EXHIBIT 10.37
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and
entered into as of December 13, 2004 between DCI USA, INC.,
a Delaware corporation (the "Company"); the Buyer(s) listed
on the Securities Purchase Agreement, dated the date
hereof (the "Investor(s)"), and XXXXX XXXXXXXX PC, as Escrow
Agent hereunder (the "Escrow Agent").
BACKGROUND
WHEREAS, the Company and the Investor(s) have entered
into a Securities Purchase Agreement (the "Securities
Purchase Agreement"), dated as of the date hereof, pursuant
to which the Company proposes to sell secured convertible
debentures (the "Convertible Debentures") which shall be
convertible into the Company's Common Stock, par value
$0.001 per share (the "Common Stock"), at a price per share
equal to the Purchase Price, as that term is defined in the
Securities Purchase Agreement. The Securities Purchase
Agreement provides that the Investor(s) shall deposit the
purchase amount in a segregated escrow account to be held by
Escrow Agent in order to effectuate a disbursement to the
Company at a closing to be held as set forth in the
Securities Purchase Agreement (the "Closing").
WHEREAS, the Company intends to sell Convertible
Securities (the "Offering").
WHEREAS, Escrow Agent has agreed to accept, hold, and
disburse the funds deposited with it in accordance with the
terms of this Agreement.
WHEREAS, in order to establish the escrow of funds and
to effect the provisions of the Securities Purchase
Agreement, the parties hereto have entered into this
Agreement.
NOW THEREFORE, in consideration of the foregoing, it is
hereby agreed as follows:
1. Definitions. The following terms shall have the
following meanings when used herein:
a. "Escrow Funds" shall mean the funds deposited
with Escrow Agent pursuant to this Agreement.
b. "Joint Written Direction" shall mean a
written direction executed by the Investor(s) and the
Company directing Escrow Agent to disburse all or a portion
of the Escrow Funds or to take or refrain from taking any
action pursuant to this Agreement.
c. "Escrow Period" shall begin with the
commencement of the Offering and shall terminate upon the
earlier to occur of the following dates:
(i) The date upon which Escrow Agent
confirms that it has received in the Escrow Account all of
the proceeds of the sale of the Convertible Debentures, and
has transferred the proceeds to the Company upon the
satisfaction of conditions to Closing as set forth in the
Securities Purchase Agreement of even date hereof;
(ii) The date upon which a determination
is made by the Company and the Investor(s) to terminate the
Offering prior to the sale of all the Convertible
Debentures.
During the Escrow Period, the Company and the
Investor(s) are aware that they are not entitled to any
funds received into escrow and no amounts deposited in the
Escrow Account shall become the property of the Company or
the Investor(s) or any other entity, or be subject to the
debts of the Company or the Investor(s) or any other entity.
2. Appointment of and Acceptance by Escrow Agent.
The Investor(s) and the Company hereby appoint Escrow Agent
to serve as Escrow Agent hereunder. Escrow Agent hereby
accepts such appointment and, upon receipt by wire transfer
of the Escrow Funds in accordance with Section 3 below,
agrees to hold, invest and disburse the Escrow Funds in
accordance with this Agreement.
a. The Company hereby acknowledges that the
Escrow Agent is counsel to the Investor(s) in connection
with the transactions contemplated and referred herein. The
Company agrees that in the event of any dispute arising in
connection with this Escrow Agreement or otherwise in
connection with any transaction or agreement contemplated
and referred herein, the Escrow Agent shall be permitted to
continue to represent the Investor(s) and the Company will
not seek to disqualify such counsel.
3. Creation of Escrow Funds. On or prior to the date
of the commencement of the Offering, the parties shall
establish an escrow account with the Escrow Agent, which
escrow account shall be entitled as follows: DCI USA,
Inc./Cornell Capital Partners, LP Escrow Account for the
deposit of the Escrow Funds. The Investor(s) will instruct
subscribers to wire funds to the account of the Escrow Agent
as follows:
Bank: Wachovia Bank, N.A.
