COVE APPAREL, INC.
IMPOUND OF FUNDS AGREEMENT
This Agreement was entered into ________, 2003, between Cove Apparel,
Inc., a Nevada corporation (the "Company") and US Bank, N.A. (the "Impound
Agent"). The Impound Agent is located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The Company has applied to register its securities with the
Administrator of Securities of the State of Nevada (the "Administrator") and, if
applicable, with the Administrator of Securities of other states. As a condition
of registering the offering, the Administrator required the Company to enter
into this Agreement. The Impound Agent represents that it is a financial
institution and its deposits are federally insured. The Impound Agent is willing
to act as the Impound Agent and to hold the funds under this Agreement.
The Company and the Impound Agent agree as follows:
Deposit of Funds
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1. Within 2 business days after the Company receives the monies, the
Company will deposit all monies that it receives from the sale of
securities (the "Impound Funds") in an impound account with the Impound
Agent to be designated the "Cove Apparel Impound Account" (the "Impound
Account").
2. The Company and its agents will instruct subscribers to make their
checks payable to the Impound Account. The Company will provide the
Impound Agent with a copy of the Subscription Agreement together with
the Impound Funds. The Company will provide the Impound Agent with the
name, address and social security or other tax identification number of
each subscriber and the date and amount of each subscription.
3. If the Impound Agent received checks that fail to clear the bank on
which they are drawn, the Impound Agent will return those checks,
together with the related Subscription Agreement, to the subscriber.
The Impound Agent will send a copy of the returned checks and related
Subscription Agreements to the Company.
Keeping of Fund
---------------
4. The Impound Agent will keep the Impound Funds, segregated in the
Impound Account, for investment purposes, until the Impound Agent
releases the Impound Funds to the Company or returns them to the
subscribers under paragraph 7 or 8, below.
5. Unless the Administrator directs to the contrary, the Impound Agent
will invest the funds deposited in the Impound Account as directed by
the Company in liquid investments, such as bank certificates of deposit
or United States treasury bills, or savings accounts at the Impound
Agent.
6. Impound Funds are not assets of the Company and are not subject to
judgment or creditors claims against the Company until the Impound
Funds are released to the Issuer under this Agreement.
Release or Return of Funds
--------------------------
7. If, by the _______ day of ________, 2003 (the "Closing Date"), the
funds deposited in the Impound Account amount to or exceed Eighty One
Thousand Dollars ($81,000.00) (the "Minimum Subscription"), then the
Impound Agent will release those funds, and all other funds deposited
after that, to the Company provided that
(a) the Impound Agent has provided the Administrator with a letter
stating that $81,000 has been deposited into the Impound
Account before the Closing Date, and
(b) the Administrator has provided the Impound Agent and the
Company with written consent to the release of the funds from
the Impound Agreement.
8. If, by the Closing Date, the funds deposited in the Impound Account do
not equal or exceed the Minimum Subscription, the Impound Agent will
(a) advise the Company and the Administrator in writing that it has
not received the Minimum Subscription, and
(b) will return to each subscriber the amount the Impound Agent
received on behalf of that subscriber.
9. The Impound Agent will divide any interest earned on the Impound
Account between the subscribers based on their subscription and pay
that to them.
Revocation or Suspension of Registration
-----------------------------------------
10. If, at any time before the Impound Agent releases the funds as provided
in Paragraph 7 or 8 of this Agreement, the Administrator advises the
Impound Agent that it has revoked or suspended the registration, the
Administrator may direct the Impound Agent
(a) not to release the funds in the Impound Account until further
notice by the Administrator, or
(b) to release to each subscriber the amount that the Impound Agent
received on behalf of that subscriber together with interest as
set out in paragraph 9.
Abandonment of Offering
-----------------------
11. If the Impound Agent receives a letter from the Company stating that
the offering has been abandoned, the Impound Agent will return to each
subscriber the amount the Impound Agent received on behalf of that
subscriber together with interest as set out in paragraph 9.
Termination of Agreement
------------------------
12. This Agreement will terminate once the Impound Agent has released all
funds from the Impound Account in accordance with this Agreement.
Duty of Impound Agent
---------------------
13. The Impound Agent will act as a depository only, and its sole
responsibility will be to act in accordance with the terms of this
Agreement.
Records of Impound Agent
------------------------
14. The Impound Agent will keep records (the "Records") that disclose
(a) the names, addresses, telephone numbers and tax identification
numbers of the subscribers,
(b) the amount received on behalf of each subscriber,
(c) the amount and date of the securities purchased,
(d) the date that the Impound Agent released or returned the funds
held in the Impound Account
15. The Impound Agent will provide to the Administrator, on request, true,
complete and current copies of the Records.
Impound Agent Compensation
--------------------------
The Company will pay the Impound Agent reasonable compensation for its services
in the amount of $______.
Scope of Agreement
-------------------
16. This Agreement will be for the benefit of, and binding on, the Company,
the Impound Agent and their successors, the subscribers and their
heirs, assignees, beneficiaries, executors, administrators and their
legal representatives. If, for any reason, the Impound Agent named in
this Agreement is unable or unwilling to continue to act as an impound
agent, then the Company may substitute, with the consent of the
Administrator, another person to serve as Impound Agent.
IN WITNESS WHEREOF, the parties have executed this Agreement the
_________ day of ___________________, 2003.
COMPANY: Cove Apparel, Inc.,
a Nevada corporation
By ___________________________________
President
IMPOUND AGENT: US Bank, Newport Beach
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▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
By ___________________________________
Its __________________________________