Exhibit 10.2
FORM OF RULE 419 ESCROW AGREEMENT
Letter of Escrow Instructions
To: Corporate Trust/Agency Administration
Apex Wealth Enterprises Limited - Rule 419 escrow, __________________
Bank Escrow No. __________
This Letter of Escrow Instructions to ___________ Bank, hereinafter called
Escrow Agent, shall become immediately and automatically become operative and
effective upon the successful completion of a public offering of certain
securities of Apex Wealth Enterprises Limited (the "Company") which is described
more fully in the Company's Form F-1 Registration Statement under the Securities
Act of 1933 (Registration No.333-___________). The Company and the Escrow Agent
have previously entered into a Letter of Escrow Instructions dated
_________________, 2003 which relates to the creation, operation and termination
of the Apex Wealth Enterprises Limited - Subscription Escrow, _________ Bank
Escrow No. ___________ (the "Subscription Escrow"). The terms and conditions of
the Subscription Escrow are incorporated herein by this reference.
1. ESCROW PURPOSE:
1.1 This escrow is a single party holding escrow established by the
Company. There are no other parties to this escrow.
1.2 The purpose of this escrow is to receive, hold and ultimately
distribute, in accordance with the terms of this agreement:
(a) The cash proceeds ("Offering Proceeds") of the Company's
registered public offering of securities;
and
(b) The stock certificates representing beneficial ownership of the
securities that will be sold to the public and issued as
compensation as a result of the Company's registered public
offering of securities.
1.3 This escrow agreement constitutes an essential element of the Company's
proposed public offering of securities and is required by Securities
and Exchange Commission Rule 419. The parties to this Agreement shall,
at all times, conduct all of their activities relating to the Rule 419
escrow created hereby in strict compliance with the letter and the
spirit of Rule 419. In the event of any inconsistency between the terms
of this Agreement and the requirements of Rule 419, the requirements of
Rule 419 shall have priority.
2. ESCROW DEPOSITS:
2.1 Upon successful completion of the Company's offering, the escrow agent
for the Subscription Escrow, will
(a) Prepare a detailed schedule that identifies each person who
has purchased shares of the Company's Common Stock, states the
number of shares purchased by each subscriber, and otherwise
complies with the requirements of 12 CFR 330.1 of the Regulations
of the Federal Deposit Insurance Corporation.; and
(b) Directly transfer to the Rule 419 escrow created by this
agreement all funds then on deposit in the Subscription Escrow,
including any interest previously earned thereon.
2.2 As soon as practicable after the successful completion of the Company's
offering, the Company will deliver, or cause to be delivered, to the Escrow
Agent, Stock Certificates representing the ownership of the 2,000,000 shares of
common stock that have been sold to the public in connection with the Company's
public offering of securities. All stock certificates delivered to the
Escrow Agent shall be registered in the name of the owner thereof and contain
such other information as the Company and the Escrow Agent deem necessary or
desirable to comply with the requirements of Securities and
Exchange Commission Rule 419 and the Regulations of the Federal Deposit
Insurance Corporation, or otherwise provide for the efficient performance
of the Escrow Agent's duties hereunder.
2.3 When the Escrow Agent has received the subscription funds specified in
Section 2.1 and the stock certificates specified in Section 2.2, it shall
examine the stock certificates delivered by the Company to confirm that the
information on the stock certificates agrees in all particulars with the
information in the detailed schedule prepared by the subscription escrow agent.
In the event of any discrepancy between the records of the subscription escrow
agent and the records of the Company, the records of the subscription escrow
agent shall have priority.
2.4 When the Escrow Agent has confirmed the receipt of $20,000 in cash
subscription proceeds, together with any interest previously earned thereon, and
confirmed that the stock certificates delivered by the Company agree in all
particulars with the information in the detailed schedule prepared by the
subscription escrow agent, the Escrow Agent shall promptly disburse the sum of
Two Thousand Dollars ($2,000) to the Company. All remaining subscription funds
shall be deposited in the Rule 419 escrow and be treated for all purposes of
this agreement as the "Escrow Funds."
2.5 The Escrow Funds and all stock certificates delivered to the Escrow
Agent pursuant to Sections 2.2 shall be held and disposed of by Escrow Agent in
accordance with the following instructions and upon the terms and conditions
hereinafter set forth.