Routing #: 000000000
Account #: 2000014931134
Name on Account: Xxxxx Xxxxxxxx PC as Escrow
Agent
Name on Sub-Account: DCI USA, Inc./Cornell Capital
Partners, LP Escrow account
4. Deposits into the Escrow Account. The Investor(s)
agrees that they shall promptly deliver funds for the
payment of the Convertible Debentures to Escrow Agent for
deposit in the Escrow Account.
5. Disbursements from the Escrow Account.
a. The Escrow Agent will continue to hold such
funds until Cornell Capital Partners, LP on behalf of the
Investor(s) and Company execute a Joint Written Direction
directing the Escrow Agent to disburse the Escrow Funds
pursuant to Joint Written Direction signed by the Company
and the Investor(s). In disbursing such funds, Escrow Agent
is authorized to rely upon such Joint Written Direction from
the Company and the Investor(s) and may accept any signatory
from the Company listed on the signature page to this
Agreement and any signature from the Investor(s) that the
Escrow Agent already has on file.
b. In the event Escrow Agent does not receive
the amount of the Escrow Funds from the Investor(s), Escrow
Agent shall notify the Company and the Investor(s). Upon
receipt of payment instructions from the Company, Escrow
Agent shall refund to each subscriber without interest the
amount received from each Investor(s), without deduction,
penalty, or expense to the subscriber. The purchase money
returned to each subscriber shall be free and clear of any
and all claims of the Company, the Investor(s) or any of
their creditors.
c. In the event Escrow Agent does receive the
amount of the Escrow Funds prior to expiration of the Escrow
Period, in no event will the Escrow Funds be released to the
Company until such amount is received by Escrow Agent in
collected funds. For purposes of this Agreement, the term
"collected funds" shall mean all funds received by Escrow
Agent which have cleared normal banking channels and are in
the form of cash.
d. The Investor shall initiate the wire of the
net proceeds of each installment of the Closings referenced
in the Securities Purchase Agreement of even date herewith
from the sale of the Convertible Debenture to the Escrow
Agent in no later than five (5) business days after the
Closing Date.
6. Collection Procedure. Escrow Agent is hereby
authorized to deposit the proceeds of each wire in the
Escrow Account.
7. Suspension of Performance: Disbursement Into
Court. If at any time, there shall exist any dispute
between the Company and the Investor(s) with respect to
holding or disposition of any portion of the Escrow Funds or
any other obligations of Escrow Agent hereunder, or if at
any time Escrow Agent is unable to determine, to Escrow
Agent's sole satisfaction, the proper disposition of any
portion of the Escrow Funds or Escrow Agent's proper actions
with respect to its obligations hereunder, or if the parties
have not within thirty (30) days of the furnishing by Escrow
Agent of a notice of resignation pursuant to Section 9
hereof, appointed a successor Escrow Agent to act hereunder,
then Escrow Agent may, in its sole discretion, take either
or both of the following actions:
a. suspend the performance of any of its
obligations (including without limitation any disbursement
obligations) under this Escrow Agreement until such dispute
or uncertainty shall be resolved to the sole satisfaction of
Escrow Agent or until a successor Escrow Agent shall be
appointed (as the case may be); provided however, Escrow
Agent shall continue to invest the Escrow Funds in
accordance with Section 8 hereof; and/or
b. petition (by means of an interpleader action
or any other appropriate method) any court of competent
jurisdiction in any venue convenient to Escrow Agent, for
instructions with respect to such dispute or uncertainty,
and to the extent required by law, pay into such court, for
holding and disposition in accordance with the instructions
of such court, all funds held by it in the Escrow Funds,
after deduction and payment to Escrow Agent of all fees and
expenses (including court costs and attorneys' fees) payable
to, incurred by, or expected to be incurred by Escrow Agent
in connection with performance of its duties and the
exercise of its rights hereunder.
c. Escrow Agent shall have no liability to the
Company, the Investor(s), or any person with respect to any
such suspension of performance or disbursement into court,
specifically including any liability or claimed liability
that may arise, or be alleged to have arisen, out of or as a
result of any delay in the disbursement of funds held in the
Escrow Funds or any delay in with respect to any other
action required or requested of Escrow Agent.
