Stock Escrow And Lock-in Agreement

Exhibit 10.7


FORM OF
STOCK ESCROW AND LOCK-IN AGREEMENT


This Escrow Agreement (the "Agreement") is made and entered into as of the _____ day of __________, 199_, [THE DATE OF THE INITIAL CLOSING] by and among Edward J. Lauth, III ("Lauth"), Poole Financial Group, Inc., a Pennsylvania corporation ("PFG"), The Historic Bellefonte Brewery, Inc., a Pennsylvania corporation (the "Company") and ____________________ ("Escrow Agent").


R E C I T A L S


WHEREAS, Lauth and PFG are each owners of 206,250 shares (together the "Escrow Shares") of the common stock, no par value, (the "Common Stock") of the Company;


WHEREAS, the Company has proposed a public offering of a minimum of 500,000 and a maximum of 1,250,000 shares of Common Stock (the "Offering"), and the Company has applied to the Pennsylvania Securities Commission for registration of the shares of Common Stock to be offered for sale in the Offering, and, in connection therewith, the Pennsylvania Securities Commission has requested that Lauth and PFG as the founders of the Company enter into this Agreement to provide for the escrow of the Escrow Shares on the terms and conditions hereinafter set forth;


WHEREAS, Lauth and PFG each desire to subject up to 103,125 shares of Common Stock owned by Lauth and PFG, respectively (together the "Condition Shares") to possible return to the Company unless certain conditions are met as set forth herein;


WHEREAS, Lauth and PFG may benefit from the Company's successful completion of the Offering, and therefore desire to enter into this Agreement; and


WHEREAS, Lauth, PFG and the Company desire to appoint Escrow Agent as escrow agent in accordance with the terms hereof, and Escrow Agent desires to act as escrow agent in accordance with the terms hereof.


A G R E E M E N T


In consideration of the mutual promises contained herein and for other good and valuable consideration, receipt of which is hereby acknowledged, and intending to be legally bound, the parties agree as follows:


1. APPOINTMENT OF ESCROW AGENT. Escrow Agent is hereby appointed to act as escrow agent in accordance with the terms hereof, and Escrow Agent hereby accepts such appointment. Escrow Agent shall have all the rights, powers, duties and obligations provided herein.


2. DEPOSIT OF ESCROW SHARES.


(a) Lauth and PFG shall deliver, upon execution of this Agreement, to the Escrow Agent a stock certificate (or certificates), along with stock powers executed in blank, evidencing Lauth and PFG's respective ownership of the Escrow Shares.


(b) Escrow Agent shall, upon receipt of the Escrow Shares, hold the Escrow Shares in escrow pursuant to the terms set forth in this Agreement.


3. DISTRIBUTION OF ESCROW SHARES.


(a) DEFINITIONS. For the purposes of this Agreement, the following terms shall be defined as indicated:


(i) "Net Sales" shall mean sales less excise taxes;


(ii) "Net Income" shall mean income after income taxes;


(iii) "Fiscal Year" shall mean the twelve months ended December 31 of each year (or other fiscal twelve month period selected by the Company for its accounting and financial reporting);


(iv) "Requisite Net Revenues" shall mean $1,500,000 of Net Revenues in any Fiscal Year;


(v) "Requisite Net Earnings" shall mean $275,000 of Net Earnings in any Fiscal Year;


(vi) "Eligible Trading Market" shall mean the Common Stock being quoted or included in the over-the-counter inter-dealer market, the Nasdaq SmallCap Market, a national securities exchange or the Nasdaq Stock Market or comparable securities exchange or market, for a period of at least six (6) months;


2


(vii) "Market Price" shall mean the mean average price on an Eligible Trading Market (determined as the mean average of the high and low bid price, the mean average closing bid price or the mean average closing price, as applicable depending upon which Eligible Trading Market is used) during a consecutive 6-week period (defined as six consecutive calendar weeks in which there are a minimum of three days per week in which such Eligible Trading Market is open for trading) other than any 6-week period during which Lauth, PFG, the Company, the officers or directors of PFG or the Company, or any Affiliates (as hereinafter defined) of any of such persons or entities, have purchased any shares of Common Stock; and


(viii) "Affiliate" shall mean a person that directly or indirectly controls, or is controlled by, or is under common control with, such other person, and, with respect to a natural person, shall also mean such person's immediate family (i.e., spouse, parents, children, brothers and sisters, mothers and fathers-in-law, sons and daughters-in-law and brothers and sisters-in-law).


