EXHIBIT 10.1
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FUNDS ESCROW AGREEMENT
This Agreement (this "Agreement") is dated as of the 16th day of May
2005among XXXXXX, INC, a Delaware corporation (the "Company"), Laurus Master
Fund, Ltd. (the "Purchaser"), and Loeb & Loeb LLP (the "Escrow Agent"):
W I T N E S S E T H:
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WHEREAS, the Purchaser has advised the Escrow Agent that (a) the Company
and the Purchaser have entered into a Securities Purchase Agreement (the
"Securities Purchase Agreement") for the sale by the Company to the Purchaser of
a secured convertible term note (the "Term Note"), (b) the Company has issued to
the Purchaser a common stock purchase warrant (the "Term Note Warrant") in
connection with the issuance of the Term Note, and (c) the Company and the
Purchaser have entered into a Registration Rights Agreement covering the
registration of the Company's common stock underlying the Term Note and the Term
Note Warrant (the "Term Note Registration Rights Agreement");
WHEREAS, the Company and the Purchaser wish the Purchaser to deliver to
the Escrow Agent copies of the Documents (as hereafter defined) and the Escrowed
Payment (as hereafter defined) to be held and released by Escrow Agent in
accordance with the terms and conditions of this Agreement; and
WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant
to the terms and conditions of this Agreement;
NOW THEREFORE, the parties agree as follows:
ARTICLE I
INTERPRETATION
1.1. DEFINITIONS. Whenever used in this Agreement, the following terms
shall have the meanings set forth below.
(a) "Agreement" means this Agreement, as amended, modified and/or
supplemented from time to time by written agreement among the parties hereto.
(b) "Closing Payment" means the closing payment to be paid to Laurus
Capital Management, LLC, the fund manager, as set forth on Schedule A hereto.
(c) "Disbursement Letter" means that certain letter delivered to the
Escrow Agent by each of the Purchaser and the Company setting forth wire
instructions and amounts to be funded at the Closing.
(d) "Documents" means copies of the Disbursement Letter, the
Securities Purchase Agreement, the Term Note, the Term Note Warrant and the Term
Note Registration Rights Agreement
(e) "Escrowed Payment" means $6,000,000.
1.2. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto with respect to the matters contained herein and
supersedes all prior agreements, understandings, negotiations and discussions of
the parties, whether oral or written. There are no warranties, representations
and other agreements made by the parties in connection with the subject matter
hereof except as specifically set forth in this Agreement.
1.3. EXTENDED MEANINGS. In this Agreement words importing the singular
number include the plural and vice versa; words importing the masculine gender
include the feminine and neuter genders. The word "person" includes an
individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.
1.4. WAIVERS AND AMENDMENTS. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, in each case only by a written instrument signed by all parties
hereto, or, in the case of a waiver, by the party waiving compliance. Except as
expressly stated herein, no delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right, power or privilege hereunder
preclude any other or future exercise of any other right, power or privilege
hereunder.
1.5. HEADINGS. The division of this Agreement into articles, sections,
subsections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.
1.6. LAW GOVERNING THIS AGREEMENT; CONSENT TO JURISDICTION. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. With
respect to any suit, action or proceeding relating to this Agreement or to the
transactions contemplated hereby ("Proceedings"), each party hereto irrevocably
submits to the exclusive jurisdiction of the courts of the County of New York,
State of New York and the United States District court located in the county of
New York in the State of New York. Each party hereto hereby irrevocably and
unconditionally a) waives trial by jury in any Proceeding relating to this
Agreement and for any related counterclaim and (b) waives any objection which it
may have at any time to the laying of venue of any Proceeding brought in any
such court, waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with respect to such
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Proceedings, that such court does not have jurisdiction over such party. As
between the Company and the Purchaser, the prevailing party shall be entitled to
recover from the other party its reasonable attorneys' fees and costs. In the
event that any provision of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable, then the remainder of this
Agreement shall not be affected and shall remain in full force and effect.
1.7. CONSTRUCTION. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and, therefore, stipulates
that the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Agreement to
favor any party against the other.
ARTICLE II
APPOINTMENT OF AND DELIVERIES TO THE ESCROW AGENT
2.1. APPOINTMENT. The Company and the Purchaser hereby irrevocably
designate and appoint the Escrow Agent as their escrow agent for the purposes
set forth herein, and the Escrow Agent by its execution and delivery of this
Agreement hereby accepts such appointment under the terms and conditions set
forth herein.