8. Investment of Escrow Funds. Escrow Agent shall
deposit the Escrow Funds in a non-interest bearing account.
If Escrow Agent has not received a Joint Written
Direction at any time that an investment decision must be
made, Escrow Agent shall maintain the Escrow Funds, or such
portion thereof, as to which no Joint Written Direction has
been received, in a non-interest bearing account.
9. Resignation and Removal of Escrow Agent. Escrow
Agent may resign from the performance of its duties
hereunder at any time by giving thirty (30) days' prior
written notice to the parties or may be removed, with or
without cause, by the parties, acting jointly, by furnishing
a Joint Written Direction to Escrow Agent, at any time by
the giving of ten (10) days' prior written notice to Escrow
Agent as provided herein below. Upon any such notice of
resignation or removal, the representatives of the
Investor(s) and the Company identified in Sections 13a.(iv)
and 13b.(iv), below, jointly shall appoint a successor
Escrow Agent hereunder, which shall be a commercial bank,
trust company or other financial institution with a combined
capital and surplus in excess of $10,000,000.00. Upon the
acceptance in writing of any appointment of Escrow Agent
hereunder by a successor Escrow Agent, such successor Escrow
Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the retiring
Escrow Agent, and the retiring Escrow Agent shall be
discharged from its duties and obligations under this Escrow
Agreement, but shall not be discharged from any liability
for actions taken as Escrow Agent hereunder prior to such
succession. After any retiring Escrow Agent's resignation
or removal, the provisions of this Escrow Agreement shall
inure to its benefit as to any actions taken or omitted to
be taken by it while it was Escrow Agent under this Escrow
Agreement. The retiring Escrow Agent shall transmit all
records pertaining to the Escrow Funds and shall pay all
funds held by it in the Escrow Funds to the successor Escrow
Agent, after making copies of such records as the retiring
Escrow Agent deems advisable and after deduction and payment
to the retiring Escrow Agent of all fees and expenses
(including court costs and attorneys' fees) payable to,
incurred by, or expected to be incurred by the retiring
Escrow Agent in connection with the performance of its
duties and the exercise of its rights hereunder.
10. Liability of Escrow Agent.
a. Escrow Agent shall have no liability or
obligation with respect to the Escrow Funds except for
Escrow Agent's willful misconduct or gross negligence.
Escrow Agent's sole responsibility shall be for the
safekeeping, investment, and disbursement of the Escrow
Funds in accordance with the terms of this Agreement.
Escrow Agent shall have no implied duties or obligations and
shall not be charged with knowledge or notice or any fact or
circumstance not specifically set forth herein. Escrow
Agent may rely upon any instrument, not only as to its due
execution, validity and effectiveness, but also as to the
truth and accuracy of any information contained herein,
which Escrow Agent shall in good faith believe to be
genuine, to have been signed or presented by the person or
parties purporting to sign the same and conform to the
provisions of this Agreement. In no event shall Escrow
Agent be liable for incidental, indirect, special, and
consequential or punitive damages. Escrow Agent shall not
be obligated to take any legal action or commence any
proceeding in connection with the Escrow Funds, any account
in which Escrow Funds are deposited, this Agreement or the
Purchase Agreement, or to appear in, prosecute or defend any
such legal action or proceeding. Escrow Agent may consult
legal counsel selected by it in any event of any dispute or
question as to construction of any of the provisions hereof
or of any other agreement or its duties hereunder, or
relating to any dispute involving any party hereto, and
shall incur no liability and shall be fully indemnified from
any liability whatsoever in acting in accordance with the
opinion or instructions of such counsel. The Company and
the Investor(s) jointly and severally shall promptly pay,
upon demand, the reasonable fees and expenses of any such
counsel.
