EXHIBIT 10.7
ESCROW AGREEMENT
----------------
PriVest Bank
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000
Attention: ____________________
Re: G REIT, Inc.
------------
Ladies and Gentlemen:
G REIT, Inc., a Virginia corporation (the "Company"), will issue in a
public offering (the "Offering") its common stock (the "Stock") pursuant to a
Registration Statement on Form S-11 filed by the Company with the Securities and
Exchange Commission. NNN Capital Corp., a California corporation (the "Dealer
Manager"), will act as dealer manager for the offering of the Stock. The Company
is entering into this agreement with you to set forth the terms on which you, as
Escrow Agent, will hold and disburse the proceeds from subscriptions for the
purchase of the Stock in the Offering until such time as: (i) subscriptions from
nonaffiliates of the Company have been received for Stock, resulting in total
minimum capital raised of $1,000,000 (the "Required Capital"); (ii) in the case
of subscriptions received from residents of Pennsylvania ("Pennsylvania
Investors"), the Company has received subscriptions for Stock resulting in total
minimum capital raised of $20,000,000, not including subscriptions from
Pennsylvania Investors (the "Pennsylvania Required Capital"); and (iii) in the
case of subscriptions received from residents of Oregon ("Oregon Investors"),
the Company has received subscriptions for Stock resulting in total minimum
capital raised of $20,000,000, not including subscriptions from Oregon Investors
(the "Oregon Required Capital").
Based upon your representation and warranty that you are, and at all
times during the term of this agreement will be, deemed a "bank" as that term is
defined in Section 3(a)(6) of the Securities Exchange Act of 1934, as amended,
the Company hereby appoints you as Escrow Agent for purposes of holding the
proceeds from the subscriptions for the Stock, on the terms and conditions
hereinafter set forth:
1. Persons subscribing to purchase the Stock will be instructed by the Dealer
Manager or any soliciting dealers to remit the purchase price in the form of
checks, drafts, or money orders (hereinafter called "instruments of payment")
payable to the order of, or funds wired in favor of, "PriVest Bank, as Escrow
Agent." Any checks received made payable to a party other than the Escrow Agent
shall be returned to the soliciting dealer who submitted the check. Within one
(1) business day after receipt of instruments of payment from the Offering, the
Dealer Manager will send to you: (a) each subscriber's name, address, number of
shares purchased,
and purchase price remitted, and (b) the instruments of payment from such
subscribers, for deposit by you into an interest-bearing deposit account
entitled "ESCROW ACCOUNT FOR THE BENEFIT OF SUBSCRIBERS FOR COMMON STOCK OF G
REIT, INC." (the "Escrow Account"), which deposit shall occur within one (1)
business day after you receive such materials. Instruments of payment and wired
funds received from Pennsylvania Investors (as identified as such by the
Company) shall be placed in a separate interest-bearing deposit account entitled
"ESCROW ACCOUNT FOR THE BENEFIT OF PENNSYLVANIA INVESTORS" (the "Pennsylvania
Escrow Account"). Instruments of payment and wired funds received from Oregon
Investors (as identified as such by the Company) shall be placed in a separate
interest-bearing deposit account entitled "ESCROW ACCOUNT FOR THE BENEFIT OF
OREGON INVESTORS" (the "Oregon Escrow Account"). Each of the Escrow Account,
Pennsylvania Escrow Account, and Oregon Escrow Account will be established and
maintained in such a way as to permit the interest income calculations described
in paragraph 7(a).
2. You agree to promptly process for collection the instruments of payment
upon deposit into either the Escrow Account, the Pennsylvania Escrow Account, or
the Oregon Escrow Account. You will hold the deposited funds in the Escrow
Account, the Pennsylvania Escrow Account, and the Oregon Escrow Account until
such funds are disbursed in accordance with paragraph 3 hereof. If any of the
instruments of payment are returned to you for nonpayment prior to receipt by
you of the Required Capital or, in connection with subscriptions from
Pennsylvania Investors, the Pennsylvania Required Capital or, in connection with
subscriptions from Oregon Investors, the Oregon Required Capital, you shall
promptly notify the Dealer Manager and the Company in writing of such
nonpayment, and you are authorized to debit the Escrow Account, the Pennsylvania
Escrow Account, or the Oregon Escrow Account, as applicable, in the amount of
such return payment as well as any interest earned on the amount of such
payment.
