ESCROW AGREEMENT (the "Agreement") made this __ day of December, 2000 between
Bodyguard Records.com, Inc., a privately owned Delaware corporation with
principal offices at 138 Fulton Street, New York, New York 10038, (the
"Company") and Continental Stock Transfer & Trust Company, with an office at 2
Broadway, 19th Floor, New York, New York 10004 (the "Escrowee"). The Company and
the Escrowee are sometimes collectively referred to as the "Parties" and
individually as a "Party".
W I T N E S S E T H :
WHEREAS, the Company intends to conduct a public offering (the
"Offering") of a minimum of 100,000 and a maximum of 400,000 shares of common
stock, $.001 par value per share (the "Shares") at $2.50 per Share on a 100,000
Share-or-none-best efforts basis pursuant to Form SB-2 Registration Statement
No. 333-40444 (the "Registration Statement") as filed with the Securities and
Exchange Commission (the "SEC") on June , 2000 and ordered effective by the SEC
on _________, the date the Company is authorized to accept subscriptions for the
Shares(the "Effective Date"); and
WHEREAS, in accordance with the terms and conditions enumerated in the
definitive prospectus contained in the Registration Statement and dated the
Effective Date, a copy of which is annexed hereto as Exhibit "A" and hereby
incorporated herein by reference (the "Prospectus"), the Company proposes to
establish an escrow arrangement with the Escrowee; and
WHEREAS, the Escrowee has agreed to act as escrow agent in connection
with the deposit by the Company with the Escrowee of the gross proceeds received
from the sale of the Shares to subscribers in the Offering whether cash, checks
or wire transfers (the "Funds") on the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, the Escrowee has an agreement with The Chase Manhattan Bank,
52 Broadway, New York, 10004 (the "Bank") to establish a non-interest bearing
escrow account into which the Escrowee shall deposit the Funds (the "Bank
Account"); and
WHEREAS, the Company understands and accepts that the Escrowee's duties
and responsibilities hereunder are purely ministerial in nature.
NOW, THEREFORE, it is agreed as follows:
1. Establishment of Escrow. By virtue of their respective execution of
this Agreement, the Company's causing the delivery of the Funds to the Escrowee,
and the Escrowee's acceptance of the Funds no sooner than the Effective Date,
the Parties hereby create the escrow made the subject of this Agreement. All
checks representing Funds shall be payable to "Continental Stock Transfer as
Escrow Agent for Bodyguard Records.com". On the day following the receipt
thereof, any check not payable as indicated herein shall be returned by the
escrowee to the prospective purchaser, or if the Escrowee has insufficient
information to do so, then to the Company. Any such check shall not be deemed to
have been delivered to the Escrowee pursuant to this Agreement. The Company
hereby authorizes the Escrowee to deposit the Funds into the Bank Account and to
utilize, transfer and disburse the Funds as hereinafter provided. The
1
<PAGE>
2. Terms of the Escrow. Commencing with the execution of this Agreement
on or after the Effective Date, and continuing until the Company's deposit of
$250,000 in Funds which shall have clear collection representing the gross
proceeds from the sale of a minimum of 100,000 Shares (the "Cleared Funds") or
90 calendar days from the date of this Agreement whichever sooner occurs (the
"Minimum Sale Termination Date"), the Escrowee shall act as escrow agent. The
Escrowee agrees to receive the Funds and disburse the Cleared Funds in
accordance with the following conditions:
A. Deposit of Funds.All Funds from the sale of Shares shall be
deposited in the Bank Account. Prior to the making of each deposit, the Company
shall have delivered to the Escrowee in writing: (i) the name and address of
each subscriber to the Shares (the "Subscriber"); (ii) the aggregate number of
Shares subscribed for by the Subscriber; and (iii) the aggregate Dollar amount
of such subscription (the "Subscription Information"). Thereafter the Escrowee
shall cause the Bank to process all Funds for collection through the banking
system. The Escrowee shall not be required to accept Funds for credit into the
Bank Account which are not accompanied by all Subscription Information or
received during the Escrowee's normal business hours. The Escrowee shall notify
the Company, on a daily basis, of the amount of Funds which have been deposited
in the Bank Account and of the amount of Cleared Funds in the Bank Account.