b. Escrow Agent is hereby authorized, in its
sole discretion, to comply with orders issued or process
entered by any court with respect to the Escrow Funds,
without determination by Escrow Agent of such court's
jurisdiction in the matter. If any portion of the Escrow
Funds is at any time attached, garnished or levied upon
under any court order, or in case the payment, assignment,
transfer, conveyance or delivery of any such property shall
be stayed or enjoined by any court order, or in any case any
order judgment or decree shall be made or entered by any
court affecting such property or any part thereof, then and
in any such event, Escrow Agent is authorized, in its sole
discretion, to rely upon and comply with any such order,
writ judgment or decree which it is advised by legal counsel
selected by it, binding upon it, without the need for
appeal or other action; and if Escrow Agent complies with
any such order, writ, judgment or decree, it shall not be
liable to any of the parties hereto or to any other person
or entity by reason of such compliance even though such
order, writ judgment or decree may be subsequently reversed,
modified, annulled, set aside or vacated.
11. Indemnification of Escrow Agent. From and at all
times after the date of this Agreement, the parties jointly
and severally, shall, to the fullest extent permitted by law
and to the extent provided herein, indemnify and hold
harmless Escrow Agent and each director, officer, employee,
attorney, agent and affiliate of Escrow Agent (collectively,
the "Indemnified Parties") against any and all actions,
claims (whether or not valid), losses, damages, liabilities,
costs and expenses of any kind or nature whatsoever
(including without limitation reasonable attorney's fees,
costs and expenses) incurred by or asserted against any of
the Indemnified Parties from and after the date hereof,
whether direct, indirect or consequential, as a result of or
arising from or in any way relating to any claim, demand,
suit, action, or proceeding (including any inquiry or
investigation) by any person, including without limitation
the parties to this Agreement, whether threatened or
initiated, asserting a claim for any legal or equitable
remedy against any person under any statute or regulation,
including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause
or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or failure
of performance of this Agreement or any transaction
contemplated herein, whether or not any such Indemnified
Party is a party to any such action or proceeding, suit or
the target of any such inquiry or investigation; provided,
however, that no Indemnified Party shall have the right to
be indemnified hereunder for liability finally determined by
a court of competent jurisdiction, subject to no further
appeal, to have resulted from the gross negligence or
willful misconduct of such Indemnified Party. If any such
action or claim shall be brought or asserted against any
Indemnified Party, such Indemnified Party shall promptly
notify the Company and the Investor(s) hereunder in writing,
and the Investor(s) and the Company shall assume the defense
thereof, including the employment of counsel and the payment
of all expenses. Such Indemnified Party shall, in its sole
discretion, have the right to employ separate counsel (who
may be selected by such Indemnified Party in its sole
discretion) in any such action and to participate and to
participate in the defense thereof, and the fees and
expenses of such counsel shall be paid by such Indemnified
Party, except that the Investor(s) and/or the Company shall
be required to pay such fees and expense if (a) the
Investor(s) or the Company agree to pay such fees and
expenses, or (b) the Investor(s) and/or the Company shall
fail to assume the defense of such action or proceeding or
shall fail, in the sole discretion of such Indemnified
Party, to employ counsel reasonably satisfactory to the
Indemnified Party in any such action or proceeding, (c) the
Investor(s) and the Company are the plaintiff in any such
action or proceeding or (d) the named or potential parties
to any such action or proceeding (including any potentially
impleaded parties) include both the Indemnified Party, the
Company and/or the Investor(s) and the Indemnified Party
shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from
or additional to those available to the Company or the
Investor(s). The Investor(s) and the Company shall be
jointly and severally liable to pay fees and expenses of
counsel pursuant to the preceding sentence, except that any
obligation to pay under clause (a) shall apply only to the
party so agreeing. All such fees and expenses payable by
the Company and/or the Investor(s) pursuant to the foregoing
sentence shall be paid from time to time as incurred, both
in advance of and after the final disposition of such action
or claim. The obligations of the parties under this section
shall survive any termination of this Agreement, and
resignation or removal of the Escrow Agent shall be
independent of any obligation of Escrow Agent.