2.2. COPIES OF DOCUMENTS TO ESCROW AGENT. On or about the date hereof,
the Purchaser shall deliver to the Escrow Agent copies of the Documents executed
by the Company to the extent it is a party thereto.
2.3. DELIVERY OF ESCROWED PAYMENT TO ESCROW AGENT. On or about the date
hereof, the Purchaser shall deliver to the Escrow Agent the Escrowed Payment.
2.4. INTENTION TO CREATE ESCROW OVER THE ESCROWED PAYMENT. The Purchaser
and the Company intend that the Escrowed Payment shall be held in escrow by the
Escrow Agent and released from escrow by the Escrow Agent only in accordance
with the terms and conditions of this Agreement.
ARTICLE III
RELEASE OF ESCROW
3.1. RELEASE OF ESCROW. Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Escrowed Payment from escrow as follows:
(a) Promptly following receipt by the Escrow Agent of (i) copies of
the fully executed Documents and this Agreement, (ii) the Escrowed Payment in
immediately available funds, (iii) joint written instructions ("Joint
Instructions") executed by the Company and the Purchaser setting forth the
payment direction instructions with respect to the Escrowed Payment and (iv)
Escrow Agent's verbal instructions from Xxxxx Grin and/or Xxxxxx Grin (each of
whom is a director of the Purchaser) indicating that all closing conditions
relating to the Documents have been satisfied and directing that the Escrowed
Payment be disbursed by the Escrow Agent in accordance with the Joint
Instructions, then the Escrowed Payment shall be deemed released from escrow and
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shall be promptly disbursed in accordance with the Joint Instructions. The Joint
Instructions shall include, without limitation, Escrow Agent's authorization to
retain from the Escrowed Payment Escrow Agent's fee for acting as Escrow Agent
hereunder and the Closing Payment for delivery to Laurus Capital Management, LLC
in accordance with the Joint Instructions.
(b) Upon receipt by the Escrow Agent of a final and non-appealable
judgment, order, decree or award of a court of competent jurisdiction (a "Court
Order") relating to the Escrowed Payment, the Escrow Agent shall remit the
Escrowed Payment in accordance with the Court Order. Any Court Order shall be
accompanied by an opinion of counsel for the party presenting the Court Order to
the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent) to
the effect that the court issuing the Court Order is a court of competent
jurisdiction and that the Court Order is final and non-appealable.
3.2. ACKNOWLEDGEMENT OF COMPANY AND PURCHASER; DISPUTES. The Company and
the Purchaser acknowledge that the only terms and conditions upon which the
Escrowed Payment are to be released from escrow are as set forth in Sections 3
and 4 of this Agreement. The Company and the Purchaser reaffirm their agreement
to abide by the terms and conditions of this Agreement with respect to the
release of the Escrowed Payment. Any dispute with respect to the release of the
Escrowed Payment shall be resolved pursuant to Section 4.2 or by written
agreement between the Company and Purchaser.
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1. DUTIES AND RESPONSIBILITIES OF THE ESCROW AGENT. The Escrow Agent's
duties and responsibilities shall be subject to the following terms and
conditions:
(a) The Purchaser and the Company acknowledge and agree that the
Escrow Agent (i) shall not be required to inquire into whether the Purchaser,
the Company or any other party is entitled to receipt of any Document or all or
any portion of the Escrowed Payment; (ii) shall not be called upon to construe
or review any Document or any other document, instrument or agreement entered
into in connection therewith; (iii) shall be obligated only for the performance
of such duties as are specifically assumed by the Escrow Agent pursuant to this
Agreement; (iv) may rely on and shall be protected in acting or refraining from
acting upon any written notice, instruction, instrument, statement, request or
document furnished to it hereunder and believed by the Escrow Agent in good
faith to be genuine and to have been signed or presented by the proper person or
party, without being required to determine the authenticity or correctness of
any fact stated therein or the propriety or validity or the service thereof; (v)
may assume that any person purporting to give notice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so; (vi) shall not be responsible for the identity, authority
or rights of any person, firm or company executing or delivering or purporting
to execute or deliver this Agreement or any Document or any funds deposited
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hereunder or any endorsement thereon or assignment thereof; (vii) shall not be
under any duty to give the property held by Escrow Agent hereunder any greater
degree of care than Escrow Agent gives its own similar property; and (viii) may
consult counsel satisfactory to Escrow Agent (including, without limitation,
Loeb & Loeb, LLP or such other counsel of Escrow Agent's choosing), the opinion
of such counsel to be full and complete authorization and protection in respect
of any action taken, suffered or omitted by Escrow Agent hereunder in good faith
and in accordance with the opinion of such counsel.