(b) DISTRIBUTION UPON SATISFACTION OF CERTAIN CONDITIONS.


(i) If the Company has Requisite Net Revenues or Requisite Net Earnings in any of the three (3) Fiscal Years in the period ending December 31, 199_ [THE END OF THE THIRD FISCAL YEAR FOLLOWING THE INITIAL CLOSING], then the Condition Shares shall no longer be considered Condition Shares, but shall still be Escrow Shares, all of which shall continue to be subject to the provisions of Section 5 of this Agreement.


(ii) If the Company has Requisite Net Revenues or Requisite Net Earnings in any of the four (4) Fiscal Years in the period ending December 31, 200_ [THE END OF THE SEVENTH FISCAL YEAR FOLLOWING THE INITIAL CLOSING], then all of the Escrow Shares shall be returned to Lauth and the Company and, upon such delivery by the Escrow Agent, the escrow created by this Agreement shall cease and this Agreement shall be terminated.


(iii) If the Company has not attained the Requisite Net Revenues or Requisite Net Earnings in any Fiscal Year prior to January 1, 200_ [THE FIRST DAY OF THE EIGHTH FISCAL YEAR FOLLOWING THE INITIAL CLOSING], then Lauth and PFG shall be entitled to receive that percentage of the Condition Shares equal to the highest percentage that the Company's actual Net Revenues or actual Net Earnings in any Fiscal Year during the seven year period ending December 31, 200_ [THE END OF THE SEVENTH FISCAL YEAR FOLLOWING THE INITIAL CLOSING] bears to the Requisite Net Revenues or the Requisite Net Earnings, whichever percentage is higher, and such percentage of Condition Shares shall be returned to each of Lauth and PFG, and the balance of the Condition Shares


3


shall be distributed to the Company, and Lauth and PFG shall have no further rights to, or interest in, such balance of Condition Shares. Upon such deliveries by the Escrow Agent, the escrow created by this Agreement shall cease and this Agreement shall be terminated.


(c) EARLY DISTRIBUTION. If, after December 31, 199_ [THE END OF THE THIRD FISCAL YEAR FOLLOWING THE INITIAL CLOSING], the Company has not attained the Requisite Net Revenues or the Requisite Net Earnings in any Fiscal Year prior to the date upon which Lauth and PFG, in their sole discretion, elect to exercise their option to early terminate this escrow pursuant to this provision (which shall be referred to as a "Section 3(b) Election"), Lauth and PFG shall be entitled to receive that percentage of the Condition Shares equal to the highest percentage that the Company's actual Net Revenues or actual Net Earnings in any Fiscal Year ended prior to the date of Lauth and PFG's Section 3(b) Election bears to the Requisite Net Revenues or the Requisite Net Earnings, whichever percentage is higher, and such percentage of the Condition Shares, as well as the remainder of the Escrow Shares, shall be returned to Lauth and PFG, and the balance of the Condition Shares shall be distributed to the Company, and Lauth and PFG shall have no further rights to, or interest in, such balance of the Condition Shares. Upon such deliveries by the Escrow Agent, the escrow created by this Agreement shall cease and this Agreement shall be terminated. Lauth and PFG shall exercise a Section 3(b) Election by sending notice to the Company which shall then instruct the Escrow Agent in accordance with the provisions of Section 4 of this Agreement.


(d) DISTRIBUTION UPON SALE OR MERGER.


(i) If, during the period from the date of the Agreement until December 31, 200_ [THE END OF THE SEVENTH FISCAL YEAR FOLLOWING THE INITIAL CLOSING], the Company is acquired, merged with or into another entity, consolidated with another entity, or the Company sells all, or substantially all of its assets (other than in the ordinary course of business) (collectively referred to as a "Sale Transaction") and the consideration for the Sale Transaction on a per share of Common Stock basis (the "Share Consideration") in the form of cash, debt, stock, cash equivalent or any combination thereof, is equal to or greater than the following amounts during the periods indicated:


$11.00 - From the date of this Agreement to December
31, 199_(1)
$12.10 - From January 1, 199_ to December 31, 199_
$13.31 - From January 1, 199_ to December 31, 199_
$14.64 - From January 1, 199_ to December 31, 199_


______________________


(1) [THE FIRST FISCAL YEAR FOLLOWING THE INITIAL CLOSING]


...