Exhibit 10.4

 

STOCK ESCROW AGREEMENT

 

This STOCK ESCROW AGREEMENT, dated as of July 15, 2014 (this “Agreement”), is
made by and among 1347 CAPITAL CORP., a Delaware corporation (“Company”), 1347
INVESTORS LLC, a Delaware limited liability company (the “Initial Stockholder”),
and CONTINENTAL STOCK TRANSFER & TRUST COMPANY, a New York corporation (“Escrow
Agent”).

 

WHEREAS, the Company has entered into an Underwriting Agreement, dated as of
July 15, 2014 (the “Underwriting Agreement”), with EarlyBirdCapital, Inc.
(“EBC”) acting as representative of the several underwriters (collectively, the
“Underwriters”), pursuant to which, among other matters, the Underwriters have
agreed to purchase 4,000,000 units (“Units”) of the Company, plus an additional
600,000 Units if the Underwriters exercise their over-allotment option in full.
Each Unit consists of one share of common stock of the Company, par value
$0.0001 per share (“Common Stock”), one right (a “Right”) to receive one-tenth
of one share of Common Stock upon the Company’s initial business combination and
one warrant (a “Warrant”) to purchase one-half of one share of Common Stock, all
as more fully described in the Company’s final Prospectus, dated July 15, 2014
(the “Prospectus”), comprising part of the Company’s Registration Statement on
Form S-1 (File No. 333-195695) under the Securities Act of 1933, as amended (the
“Registration Statement”), declared effective on July 15, 2014 (the “Effective
Date”);

 

WHEREAS, the Initial Stockholder has agreed as a condition of the sale of the
Units to deposit the 1,150,000 shares of Common Stock held by the Initial
Stockholder prior to the Company’s initial public offering as set forth opposite
its name in Exhibit A attached hereto (the “Escrow Shares”) in escrow as
hereinafter provided; and

 

WHEREAS, the Company and the Initial Stockholder desire that the Escrow Agent
accept the Escrow Shares, in escrow, to be held and disbursed as hereinafter
provided.

 

IT IS AGREED:

 

1.Appointment of Escrow Agent. The Company and the Initial Stockholder hereby
appoint the Escrow Agent to act in accordance with and subject to the terms of
this Agreement and the Escrow Agent hereby accepts such appointment and agrees
to act in accordance with and subject to such terms.

 

2.Deposit of Escrow Shares. On or before the Effective Date, the Initial
Stockholder shall deliver to the Escrow Agent certificates representing the
Escrow Shares, together with applicable stock powers, to be held and disbursed
subject to the terms and conditions of this Agreement. The Initial Stockholder
acknowledges that the certificate representing the Escrow Shares is legended to
reflect the deposit of such Escrow Shares under this Agreement.

 

3.Disbursement of the Escrow Shares.

 

3.1.The Escrow Agent shall hold the Escrow Shares during the period (the “Escrow
Period”) commencing on the date hereof and (i) for 50% of the Escrow Shares,
ending on the earlier of (x) one year after the date of the consummation of the
Company’s initial business combination (as described in the Registration
Statement, hereinafter a “Business Combination”), (y) the date on which the
closing price of the Company’s Common Stock equals or exceeds $12.50 per share
(as adjusted for stock splits, stock dividends, reorganizations and
recapitalizations) for any 20 trading days within any 30-trading day period
commencing after the Company’s Business Combination and (z) the date of
consummation of a Sale Transaction, and (ii) for the remaining 50% of the Escrow
Shares, ending on the earlier of (x) one year after the date of the consummation
of a Business Combination and (y) the date of consummation of a Sale
Transaction. For purposes hereof, a “Sale Transaction” means a liquidation,
merger, stock exchange or other similar transaction subsequent to the Company’s
initial Business Combination which results in all of the stockholders of the
Company or such other entity surviving the Business Combination having the right
to exchange their shares of Common Stock for cash, securities or other property.
The Company shall promptly provide notice of the consummation of a Business
Combination or a Sale Transaction to the Escrow Agent. Upon completion of the
Escrow Period, the Escrow Agent shall disburse the applicable amount of the
Initial Stockholder’s Escrow Shares (and any applicable stock power) to such
Initial Stockholder. In addition, if the Escrow Agent is notified by the Company
pursuant to Section 6.7 hereof that the Company is being liquidated at any time
during the Escrow Period, then the Escrow Agent shall destroy the certificates
representing the Escrow Shares. The Escrow Agent shall have no further duties
hereunder after the disbursement of the Escrow Shares in accordance with this
Section 3.

 

 

 

 

3.2.Notwithstanding Section 3.1, if the Underwriters do not exercise in full
their over-allotment option to purchase an additional 600,000 Units of the
Company within 45 days of the date of the Prospectus (as described in the
Underwriting Agreement), the Initial Stockholder agrees that the Escrow Agent
shall return to the Company for cancellation, at no cost, the number of Escrow
Shares held by such holder determined by multiplying 150,000 by a fraction, (i)
the numerator of which is 600,000 minus the number of shares of Common Stock
purchased by the Underwriters upon the exercise of their over-allotment option,
and (ii) the denominator of which is 600,000. The Company shall promptly provide
notice to the Escrow Agent of the expiration or termination of the Underwriters’
over-allotment option and the number of Units, if any, purchased by the
Underwriters in connection with their exercise thereof.