3. INVESTMENT OF ESCROW FUNDS:
3.1 The Escrow Funds may only be invested in (i) an obligation that
constitutes a "deposit" as that term is defined in section 3(1) of the Federal
Deposit Insurance Act, (ii) securities of an open-end investment company
registered under the Investment Company Act of 1940 that holds itself our 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 (iii) securities that
are direct obligations of, or obligations guaranteed as to principal or interest
by, the United States.
3.2 All interest earned with respect to the Escrow Funds shall be added to
the principal thereof and treated as Escrow Funds for all purposes of this
Agreement.
3.3 The Escrow Agent, in consultation with the Company, shall allocated the
Escrow Funds in such a manner as will, in the judgment of the Escrow Agent,
maximize the annual return on the Escrow Funds, maximize the amount that is
insured by the United States and/or guaranteed as to principal and interest by
the United States, and minimize the potential for loss of principal through
market fluctuations.
3.4 The Escrow Funds, shall not be invested in any securities that have a
scheduled maturity of more than six months from the date of acquisition.
4. TERMINATION AND DISBURSEMENTS:
4.1 If the Company has not negotiated a business combination, filed a
post-effective amendment to its registration statement, completed a
reconfirmation offering meeting the requirements of Rule 419 and closed on the
business combination agreement on or before ___________________ ("Termination
Date") the Escrow Agent shall:
(a) Promptly forward a refund check to each person who purchased shares of
the Company's common stock for cash in connection with the original offering.
Notwithstanding any other provision of this agreement, the owners of the
compensation shares referred to in Section 2.5 shall not be entitled to
participate in any cash distributions. For purposes of this Agreement, all
refunds shall be allocated among the purchasers of the Company's common stock on
a per share basis and the Escrow Agent shall not be obligated to separately
account for interest earned on the subscription escrow. Instead, the Escrow
Agent is specifically authorized to determine the available balance in the
Escrow Account and divide such balance by 2,000,000 shares to calculate the
amount of cash per share to be distributed to the purchasers. Refund checks
shall be rounded up to the nearest whole cent and any overpayment resulting from
such rounding shall be payable in cash by the Company.
(b) Promptly return all stock certificates to the Company for cancellation.
When all stock certificates and all Escrow Funds deposited with the Escrow Agent
have been disbursed in accordance with the provisions of this Section 4.1, the
Rule 419 escrow will terminate.
4.2 If the Company negotiates a business combination, files a
post-effective amendment to its registration statement, completes a
reconfirmation offering meeting the requirements of Rule 419 and closes on the
business combination agreement on or before the Termination Date, the Company
shall promptly deliver, or cause to be delivered, to the Escrow Agent:
(a) A copy of the definitive prospectus included in its post-effective
amendment and used in connection with the reconfirmation offering;
(b) A schedule setting forth the identity of each person who purchased
shares of the Company's common stock for cash in connection with the original
offering;
(c) A schedule setting forth the identity of each person who received
shares of the Company's common stock as compensation in connection with the
original offering;
(d) A copy of each subscription reconfirmation agreement received from a
person who purchased shares of the Company's common stock for cash in connection
with the original offering;
(e) A copy of each subscription reconfirmation agreement received from a
person who received shares of the Company's common stock as compensation in
connection with the original offering;
(f) A schedule setting forth the identity of each person who refused or
otherwise failed to execute a reconfirmation agreement within the time limits
specified in Rule 419 and the definitive prospectus; and
(g) A Certificate signed by a Director and the Secretary of the Company
that all conditions precedent to the termination of the Rule 419 escrow have
been satisfied.
4.3 Upon receipt of the notice and documentation specified in Section 4.2,
the Escrow Agent shall:
(a) Promptly forward a refund check to each person who purchased shares of
the Company's common stock for cash in connection with the original offering and
subsequently refused or otherwise failed to execute a reconfirmation agreement
within the time limits specified in Rule 419 and the definitive prospectus. For
purposes of this Agreement, all refund checks shall be rounded up to the nearest
cent and any overpayment resulting from such rounding shall be deducted from the
amount payable to the Company;
(b) Promptly forward a stock certificate to each person who purchased
shares of the Company's common stock for cash in connection with the original
offering and subsequently executed a reconfirmation agreement;
(c) Promptly forward a stock certificate to each person who received shares
of the Company's common stock as compensation in connection with the original
offering and subsequently executed a reconfirmation agreement;
(d) Promptly return all remaining stock certificates to the Company for
cancellation; and
(e) Promptly forward all remaining Escrow Funds to the Company. When all
stock certificates and all Escrow Funds deposited with the Escrow Agent have
been disbursed in accordance with the provisions of this Section 4.3, the Rule
419 escrow will terminate.