3. (a) Subject to the provisions of subparagraphs 3(b)-3(e) below:
(i) once you have received and collected subscription proceeds in
the Escrow Account in collected funds an amount equal to or greater than the
Required Capital, you shall promptly notify the Company and, upon receiving
written instruction from the Company, (A) disburse to the Company, by check or
wire transfer, the funds in the Escrow Account representing the gross purchase
price for the Stock, and (B) disburse to the subscribers any interest thereon
calculated pursuant to the provisions of paragraph 7. For purposes of this
Agreement, the term "collected funds" shall mean all funds received by the
Escrow Agent have cleared normal banking channels and are in the form of cash.
Following such disbursements, the Escrow Account shall close and thereafter you
shall forward directly to the Company upon receipt by you any subscription
documents and instruments of payment received by you from subscribers other than
Pennsylvania Investors and Oregon Investors.
2
(ii) after the closing of the Escrow Account, the Company and the
Dealer Manager shall continue to forward to you instruments of payment and
subscriber information received from Pennsylvania Investors for deposit into the
Pennsylvania Escrow Account until such time as the Company notifies you in
writing that total subscription proceeds (not including the amount then in the
Pennsylvania Escrow Account) equal or exceed the Pennsylvania Required Capital.
Upon your receipt of a written notice from the Company that total subscription
proceeds (not including the amount then in the Pennsylvania Escrow Account)
equalling or exceeding the Pennsylvania Required Capital have been received in
collected funds, you shall (A) disburse to the Company, by check or wire
transfer, the funds then in the Pennsylvania Escrow Account representing the
gross purchase price for the Stock, and (B) disburse to the Pennsylvania
Investors any interest thereon calculated pursuant to the provisions of
paragraph 7. Following such disbursements, the Pennsylvania Escrow Account will
close and thereafter you shall forward directly to the Company upon receipt by
you any subscription documents and instruments of payment received by you.
(iii) after the closing of the Escrow Account, the Company and the
Dealer Manager shall continue to forward to you instruments of payment and
subscriber information received from Oregon Investors for deposit into the
Oregon Escrow Account until such time as the Company notifies you in writing
that total subscription proceeds (not including the amount then in the Oregon
Escrow Account) equal or exceed the Oregon Required Capital. Upon your receipt
of a written notice from the Company that total subscription proceeds (not
including the amount then in the Oregon Escrow Account) equalling or exceeding
the Oregon Required Capital have been received in collected funds, you shall (A)
disburse to the Company, by check or wire transfer, the funds then in the Oregon
Escrow Account representing the gross purchase price for the Stock, and (B)
disburse to the Oregon Investors any interest thereon calculated pursuant to the
provisions of paragraph 7. Following such disbursements, the Oregon Escrow
Account will close and thereafter you shall forward directly to the Company upon
receipt by you any subscription documents and instruments of payment received by
you.
(b) If, at the close of business on __________ ___, 200__ (the
"Expiration Date") you are not in receipt of evidence of subscriptions accepted
on or before such date, and instruments of payment dated not later than that
date (or actual wired funds), for the purchase of Stock providing for total
purchase proceeds that equal or exceed the Required Capital (from all sources
but exclusive of any funds received from subscriptions for Stock from entities
which the Company has notified you are affiliated with the Company or its
affiliates), you shall promptly so notify the Company. Thereafter, you agree to
request an executed IRS Form W-9 from each subscriber within ten (10) calendar
days after you provide such notice. On the tenth (10th) day following the date
of your receipt of the notice, you shall promptly return directly to each
subscriber by your check the collected funds deposited in the Escrow Account,
the Pennsylvania Escrow Account, and the Oregon
3
Escrow Account on behalf of such subscriber (unless earlier disbursed in
accordance with paragraph 3(c) below), or shall return the instruments of
payment delivered to you if such instruments have not been processed for
collection prior to such time, together with interest in the amounts calculated
pursuant to paragraph 7 for each subscriber at the address given to you by the
Dealer Manager or the Company. In the event an executed Form W-9 is not received
by you from each subscriber within such period, you shall thereupon remit an
amount to the subscribers in accordance with the provisions hereof, withholding
thirty-one percent (31%) of any interest income on subscription proceeds
(determined in accordance with paragraph 7) attributable to those subscribers
not furnishing executed forms in accordance with IRS Regulations. However, you
shall not be required to remit any payments until funds represented by such
payments have been collected by you.