 

4.Rights of Initial Stockholder in Escrow Shares.

 

4.1.Voting Rights as a Stockholder. Subject to the terms of the Insider Letter
described in Section 4.4 hereof and except as herein provided, the Initial
Stockholder shall retain all of its rights as a stockholder of the Company
during the Escrow Period, including, without limitation, the right to vote such
shares.

 

4.2.Dividends and Other Distributions in Respect of the Escrow Shares. During
the Escrow Period, all dividends payable in cash with respect to the Escrow
Shares shall be paid to the Initial Stockholder, but all dividends payable in
stock or other non-cash property (“Non-Cash Dividends”) shall be delivered to
the Escrow Agent to hold in accordance with the terms hereof. As used herein,
the term “Escrow Shares” shall be deemed to include the Non-Cash Dividends
distributed thereon, if any.

 

4.3.Restrictions on Transfer. During the Escrow Period, the only permitted
transfers of the Escrow Shares will be (i) to the Company’s officers, directors,
advisors and employees, (ii) as a distribution to partners, members or
stockholders of the Initial Stockholder upon the liquidation and dissolution of
the Initial Stockholder, (iii) by bona fide gift to a member of the Initial
Stockholder’s immediate family or to a trust, the beneficiary of which is the
Initial Stockholder or a member of the Initial Stockholder’s immediate family
for estate planning purposes, (iv) by virtue of the laws of descent and
distribution upon death, (v) pursuant to a qualified domestic relations order,
(vi) by private sales at prices no greater than the price at which the Escrow
Shares were originally purchased or (vii) to the Company for cancellation as set
forth in Section 3.2 hereof or in connection with the consummation of a Business
Combination, in each case, except for clause (vii), on the condition that such
transfers may be implemented only upon the respective transferee’s written
agreement to be bound by the terms and conditions of this Agreement and of the
Insider Letter (as defined below) signed by the Initial Stockholder transferring
the Escrow Shares.

 

4.4.Insider Letters. The Initial Stockholder has executed a letter agreement
with the Company, dated as indicated on Exhibit A hereto, and the form of which
is filed as an exhibit to the Registration Statement (the “Insider Letter”),
respecting the rights and obligations of such Initial Stockholder in certain
events, including but not limited to the liquidation of the Company.

 

5.Concerning the Escrow Agent.

 

5.1.Good Faith Reliance. The Escrow Agent shall not be liable for any action
taken or omitted by it in good faith and in the exercise of its own best
judgment, and may rely conclusively and shall be protected in acting upon any
order, notice, demand, certificate, opinion or advice of counsel (including
counsel chosen by the Escrow Agent), statement, instrument, report or other
paper or document (not only as to its due execution and the validity and
effectiveness of its provisions, but also as to the truth and acceptability of
any information therein contained) which is believed by the Escrow Agent to be
genuine and to be signed or presented by the proper person or persons. The
Escrow Agent shall not be bound by any notice or demand, or any waiver,
modification, termination or rescission of this Agreement unless evidenced by a
writing delivered to the Escrow Agent signed by the proper party or parties and,
if the duties or rights of the Escrow Agent are affected, unless it shall have
given its prior written consent thereto.

 

2

 

 

5.2.Indemnification. The Escrow Agent shall be indemnified and held harmless by
the Company from and against any expenses, including counsel fees and
disbursements, or loss suffered by the Escrow Agent in connection with any
action, suit or other proceeding involving any claim which in any way, directly
or indirectly, arises out of or relates to this Agreement, the services of the
Escrow Agent hereunder, or the Escrow Shares held by it hereunder, other than
expenses or losses arising from the gross negligence or willful misconduct of
the Escrow Agent. Promptly after the receipt by the Escrow Agent of notice of
any demand or claim or the commencement of any action, suit or proceeding, the
Escrow Agent shall notify the other parties hereto in writing. In the event of
the receipt of such notice, the Escrow Agent, in its sole discretion, may
commence an action in the nature of interpleader in an appropriate court to
determine ownership or disposition of the Escrow Shares or it may deposit the
Escrow Shares with the clerk of any appropriate court or it may retain the
Escrow Shares pending receipt of a final, non-appealable order of a court having
jurisdiction over all of the parties hereto directing to whom and under what
circumstances the Escrow Shares are to be disbursed and delivered. The
provisions of this Section 5.2 shall survive in the event the Escrow Agent
resigns or is discharged pursuant to Sections 5.5 or 5.6 below.

 

5.3.Compensation. The Escrow Agent shall be entitled to compensation from the
Company for all services rendered by it hereunder as set forth in Exhibit B. The
Escrow Agent shall also be entitled to reimbursement from the Company for all
reasonable expenses paid or incurred by it in the administration of its duties
hereunder including, but not limited to, all counsel, advisors’ and agents’ fees
and disbursements and all taxes or other governmental charges.