The parties agree that neither payment by the Company
or the Investor(s) of any claim by Escrow Agent for
indemnification hereunder shall impair, limit, modify, or
affect, as between the Investor(s) and the Company, the
respective rights and obligations of Investor(s), on the one
hand, and the Company, on the other hand, under the
Placement Agency Agreement.
12. Expenses of Escrow Agent. Except as set forth in
Section 11 the Company shall reimburse Escrow Agent for all
of its reasonable out-of-pocket expenses, including
attorneys' fees, travel expenses, telephone and facsimile
transmission costs, postage (including express mail and
overnight delivery charges), copying charges and the like.
All of the compensation and reimbursement obligations set
forth in this Section shall be payable by the Company, upon
demand by Escrow Agent. The obligations of the Company
under this Section shall survive any termination of this
Agreement and the resignation or removal of Escrow Agent.
13. Warranties.
a. The Investor(s) makes the following
representations and warranties to Escrow Agent:
(i) The Investor(s) has full power and
authority to execute and deliver this Agreement and to
perform its obligations hereunder.
(ii) This Agreement has been duly
approved by all necessary corporate action of the
Investor(s), including any necessary shareholder approval,
has been executed by duly authorized officers of the
Investor(s), enforceable in accordance with its terms.
(iii) The execution, delivery, and
performance of the Investor(s) of this Agreement will not
violate, conflict with, or cause a default under the
certificate of incorporation or bylaws of the Investor(s),
any applicable law or regulation, any court order or
administrative ruling or degree to which the Investor(s) is
a party or any of its property is subject, or any agreement,
contract, indenture, or other binding arrangement.
(iv) Xxxx Xxxxxx has been duly appointed
to act as the representative of the Investor(s) hereunder
and has full power and authority to execute, deliver, and
perform this Escrow Agreement, to execute and deliver any
Joint Written Direction, to amend, modify, or waive any
provision of this Agreement, and to take any and all other
actions as the Investor(s)'s representative under this
Agreement, all without further consent or direction form, or
notice to, the Investor(s) or any other party.
(v) No party other than the parties hereto
and the Investor(s)s have, or shall have, any lien, claim or
security interest in the Escrow Funds or any part thereof.
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 Escrow
Funds or any part thereof.
(vi) All of the representations and
warranties of the Investor(s) contained herein are true and
complete as of the date hereof and will be true and complete
at the time of any disbursement from the Escrow Funds.
b. The Company makes the following
representations and warranties to the Escrow Agent:
(i) The Company is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Delaware and has full power and
authority to execute and deliver this Agreement and to
perform its obligations hereunder.
(ii) This Agreement has been duly
approved by all necessary corporate action of the Company,
including any necessary shareholder approval, has been
executed by duly authorized officers of the Company,
enforceable in accordance with its terms.
(iii) The execution, delivery, and
performance by the Company of this Agreement is in
accordance with the Securities Purchase Agreement and will
not violate, conflict with, or cause a default under the
certificate of incorporation or bylaws of the Company, any
applicable law or regulation, any court order or
administrative ruling or decree to which the Company is a
party or any of its property is subject, or any agreement,
contract, indenture, or other binding arrangement, including
without limitation to the Securities Purchase Agreement, to
which the Company is a party.
(iv) Xxxxx Xxxxxxxxxx has been duly
appointed to act as the representative of the Company
hereunder and has full power and authority to execute,
deliver, and perform this Agreement, to execute and deliver
any Joint Written Direction, to amend, modify or waive any
provision of this Agreement and to take all other actions as
the Company's Representative under this Agreement, all
without further consent or direction from, or notice to, the
Company or any other party.
