Exhibit 10.9
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement"), dated as of December __,
2000, is entered into by and among Digital Descriptor Systems, Inc., a Delaware
corporation (the "Company"), AJW Partners, LLC, ("AJW"), New Millennium Capital
Partners II, LLC, ("New Millennium" and together with AJW, the "Purchasers", and
each a "Purchaser") and Xxxx Xxxxxxxxx, Esq., as escrow agent (the "Escrow
Agent").
WITNESSETH:
WHEREAS, pursuant to that certain Secured Convertible Debenture
Purchase Agreement, dated as of the date hereof, between the Company and the
Purchasers (the "Purchase Agreement"), the Company proposes to sell $600,000
aggregate gross proceeds of the Company's 12% Secured Convertible Debentures
("Debentures") which are convertible into shares of the Company's common stock
(the "Common Stock") to the Purchasers on the terms and conditions set forth in
the Purchase Agreement;
WHEREAS, capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement or Debenture;
WHEREAS, simultaneously herewith, the Escrow Agent shall receive a
fully executed copy of each Transaction Document;
WHEREAS, pursuant to the Purchase Agreement, simultaneously herewith,
the Company shall deliver to the Escrow Agent Certificates of Common Stock in an
amount equal to [ ], which represents the sum of (i) 200% of the number of
shares of Common Stock which would be issuable upon the conversion in full of
the Debentures assuming such conversion occurred on the Original Issue Date, the
Debentures remain outstanding for one year and such conversion occurred at a
price equal to the lessor of (a) $0.08 and (b) 50% of the average of the lowest
three inter-day prices (which need not occur on consecutive Trading Days) during
the ten Trading Days immediately preceding the Closing Date, and (ii) exercise
in full of the Warrants (the "Escrowed Stock Certificates"); and
WHEREAS, the Escrowed Stock Certificates are to be held by the Escrow
Agent in escrow and distributed to the Company and/or the Purchasers in
accordance with the terms and conditions hereinafter set forth.
NOW, THEREFORE, it is hereby agreed as follows:
A. Appointment of Escrow Agent; Delivery of Escrowed Stock.
1. The Escrow Agent is hereby appointed as escrow agent by the
parties hereto strictly in accordance with the terms and provisions of this
Agreement and the Escrow Agent hereby accepts such appointment.
2. Simultaneously with the execution of this Agreement, the Company
shall deliver to the Escrow Agent the Escrowed Stock Certificates undated and
issued in blank. For all purposes under this Agreement, the Escrowed Stock
Certificates may be maintained in either paper or electronic form.
B. Release of Escrowed Stock.
1. Upon receipt of a Notice of Conversion in the form of Exhibit A
annexed hereto executed by the Purchaser (which Notice of Conversion shall have
been simultaneously delivered to the Company by the Purchaser), the Escrow Agent
is authorized and directed by the parties hereto to immediately date the
Escrowed Stock Certificate(s) as of the date thereof and deliver to such
Purchaser the Escrowed Stock Certificate(s) representing the "Number of Shares
of Common Stock to be Issued" as shown on such Notice of Conversion. No
signature approval or other documentation shall be required to effect such
delivery, and Escrow Agent's obligations hereunder shall not be affected by any
contrary instructions by the Company.
2. Upon receipt of a Form of Election to Purchase in the form of
Exhibit B annexed hereto executed by the Purchaser (which Form of Election to
purchase shall have been simultaneously delivered to the Company by the
Purchasers), the Escrow Agent is authorized immediately to date the Escrowed
Stock Certificate(s) as of the date thereof and deliver to such Purchaser the
Escrowed Stock Certificate(s) representing the number of shares of Common Stock
to be purchased as shown on such Form of Election to Purchase. No signature
approval or other documentation shall be required to effect such delivery, and
Escrow Agent's obligations hereunder shall not be affected by any contrary
instructions by the Company.
3. In the event that the Purchasers do not convert the Debentures in
full and exercise the Warrant in full, upon receipt by the Escrow Agent of
written notice from each of the Company and each Purchaser, the Escrow Agent
shall immediately deliver the remaining Escrowed Stock Certificates held in
escrow to the Company.
C. Escrowed Stock Certificates. The Company and each Purchaser hereby
agree that:
1. unless and until delivered upon the conversion of the Debentures
or exercise of the Warrants, as the case may be, the Escrowed Stock Certificates
(i) are not transferable by any person, (ii) do not represent outstanding shares
of Common Stock, and (iii) confer no rights of any nature whatsoever on the
Purchasers, including, without limitation, voting rights or any shareholder
rights.
2. upon delivery of the Escrowed Stock Certificates by the Escrow
Agent to the Purchasers, each Escrowed Stock Certificate shall represent the
number of validly issued, fully-paid, nonassessable shares of Common Stock shown
on the face thereof, with all the rights otherwise pertaining to the Common
Stock.