(c) Notwithstanding subparagraphs 3(a) and 3(b) above, if you are not
in receipt of evidence of subscriptions accepted on or before the close of
business on such date that is 120 days after commencement of the Offering (the
Company will notify you of the commencement date of the Offering) (the "Initial
Escrow Period"), and instruments of payment dated not later than that date (or
actual wired funds), for the purchase of Stock providing for total purchase
proceeds (from all sources other than Pennsylvania Investors) that equal or
exceed the Pennsylvania Required Capital, you shall promptly so notify the
Company. Thereafter, the Company shall send to each Pennsylvania Investor by
certified mail within ten (10) calendar days after the end of the Initial Escrow
Period a notification in the form of Exhibit A. If, pursuant to such
---------
notification, a Pennsylvania Investor requests the return of his or her
subscription funds within ten (10) calendar days after receipt of the
notification (the "Request Period"), you agree to request an executed IRS Form
W-9 from each such Pennsylvania Investor within ten (10) calendar days after you
receive such notice from such Pennsylvania Investor. You shall promptly return
directly to each Pennsylvania Investor by your check the collected funds
deposited in the Pennsylvania Escrow Account on behalf of each Pennsylvania
Investor, or shall return the instruments of payment delivered to you if such
instruments have not been processed for collection prior to such time, at the
address given to you by the Dealer Manager or the Company, together with
interest income in the amounts calculated pursuant to paragraph 7 for each
subscriber. If an executed Form W-9 is not received by you from such
Pennsylvania Investor within such period, you shall thereupon remit an amount to
such Pennsylvania Investor in accordance with the provisions hereof, withholding
thirty-one percent (31%) of any interest income earned on subscription proceeds
(determined in accordance with paragraph 7) attributable to such Pennsylvania
Investor not furnishing executed forms in accordance with IRS Regulations.
However, you shall not be required to remit any payments until funds represented
by such payments have been collected by you.
(d) The subscription funds of Pennsylvania Investors who do not request
the return of their subscription funds within the Request Period shall
4
remain in the Pennsylvania Escrow Account for successive 120-day escrow periods
(each, a "Successive Escrow Period"), each commencing automatically upon the
termination of the prior Successive Escrow Period, and the Company and Escrow
Agent shall follow the notification and payment procedure set forth in
subparagraph 3(c) above with respect to the Initial Escrow Period for each
Successive Escrow Period until the occurrence of the earliest of (i) the
Expiration Date, (ii) the receipt and acceptance by the Company of subscriptions
for the purchase of Stock with total collected funds that equal or exceed the
Pennsylvania Required Capital and the disbursement of the Pennsylvania Escrow
Account on the terms specified herein, or (iii) all funds held in the
Pennsylvania Escrow Account having been returned to the Pennsylvania Investors
in accordance with the provisions hereof.
(e) If the Company rejects any subscription for which you have already
collected funds, you shall, upon the written request of the Company, promptly
issue a refund check to the rejected subscriber. If the Company rejects any
subscription for which you have not yet collected funds but have submitted the
subscriber's check for collection, you shall promptly issue a check in the
amount of the subscriber's check to the rejected subscriber after you have
cleared such funds. If you have not yet submitted a rejected subscriber's check
for collection, you shall promptly remit the subscriber's check directly to the
subscriber.
4. You shall report to the Company weekly the account balances in each of
the Escrow Account, the Pennsylvania Escrow Account, and the Oregon Escrow
Account and the activity in each account since the last report.
