ESCROW AGREEMENT, dated as of June 1, 2002, between Vanderkam &
▇▇▇▇▇▇▇, 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 Vanderkam &
▇▇▇▇▇▇▇ at ▇▇▇▇▇▇▇ Bank in Houston, Texas.
"Escrow Agent" shall mean Vanderkam & ▇▇▇▇▇▇▇, 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) the date of
acceptance of subscriptions for $750,000 in common stock and warrants, (2) such
earlier date as may be determined by the Company and (1) one year after the
effective date of the offering or, if the Company determines to extend the
Offering, to a date not later than two years after effectiveness.
2. Appointment of the Escrow Agent.
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.
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, or if all or any portion of the deposit made
on behalf of any subscriber remains on deposit after the Offering
Termination Date, 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 Company, 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. The Company may by notice to the Escrow Agent delivered with the related
Refund Notice provide that an amount equal to the cash deposits being
returned to the Company in accordance with section 7.1.1 hereof shall be
netted out of the following day's funds wired to the Escrow Agent. Any such
notice shall include the information required by section 3.3 hereof with
respect to the subscriber against whose deposit such funds are to be
credited.
5.3. Prior to each closing of the Minimum Offering Amount which is $125,000, 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.
5.4 In the event that the minimum offering proceeds are not raised within
twelve months of the offering, then the Escrow Agent shall return all
deposits received to each subscriber.
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.
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 on the
date the Minimum Offering Amount is received. 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
Vanderkam & ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
if to: the Company,
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ Birmingham
12. Miscellaneous.
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.
Vanderkam & ▇▇▇▇▇▇▇
By:/s/ Vanderkam & ▇▇▇▇▇▇▇
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International Test Systems
By:/s/ ▇▇▇▇▇ ▇. Birmingham
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▇▇▇▇▇ ▇. Birmingham
President and CEO
