MEDCARE TECHNOLOGIES, INC.
ESCROW AGREEMENT AND INSTRUCTIONS
This Escrow Agreement and Instructions (the "Agreement") dated as of June __,
1998 is made by and among MEDCARE TECHNOLOGIES, INC., a Delaware corporation
(the "Company"), XXXXXX INVESTMENTS, LLC, a Georgia limited liability company
("Placement Agent"), the undersigned subscriber of Series A Preferred Stock
executing this Agreement ("Subscriber") and FIRST UNION NATIONAL BANK OF
GEORGIA, as escrow agent (the "Escrow Agent") with respect to the following:
Recitals
WHEREAS, the Company issued and sold Series A Preferred Stock to the
Subscriber on or about July 8, 1997 (the "Initial Closing"); and
WHEREAS, such Series A Preferred Stock was accompanied by a warrant
(the "Preferred Warrant") to purchase an amount of additional Series A Preferred
Stock up to the amount purchased by the Subscriber in the Initial Closing; and
WHEREAS, the Subscriber has exercised its Preferred Warrant to purchase
additional Series A Preferred Stock (the "New Preferred Stock") in the amount
set forth in the Subscriber's Preferred Warrant; and
WHEREAS, the Company wishes to offer and sell (the "Offering") the New
Preferred Stock to the Subscriber at a purchase price of $10,000 per share; and
WHEREAS, the parties desire to establish an escrow account (the "Escrow
Account") with the Escrow Agent into which certain moneys and documents will be
deposited and held in escrow in connection with the Offering; and
WHEREAS, the Escrow Agent has agreed to act as the escrow agent on
behalf of the Company and Placement Agent on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the premises the parties agree as
follows:
1. APPOINTMENT OF ESCROW AGENT: The parties each appoint the Escrow Agent to act
as the escrow agent for the Offering, on the terms and conditions of this
Agreement. The Escrow Agent agrees to act as the escrow agent and perform the
functions set forth in this Agreement, subject to all its terms.
2. ESCROW AGREEMENT: The Placement Agent hereby agrees to pay the Escrow Agent
for the opening of the Escrow Account plus incidental expenses (to be paid out
of
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moneys wired into escrow) for all ordinary services rendered hereunder (the
"Escrow Fee"). The Placement Agent and Company further agree to pay the Escrow
Agent reasonable fees, which shall be agreed upon between the parties, for any
services in addition to those provided for herein to the extent that the
Placement Agent or the Company, respectively, has expressly requested such
extraordinary services and has been made aware of their cost in advance of their
performance.
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3. DEPOSITS:
SUBSCRIBER: Subscriber will cause each of the following to be presented to
and deposited with the Escrow Agent:
a) funds for payment of the New Preferred Stock ("Exercise Payments") to be
made into the Escrow Account by wire transfer of U.S. dollars; and
b) signature pages for the Agreement and Amendment between the Company and
the Subscriber dated of date even herewith (the "Agreement and Amendment"),
(the "Subscriber Documents"), signed by the Subscriber, for the purchase of
the New Preferred Stock.
COMPANY: Prior to a closing, the Company will cause the following to be
presented to and deposited with the Escrow Agent (items (a) through (g) below
are referred to herein as the "Company Documents"):
a) original Preferred Stock certificates issued in the name of the
Subscriber with the number of shares as is contained in the Agreement and
Amendment approved by the Company for this Offering;
b) One complete Agreement and Amendment, counter-signed by the Company, for
the purchase of the Preferred Stock by the Subscriber;
c) the Placement Agent's compensation, as set forth on Exhibit A attached
hereto;
d) An opinion of counsel, signed by the Company's outside legal counsel;
e) An officer's certificate from the Company stating that the
representations and warranties of the Company in the Subscriber Documents
are true and correct in all material respects on the date of Closing;
f) A certificate ("Registration Effectiveness Certificate") from the
Company stating that a Registration Statement covering the resale of all
common stock issued or issuable upon conversion of any Series A Preferred
Stock, including the New Preferred Stock, has been declared effective and
is available for use.
g) A 3 Month Warrant, issued in the name of the Subscriber, as described in
the Agreement and Amendment.
A facsimile copy of any signed document(s), amendment, instruction or waiver
referred to herein (except for the Preferred Stock certificates and the
Warrants, for which signed originals are required) shall be sufficient for all
purposes throughout this Agreement.
4. INVESTMENT OF FUNDS: All Exercise Payments received before 12:00 Noon on a
given day and not disbursed on the same day received shall be deposited by the
Escrow Agent into a separate First Union National Bank Money Market account
established for the purpose of this escrow and shall upon clearance earn per
diem interest at a rate provided by the Escrow Agent for all similar accounts.