4.4 In the Company conducts a reconfirmation offering and the terms of such
offering are not accepted by the holders of the number of shares specified in
the definitive prospectus included in the Company's post-effective amendment,
the Escrow Agent shall:
(a) Promptly forward a refund check to each person who purchased shares of
the Company's common stock for cash in connection with the original offering.
For purposes of this Agreement, all refund checks shall be rounded up to the
nearest cent and any overpayment resulting from such rounding shall be deducted
from the amount payable to the Company.
(b) Promptly return all stock certificates to the Company for cancellation.
When all stock certificates and all Escrow Funds deposited with the Escrow
Agent have been disbursed in accordance with the provisions of this Section 4.4,
the Rule 419 escrow will terminate. 5. NO MODIFICATION:
5.1 After the deposit of the Escrow Funds, these instructions shall not be
modified, rescinded or amended.
6. GENERAL PROVISIONS:
6.1 All parties understand and agree that Escrow Agent is not a principal,
participant, or beneficiary of the underlying transaction that necessitates this
Agreement. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in acting or refraining from acting on any instrument believed by it to be
genuine and to have been signed or presented by the proper party or parties,
their officers, representatives or agents. The Escrow Agent shall not be liable
for any action taken or omitted by it in good faith and believed by it to be
authorized hereby, nor for action taken or omitted by it in accordance with the
advice of its counsel. Escrow Agent shall be responsible for holding, investing
and disbursing the Escrowed Assets pursuant to the Agreement, but in no event
shall be liable for any exemplary or consequential damages in excess of Escrow
Agent's fee hereunder.
6.2 Unless otherwise provided herein, the Escrow Agent shall accept the
Escrowed Assets pursuant to the Agreement and invest such assets at the written
request of the parties hereto specifying with particularity or by accompanying
schedule the type and identity o the assets to be deposited. Acceptance of the
Escrowed Assets shall be communicated by Escrow Agent to parties by account
statement or otherwise in writing as soon as practicable after receipt, and any
discrepancies shall be noted to Escrow Agent by the parties in writing within
forty five (45) days of receiving such communication. Failure to note any
discrepancies shall be deemed confirmation of the description of Escrowed Assets
listed on the report regardless of any variations from the original schedule.
Any request to invest assets shall be in writing or facsimile and specify the
type of investment to be made, the maturity date, and the principal amount to be
invested. The Escrow Agent shall not be liable for delay or failure to invest
funds without written instructions or for losses on any investments made by it
pursuant to and in compliance with such instructions.
6.3 Should any controversy arise between the undersigned with respect to
this Escrow Agreement or with respect to the right to receive the Escrowed
Assets, Escrow Agent shall have the right to consult counsel and/or to institute
a bill of interpleader in any court of competent jurisdiction to determine the
rights of the parties. In the event it is a party to any dispute, Escrow Agent
shall have the additional right to refer such controversy to binding
arbitration. Should such actions be necessary, or should Escrow Agent become
involved in litigation in any manner whatsoever on account of this Escrow
Agreement of the Escrowed Assets made hereunder, the undersigned hereby bind and
obligate themselves, their heirs and legal representatives to pay Escrow Agent,
in addition to any charge made hereunder for acting as Escrow Agent, reasonable
attorney's fees incurred by Escrow Agent, and any other disbursements, expenses,
losses, costs and damages in connection with and resulting from such actions.
6.4 The Escrow Agent shall have no liability under, or duty to inquire
beyond the terms and provisions of the Agreement, and it is agreed that its
duties are purely ministerial in nature, and that the Escrow Agent shall incur
no liability whatsoever except for willful misconduct or gross negligence so
long as it has acted in good faith. The Escrow Agent shall not be bound by any
modification, amendment, termination, cancellation, rescission or super session
of this Escrow Agreement unless the same shall be in writing and signed by all
of the other parties hereto and, if its duties as Escrow Agent hereunder are
affected thereby, unless it shall have given prior written consent thereto.