D. Escrow Agent.
1. The Escrow Agent shall have no duties or responsibilities other
than those expressly set forth herein. The Escrow Agent shall have no duty to
enforce any obligation of any party to this Agreement to make any delivery, or
to direct or cause any delivery to be made, or to enforce any obligation of any
party to this Agreement to perform any other act. The Escrow Agent shall be
under no liability to the other parties hereto or to anyone else, by reason of
any failure on the part of any party hereto or any other signatory of any
document or any other person to perform such person's obligation under any such
document. Except for amendments to this Agreement referred to below, the Escrow
Agent shall not be obligated to recognize any agreement between any or all of
the persons referred to herein, including but not limited to the Purchase
Agreement, notwithstanding that references thereto may be made herein and
whether or not it has knowledge thereof.
2. The Escrow Agent shall not be liable to the other parties hereto
or to anyone else for any action taken or omitted by it, or any action suffered
by it to be taken or omitted, in good faith and in the exercise of its own best
judgment. The Escrow Agent may rely conclusively and shall be protected in
acting upon any order, notice, demand, certificate, opinion or advice of counsel
chosen by the Escrow Agent, which counsel shall not be associated with either
the Company or the Purchasers, statement, instrument, report or other paper or
document (not only as to its due execution and the validity and effectiveness of
its provisions, but also as to the truth and acceptability of any information
therein contained) which is believed by the Escrow Agent to be genuine and to be
signed or presented by the proper person or persons. The Escrow Agent shall not
be bound by any notice or demand, or any waiver, modification, termination or
rescission of this Agreement or any of the terms hereof, unless evidenced by a
writing delivered to the Escrow Agent signed by the proper party or parties and,
if the duties or rights of the Escrow Agent are affected, unless it shall give
its prior written consent thereto.
3. The Escrow Agent shall not be responsible for the sufficiency or
accuracy of the form of, or the execution, validity, value or genuineness of,
any document or property received, held or delivered by it hereunder, or of any
signature or endorsement thereon, or for any lack of endorsement thereon, or for
any description therein, nor shall the Escrow Agent be responsible or liable to
the other parties hereto or to anyone else in any respect on account of the
identity, authority, or rights of the persons executing or delivering or
purporting to execute or deliver any document or property or this Agreement.
4. Each of the parties hereto, jointly and severally, agrees to
release and hold Escrow Agent and each of its officers, employees and agents
harmless from, and indemnify Escrow Agent and each of its officers, employees
and agents against, any loss, liability, and expense (including attorneys' fees
and expenses) suffered or incurred pursuant to any claim or demand of any of
them or any third party arising out of or in connection with the provisions of
this Escrow Agreement or with the administration of its duties hereunder, except
for claims for damages arising out of the negligence or willful misconduct of
Escrow Agent. In no event shall the Escrow Agent be liable for indirect,
punitive, special or consequential damages. The foregoing indemnities shall
survive the resignation of Escrow Agent or the termination of this Escrow
Agreement. Upon its delivery or release of all of the Escrowed Stock
Certificates in accordance with this Agreement, or its resignation pursuant to
Section 6, the Escrow Agent shall be discharged of all further obligations
hereunder.
5. Escrow Agent shall permit the independent public accountants or
other authorized representatives of the Company and the Purchasers, from time to
time at reasonable times and upon reasonable notice, to confirm the existence of
the Escrowed Stock Certificates and the number of shares of Common Stock
represented thereby then held under this Agreement.
E. Escrow Agent Expenses. The fees and expenses of the Escrow Agent for
its services under this Escrow Agreement, as set forth on Exhibit C, shall be
paid by the Company.
F. Termination; Resignation.
1. This Agreement shall terminate on the final disposition of the
Escrowed Stock Certificates in accordance with the terms hereof provided that
the rights of the Escrow Agent and the obligations of the other parties hereto
under Sections 4, 5 or 7 shall survive the termination hereof.
2. The Escrow Agent may resign at any time by giving written notice
thereof to the other parties hereto, but such resignation shall not become
effective until a successor escrow agent shall have been appointed and shall
have accepted such appointment in writing. Upon receiving such notice of
resignation, Purchasers holding a majority of the Escrowed Share Certificates
shall promptly appoint a successor Escrow Agent (which shall not be a Purchaser
or any affiliate of a Purchaser) by written instrument, a copy of which shall be
delivered to the resigning Escrow Agent. If the parties shall fail to make such
appointment within thirty (30) days after receipt of Escrow Agent's notice of
resignation, the resigning Escrow Agent may apply to any court of competent
jurisdiction for the appointment of a successor.
G. Jurisdiction. Each of the other parties hereto hereby irrevocably
consents to the venue and jurisdiction of the courts of the State of New York
and of any Federal court located in such State in connection with any action,
suit or other proceeding arising out of or relating to this Agreement or any
action taken or omitted hereunder, and waives personal service of any summons,
complaint or other process and agrees that the service thereof may be made by
certified or registered mail directed to such person at such person's address
for purposes of notices hereunder.
H. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Escrow Agent, to: Xxxx Xxxxxxxxx, Esq.
00000 Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
If to the Company, to: Digital Descriptor Systems, Inc.