(v) No party other than the parties hereto
and the Investor(s)s have, or shall have, any lien, claim or
security interest in the Escrow Funds or any part thereof.
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 Escrow
Funds or any part thereof.
(vi) All of the representations and
warranties of the Company contained herein are true and
complete as of the date hereof and will be true and complete
at the time of any disbursement from the Escrow Funds.
14. Consent to Jurisdiction and Venue. In the event
that any party hereto commences a lawsuit or other
proceeding relating to or arising from this Agreement, the
parties hereto agree that the United States District Court
for the District of New Jersey shall have the sole and
exclusive jurisdiction over any such proceeding. If all
such courts lack federal subject matter jurisdiction, the
parties agree that the Superior Court Division of New
Jersey, Chancery Division of Xxxxxx County shall have sole
and exclusive jurisdiction. Any of these courts shall be
proper venue for any such lawsuit or judicial proceeding and
the parties hereto waive any objection to such venue. The
parties hereto consent to and agree to submit to the
jurisdiction of any of the courts specified herein and agree
to accept the service of process to vest personal
jurisdiction over them in any of these courts.
15. Notice. All notices and other communications
hereunder shall be in writing and shall be deemed to have
been validly served, given or delivered five (5) days after
deposit in the United States mails, by certified mail with
return receipt requested and postage prepaid, when delivered
personally, one (1) day delivered to any overnight courier,
or when transmitted by facsimile transmission and upon
confirmation of receipt and addressed to the party to be
notified as follows:
If to Investor(s), to: Cornell Capital Partners, LP
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Portfolio Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Escrow Agent, to: Xxxxx Xxxxxxxx PC
000 Xxxxxx Xxxxxx - Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Company, to: DCI USA, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxx Xxxxx & Associates
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Or to such other address as each party may designate for
itself by like notice.
16. Amendments or Waiver. This Agreement may be
changed, waived, discharged or terminated only by a writing
signed by the parties hereto. No delay or omission by any
party in exercising any right with respect hereto shall
operate as waiver. A waiver on any one occasion shall not
be construed as a bar to, or waiver of, any right or remedy
on any future occasion.
17. Severability. To the extent any provision of this
Agreement is prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such
prohibition, or invalidity, without invalidating the
remainder of such provision or the remaining provisions of
this Agreement.
18. Governing Law. This Agreement shall be construed
and interpreted in accordance with the internal laws of the
State of New Jersey without giving effect to the conflict of
laws principles thereof.
19. Entire Agreement. This Agreement constitutes the
entire Agreement between the parties relating to the
holding, investment, and disbursement of the Escrow Funds
and sets forth in their entirety the obligations and duties
of the Escrow Agent with respect to the Escrow Funds.
20. Binding Effect. All of the terms of this
Agreement, as amended from time to time, shall be binding
upon, inure to the benefit of and be enforceable by the
respective heirs, successors and assigns of the Investor(s),
the Company, or the Escrow Agent.
21. Execution of Counterparts. This Agreement and any
Joint Written Direction may be executed in counter parts,
which when so executed shall constitute one and same
agreement or direction.
22. Termination. Upon the first to occur of the
disbursement of all amounts in the Escrow Funds pursuant to
Joint Written Directions or the disbursement of all amounts
in the Escrow Funds into court pursuant to Section 7 hereof,
this Agreement shall terminate and Escrow Agent shall have
no further obligation or liability whatsoever with respect
to this Agreement or the Escrow Funds.
IN WITNESS WHEREOF the parties have hereunto set their
hands and seals the day and year above set forth.
DCI USA, INC.
By: /s/ Xxxxx Xxxxxxxxxx
Name: Xxxxx Xxxxxxxxxx
Title: Chairman
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: Xxxx Xxxxxx
Name: Xxxx Xxxxxx
Title: Portfolio Manager
XXXXX XXXXXXXX PC
By: Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx, Esq.
Title:
