ESCROW AGREEMENT (PUBLIC OFFERING)
AGREEMENT made this 1st day of August, 1996 by and among the Issuer whose
name and address appears on the Information Sheet (as defined herein) attached
to this Agreement, and American Securities Transfer Company, ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
W I T N E S S E T H
WHEREAS, the Issuer has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement (the "Registration Statement")
covering a proposed public offering of its securities (collectively, the
"Securities", and individually, a "Share") as described on the Information
Sheet; and
WHEREAS, the Issuer proposes to offer the Securities, as agent for the
Issuer, for sale to the public on a "best efforts, all or none basis" at the
price per Share all as set forth on the Information Sheet; and
WHEREAS, the Issuer proposes to establish an escrow account with the Escrow
Agent in connection with such public offering and the Escrow Agent is willing to
establish such escrow account on the terms and subject to the conditions
hereinafter set forth;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Information Sheet. Each capitalized term not otherwise defined in this
Agreement shall have the meaning set forth for such term on the Information
Sheet which is attached to this Agreement and is incorporated by reference
herein and made a part hereof (the "Information Sheet").
2. Establishment of Escrow Account.
2.1 The parties hereto shall establish a non-interest bearing escrow
account at the office of the Escrow Agent, and bearing the designation, set
forth on the Information Sheet (the "Escrow Account").
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 of the Registration Statement (the "Effective Date") and
the Escrow Agent shall not be required to accept any amount for deposit in the
Escrow Account prior to its receipt of such notification.
2.3. The Offering Period, which shall be deemed to commence on the
Effective Date, shall consist of the number of calendar days or business days
set forth on the Information Sheer. The Offering Period shall be extended by an
Extension Period only if the Escrow Agent shall have received written notice
thereof at least five (5) business days prior to the expiration of the Offering
Period. The Extension Period, which shall be deemed to commence on the next
calendar day following the expiration of expiration of the Offering Period,
shall consist of the number of the calendar days or business days set forth on
the Information Sheet. The last day of the offering Period, or the last day of
the Extension Period (if the Escrow Agent has received written notice thereof as
hereinabove provided), is referred to herein as the "Termination Date." After
the Termination Date, the Issuer shall not deposit, and the Escrow Agent shall
not accept, any additional amounts representing payments by prospective
purchasers.
3. Deposits in the Escrow Account.
3.1. Upon receipt, the Issuer shall promptly deposit all monies received
from investors to the Escrow Agent. All of these deposited proceeds (the
"Deposited Proceeds") shall be in the form of checks or money orders. All checks
or money orders deposited into the Escrow Account shall be made payable to
"Pacific Basin Development, Corp. and American Securities Transfer Company, as
Escrow Agent" Any check or money order payable other than to the Escrow Agent as
required hereby shall be returned to the prospective purchaser, or if the Escrow
Agent has insufficient information to do so, then to the Issuer (together with
any subscription Information, as defined below, or other documents delivered
herewith) by noon of the next business day following receipt of such check by
the Escrow Agent, and such check shall be deemed not to have been delivered to
the Escrow Agent pursuant to the terms of this agreement. The Deposited Proceeds
and interest or dividends thereon, if any, shall be held for the sole benefit of
the purchasers of the securities.
3.2. The deposited Proceeds shall be invested in either;
(a) an obligation that constitutes a "deposit" as that term is defined
in Section (3)(1) of the Federal Deposit Insurance Act;
(b) securities of any open-end investment company registered under the
Investment Company Act of 1940 that holds itself out as a money market fund
meeting the conditions of paragraphs (c)(2), (c)(3), and (c)(4) of Rule 2a-7
under the Investment Company Act; or
(c) securities that are direct obligations of, or obligations
guaranteed as to principal or interest by, the United States.
2
3.3. Simultaneously with each deposit into the Escrow Account, the Issuer
shall inform the Escrow Agent by confirmation slip or other writing of the name
and address of the prospective purchaser, the number of Securities subscribed
for by such purchaser, and the aggregate dollar amount of such subscription
(collectively, the "Subscription Information").
3.4 The Escrow Agent shall not be required to accept for deposit into the
Escrow Account checks which are not accompanied by the appropriate subscription
Information. Checks and money orders 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.