000 Xxxxxxx Xxxxxxx
Xxxxxxxx Xxxxx, XX 00000
Facsimile No.: [ ]
Attn: [ ]
With copies to: [ ]
[ ]
[ ]
Facsimile No.: ( ) [ ]
Attn:[ ]
If to the Purchasers, to: AJW Partners, LLC
000 Xxxxx Xxxxxx, Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx
and: New Millennium Capital Partners II, LLC
000 Xxxxx Xxxxxx, Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxxx
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and
(000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
I. Miscellaneous.
1. This Agreement shall be binding on and inure to the benefit of
all parties hereto and may not be modified or amended orally, but only in a
writing signed by all parties hereto.
2. If any term, condition or provision of this Agreement, or the
application thereof to any circumstance or party hereto, shall ever be held to
be invalid or unenforceable, then in each such event the remainder of this
Agreement or the application of such term, condition or provision to any other
circumstance or party hereto (other than those as to which it shall be invalid
or unenforceable) shall not be thereby affected, and each term, condition and
provision hereof shall remain valid and enforceable to the fullest extent
permitted by law.
3. This Agreement may be executed in any number of facsimile or
original counterparts, each counterpart for all purposes being deemed an
original, and all such counterparts shall together constitute only one and the
same Agreement.
4. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing such
instrument to be drafted. The terms "hereby", "hereof", "hereto", "hereunder"
and any similar terms, as used in this Agreement, refer to this Agreement in its
entirety and not only to this particular portion of this Agreement where the
term is used. The word "person" shall mean any natural person, partnership,
corporation, government and any other form of business or legal entity. All
words or terms used in this Agreement, regardless of the number or gender in
which they are used, shall be deemed to include any other number and any other
gender as the context may require. This Agreement shall not be admissible in
evidence to construe the provision of any prior agreement. The rule of ejusdem
generis shall not be applicable herein to limit a general statement, which is
followed by or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned.
5. This Agreement and the rights and obligations hereunder of the
Escrow Agent may be assigned by the Escrow Agent only to a successor to its
entire business. This Agreement shall be binding upon and inure to the benefit
of each party's respective permitted successors, heirs and permitted assigns. No
other person shall acquire or have any rights under or by virtue of this
Agreement. This Agreement may not be changed orally or modified, amended or
supplemented without an express written agreement executed by the Escrow Agent
and the other parties hereto. This Agreement is intended to be for the sole
benefit of the parties hereto, and (subject to the provisions of this Section
9(e) their respective successors, heirs and assigns, and none of the provisions
of this Agreement are intended to be, nor shall be construed to be, for the
benefit of any third person.
6. The Agreement shall be governed by and construed in accordance
with the laws of the internal laws of the State of New York. The representations
and warranties contained in this Agreement shall survive the execution and
delivery hereof and any investigation made by any party. The headings in this
Agreement are for purposes of reference only and shall not limit or otherwise
affect any of the terms hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
Xxxx Nacarrato, Esq.
/s/ Xxxx Nacarrato
---------------------------------------
Title: Escrow Agent
DIGITAL DESCRIPTOR SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Chief Financial Officer
AJW PARTNERS, LLC
By: SMS Group, LLC
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title:
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title:
Exhibit A
Notice of Conversion
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the attached Debenture into shares of
common stock, $0.001 par value per share (the "Common Stock"), of Digital
Descriptor Systems, Inc. (the "Company") according to the conditions hereof, as
of the date written below. If shares are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and opinions
as reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
___________________________________________________
Date to Effect Conversion
___________________________________________________
Principal Amount of Debentures to be Converted
Payment of Interest in Kind [ ] Yes [ ] No
If yes, $ _______ of Interest Accrued on Account
of Conversion at Issue
___________________________________________________
Number of shares of Common Stock to be Issued
___________________________________________________
Applicable Conversion Price
___________________________________________________
Signature
___________________________________________________
Name
___________________________________________________
Address
Schedule 1 to the Notice of Conversion
Conversion Schedule
Digital Descriptor Systems, Inc.
12% Convertible Debentures due twelve months from issuance
Dated:
================================================================================
Aggregate
Principal
Amount
Remaining
Subsequent to
Conversion
Date of Conversion (or original
(or for first entry, Amount of Principal
Original Issue Date) Conversion Amount) Company Attest
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Exhibit B
Form of Election to Purchase
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the Warrant to which this form applies, issued by Digital Descriptor
Systems, Inc. ("Digital"))
To Digital Descriptor Systems, Inc.:
The undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $0.001 par value per share, of Digital (the "Common
Stock") and, if such Holder is not utilizing the cashless exercise provisions
set forth in this Warrant, encloses herewith $________ in cash, certified or
official bank check or checks, which sum represents the aggregate Exercise Price
(as defined in the Warrant) for the number of shares of Common Stock to which
this Form of Election to Purchase relates, together with any applicable taxes
payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
________________________________
________________________________________________________________________________
(Please print name and address)
Dated:________________,______ Name of Holder:
(Print)_______________________________________
(By:)_________________________________________
(Name:)
(Title:)
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant)
Exhibit C
Escrow Agent Fees