(b) The Purchaser and the Company acknowledge that the Escrow Agent
is acting solely as a stakeholder at their request and that the Escrow Agent
shall not be liable for any action taken by Escrow Agent in good faith and
believed by Escrow Agent to be authorized or within the rights or powers
conferred upon Escrow Agent by this Agreement. The Purchaser and the Company
hereby, jointly and severally, indemnify and hold harmless the Escrow Agent and
any of Escrow Agent's partners, employees, agents and representatives from and
against any and all actions taken or omitted to be taken by Escrow Agent or any
of them hereunder and any and all claims, losses, liabilities, costs, damages
and expenses suffered and/or incurred by the Escrow Agent arising in any manner
whatsoever out of the transactions contemplated by this Agreement and/or any
transaction related in any way hereto, including the fees of outside counsel and
other costs and expenses of defending itself against any claims, losses,
liabilities, costs, damages and expenses arising in any manner whatsoever out
the transactions contemplated by this Agreement and/or any transaction related
in any way hereto, except for such claims, losses, liabilities, costs, damages
and expenses incurred by reason of the Escrow Agent's gross negligence or
willful misconduct. The Escrow Agent shall owe a duty only to the Purchaser and
the Company under this Agreement and to no other person.
(c) The Purchaser and the Company shall jointly and severally
reimburse the Escrow Agent for its reasonable out-of-pocket expenses (including
counsel fees (which counsel may be Loeb & Loeb LLP or such other counsel of the
Escrow Agent's choosing) incurred in connection with the performance of its
duties and responsibilities hereunder, which shall not (subject to Section
4.1(b)) exceed $2,000.
(d) The Escrow Agent may at any time resign as Escrow Agent
hereunder by giving five (5) business days prior written notice of resignation
to the Purchaser and the Company. Prior to the effective date of resignation as
specified in such notice, the Purchaser and Company will issue to the Escrow
Agent a Joint Instruction authorizing delivery of the Documents and the Escrowed
Payment to a substitute Escrow Agent selected by the Purchaser and the Company.
If no successor Escrow Agent is named by the Purchaser and the Company, the
Escrow Agent may apply to a court of competent jurisdiction in the State of New
York for appointment of a successor Escrow Agent, and deposit the Documents and
the Escrowed Payment with the clerk of any such court and/or otherwise commence
an interpleader or similar action for a determination of where to deposit the
same.
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(e) The Escrow Agent does not have and will not have any interest in
the Documents and the Escrowed Payment, but is serving only as escrow agent,
having only possession thereof.
(f) The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith and reasonably believed by it to be authorized
hereby or within the rights or powers conferred upon it hereunder, nor for
action taken or omitted by it in good faith, and in accordance with advice of
counsel (which counsel may be Loeb & Loeb, LLP or such other counsel of the
Escrow Agent's choosing), and shall not be liable for any mistake of fact or
error of judgment or for any acts or omissions of any kind except to the extent
any such liability arose from its own willful misconduct or gross negligence.
(g) This Agreement sets forth exclusively the duties of the Escrow
Agent with respect to any and all matters pertinent thereto and no implied
duties or obligations shall be read into this Agreement.
(h) The Escrow Agent shall be permitted to act as counsel for the
Purchaser or the Company, as the case may be, in any dispute as to the
disposition of the Documents and the Escrowed Payment, in any other dispute
between the Purchaser and the Company, whether or not the Escrow Agent is then
holding the Documents and/or the Escrowed Payment and continues to act as the
Escrow Agent hereunder.
(i) The provisions of this Section 4.1 shall survive the resignation
of the Escrow Agent or the termination of this Agreement.