6.5 The Escrow Agent may at any time resign hereunder by giving written
notice of its resignation to the other parties hereto, at their address set
forth herein, at least ten (10) days prior to the date specified for such
resignation to take effect, and upon the effective date of such resignation, the
Escrowed Assets hereunder shall be delivered to such person as may be designated
in writing by the appropriate parties executing this Escrow Agreement, whereupon
all the Escrow Agent's obligations hereunder shall cease and terminate. The
Escrow Agent's sole responsibility until such termination shall be to keep
safely all Escrowed Assets and to deliver the same to a person designated by the
appropriate parties executing this Escrow Agreement or in accordance with the
directions of a final order or judgment of a court of competent jurisdiction.
6.6 The parties agree to indemnify, defend and hold the Escrow Agent
harmless from and against any and all loss, damage, tax, liability and expense
that may be incurred by the Escrow Agent arising out of or in connection with
its acceptance or appointments as Escrow Agent hereunder, including costs and
expenses of defending itself against any claim or liability in connection with
its performance hereunder.
6.7 The parties jointly and severally agree to pay to the Escrow Agent its
fees for the services rendered pursuant to the provisions of this Escrow
Agreement and will reimburse the Escrow Agent for reasonable expenses, including
reasonable attorney's fees incurred in connection with the negotiations,
drafting and performance of such services. Except as otherwise noted, this fee
covers account acceptance, set up and termination expenses; plus usual and
customary related administrative services such as safekeeping, investment and
payment of funds specified herein or in the exhibits attached. Activities
requiring excessive administrator time or out-of-pocket expenses such as
optional substitution of collateral or securities shall be deemed extraordinary
expenses for which related costs, transaction charges, and additional fees will
be billed at Escrow Agent's standard charges for such items. A fee schedule has
been provided to all parties to this Escrow.
6.8 Escrow Agent is hereby given a lien on all Escrowed Assets for all
indebtedness that may become owing to Escrow Agent hereunder, which lien may be
enforced by Escrow Agent by setoff or appropriate foreclosure proceedings.
6.9 The parties warrant to the Escrow Agent that there are no Federal,
State or local tax liability or filing requirements whatsoever concerning the
Escrow Agent's actions contemplated hereunder and warrant and represent to the
Escrow Agent that the Escrow Agent has no duty to withhold or file any report of
any tax liability under any Federal of State income tax, local or State property
tax, local or State sales or use taxes, or any other tax by any taxing
authority. The parties hereto agree to jointly and severally indemnify the
Escrow Agent fully for any tax liability, penalties or interest incurred by the
Escrow Agent arising hereunder and agree to pay in full any such tax liability
together with penalty and interest if any tax liability is ultimately assessed
against the Escrow Agent for any reason as a result of its action hereunder
(except for the Escrow Agent's individual income tax liability aising from its
income fees).
6.10 The Escrow Agent shall have no liability for loss arising from any
cause beyond its control, including, but not limited to, the following:
(a) the act, failure or neglect of any agent or correspondent selected by
the Escrow Agent or the parties hereto;
(b) any delay, error, omission or default connected with the remittance of
funds;
(c) any delay, error, omission or default of any mail, telegraph, cable or
wireless agency or operator;
(d) the acts or edicts of any government or governmental agency or other
group or entity exercising governmental powers.
6.11 This Escrow Agreement shall be governed by and construed in accordance
with the laws of the State of New York. The parties hereto expressly waive such
duties and liabilities, it being their intent to create solely an agency
relationship and hold the Escrow Agent liable only in the event of its gross
negligence or willful misconduct in order to obtain the lower fee schedule rates
as specifically negotiated with the Escrow Agent.
7. NOTICES:
7.1 All notices, demands, requests or payments provided for or given
pursuant to this Escrow must be in writing or facsimile. All such notices shall
be deemed to have been properly given or served by personal delivery or by
depositing the same in the United States mail addressed to the person entitled
to receive such notice at the address set forth below.
To: The Company
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To: ___________________
___________ Bank, N.A.
Corporate Trust/Agency Administration
7.2 All notices shall be effective when received.
Approved and accepted by the Parties this ________ day of [ ], 2003.
Apex Wealth Enterprises Limited _________________ Bank, N.A.
By: By:
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for and on behalf of (Name and Title of Signatory)
Apex Wealth Enterprises Limited of _________________ Bank, N.A.