3.5. The Escrow Agent shall not be required to accept any amounts
representing payments by prospective purchasers, whether by check or money
order, except during the Escrow Agent's regular banking hours. Any check, money
order or cash not received prior to 1:00 p.m. shall be deposited the following
business day.
3.6. Interest or dividends earned on the Deposited Proceeds, if any, shall
be held in the escrow Account until the Deposited Proceeds are released in
accordance with the provisions of section 4 of the Escrow Agreement. If the
Deposited Proceeds are released to a purchaser of the securities, the purchaser
shall receive interest or dividends earned, if any, on such Deposited Proceeds
up to the date of release. If the Deposited Proceeds held in the Escrow Account
are released to the Company, and interest or dividends earned on such funds up
to the date of release may be released to the Company.
3.7. The Issuer shall deposit the Securities directly into the Escrow
Account promptly upon issuance (the "Deposited Securities"). The identity of the
purchaser of the Securities shall be included on the Common Stock and Warrant
certificates.
3.8. The Deposited Securities shall be held for the sole benefit of the
purchasers. No transfer or other disposition of Securities held in the Escrow
Account or any interest related to such Securities shall be permitted other than
by will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Internal Revenue Code of 1986, as
amended, or Title I of the Employee Retirement Income Security Act, or the rules
thereunder.
3
3.9. The Escrow Agent shall refund any portion of the Deposited Proceeds
prior to disbursement of the Deposited Proceeds in accordance with Section 4
hereof upon instructions in writing signed by the Issuer.
4. Disbursement from the Escrow Account.
4.1. The Deposited Proceeds may be released to the Company and the
Securities delivered to the purchaser or other registered holder only at the
same time as or after:
(a) the Escrow Agent has received a signed representation from the
Company, together with an opinion of counsel that the following events have
already occurred and the following requirements have already been met:
(1) Upon execution of an agreement(s) for the acquisition(s) of a
business(es) or assets that will constitute the business (or a line of business)
of the Company and for which the fair value of the business(es) or net assets to
be acquired represents at least 80 percent of the maximum offering proceeds,
including proceeds received or to be received upon the exercise or conversion of
the Securities offered, but excluding amounts payable to non-affiliates for
underwriting commissions, underwriting expenses, and dealer allowances, if any,
the Company filed a post-effective amendment that:
(i) Discloses the information specified by the SB-2 registration statement
form and Industry Guides, including financial statements of the Company and the
company or business with which it plans to merge or acquire (the "Target
Company"), and pro forma financial information required by the SB-2 and
applicable rules and regulations:
(ii) Discloses the results of the initial offering, including but not
limited to:
(A) The gross offering proceeds received to date, specifying the
amounts paid for underwriter commissions, underwriting expenses and dealer
allowances, if any, amounts disbursed to the Company, and amounts remaining in
the Escrow Account; and
4
(B) The specific amount, use and application of funds disbursed to the
Company do date, including, but not limited to, amounts paid to officers,
directors, promoters, controlling shareholders or affiliates, either directly or
indirectly specifying the amounts and purposes of such payments; and
(iii) Discloses the terms of the offering as described pursuant to Section
4 of this Escrow Agreement.
(2) The terms of the offering provided, and the Company
satisfied, the following conditions:
(i) Within five business days after the effective date of the
post-effective amendment(s), the Company shall send by first class mail or other
equally prompt means, 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:
(ii) Each purchaser shall have no fewer than 20 business days and no more
than 45 business days from the effective date of the post-effective amendment to
notify the Company in writing that the purchaser elects to remain an investor.
If the Company has not received such written notification by the 45th business
day following the effective date of the post-effective amendment, funds and
interest or dividends, if any, held in the Escrow Account shall be sent by first
class mail or other equally prompt means to the purchaser within five business
days:
(iii) The acquisition(s) meeting the criteria set forth in paragraph (a)
(1) of this Section 4 will be consummated if a sufficient number of purchasers
confirm their investments; and
(iv) If a consummated acquisition(s) meeting the requirements of this
section has not occurred by a date 18 months after the Effective Date, the
Deposited Funds shall be returned by first class mail or equally prompt means to
the purchaser with five business days following that date.
(b) Funds held in the Escrow Account may be released to the Company and
securities may be delivered to the purchaser or other registered holder
identified on the deposited securities only at the same time as or after
consummation of an acquisition(s) meeting the requirements set forth in Section
4.1(a) (1) (iii) of this Escrow Agreement.