5. Prior to the disbursement of funds deposited in the Escrow Account , the
Pennsylvania Escrow Account, or the Oregon Escrow Account in accordance with the
provisions of paragraph 3 hereof, you shall invest all of the funds deposited in
the Escrow Account, the Pennsylvania Escrow Account, and the Oregon Escrow
Account in "Short-Term Investments" (as defined below) in compliance with SEC
Rule 15c2-4 and you are further authorized and you agree to reinvest all
earnings and interest derived therefrom in Short-Term Investments specified
below. In the event that instruments of payment are returned to you for
nonpayment, you are authorized to debit the Escrow Account, the Pennsylvania
Escrow Account, or the Oregon Escrow Account, as applicable, in accordance with
paragraph 2 hereof.
"Short-Term Investments" include obligations of, or obligations
guaranteed by, the United States government or bank money-market accounts or
certificates of deposit of national or state banks that have deposits insured by
the Federal Deposit Insurance Corporation (including certificates of deposit of
any bank acting as a depository or custodian for any such funds, including,
without limitation, such certificates or instruments of American International
Bank) which mature on or before the Expiration Date, unless such instrument
cannot be readily
5
sold or otherwise disposed of for cash by the Expiration Date without any
dissipation of the offering proceeds invested.
The following securities are not permissible investments:
(a) money market mutual funds;
(b) corporate equity or debt securities;
(c) repurchase agreements;
(d) bankers' acceptances;
(e) commercial paper; and
(f) municipal securities.
6. You are entitled to rely upon written instructions you receive from the
Company, unless you have actual knowledge that such instructions are not valid
or genuine; provided that, if in your opinion, any instructions from the Company
are unclear, you may request clarification from the Company prior to taking any
action and if such instructions continue to be unclear, you may rely upon
written instructions from the Company's legal counsel in distributing or
continuing to hold any funds. However, you shall not be required to disburse any
funds attributable to instruments of payment which have not been collected by
you, provided you shall use your best efforts to promptly collect such funds
after your receipt of disbursement instructions from the Company and shall
disburse such funds in compliance with the disbursement instructions from the
Company.
7. If the Offering terminates prior to receipt of the Required Capital or
one or more Pennsylvania Investors elects to have his or her subscription
returned in accordance with paragraph 3, interest income earned on subscription
proceeds deposited in the Escrow Account (the "Escrow Income"), the Pennsylvania
Escrow Account (the "Pennsylvania Escrow Income"), and the Oregon Escrow Account
(the "Oregon Escrow Income") shall be remitted to subscribers in accordance with
paragraph 3 and without any deductions for escrow expenses. Each subscriber's
pro rata portion of Escrow Income, Pennsylvania Escrow Income, or Oregon Escrow
Income shall be determined as follows: the total amount of Escrow Income (or
Pennsylvania Escrow Income or Oregon Escrow Income, as appropriate) shall be
multiplied by a fraction, (i) the numerator of which is determined by
multiplying the number of shares of Stock purchased by said subscriber times the
number of days said subscriber's proceeds are held in the Escrow Account, the
Pennsylvania Escrow Account, or the Oregon Escrow Account, as applicable, prior
to the date of disbursement, and (ii) the denominator of which is the total of
the numerators for all such subscribers in such account. The Company shall
reimburse the Escrow Agent for all escrow expenses. You shall remit all such
Escrow Income, Pennsylvania Escrow Income, and Oregon Escrow Income in
accordance with paragraph 3.
6
8. As compensation for serving as Escrow Agent hereunder, you shall receive
a fee, as set forth in Schedule A attached hereto.
----------
9. In performing any of your duties hereunder, you shall not incur any
liability to anyone for any damages, losses, or expenses, except for your
willful misconduct, breach of trust, or gross negligence. Accordingly, you shall
not incur any such liability with respect to any action taken or omitted (a) in
good faith upon advice of your counsel given with respect to any questions
relating to your duties and responsibilities under this Agreement, or (b) in
reliance upon any instrument, including any written instrument or instruction
provided for in this Agreement, not only as to its due execution and validity
and effectiveness of its provisions but also as to the truth and accuracy of
information contained therein, which you shall in good faith believe to be
genuine, to have been signed or presented by a proper person or persons and to
conform to the provisions of this Agreement.