 

5.4.Further Assurances. From time to time on and after the date hereof, the
Company and the Initial Stockholder shall deliver or cause to be delivered to
the Escrow Agent such further documents and instruments and shall do or cause to
be done such further acts as the Escrow Agent shall reasonably request to carry
out more effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected in acting
hereunder.

 

5.5.Resignation. The Escrow Agent may resign at any time and be discharged from
its duties as escrow agent hereunder by its giving the other parties hereto
written notice, and such resignation shall become effective as hereinafter
provided. Such resignation shall become effective at such time that the Escrow
Agent shall turn over, to a successor escrow agent appointed by the Company, the
Escrow Shares held hereunder. If no new escrow agent is so appointed within the
60-day period following the giving of such notice of resignation, the Escrow
Agent may deposit the Escrow Shares with any court it reasonably deems
appropriate.

 

5.6.Discharge of Escrow Agent. The Escrow Agent shall resign and be discharged
from its duties as escrow agent hereunder if so requested in writing at any time
by the other parties hereto, jointly, provided, however, that such resignation
shall become effective only upon acceptance of appointment by a successor escrow
agent as provided in Section 5.5.

 

5.7.Liability. Notwithstanding anything herein to the contrary, the Escrow Agent
shall not be relieved from liability hereunder for its own gross negligence or
its own willful misconduct.

 

5.8.Waiver. The Escrow Agent hereby waives any right of set-off or any other
right, title, interest or claim of any kind (“Claim”) in, or to any distribution
of, the Trust Account (as defined in that certain Investment Management Trust
Agreement, dated as of the date hereof, by and between the Company and the
Escrow Agent as trustee thereunder) and hereby agrees not to seek recourse,
reimbursement, payment or satisfaction for any Claim against the Trust Account
for any reason whatsoever.

 

3

 

 

6.Miscellaneous.

 

6.1.Governing Law. This Agreement shall for all purposes be deemed to be made
under and shall be construed in accordance with the laws of the State of New
York, without giving effect to conflicts of law principles that would result in
the application of the substantive laws of another jurisdiction.

 

6.2.Third Party Beneficiaries. The Initial Stockholder hereby acknowledges that
the Underwriters are third party beneficiaries of this Agreement and that this
Agreement may not be modified or changed without the prior written consent of
EBC.

 

6.3.Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to the subject matter hereof and, except as
expressly provided herein, may not be changed or modified except by an
instrument in writing signed by the party to the charged.

 

6.4.Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
thereof.

 

6.5.Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the respective parties hereto and their legal representatives,
successors and assigns.

 

6.6.Notices. Any notice or other communication required or which may be given
hereunder shall be in writing and either be delivered personally or be mailed,
certified or registered mail, or by private national courier service, return
receipt requested, postage prepaid, and shall be deemed given when so delivered
personally or, if mailed, two days after the date of mailing, as follows:

 

If to the Company, to:

 

1347 Capital Corp.

150 Pierce Road, 6th Floor

Itasca, IL 60143

Attn: Hassan R. Baqar, Chief Financial Officer and Secretary

 

If to the Initial Stockholder, to its address set forth on Exhibit A.

 

and if to the Escrow Agent, to:

 

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Chairman

 

A copy of any notice sent hereunder shall be sent to:

 

EarlyBirdCapital, Inc.

275 Madison Avenue, 27th Floor

New York, New York 10016

Attn: Michael Powell, Managing Director

 

and:

 

McDermott Will & Emery LLP

340 Madison Avenue

New York, New York 10173

Attn: Joel L. Rubinstein

 

and:

 

4

 

 

Graubard Miller

The Chrysler Building

405 Lexington Avenue

New York, New York 10174

Attn: David Alan Miller, Esq.

 

The parties may change the persons and addresses to which the notices or other
communications are to be sent by giving written notice to any such change in the
manner provided herein for giving notice.

 

6.7.Liquidation of the Company. The Company shall give the Escrow Agent written
notification of the liquidation and dissolution of the Company in the event that
the Company fails to consummate a Business Combination within the time period
specified in the Prospectus.

 

[Signature Page Follows]

 

5

 

 

WITNESS the execution of this Agreement as of the date first above written.

 

  COMPANY:           1347 CAPITAL CORP.               By: /s/ Gordon G. Pratt  
  Name: Gordon G. Pratt     Title: President, Chief Executive Officer and
Director                   INITIAL STOCKHOLDER:           1347 INVESTORS LLC    
      By: /s/ Hassan R. Baqar     Name: Hassan R. Baqar     Title: President    
            ESCROW AGENT:             CONTINENTAL STOCK TRANSFER & TRUST COMPANY
          By: /s/ Monty Harry     Name: Monty Harry     Title: Vice President  

 

[Signature Page to Stock Escrow Agreement]

 

6

 

 

EXHIBIT A

 

Name and Address of

Initial Stockholder

Number

of Shares

Stock

Certificate Number

Date of

Insider Letter

1347 Investors LLC

150 Pierce Road, 6th Floor

Itasca, IL 60143

1,150,000 1 July 15, 2014

 

7

 

  

EXHIBIT B

 

ESCROW AGENT FEES

 

$200 escrow agent fee per month.

 

8