5. OFFERING DATE AND TERMINATION DATE: For the purpose of this Escrow
Agreement,
the escrow's duration shall commence on the "Offering Date" which shall be June
1, 1998 and end no later than the "Termination Date" which shall be November 20,
1998.
6. DISBURSEMENT OF FUNDS:
(a) INSTRUCTIONS FOR EXCHANGE OF MONEY AND PREFERRED STOCK: The
Escrow
Agent shall hold each of the certificates for the New Preferred Stock (the
"Preferred Stock certificates") and the Company Documents deposited to the order
of the Company against delivery of the corresponding Subscription Agreement
signature pages (signed by the respective Subscribers and counter-signed by the
Company) and Exercise Payments by the respective Subscribers and shall hold the
corresponding Subscription Agreement signature page (signed by the respective
parties) and Exercise Payments to the order of such Subscribers, each against
delivery of the Preferred Stock certificates and the Company Documents [(a)
through (g) above] by the Company, all in compliance with Section 6(b) below.
The Escrow Agent shall not wire proceeds from any particular Subscriber to
Company unless and until Company has counter-signed that Subscriber's
Subscription Agreement signature page.
(b) TIME FOR RELEASE OF MONEY AND PREFERRED STOCK:
Assuming that the conditions in Section 6(c) below have been met,
release of the Exercise Payments and corresponding Preferred Stock
certificates that are received into Escrow at or before 12:00 Noon,
Atlanta, Georgia time on any business day from the Offering Date through
the Termination Date shall occur before the end of business on the date of
such receipt. In the event that any Exercise Payments or Preferred Stock
certificates are received into Escrow after 12:00 Noon Atlanta, Georgia
time but before the close of business on any business day from the Offering
Date through the Termination Date, the Escrow Agent shall release such
Exercise Payments and Preferred Stock certificates as soon as practicable
but no later than the close of business on the following business day.
(c) CONDITIONS FOR RELEASE OF MONEY AND PREFERRED STOCK
CERTIFICATES:
Beginning on the Offering Date and upon receipt of a facsimile or original
signed Amendment and Agreement (or signature page) and Exercise Payments from
any Subscriber and receipt of the corresponding Preferred Stock certificates in
that Subscriber's name and all of the executed Company Documents (either
originals or a facsimile copies thereof) from the Company, including the
Registration Effectiveness Certificate, on or before November 20, 1998, the
Escrow Agent is instructed to:
(i) release the Exercise Payments, less Placement Agent's fees as
detailed in Exhibit "A" (the "Placement Agent's Fee"), to the
Company's account by wire transfer in immediately available
funds, as set forth below; and
(ii) deliver such corresponding Preferred Stock certificates and
Company Documents signed by the Company to that Subscriber by
Federal Express or equivalent courier service at the Subscriber's
address as set forth in its Subscription Agreement (or such other
address as is provided in writing by the Subscriber or Placement
Agent); and
(iii) deliver Placement Agent's Fee, as defined above, and copies
of the Company Documents (as defined in Section 3 above) by
overnight courier to Placement Agent.
At the end of each business day, the Escrow Agent shall provide to the
Company and Placement Agent, a spreadsheet or similar schedule reflecting the
Subscription Agreement signature pages, Payments and Preferred Stock
certificates received, and a schedule listing any moneys wired out by the Escrow
Agent, if applicable. Wiring instructions for wiring funds to the Company and to
Placement Agent will be provided to the Escrow Agent by the Company and
Placement Agent, respectively. The Escrow Agent shall (1) call Xxxx X. Xxxxxx,
Xxxx Xxxxxxx or Xxxx Xxxxxxx to confirm receipt of wiring instructions from
Placement Agent, and shall (2) call Harmel Rayat to confirm receipt of Company's
wiring instructions, at their respective telephone numbers set forth in Section
14(c) below.
(d) [Intentionally Left Blank].
(e) RELEASE OF THE ACCRUED INTEREST. The Escrow Agent shall calculate the
interest accrued on the total amount of accepted Exercise Payments made by the
various Subscribers, pursuant to Paragraph 4 above. The Escrow Agent shall
release the accrued interest on each of the Exercise Payments to the Company by
wire transfer of immediately available funds as provided above in the normal
course of business, but no later than five (5) days after the last day of the
month in which the last Subscription Payment was received.