4.2 In the event that at the close of regular banking hours on the
Termination Date less than all of the Shares have been sold, the Escrow Agent
5
shall promptly refund to each prospective purchaser the amount of payment
received from such purchaser held in Escrow without interest thereon or
deduction therefrom, and the Escrow Agent shall notify the Issuer of its
distribution of the Deposited Proceeds.
4.3 In the event that at any time up to the close of banking hours on the
Termination Date all of the Shares have been sold, the Escrow Agent shall notify
the Issuer of such fact in writing within a reasonable time thereafter. The
Escrow Agent shall hold the Deposited Proceeds until the events described in
Section 4.1 of this Escrow Agreement take place.
4.4 Upon disbursement of the Deposited Proceeds pursuant to the terms of
this Section 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 Deposited Proceeds.
5. Rights, Duties and Responsibilities of Escrow Agent.
It is understood and agreed that the duties of the Escrow Agent are purely
ministerial in nature, and that:
5.1 The Escrow Agent shall not be responsible for the performance by the
Issuer of its obligations under this Agreement.
5.2 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 money orders representing
the payment of money, 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 delivered to the
Escrow Agent therewith. Such amount need not be accepted for deposit in the
Escrow Account until such discrepancy has been resolved.
5.3 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, if any, which
accompanied such check.
6
5.4 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 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. The Escrow Agent
must, however, determine for itself whether the conditions permitting to the
release of the funds in the Escrow Account have been met.
5.5 In the event that the Escrow Agent shall be uncertain as to its duties
or rights hereunder or shall receive instructions with respect to the Escrow
Account or the Deposited Proceeds which, in its sole determination, are in
conflict either with other instructions received by it or with any provision of
this Agreement, the Escrow Agent, at its sole option, may deposit the Deposited
Proceeds (and any other amounts that thereafter become part of the Deposited
Proceeds) with the registry 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 Deposited Proceeds with the registry of any court, the Escrow Agent
shall be relieved of all further obligations and released from all liability
hereunder.
5.6 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. 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.
5.7 The Escrow Agent shall have no responsibility at any time to ascertain
whether or not any security interest exists in the Deposited Proceeds or any
part thereof or to file any financing statement under the Uniform Commercial
Code with respect to the Deposited Proceeds or any part thereof.
5.8 The Escrow Agent shall determine whether or not the Offering has been
successful, and if it determines that less than all of the securities being
offered have been sold, thus, rendering the Offering unsuccessful, the Escrow
Agent shall return the proceeds of the Offering to the investors on a pro-rata
basis.
7
6. Amendment; Resignation. This Agreement may be altered or amended only
with the written consent of the Issuer and the Escrow Agent. The Escrow Agent
may resign for any reason upon seven (7) business 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 Deposited Proceeds, but its only duty shall be to hold the Deposited
Proceeds for a period of not more than ten (10) 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 hereof (including the name
and address of such successor escrow agent) shall have been given to the
resigning Escrow Agent by the Issuer and such successor escrow agent, the
resigning Escrow Agent shall pay over to the successor escrow agent the
Deposited Proceeds, 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 Deposited
Proceeds to each prospective purchaser without interest thereon or deduction
therefrom, and the resigning Escrow Agent shall notify the Issuer in writing of
its liquidation and distribution of the Deposited Proceeds; 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 8 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 Deposited Proceeds to a successor Escrow Agent or distribution
of the Deposited Proceeds pursuant to this Section 6.
7. Representations and Warranties. The Issuer hereby represents and
warrants to the Escrow Agent that:
7.1 No party other than the parties hereto and the prospective purchasers
have, or shall have any lien, claim or security interest in the Deposited
Proceeds or any part thereof.
7.2 No financing statement under the Uniform Commercial Code is on file in
any jurisdiction claiming a security interest in or describing (whether
specifically or generally) the Deposited Proceeds or any part thereof.
7.3 The Subscription Information submitted with each deposit shall, at the
time of submission and at the time of the disbursement of the Deposited
Proceeds, be deemed a representation and warranty that such deposit represents a
bona fide sale to the purchaser described therein of the amount of Securities
set forth in such Subscription Information.
8
7.4 All of the information contained in the Information Sheet, is, as of
the date hereof and will be, at the time of any disbursement of the Deposited
Proceeds, true and correct.
8. Fees and Expenses. The Escrow Agent shall be entitled to the Escrow
Agent Fee set forth in the Information Sheet, payable upon execution of this
Agreement. In addition, the Issuer agrees to reimburse the Escrow Agent for any
reasonable expenses incurred in connection with this Agreement, including, but
not limited to, reasonable counsel fees, but not including the review of this
Agreement.
9. Indemnification and Contribution.
9.1 The Issuer (referred to as the "Indemnitor") 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 loss, liability, cost damage and expense, including, without
limitation, reasonable counsel fees, which the Indemnitees may suffer or incur
by reason of any action, claim or proceeding brought against the Indemnitees
arising out of or relating in any way to this Agreement or any transaction to
which this Agreement relates, unless such action, claim or proceeding is the
result of the willful misconduct of the Indemnitees.
9.2 If the indemnification provided for in this Section 9 is applicable,
but for any reasons held to be unavailable, the Indemnitor shall contribute such
amounts as are just and equitable to pay, or to reimburse the Indemnitees for,
the aggregate of any and all losses, liabilities, costs, damages and expenses,
including counsel fees, actually incurred by the Indemnitees as a result of or
in connection with, and any amount paid in settlement of any action, claim or
proceeding arising out of or relating in any way to any transactions or
omissions of the Indemnitor.
9.3 Any Indemnitee which proposes to assert the right to be indemnified
under this Section 9, promptly after receipt of notice of commencement of any
action, suit or proceeding against such Indemnitee in respect of which a claim
is to be made against the Indemnitor under this Section 9, will notify the
Indemnitor of the commencement of such action, suit or proceeding, enclosing a
copy of all papers served, but the omission so to notify the Indemnitor of any
9
such action, suit or proceeding shall not relieve the Indemnitor from any
liability which they may have to any Indemnitee otherwise than under this
Section 9. In case any such action, suit or proceeding shall be brought against
any indemnitee and it shall notify the Indemnitor of the commencement thereof,
the Indemnitor shall be entitled to participate in and, to the extent that they
shall wish, to assume the defense thereof, with counsel satisfactory to such
Indemnitee. The Indemnitee shall have the right to employ its counsel in any
such action, but the fees and expenses of such counsel shall be at the expense
of such Indemnitee unless (i) the employment of counsel by such Indemnitee has
been authorized by the Indemnitor, (ii) the Indemnitee shall have concluded
reasonably that there may be a conflict of interest among the Indemnitor and the
Indemnitee in the conduct of the defense of such action (in which case the
Indemnitor shall not have the right to direct the defense of such action on
behalf of the Indemnitee) or (iii) the Indemnitor in fact shall not have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of counsel shall be borne by the Indemnitor.
9.4 The Indemnitor agrees to provide the Indemnitees with copies of all
registration statements pre- and post-effective amendments to such registration
statements including exhibits, whether filed with the SEC prior to or subsequent
to the disbursement of the Deposited Proceeds.
9.5 The provisions of this Section 9 shall survive any termination of this
Agreement, whether by disbursement of the Deposited Proceeds, resignation of the
Escrow Agent or otherwise.
10. Governing Law and Assignment. This Agreement shall be construed in
accordance with and governed by the laws of the State of Colorado and shall be
binding upon the parties hereto and their respective successors and assign;
provided, however, that any assignment or transfer by any party of its rights
under this Agreement or with respect to the Deposited Proceeds 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. Notices. 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 the Express Mail
service offered by the United States Post Office, and addressed, if to the
Issuer, at its address set forth in the Information Sheet, and if to the Escrow
Agent, American Securities Transfer Company.
10
12. Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be upaid or
unenforceable, the remaining provisions of this Agreement or the application of
such provision to persons or 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. Closing. The closing shall take place within 90 days of the Effective
Date unless an additional 90 days is approved by the Company, but in no instance
later than 180 days after the Effective Date.
14. Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular, or plural as the context may
require.
15. Captions. All captions are for convenience only and shall not limit or
define the term thereof.
16. Execution in Several Counterparts. This Agreement may be executed in
several counterparts or by separate instruments and all of such counterparts and
instruments shall constitute one agreement, binding on all of the parties
herein.
17. Entire Agreement. 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 herewith.
11
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
THE ISSUER: Pacific Basin Development Corp.
By: /S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
ESCROW AGENT: American Securities Transfer Company
By:
-----------------------------------------
12