4.2. DISPUTE RESOLUTION; JUDGMENTS. Resolution of disputes arising under
this Agreement shall be subject to the following terms and conditions:
(a) If any dispute shall arise with respect to the delivery,
ownership, right of possession or disposition of the Documents and/or the
Escrowed Payment, or if the Escrow Agent shall in good faith be uncertain as to
its duties or rights hereunder, the Escrow Agent shall be authorized, without
liability to anyone, to (i) refrain from taking any action other than to
continue to hold the Documents and the Escrowed Payment pending receipt of a
Joint Instruction from the Purchaser and the Company, (ii) commence an
interpleader or similar action, suit or proceeding for the resolution of any
such dispute; and/or (iii) deposit the Documents and the Escrowed Payment with
any court of competent jurisdiction in the State of New York, in which event the
Escrow Agent shall give written notice thereof to the Purchaser and the Company
and shall thereupon be relieved and discharged from all further obligations
pursuant to this Agreement. The Escrow Agent may, but shall be under no duty to,
institute or defend any legal proceedings which relate to the Documents and the
Escrowed Payment. The Escrow Agent shall have the right to retain counsel if it
becomes involved in any disagreement, dispute or litigation on account of this
Agreement or otherwise determines that it is necessary to consult counsel which
such counsel may be Loeb & Loeb LLP or such other counsel of the Escrow Agent's
choosing.
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(b) The Escrow Agent is hereby expressly authorized to comply with
and obey any Court Order. In case the Escrow Agent obeys or complies with a
Court Order, the Escrow Agent shall not be liable to the Purchaser and the
Company or to any other person, firm, company or entity by reason of such
compliance.
ARTICLE V
GENERAL MATTERS
5.1. TERMINATION. This escrow shall terminate upon disbursement of the
Escrowed Payment in accordance with the terms of this Agreement or earlier upon
the agreement in writing of the Purchaser and the Company or resignation of the
Escrow Agent in accordance with the terms hereof.
5.2. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier, regular or certified mail):
If to the Company, to: XXXXXX, INC.
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Facsimile:
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With a copy to:
(b) If to the Purchaser, to:
LAURUS MASTER FUND, LTD.
M&C Corporate Services Limited
X.X. Xxx 000 XX, Xxxxxx House
South Church Street
Xxxxxx Town
Grand Cayman, Cayman Islands, Fax: 000-000-0000
(c) If to the Escrow Agent, to:
Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.
5.3. INTEREST. The Escrowed Payment shall not be held in an interest
bearing account nor will interest be payable in connection therewith.
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5.4. ASSIGNMENT; BINDING AGREEMENT. Neither this Agreement nor any right
or obligation hereunder shall be assignable by any party without the prior
written consent of the other parties hereto. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.
5.5. INVALIDITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal, or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
5.6. COUNTERPARTS/EXECUTION. This Agreement may be executed in any
number of counterparts and by different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same agreement. This
Agreement may be executed by facsimile transmission.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
XXXXXX, INC.
By:
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Name:
Title:
PURCHASER:
LAURUS MASTER FUND, LTD.
By:
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Name:
Title:
ESCROW AGENT:
LOEB & LOEB LLP
By:
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Name:
Title:
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SCHEDULE A TO FUNDS ESCROW AGREEMENT
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PURCHASER PRINCIPAL NOTE AMOUNT
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LAURUS MASTER FUND, LTD. [Term Note in an aggregate
M&C Corporate Services Limited principal amount of
X.X. Xxx 000 XX, Xxxxxx House $6,000,000]
Xxxxx Xxxxxx Xxxxxx, Xxxxxx Xxxx,
Xxxxx Xxxxxx, Xxxxxx Xxxxxxx
Fax: 000-000-0000
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TOTAL: $6,0O0,000
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FUND MANAGER CLOSING PAYMENT
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LAURUS CAPITAL MANAGEMENT, L.L.C. Closing payment payable in connection
000 Xxxxx Xxxxxx, 00xx Xxxxx with invstment by Laurus Master Fund,
Xxx Xxxx, Xxx Xxxx 00000 Ltd. for which Laurus Capital Manage-
Fax: 000-000-0000 ment, L.L.C. is the manager.
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TOTAL: $234,000
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WARRANT RECIPIENT WARRANTS IN CONNECTIN WITH OFFERING
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LAURUS MASTER FUND, LTD.
M&C Corporate Services Limited
X.X. Xxx 000 XX, Xxxxxx House
South Church Street, Xxxxxx Town,
Grand Cayman, Cayman Islands
Fax: 000-000-0000
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TOTAL: Warrants exercisable into 100,000
shares of common stock of the Company
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