(f) TERMINATION OF THE OFFERING: If the Escrow Agent has not received the
Exercise Payments and the Subscriber Documents from the Subscriber, and all of
the Company Documents from the Company, including but not limited to the
Registration Effectiveness Certificate by the close of business on the
Termination Date, then the Escrow Agent shall return all Preferred Stock
certificates and Company Documents to the Company and the Exercise Payments,
together with any interest earned and the Subscriber Documents to the Subscriber
on the following business day.
The Escrow Agent's duties shall be terminated once the balance of the
Escrow Account is disbursed pursuant to the terms hereof (except that it shall
continue to be obligated to forward the accrued interest earned pursuant to
Section 6(e)).
7. COLLECTED FUNDS: No interest shall accrue on any Subscription Payment and no
Subscription Payment shall be disbursed pursuant to Section 6 until the
Subscription Payment has been received by the Escrow Agent in immediately
available funds.
8. LIABILITY OF ESCROW AGENT: In performing any duties under this Agreement, the
Escrow Agent shall not be liable to the Company, Placement Agent, Subscriber or
any other party for damages, losses, or expenses, except for gross negligence or
willful misconduct on the part of the Escrow Agent. The Escrow Agent shall not
incur any such liability for (1) any act or failure to act or for any act
omitted in good faith, or (2) any action taken or omitted in reliance upon any
instrument, including any written statement or affidavit provided for in this
Agreement that the Escrow Agent shall in good faith believe to be genuine, nor
will the Escrow Agent be liable or responsible for forgeries, fraud,
impersonations, or determining the scope of any representative authority. In
addition, the Escrow Agent may consult with legal counsel in connection with the
Escrow Agent's duties under this Agreement and shall be fully protected in any
reasonable action taken, suffered, or permitted by it in good faith in
accordance with the advice of counsel. The Escrow Agent is not responsible for
determining and verifying the authority of any person acting or purporting to
act on behalf of any party to this Agreement, except for gross negligence or
willful misconduct as set forth above.
9. FEES AND EXPENSES: It is understood that the fees and usual charges agreed
upon for services of the Escrow Agent shall be considered compensation for
ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not properly fulfilled by a party other than
the Escrow Agent, or if the Company or Placement Agent requests a substantial
modification of its terms, or if any controversy arises, or if the Escrow Agent
is made a party to, or intervenes in, any litigation pertaining to this
Agreement or its subject matter, the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all reasonable
costs, attorneys' fees, including allocating costs of in-house counsel, and
expenses occasioned by such default, delay, controversy or litigation and the
Escrow Agent shall have the right to retain all documents or other things of
value at any time held by the Escrow Agent in this Agreement until such
compensation, fees, costs and expenses are paid. The Company and Placement Agent
promise to pay these sums upon demand. Unless otherwise provided, Placement
Agent will pay the Escrow Agent's usual charges and the bank may deduct such
sums from Placement Agent's Fee.
10. CONTROVERSIES: If any controversy arises between the parties to this
Agreement, or with any other person, concerning the subject matter of this
Agreement, or its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. In such event, the
Escrow Agent will not be liable for interest or damages, except in the case of
gross negligence or willful misconduct, as set forth above. Furthermore, the
Escrow Agent may at its option file an action of interpleader requiring the
parties to any such controversy to answer and litigate any claims and rights
among themselves. The Escrow Agent is authorized to deposit with the clerk of
the court all documents and funds held in escrow, except all reasonable cost,
expenses, charges and reasonable attorney fees incurred by the Escrow Agent due
to the interpleader action and which the Company and Placement Agent, jointly
and severally, agree to pay. Upon initiating such action, the Escrow Agent shall
be fully released and discharged of and from all obligation and liability
imposed by the terms of this Agreement.
11. INDEMNIFICATION OF ESCROW AGENT: The Company and Placement Agent, jointly
and severally, and their successors and assigns agree to indemnify and hold the
Escrow Agent harmless against any and all losses, claims, damages, liabilities,
and expenses, including reasonable costs of investigation, reasonable counsel
fees, including allocated costs of in-house counsel and disbursements that may
be imposed on the Escrow Agent or incurred by the Escrow Agent in connection
with the performance of its duties under this Agreement, including but not
limited to any litigation arising from this Agreement or involving its subject
matter, except for those incurred by virtue of the Escrow Agent's gross
negligence or willful misconduct. The Escrow Agent shall have a first lien on
the property and papers held under this Agreement for such compensation and
expenses, provided that the Escrow Agent shall have no such lien in respect of
compensation and expenses claimed arising out of or in connection with any
actual or alleged gross negligence or willful misconduct of the Escrow Agent.
Indemnification under this Section shall survive the termination of this
Agreement.