10. The Company hereby agrees to indemnify and hold you harmless against
any and all losses, claims, damages, liabilities, and expenses, including
reasonable attorneys' fees and disbursements, that may be imposed on you or
incurred by you in connection with your acceptance of appointment as the Escrow
Agent hereunder, or the performance of your duties hereunder, including any
litigation arising from this Agreement or involving the subject matter hereof,
except where such losses, claims, damages, liabilities, and expenses result from
your willful misconduct, breach of trust, or gross negligence.
11. In the event of a dispute between the parties hereto sufficient in your
discretion to justify doing so, you shall be entitled to tender into the
registry or custody of any court of competent jurisdiction all money or property
in your hands under this Agreement, together with such legal pleadings as you
deem appropriate, and thereupon be discharged from all further duties and
liabilities under this Agreement. In the event of any uncertainty as to your
duties hereunder, you may refuse to act under the provisions of this Agreement
pending order of a court of competent jurisdiction and you shall have no
liability to the Company or to any other person as a result of such action. Any
such legal action may be brought in such court as you shall determine to have
jurisdiction thereof. The filing of any such legal proceedings shall not deprive
you of your compensation earned prior to such filing.
12. All communications and notices required or permitted by this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally or by messenger or by overnight delivery service or when received via
telecopy or other electronic transmission, in all cases addressed to the person
for whom it is intended at such person's address set forth below or to such
other address as a party shall have designated by notice in writing to the other
party in the manner provided by this paragraph:
7
(a) if to the Company:
G REIT, Inc.
0000 X. Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxx, Xxxxxxxxxx 00000
fax: (000) 000-0000
Attn.: Xxxxxxx X. Xxxxxxxx, President
(b) if to the Dealer Manager:
NNN Capital Corp.
0000 X. Xxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxx, Xxxxxxxxxx 00000
fax: (000) 000-0000
Attn.: Xxxxx X. Xxxxxxxx
(c) if to you:
PriVest Bank
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000
fax: _________________
Attn.: _________________
Each party hereto may, from time to time, change the address to which notices to
it are to be delivered or mailed hereunder by notice in accordance herewith to
the other parties.
13. This Agreement shall be governed by the laws of the State of California
as to both interpretation and performance without regard to the conflict of laws
rules thereof.
14. The provisions of this Agreement shall be binding upon the legal
representatives, successors, and assigns of the parties hereto.
15. The Company and the Dealer Manager hereby acknowledge that you are
serving as Escrow Agent only for the limited purposes herein set forth, and
hereby agree that they will not represent or imply that you, by serving as
Escrow Agent hereunder or otherwise, have investigated the desirability or
advisability of investment in the Company or have approved, endorsed, or passed
upon the merits of the Stock or the Company, nor shall they use your name in any
manner whatsoever in connection with the offer or sale of the Stock other than
by acknowledgment that you have agreed to serve as Escrow Agent for the limited
purposes herein set forth.
8
16. This Agreement and any amendment hereto may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed to be an
original.
17. Except as otherwise required for subscription funds received from
Pennsylvania Investors and Oregon Investors as provided herein, in the event
that you receive instruments of payment (or wired funds) after the Required
Capital has been received and the proceeds of the Escrow Account have been
distributed to the Company, you are hereby authorized to deposit such
instruments of payment within one (1) business day to any deposit account as
directed by the Company. The application of said funds into a deposit account or
to forward such funds directly to the Company, in other case directed by the
Company shall be a full acquittance to you and you shall not be responsible for
the application of said funds thereafter.
18. The Escrow Agent shall be bound only by the terms of this Escrow
Agreement and shall not be bound by or incur any liability with respect to any
other agreements or understanding between any other parties, whether or not the
Escrow Agent has knowledge of any such agreements or understandings.
19. Indemnification provisions set forth herein shall survive the
termination of this Agreement.
20. Unless otherwise provided in this Agreement, final termination of this
Escrow Agreement shall occur on the date that all funds held in the Escrow
Account are distributed either (a) to the Company or to subscribers pursuant to
paragraph 3 hereof or (b) to a successor escrow agent upon written instructions
from the Company.
21. The Escrow Agent has no responsibility for accepting, rejecting, or
approving subscriptions.
22. This Agreement shall not be modified, revoked, released, or terminated
unless reduced to writing and signed by all parties hereto, subject to the
following paragraph.
If, at any time, any attempt is made to modify this Agreement in a
manner that would increase the duties and responsibilities of the Escrow Agent
or to modify this Agreement in any manner which the Escrow Agent shall deem
undesirable, or at any other time, the Escrow Agent may resign by providing
written notice to the Company and until (a) the acceptance by a successor escrow
agent as shall be appointed by the Company; or (b) thirty (30) days after such
written notice has been given, whichever occurs sooner, the Escrow Agent's only
remaining obligation shall be to perform its duties hereunder in accordance with
the terms of the Agreement.
23. The Escrow Agent may resign at any time from its obligations under this
Escrow Agreement by providing written notice to the Company. Such
resignation shall be effective on the date specified in such notice which shall
be not less than thirty (30) days after such written notice has been given. The
Escrow Agent shall have no responsibility for the appointment of a successor
escrow agent.
24. The Escrow Agent may be removed for cause by the Company by written
notice to the Escrow Agent effective on the date specified in such written
notice. The removal of the Escrow Agent shall not deprive the Escrow Agent of
its compensation earned prior to such removal.
[Signature page follows]
10
Agreed to as of the ____ day of ________________, ______.
G REIT, INC.
By: _______________________________________________
Name: ____________________________________________
Title: _____________________________________________
NNN CAPITAL CORP.
By: _______________________________________________
Name: ____________________________________________
Title: ____________________________________________
The terms and conditions contained above are hereby accepted and agreed to by:
PRIVEST BANK
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
11
EXHIBIT A
[Form of Notice to Pennsylvania Investors]
You have tendered a subscription to purchase shares of common stock of
G REIT, Inc. (the "Company"). Your subscription is currently being held in
escrow. The guidelines of the Pennsylvania Securities Commission do not permit
the Company to accept subscriptions from Pennsylvania residents until an
aggregate of $20,000,000 of gross offering proceeds have been received by the
Company. The Pennsylvania guidelines provide that until this minimum amount of
offering proceeds is received by the Company, every 120 days during the offering
period Pennsylvania subscribers may request that their subscription be returned.
If you wish to continue your subscription in escrow until the
Pennsylvania minimum subscription amount is received, nothing further is
required.
If you wish to terminate your subscription for the Company's common
stock and have your subscription returned please so indicate below, sign, date,
and return to the Escrow Agent, PriVest Bank, at the address below.
-----------------------------
I hereby terminate my prior subscription to purchase shares of
common stock of G REIT, Inc. and request the return of my
subscription funds. I certify to G REIT, Inc. that I am a resident of
Pennsylvania.
---------------------------------------------
Signature
Name:
---------------------------------------
(please print)
Date
-------------------------
Please send the subscription refund to:
--------------------------------------
--------------------------------------
--------------------------------------
12
SCHEDULE A TO
ESCROW AGREEMENT FOR
G REIT, INC.
Schedule of Fees - Escrow Agency
PriVest Bank
Administration Fee - Payable Annually ..............................$__________
Commencing on the date of this Agreement and
on the same day of each year thereafter.
For costs incurred in connection with returned checks ..............$__________
per returned check
Charges for refunding subscription proceeds if the Required Capital, the
Pennsylvania Required Capital, or the Oregon Required Capital are not met will
be negotiated between the parties.
Charges for filing reports or information as may be required by Internal Revenue
Service regulations or for the performance of any services not contemplated at
the time of opening account, or not of a routine administrative nature, or not
specifically covered in this schedule, will be negotiated between the parties.
Actual out-of-pocket expenses such as attorneys fees, cost of special checks,
postage, insurance, telephone, telegraph, etc., will be billed at cost.
13
