EXHIBIT 10.6
ESCROW AGREEMENT
THIS AGREEMENT is made as of the day of May, 1998 by and among
DYNATEC INTERNATIONAL, INC., with its principal office at 0000 Xxxx Xxxxx
Xxxxx Xxxxx, Xxxx Xxxx Xxxx, Xxxx 00000 (hereinafter the "Company"),
SETTONDOWN CAPITAL INTERNATIONAL LTD. (the "Placement Agent") located at
Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx, X.X. Xxx X. 0000, Xxxxxx, Bahamas, the
"Purchasers" specified on Schedule A attached hereto, with their respective
principal offices at the addresses set forth in Schedule A (hereinafter
together with the Placement Agent referred to as the "Investors"), and
XXXXXXXXX, XXXXXXXXX & XXXX, LLP, 00 Xxxxxxxx, 00xx Xx., Xxx Xxxx, XX 00000
(hereinafter the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Purchasers will be purchasing $1,500,000 Convertible
Debentures, a $500,000 Convertible Debentures, and Warrants from the Company
at a purchase price as set forth in the $500,000 Convertible Debentures, the
$1,500,000 Convertible Debentures, and the Convertible Debenture and Private
Equity Line of Credit Agreement (the "Equity Line Agreement") dated May ,
1998, which will be issued as per the terms contained herein and in the
Equity Line Agreement executed by the Company and Investors; all capitalized
terms not defined herein shall have the definition as set forth in the
Agreement; and
WHEREAS, the Company shall issue to the Placement Agent pursuant to the
terms of the Equity Line Agreement, from time to time as provided herein, a
Warrant A to purchase 450,000 shares of Common Stock, and 80,000 shares of
Common Stock; and
WHEREAS, the parties hereby agree to establish an escrow account with
the Escrow Agent whereby the Escrow Agent shall hold the funds for the
purchase of the Convertible Debentures, and Put Shares (collectively referred
to as the "Securities"); and
WHEREAS, the Company shall have a Put for the remainder of the
Commitment Amount for up to $10,000,000 after the Purchase Price for the
Convertible Debentures has been paid to the Company, in accordance with the
terms and conditions in the Agreement; and
WHEREAS, it is intended that the purchase of the Securities be
consummated in accordance with the requirements set forth by Regulation D
promulgated under the Securities Act of 1933, as amended; and
WHEREAS, the Company has requested that the Escrow Agent hold the Purchase
Price for the Convertible Debentures, and the remainder of the Commitment Amount
in escrow until the Escrow Agent has received the Convertible Debentures, and
the Put Shares, as applicable. The Escrow Agent will then immediately wire
transfer or otherwise deliver at the Company's discretion immediately available
funds to the Company's account and arrange for delivery of the Convertible
Debentures and Put Shares to Investors as per the terms and conditions in the
Agreement.
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NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW FOR THE
PURCHASE OF $1,500,000 CONVERTIBLE DEBENTURES
1.1 Upon Escrow Agent's receipt of the Purchase Price from the
Purchasers for the $1,500,000 Convertible Debentures, and Warrants to be
purchased pursuant to the terms set forth in the Equity Line Agreement, into
its attorney trustee account, it shall notify the Company, or the Company's
designated attorney or agent, of the amount of funds it has received into its
account.
1.2 The Company, upon receipt of said notice and acceptance of the
Equity Line Agreement by both parties, as evidenced by the Company's and the
Investor's execution thereof, shall deliver to the Escrow Agent the
$1,500,000 Convertible Debentures and Warrants being purchased by the
Purchasers, and those shares of Common Stock and Warrants being issued to the
Placement Agent. Escrow Agent shall then communicate with the Company to
confirm the validity of their issuance.
1.3 Once Escrow Agent confirms the validity of the issuance of the
Convertible Debentures and Warrants, he shall immediately wire that amount of
funds necessary to purchase an aggregate of $1,500,000 Convertible Debentures
and Warrants per the written instructions of the Company. The Company will
furnish Escrow Agent with a "Net Letter" directing payment of (i) Placement
Agent fees as per the terms of the Equity Line Agreement to the Placement
Agent; and (ii) legal, administrative, and escrow costs as per the terms of
the Equity Line Agreement to Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP. Such fees are
to be remitted in accordance with wire instructions that will be sent to
Escrow Agent from the Company, with the net balance payable to the Company.
Once the funds (as set forth above) have been received per the Company's
instructions, the Escrow Agent shall then arrange to have the Convertible
Debentures, Common Stock, and Warrants delivered as per instructions from the
Investors.
ARTICLE 2
TERMS OF THE ESCROW FOR THE PURCHASE
OF $500,000 CONVERTIBLE DEBENTURES WITHIN FIVE TRADING
DAYS AFTER THE EFFECTIVE DATE
2.1 Upon Escrow Agent's receipt from the Purchasers of the Purchase
Price for the $500,000 Convertible Debentures to be purchased within five
Trading Days after the Effective Date, into its attorney trustee account, it
shall notify the Company, or the Company's designated attorney or agent, of
the amount of funds it has received into its account.
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2.2 The Company, upon receipt of said notice and verification from the
Company that all of the conditions as stated in the Equity Line Agreement
have been satisfied, shall deliver to the Escrow Agent the $500,000
Convertible Debentures being purchased within five Trading Days after the
Effective Date. Escrow Agent shall then communicate with the Company to
confirm the validity of their issuance.
2.3 Once Escrow Agent confirms the validity of the issuance of the
$500,000 Convertible Debentures, he shall immediately wire that amount of
funds necessary to purchase the $500,000 Convertible Debentures per the
written instructions of the Company. The Company will furnish Escrow Agent
with a "Net Letter" directing payment of (i) Placement Agent fees as per the
terms of the Equity Line Agreement to the Placement Agent; and (ii) legal,
administrative, and escrow costs as per the terms of the Equity Line
Agreement to Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP. Such fees are to be remitted
in accordance with wire instructions that will be sent to Escrow Agent from
the Company, with the net balance payable to the Company. Once the funds (as
set forth above) have been received per the Company's instructions, the
Escrow Agent shall then arrange to have the Convertible Debentures delivered
as per instructions from the Purchasers.
ARTICLE 3
TERMS OF THE ESCROW FOR THE PUT SHARES
3.1 Upon Escrow Agent's receipt of confirmation in writing that the
Company has properly served a Put Notice in accordance with the Agreement,
and once it has received the Purchase Price from the Purchasers for the Put
Shares into its attorney trustee account, it shall notify the Company, or the
Company's designated attorney or agent, of the amount of funds it has
received into its account.
3.2 The Company, upon receipt of said notice and acceptance by the
Purchasers, as evidenced by written notice by the Purchasers, shall deliver
to the Escrow Agent the Put Shares being purchased. Escrow Agent shall then
communicate with the Company to confirm the validity of its issuance.
3.3 Once Escrow Agent confirms the validity of the issuance of the Put
Shares, he shall immediately wire that amount of funds necessary to purchase
the Put Shares per the written instructions of the Company. The Company will
furnish Escrow Agent with a "Net Letter" directing payment of (i) Placement
Agent fees as per the terms of the Agreement to the Placement Agent; and (ii)
legal, administrative, and escrow costs as per the terms of the Agreement to
Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP. Such fees are to be remitted in accordance
with wire instructions that will be sent to Escrow Agent from the Company,
with the net balance payable to the Company. Once the funds have been
received per the Company's instructions, the Escrow Agent shall then arrange
to have the Put Shares delivered as per instructions from the Purchasers.
ARTICLE 4
TERMS OF THE ESCROW FOR THE 60,000 SHARES OF
COMMON STOCK ISSUABLE TO THE PLACEMENT AGENT
4.1 The Company and the Placement Agent hereby agree to establish an
escrow account with the Escrow Agent whereby the Escrow Agent shall hold 60,000
shares of Common Stock ("Escrowed
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Shares") issued by the Company pursuant to the Equity Line Agreement. The
Escrowed Shares will be issued in the name of Placement Agent. In addition,
the Escrow Agent shall hold blank Stock Powers, duly executed, by the
Placement Agent.
4.2 These shares of Common Stock shall be issued to the Placement Agent
as follows, 6,000 shares of Common Stock per the Closing of every $1,000,000
of aggregate Put Investment Amount, upon the written certification from the
Company to the Escrow Agent on or before each Closing for Put Shares of the
completion of each of the following: (i) the conditions set forth in Article
3 above have been satisfied; (ii) that such issuance of Common Stock to the
Placement Agent does not trigger the requirement of shareholder approval
under the Nasdaq governance provisions applicable to the Company; and (iii)
the Company's independent auditors agree and give written confirmation of
same that the expenses reflected by the grants of Common Stock in this
Section can be reflected in the financial statements of the Company only
incrementally on a pro rata basis as the Puts are made. The Company shall
notify the Escrow Agent and the Transfer Agent in writing of the
aforementioned issuance and the number of shares of Common Stock to be issued
to the Placement Agent per each Closing for Put Shares referenced above, and
the number of shares, if any, to be returned to the Company or returned into
escrow. Upon receipt of such notice, the Escrow Agent shall send, by
overnight mail, the original certificates to the Company's transfer agent
(the "Transfer Agent"), along with the Stock Power, executed by the Placement
Agent and transfer instructions directing the Transfer Agent to deliver these
shares of Common Stock to the Placement Agent.
4.3 The Company shall notify the Transfer Agent and the Escrow Agent,
in writing, of the number of Escrowed Shares to be issued to the Placement
Agent and the number of Escrowed Shares to be returned to the Company or into
escrow, and Escrow Agent shall deliver the executed Stock Power to the
Transfer Agent.
ARTICLE 5
MISCELLANEOUS
5.1 This Agreement may be altered or amended only with the consent of
all of the parties hereto. Should the Company or Investors attempt to change
this Agreement in a manner which, in the Escrow Agent's discretion, shall be
undesirable, the Escrow Agent may resign as Escrow Agent by notifying the
Company and the Investor in writing. In the case of the Escrow Agent's
resignation or removal pursuant to the foregoing, its only duty, until
receipt of notice from the Company and the Investors or their agent that a
successor escrow agent shall have been appointed, shall be to hold and
preserve the funds. Upon receipt by the Escrow Agent of said notice from the
Company and the Investors of the appointment of a successor escrow agent, the
name of a successor escrow account and a direction to transfer the funds, the
Escrow Agent shall promptly thereafter transfer all of the funds held in
escrow to said successor escrow agent. Immediately after said transfer, the
Escrow Agent shall furnish the Company and the Investor with proof of such
transfer. The Escrow Agent is authorized to disregard any notices, requests,
instructions or demands received by it from the Company or the Investors
after notice of resignation or removal shall have been given, unless the same
shall be the aforementioned notice from the Company and the Investors to
transfer the funds to a successor escrow agent or to return same to the
respective parties.
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5.2 The Escrow Agent shall be reimbursed by the Company and the
Investors for any reasonable expenses incurred in the event there is a
conflict between the parties and the Escrow Agent shall deem it necessary to
retain counsel.
5.3 The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith in accordance with the advice of the Escrow
Agent's counsel; and in no event shall the Escrow Agent be liable or
responsible except for the Escrow Agent's own gross negligence or willful
misconduct.
5.4 The Company and the Investors warrant to and agree with the Escrow
Agent that, unless otherwise expressly set forth in this Agreement:
(i) there is no security interest in the Securities or any part
thereof;
(ii) no financing statement under the Uniform Commercial Code is
on file in any jurisdiction claiming a security interest or in
describing (whether specifically or generally) the Securities or any
part thereof; and
(iii) the Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the
Securities or any part thereof or to file any financing statement
under the Uniform Commercial Code with respect to the Securities or
any part thereof.
5.5 The Escrow Agent in its capacity as such has no liability hereunder
to either party other than to hold the funds and the Securities and to
deliver them under the terms hereof. Each party hereto agrees to indemnify
and hold harmless the Escrow Agent in its capacity as such from and with
respect to any suits, claims, actions or liabilities arising in any way out
of this transaction including the obligation to defend any legal action
brought which in any way arises out of or is related to this Escrow.
5.6 No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No
extension of time for performance of any obligation or act shall be deemed
any extension of the time for performance of any other obligation or act.
5.7 All notices, demands, requests, consents, APPROVALS, and other
communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with
charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such
party shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business
day during normal business hours where such notice is to be received) or (b)
on the second business day following the date of mailing by
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reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be:
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If to Dynatec International, Inc.:
Dynatec International, Inc.
0000 Xxxx Xxxxx Xxxxx Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxx X. Xxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to the Placement Agent:
Settondown Capital International Ltd.
Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
P.O. Box N. 9204
Nassau, Bahamas
Attn: Xxxxxxx X. X. Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Purchasers, at the address listed on Schedule A.
If to Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP:
Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP
00 Xxxxxxxx, 00xx Xx.
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile (000) 000-0000
Either party hereto may from time to time change its address or
facsimile number for notices under this Section by giving prior written
notice of such changed address or facsimile number to the other party hereto.
5.8 This Agreement shall be binding upon and shall inure to the benefit
of the permitted successors and assigns of the parties hereto.
5.9 This Agreement is the final expression of, and contains the entire
Agreement between, the parties with respect to the subject matter hereof and
supersedes all prior understandings with respect thereto. This Agreement may
not be modified, changed, supplemented or terminated, nor may any obligations
hereunder be waived, except by written instrument signed by the parties to be
charged or by its agent duly authorized in writing or as otherwise expressly
permitted herein.
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5.10 Whenever required by the context of this Agreement, the singular
shall include the plural and masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless
otherwise indicated, all references to Articles are to this Agreement.
5.11 The Company acknowledges and confirms that it is not being represented
in a legal capacity by Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP and it has had the
opportunity to consult with its own legal advisors prior to the signing of this
Agreement.
5.12 This Agreement will be construed and enforced in accordance with
and governed by the laws of the State of New York, except for matters arising
under the Act, without reference to principles of conflicts of law. Each of
the parties consents to the jurisdiction of the U.S. District Court sitting
in the Southern District of the State of New York or the state courts of the
State of New York sitting in Manhattan in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on FORUM NON CONVENIENS, to
the bringing of any such proceeding in such jurisdictions. Each party hereby
agrees that if another party to this Agreement obtains a judgment against it
in such a proceeding, the party which obtained such judgment may enforce same
by summary judgment in the courts of any country having jurisdiction over the
party against whom such judgment was obtained, and each party hereby waives
any defenses available to it under local law and agrees to the enforcement of
such a judgment. Each party to this Agreement irrevocably consents to the
service of process in any such proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party at its address
set forth herein. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day of May, 1998.
DYNATEC INTERNATIONAL, INC. SETTONDOWN CAPITAL INTER-
NATIONAL LTD.
By______________________ By_____________________________
Its: CEO Its:
XXXXX ENTERPRISES
By_____________________________
Its:
TLG REALTY
By_____________________________
Its:
BALMLORE FUNDS S.A.
By_____________________________
Its:
AUSTOST ANSTALT XXXXXX
By_____________________________
Its:
XXXXXXXXX, XXXXXXXXX & XXXX, LLP HEWLETTE FUND
Escrow Agent
By____________________________ By____________________________
Its:
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