Impoundment Of Proceeds Agreement {08-104}

IMPOUNDMENT OF PROCEEDS AGREEMENT This Impoundment of Proceeds Agreement (Agreement) was entered into on the _______ day of _________________, ________, by and between ______________________________________ (Agent), a (state) ( national) bank, whose principal place of business is located in ______________________, ________________, and ______________________ (Issuer), whose p rincipal place of business is located in ___________________, ___________________, and (if applicable) _______________________, (Underwriter), a registered broker-dealer in _________________ whose principal place of business is located in _____________________, _______________, (all of whom are herein collect ively referred to as Signatories). The Signatories agree that: An application to register the Issuers securities for offer and sale to pu blic investors (Public Offering) has been filed with the Securities Administr ator of the State of _________________________ (Administrator). As a condition to registering the Public Offering, the Administrator has required, and the Issuer (and Underwriter) has (have) agreed, that the gross proce eds which the Issuer (Underwriter) receives from the Public Offering (Impounded Funds) shall be promptly deposited into a segregated account (Impoundment Account) with the Agent until a minimum of $_______________________ of Impounded Funds has been deposited into the Impoundment Account. The Agent shall hold and ad minister the Impounded Funds in accordance with the terms of this Agreement. I. DEFINITIONS. The following definitions shall apply to this Agreement. A. An AFFILIATE is a PERSON who, directly or indirectly, CONTROLs, is CONTROLled by, or is under common CONTROL with the PERSON specified herein. B. An ASSOCIATE, when used to indicate a relationship with a PERSON, includes: 1. Corporations or legal entities, other than the Issuer or majority-owned subsidiaries of the Issuer, of which a PERSON is an officer, director, partner, or a direct or indirect, legal or beneficial owner of five percent (5%) or more of any class of EQUITY SECURITIES; 2. Trusts or other estates in which a PERSON has a substantial beneficia l interest or for which a PERSON serves as a trustee or in a similar capacity; and 3. A PERSONs spouse and relatives, by blood or by marriage, if the PERSON is a PROMOTER of the Issuer, its subsidiaries, its AFFILIATEs, or its parent. American LegalNet, Inc. www.USCourtForms.com<<<<<<<<<********>>>>>>>>>>>>> 2 C. CONTROL is the power to direct or influence the direction of the mana gement or policies of a PERSON, directly or indirectly, through the ownership of voting securities, by contract or otherwise. D. EQUITY SECURITIES include shares of common stock or similar securitie s and convertible securities, warrants, options or rights that may be conv erted into, or exercised to purchase, shares of common stock or similar securities. E. An IMPOUNDMENT AGENT is either a state chartered bank or a federally chartered bank (supervised by the Office of the Comptroller of the Curr ency) that is domiciled and whose principal place of business is located in the United States and whose deposits are insured by the FDIC. F. A PERSON is an individual, a corporation, a limited liability company , a partnership, an association, a joint-stock company, a trust, an unincorporated organization, a government or a political subdivision of a government, or any other legal entity. G. A PROMOTER may include: 1. A PERSON who, alone or in conjunction with one or more PERSONs, directly or indirectly, took the initiative in founding or organizing th e Issuer or CONTROLs the Issuer; 2. A PERSON who, directly or indirectly, receives, as consideration for services and/or property rendered, five percent (5%) or more of any cl ass of the Issuers EQUITY SECURITIES or five percent (5%) or more of t he proceeds from the sale of any class of the Issuers EQUITY SECURITIES. A PERSON, who receives securities or proceeds solely as underwriting compensation, is excluded from the definition of PROMOTER if that PERSON falls outside the definitions of I.G.1., above, or I.G.3., 4., or 5., below; 3. A PERSON who is an officer or director of the Issuer; 4. A PERSON who legally or beneficially, directly or indirectly, owns fi ve percent (5%) or more of any class of the Issuers EQUITY SECURITIES (5% shareholder) if that PERSON was in CONTROL of the Issuer at the time of acquiring five percent (5%) or more of any class of the Issuer s EQUITY SECURITIES or if that PERSON is in CONTROL of the Issuer at the time of the public offering of the Issuers EQUITY SECURITIES; or 5. A PERSON who is an AFFILIATE or an ASSOCIATE of a PERSON specified in I.G.1., 2., 3., or 4., above. American LegalNet, Inc. www.USCourtForms.com<<<<<<<<<********>>>>>>>>>>>>> 3 H. An UNDERWRITER is any PERSON who has agreed with the Issuer or other PERSON on whose behalf a distribution is to be made: 1. To purchase securities for distribution; 2. To distribute securities for or on behalf of the Issuer or other PERSON; or 3. To manage or supervise a distribution of securities for or on behalf of the Issuer or other PERSON. II. QUALIFICATIONS OF THE IMPOUNDMENT AGENT. The Agent represents that: A. It is a state chartered bank or federally chartered bank, which is regulated by a state regulatory banking authority, the Federal Reserve, or the Office o f the Comptroller of the Currency; B. Its domicile and principal place of business are in the United States ; C. Its deposits are insured by the FDIC; D. It will hold and administer the Impounded Funds pursuant to the terms of this Agreement; and E. It is neither affiliated with, nor a major creditor of, the Issuer, i ts Promoters, or their Affiliates or Associates. III. DEPOSIT AND APPLICATION OF THE IMPOUNDED FUNDS. As long as this Agreement remains in effect: A. The Issuer (Underwriter) shall instruct public investors (Subs cribers) to make their checks, drafts, money orders, or wire transfers (Payment s) payable to the Agent, for deposit in __________________________ Impoundment Account; B. Any Payment that is made payable to any Person other than the Agent, shall be returned by the Agent by mail to the Subscriber on the first business da y (excluding legal holidays) following the Agents receipt of such Payment; C. The Issuer (Underwriter) shall transmit the Subscribers Payment s, not later than 12:00 noon on the first business day (excluding legal holidays) f ollowing the re