B. Successfully Reaching the Minimum. In the event that a minimum of
$250,000 in Cleared Funds from the sale of an aggregate of 100,000 Shares shall
have been deposited in the Escrow Account on or before the Minimum Sale
Termination Date, then the Escrowee shall furnish the Company with written
notice to that effect. The Escrowee shall then be authorized and directed to
disburse the Cleared Funds to the Company in accordance with the written
instructions received from the Company. Thereafter this Agreement shall
automatically terminate and the Escrowee shall be discharged without further
action on behalf of any Party and without further notice to the Company.
C. Failure to Reach the Minimum. In the event that a minimum of
$250,000 in Cleared Funds from the sale of an aggregate of 100,000 Shares shall
not have been deposited in the Escrow Account on or before the Minimum Sale
Termination Date or the expiration of the Collection Period (as that term is
defined in Paragraph D below), then the Escrowee shall promptly, via checks
drawn on the Bank Account, return to each Subscriber the amount of Cleared Funds
received from such Subscriber and deposited into the Bank Account without
interest thereon or deduction therefrom. Any checks received after the Minimum
Sale Termination Date shall also be returned to Subscribers as aforesaid. The
Escrowee shall furnish the Company with prompt written notice of the Company's
failure to meet the minimum Share sale requirements of this Agreement.
Thereafter this Agreement shall automatically terminate and the Escrowee shall
be discharged without further action on behalf of any Party and without further
notice to the Company.
D. Collection Period. If, on the close of business on the Minimum Sale
Termination Date a minimum of $250,000 in Cleared Funds from the sale of an
aggregate of 100,000 Shares shall not have been deposited in the Escrow Account,
2
<PAGE>
but a minimum of $250,000 in Cleared Funds from the sale of an aggregate of
100,000 Shares shall not have been deposited in the Escrow Account the Escrowee
shall have received Funds that if and when the same clear collection would bring
the of Cleared Funds to $250,000 or more, then the Escrowee shall be authorized
to suspend termination of this Agreement for a period of ten business days to
allow such Funds to clear collection (the "Collection Period"). If, following
the Collection Period, a minimum of $250,000 in Cleared Funds shall have been
deposited in the Bank Account, the Escrowee shall
E. Early Termination. In the event the Company shall terminate the
Offering before the Minimum Sale Termination Date, the Company shall furnish the
Escrowee with prompt written notice to that effect specifying the date on which
the Offering has been terminated (the "Termination Date"). Thereafter the
Escrowee shall promptly, via checks drawn on the Bank Account, return to each
Subscriber the amount of Cleared Funds received from such Subscriber and
deposited into the Bank Account without interest thereon or deduction therefrom.
Any checks received after the Termination Date or which have not cleared
collection by that date shall be processed by the Escrowee. If and when the same
clear collection, they shall be returned to Subscribers as aforesaid. Thereafter
this Agreement shall automatically terminate and the Escrowee shall be
discharged without further action on behalf of any Party and without further
notice to the Company.
F. Compensation of the Escrowee. The Escrowee shall receive a fee of
$100.00 per month for each month it serves as Escrowee and the reimbursement for
disbursements in connection with its time and expense incurred in fulfilling its
obligation pursuant to this Agreement including, but not limited to reasonable
counsel fees. The Escrowee shall have a lien on the Cleared Funds to the extent
of its fees for services as Escrowee. The Company agrees to pay the agreed upon
fee and disbursements to the Escrowee.