In order to induce, and as partial consideration for the Escrow Agent's
acceptance of this Agreement, the Company and Placement Agent each represent,
covenant and warrant to the Escrow Agent that no statement or representation,
whether oral or in writing, has been or will be made to any prospective
subscribers for any of the Preferred Stock and accompanying warrants to the
effect that the Escrow Agent is involved in any manner with the transactions or
events contemplated in that certain Letter of Agreement between the Company and
Placement Agent, Certificate of Designation or Subscription Agreements other
than as Escrow Agent under this Agreement. Without limitation to any release,
indemnification or hold harmless provision in favor of the Escrow Agent, as
elsewhere provided in this Escrow Agreement, the Company and Placement Agent
jointly and severally warrant and covenant to indemnify and hold harmless the
Escrow Agent from all liabilities, costs and expenses, including reasonable
attorneys' fees, which are occasioned by the threat or commencement of any claim
against the Escrow Agent based in whole or in part upon the allegation of
misrepresentation or omission of a material or significant fact in conjunction
with the sale or subscription of any Preferred Stock and accompanying warrants.
12. TERMINATION: This Agreement shall terminate upon the completion of the
conditions of Section 6, without any notices to any person, unless earlier
terminated pursuant to the terms hereof.
13. RESIGNATION OF ESCROW AGENT: The Escrow Agent may resign at any time upon
giving at least ten (10) days prior written notice to the Company and Placement
Agent provided, however, that no such resignation shall become effective until
the appointment of a successor escrow agent which shall be accomplished as
follows: The parties shall use their best effort to obtain a successor escrow
agent within ten (10) days after receiving such notice. The successor escrow
agent shall execute and deliver an instrument accepting such appointment and it
shall without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor escrow agent as if originally named as
escrow agent. The Escrow Agent shall thereupon be discharged from any further
duties and liability under this Agreement.
14. MISCELLANEOUS:
(a) GOVERNING LAWS: This Agreement is created by and shall be construed
under the applicable laws of the State of Georgia except for matters arising
under the United States Securities Act of 1933, as amended (the "Act"), which
matters shall be construed and interpreted in accordance with such laws.
(b) COUNTERPARTS: This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) NOTICES:
As to the Company:
Attn: Xxxxxx X. Xxxxx, Chairman
MedCare Technologies, Inc.
0000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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MedCare-2 (BR-1) Escrow
With a Copy to:
Attn: Xxxx X. Xxxxx, Esq.
Xxxx X. Xxxxx, P.C.
00000 Xxxxx Xxxxx Xxxx.
Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
As to the Placement Agent:
Attn: Xx. Xxxx X. Xxxxxx
Xxxxxx Investments, LLC
0000 Xxxxxxx Xxxxxx Xxxx
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
As to the Escrow Agent:
Attn: Xxxxx Xxxxxxx
First Union National Bank of Georgia, Corp. Trust Dept.
000 Xxxxxxxxx Xxxxxx X.X., Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(d) ENTIRE AGREEMENT: This Agreement represents the entire agreement of the
parties with respect to the Escrow Account with Escrow Agent and Escrow Agent is
not bound by any other agreements that may exist between Placement Agent and the
Company.
(e) AUTHORIZATION FOR AMENDMENTS: This Agreement shall not be amended
except pursuant to instructions in writing signed by all parties hereto. The
Escrow Agent shall be authorized to act on instructions or amendments to this
Agreement that are (a) signed by Xx. Xxxx X. Xxxxxx, Mr. P. Xxxxxxxx Xxxxxxx, or
Mr. Xxxxxxx Xxxxxxx, in the case of Placement Agent, and Xx. Xxxxxx S. Rayat, in
the case of the Company, or (b) signed by a representative of Company or
Placement Agent who has been duly authorized and notice of such authorization
has been provided to the Escrow Agent, signed by the signatories specified in
(a) above, as applicable. Such written authorization and notice, signed by the
appropriate officer, shall constitute sufficient authorization and notice for
the Escrow Agent to act upon, and the Escrow Agent shall be authorized to honor
instructions or amendments signed by such authorized representatives.
[Intentionally Left Blank]
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MedCare-2 (BR-1) Escrow
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
COMPANY: PLACEMENT AGENT:
MEDCARE TECHNOLOGIES, INC. XXXXXX INVESTMENTS, LLC
By: ___________________________
By: ___________________________ Xxxx X. Xxxxxx, President
Xxxxxx X. Xxxxx, Chairman
ESCROW AGENT: SUBSCRIBER:
FIRST UNION NATIONAL BANK __________________________
By: ____________________________ By: ____________________________
Print Name: _____________________ Print Name: ____________________
Title: ___________________________ Title: __________________________
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MedCare-2 (BR-1) Escrow
