow
Agent as contemplated herein, the Company shall reimburse the Escrow Agent for
all reasonable expenses, including reasonable counsel fees and disbursements,
paid or incurred by it in making preparations for providing the services
contemplated hereby.
12.3. This Agreement shall be construed without regard to any presumption or
other rule requiring construction against the party causing such instrument to
be drafted. The terms hereby", "hereof", "hereto", "hereunder" and any
similar terms, as used in this Agreement, refer to this Agreement in its
entirety and not only to the particular portion of this Agreement where the term
is used. The word "person" shall mean any natural person, partnership,
corporation, government and any other form of business or legal entity. All
words or terms used in this Agreement, regardless of the number or gender in
which they are used, shall be deemed to include any other number and any other
gender as the context may require. This Agreement shall not be admissible in
evidence to construe the provisions of any prior Agreement. The rule of ejusdem
generis shall not be applicable herein to limit a general statement, which is
followed by or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned.
12.4. This Agreement and the rights and obligations hereunder of any party
hereto may be assigned by such party only to a successor to such party's entire
business. This Agreement shall be binding upon and inure to the benefit of each
party's respective successors and permitted assigns. No other person shall
acquire or have any rights under or by virtue of this Agreement. This Agreement
may not be changed orally or modified, amended or supplemented without an
express written Agreement executed by the Escrow Agent and the other parties
hereto. This Agreement is intended to be for the sole benefit of the parties
hereto, and (subject to the provisions of this section 12.4) their respective
successors and assigns, and none of the provisions of this Agreement is intended
to be, nor shall any such provision be construed to be, for the benefit of any
third person.
12.5. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Texas. The representations and warranties
contained in this Agreement shall survive the execution and delivery hereof
and any investigation made by any party. The headings in this Agreement are
for purposes of reference only and shall not limit nor otherwise affect any of
the terms hereof.
12.6. This Agreement may be executed in several counterparts. Each
counterpart, when so executed and delivered, shall constitute an original
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇, Attorney at Law
International Test Systems
By: /s/ ▇▇▇▇▇ ▇. Birmingham
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▇▇▇▇▇ ▇. Birmingham
President and CEO