G. Good Faith Action. The Escrowee 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 or gross negligence.
3. Rights and Remedies of the Escrowee. The Escrowee shall have the
following rights and remedies:
A. Reliance. The Escrowee 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 Escrowee pursuant to this Agreement without the necessity of the Escrowee
verifying the truth or accuracy thereof. The Escrowee 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;
B. Counsel. The Escrowee may confer with legal counsel in the event of
any dispute or question as to the construction of any of the provisions hereof,
or its duties hereunder, and it shall incur no liability and it shall be fully
protected in acting in accordance with the opinions and instructions of such
counsel. The Company hereby authorize the Escrowee to utilize the Cleared Funds
for the payment of any of the Escrowee's legal fees unless the same are paid by
the Company;
3
<PAGE>
C. Remedies of Escrowee. The Escrowee is hereby authorized in the event
of any doubt as to the course of action he should take under this Agreement, to
petition the American Arbitration Association in the City of New York only, for
instructions or to interplead the Funds. The Company agrees to the jurisdiction
of the American Arbitration Association over their persons as well as the Funds
held by the Escrowee, waive personal service of process, and agree that service
of process by certified mail, return receipt requested, to the address set forth
herein shall constitute adequate notice of service hereunder and shall confer
personal jurisdiction on the American Arbitration Association in the City of New
York. The Company hereby agrees to indemnify and hold the Escrowee harmless from
any liability or losses occasioned thereby and to pay any and all of its cost,
expense and attorneys' fees incurred in any such action and agree that on such
petition or interpleader action that the Escrowee or its employees will be
relieved of further liability;
D. Resignation. The Escrowee may resign for any reason, upon ten
business days written notice to the Company. Should the Escrowee resign as
herein provided, it shall not be required to accept any deposit, make any
disbursement or otherwise dispose of the Funds and/or Cleared Funds, but its
only duty shall be to hold the Funds and/or Cleared Funds for a period of five
business days following the effective date of the Escrowee's resignation or
until they clear the banking system and become Cleared Funds, whichever sooner
occurs. Thereafter, and if a successor Escrowee shall have been appointed and
written notice thereof (including the name and address of such successor
escrowee) shall have been given to the Escrowee by the Company and such
successor escrowee, then the Escrowee shall pay over to the successor escrowee
the Funds and/or Cleared Funds, less any portion thereof previously paid out in
accordance with this Agreement. In the event the Escrowee shall not have
received written notice signed by the Company and a successor escrowee, then the
resigning Escrowee shall promptly, at its discretion either: (i) refund the
Funds and/or Cleared Funds to each prospective purchaser, without interest
thereon or deduction therefrom; or (ii) deposit or deliver the same to the
American Arbitration Association in the City of New York. Upon either such
delivery, the Escrowee shall automatically be released from any and all
liability under this Agreement. The Escrowee's resignation under this Paragraph
shall in no way change the terms and conditions of this Agreement concerning
reimbursement of expenses, indemnity and fees of the Escrowee;
E. No Duty to Enforce Agreements. The Escrowee shall not be responsible
for or be required to enforce any of the terms or conditions of any agreement
between the Company and any broker or dealer that the Company may recruit to
sell the Shares (the "Selling Agent") nor shall the Escrowee be responsible for
the performance by any Selling Agent or the Company of either of their
obligations under this Agreement;
F. No Duty to Accept Improperly Transmitted Funds. The Escrowee shall
not be required to accept from the Company or any Selling Agent any Funds or
Subscription Information pertaining to prospective purchasers unless such
Subscription Information is accompanied by checks, cash or wire transfers
meeting the requirements of Section 2. A, nor shall the Escrowee be required to
keep records of any information with respect to Funds deposited by the Company
4
<PAGE>
or any Selling Agent except as to the amount of such payments. However, the
Escrowee shall notify the Company or any Selling Agent within a reasonable time
of any discrepancy between the amount set forth in any Subscription Information
and the amount delivered to the Escrowee therewith; and
G. Uncertain Instructions. If the Escrowee is uncertain as to its
duties or rights hereunder or it shall receive instructions with respect to the
Bank Account, the Funds or the Cleared Funds which, in its sole determination,
are in conflict either with other instructions received by it or with any
provision of this Agreement, it shall be entitled to hold the Funds or the
Cleared Funds, or any portion thereof, in the Bank Account pending the
resolution of such uncertainty to the Escrowee's sole satisfaction. In this
regard, the Escrowee may await a final judgment of a court or courts of
competent jurisdiction; or deposit or transfer the Funds or the Cleared Funds
with the American Arbitration Association in the City of New York. Upon either
such delivery, the Escrowee shall automatically be released from any and all
liability under this Agreement.
4. Indemnification and Contribution.
A. The Company hereby agrees to indemnify the Escrowee and its
officers, directors, employees, agents and shareholders (collectively referred
to as the "Indemnitees") against, and bold 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 or gross negligence of the Indemnitees.
B. If the indemnification provided for in this Section 9 is applicable,
but for any reason is held to be unavailable, the Company 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 reasonable 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 actions
or omissions of the Indenmitors.
C. The provisions of this Section 9 shall survive any termination of
this Agreement, whether by disbursement of of the Funds, resignation of the
Escrowee or otherwise.
5. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Escrowee as follows:
A. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with power and authority
to conduct its business as the same is presently being conducted;
B. The Company has the corporate power to enter into this Agreement and
to carry out its obligations hereunder. The execution and delivery of this
Agreement and the performance of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly authorized by the
Company's Board of Directors, and no other corporate action or proceedings on
the part of the Company is necessary to authorize this Agreement and the
transactions contemplated hereby;
5
<PAGE>
C. The Company is not subject to or obligated under any charter,
by-laws or contracts or any license, franchise or permit, or subject to any
order or decree, which would be breached or violated by the execution, delivery
and performance of this Agreement by the Company in the time and manner
contemplated herein;
D. No party other than the Company and the Subscribers have or shall
have any lien, claim or security interest in the Funds, the Bank Account or any
part thereof;
E. 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 Funds, the Bank Account or any part thereof;
F. The Subscription Information submitted with each deposit of Funds
shall, at the time of submission and at the time of the escrowee's disbursement
of the Funds, shall be deemed a representation and warranty that such deposit
represents a bona fide payment by the Subscriber for the number of Shares set
forth in such Subscription Information;
8. Assignments. This Agreement shall not be assigned by the Company
without the prior written consent of the Escrowee and the written agreement by
any assignee to be bound by the terms of this Agreement. This Agreement shall
not be assigned by the Escrowee without the prior written consent of the Company
and the written agreement by any assignee to be bound by the terms of this
Agreement.
9. Additional Instruments. Each of the Parties shall from time to time,
at the request of the others, execute, acknowledge and deliver to the other any
and all further instruments that may be reasonably required to give full effect
and force to the provisions of this Agreement.
10. Entire Agreement. Each of the Parties hereby covenants that this
Agreement is intended to and does contain and embody herein all of the
understandings and agreements, both written or oral, of the Parties hereby with
respect to the subject matter of this Agreement, and that there exists no oral
agreement or understanding, express or implied liability, whereby the absolute,
final and unconditional character and nature of this Agreement shall be in any
way invalidated, empowered or affected. There are no representations, warranties
or covenants other than those set forth herein.
11. Laws of the State of New York. This Agreement shall be governed by
and interpreted under and construed in all respects in accordance with the laws
of the State of New York, irrespective of the place of domicile or residence of
the Parties.
12. Originals. This Agreement may be executed in counterparts each of
which so executed shall be deemed an original and constitute one and the same
agreement.
6
<PAGE>
13. Address of Parties. Each Party shall at all times keep the other
Party and the Escrowee informed of its principal place of business if different
from that stated herein, and shall promptly notify the other Party and the
Escrowee in writing of any change, giving the address of the new principal place
of business.
14. Notices. All notices that are required to be or may be sent
pursuant to the provision of this Agreement shall be sent by certified mail,
return receipt requested, or via overnight courier, to each of the Parties at
the addresses appearing on the first page of this Agreement, and shall count
from the date of receipt as shown on the return receipt mailing or the date
after the date of the airbill
15. Modification and Waiver. A modification or waiver of any of the
provisions of this Agreement shall be effective only if made in writing and
executed with the same formality as this Agreement. The failure of any Party to
insist upon strict performance of any of the provisions of this Agreement shall
not be construed as a waiver of any subsequent default of the same or similar
nature or of any other nature or kind.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
Bodyguard Records.com, Inc.
BY:
--------------------------------------------
John Rollo, President
Continental Stock Transfer & Trust Company
As Escrowee Only
By:
-------------------------------------------
Roger Bernhammer, Vice President
7
