Exhibit 10.8
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT ("Agreement") is made as of September 30, 2005, by
and between Securac Corp. ("Company"), Dutchess Private Equities Fund, II, L.P.
("Dutchess") and Xxxxxx X. XxXxxxx, Esq., ("Escrow Agent") (singly a "Party" and
cumulatively the "Parties").
W I T N E S S E T H:
WHEREAS, Dutchess is making a loan of $500,000 to the Company pursuant to
certain terms and conditions in consideration for which the Company is issuing
to Dutchess a debenture ("Debenture") convertible at the holder's option into
909,090 shares of the Company's common stock (the "Shares") shall be held in
-----
escrow by the Escrow pursuant to the terms of this Agreement; and
WHEREAS, $300,000 of such loan is being funded on the date hereof and the
balance is to be funded on the Company's filing of a registration statement
under the Securities Act of 1933 covering resale of the shares underlying the
Debenture;
WHEREAS, in order to facilitate issuance of shares upon conversion of the
Debenture and to provide comfort to Dutchess that the shares will be so issued
and delivered, the Company has agreed to issue and place in escrow 909,090
shares of common stock ("Shares"), to be held and released in accordance with
the terms of this Agreement; and
WHEREAS, the Company and Dutchess have requested that the Escrow Agent hold
the Shares in escrow pursuant to the terms of this Agreement, and the Escrow
Agent has agreed to so act.
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
1.1 The Parties hereby agree to have Xxxxxx X. XxXxxxx, Esq. act as
Escrow Agent whereby the Escrow Agent shall hold the Shares in accordance with
the terms of this Agreement, and the Escrow Agent has accepted such appointment.
1.2 On or prior to Dutchess wiring the net proceeds of the initial
$300,000 funding to the Company, the Company shall deliver to the Escrow Agent 9
certificates representing the Shares, which certificates shall be registered in
the name of the escrow agent, as escrow agent for Dutchess. The shares shall
bear a restrictive legend.
1.3 Upon Escrow Agent's receipt of the Shares the Escrow Agent shall
immediately notify Dutchess and the Company.
1.4 Once the funds have been wire transferred per the Company's
written instructions, the Escrow Agent shall then hold the Shares at his office
pending receipt of conversion notices from Dutchess.
1.5Upon receipt by the Escrow Agent from time to time of a properly
completed and executed conversion notice from Dutchess (in the form attached to
the debenture), the Escrow Agent shall promptly notify the Company and send not
less than that number of shares stated in the conversion notice to the Company's
transfer agent with an instruction to issue to Dutchess certificates (with a
replacement registered legend if an effective registration statement is then
pending covering the Shares for resale) for that number of shares stated in the
conversion notice and to hold the balance of the shares until further conversion
notices are received. A copy of all correspondence with the Escrow Agent shall
be provided by the Escrow Agent to the other parties hereto. The Escrow Agent
is under no obligation to issue opinion letters to the transfer agent for the
removal of legends. It shall be the Company's obligation at its sole cost and
expense to have its counsel issue opinion letters for the removal of the
legends.
1.6 Upon payment in full of all amounts outstanding under the debenture
prior to the maturity date thereof (September 30, 2010), the Company shall
notify the Escrow Agent of the same, with a copy to Dutchess. The Escrow Agent
shall thereupon promptly deliver all remaining Share certificates to the
Company's transfer agent, with instructions to cancel the certificates or to
process the certificates as otherwise instructed by the Company.
1.7 The Escrow Agent shall receive $2,000 from the gross closing proceeds of
$300,000, at the Company's cost and expense and the Company shall wire the
Escrow Agent an additional $250 each time a conversion notice is processed up to
10 conversion notices and the Company will not be obligated to pay the Escrow
Agent for any conversion notices processed after 10, which the Escrow Agent
agrees to process without further payment from the Company.
1.8 It is understood and agreed that Shares shall not be deemed issued and
outstanding on the records of the Company unless and until and to the extent the
underlying portion of the debenture into which such Shares are convertible
has been properly converted and the allocable Shares have been registered in the
name of Dutchess. Accordingly, until such time, the Shares shall not bear
voting, dividend or other rights of ownership.
1.9 This Agreement may be altered or amended only with the consent of
all of the Parties hereto. Should any of the Parties 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
Parties in writing. In the case of the Escrow Agent's resignation or removal
pursuant to the foregoing, his only duty, until receipt of notice from the
Parties that a successor escrow agent has been appointed, shall be to hold and
preserve the Shares that are in his possession. Upon receipt by the Escrow
Agent of said notice from the Parties of the appointment of a successor escrow
agent, the name of a successor escrow account and a direction to transfer the
Shares the Escrow Agent shall promptly thereafter transfer all of the Shares
held in escrow to said successor escrow agent. Immediately after said transfer
of Shares, the Escrow Agent shall furnish the Parties with proof of such
transfer. The Escrow Agent is authorized to disregard any notices, requests,
instructions or demands received by it from the Parties after notice of
resignation or removal shall have been given, unless the same shall be the
aforementioned notice from the Parties to transfer the Shares to a successor
escrow agent or to return same to the respective Parties.
1.10 The Escrow Agent shall be reimbursed by the Parties 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. The
Escrow Agent shall not be liable for any action taken or omitted by him 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. The Escrow Agent shall be
obligated only for the performance of such duties as are specifically set forth
herein and may rely and shall be protected in relying or refraining from acting
on any instrument reasonably believed by the Escrow Agent to be genuine and to
have been signed or presented by the proper Party or Parties. The Escrow Agent
shall not be personally liable for any act the Escrow Agent may do or omit to do
hereunder as the Escrow Agent while acting in good faith, and any act done or
omitted by the Escrow Agent pursuant to the advice of the Escrow Agent's
attorney-at-law shall be conclusive evidence of such good faith.
1.11 The Escrow Agent has made no representations or warranties to the
Company or Dutchess in connection with this transaction. The Escrow Agent has no
liability hereunder to any Party other than to hold the Shares received by the
Company and to deliver them under the terms hereof. The Escrow Agent shall have
no responsibility at any time to ascertain whether or not any security interest
exists in the Shares or any part thereof or to file any financing statement
under the Uniform Commercial Code with respect to the Shares or any part
thereof. Each Party hereto agrees to indemnify and hold harmless the Escrow
Agent 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 Agreement or
the investment being made by Dutchess. The Company and Dutchess acknowledge and
represent that they are not being represented in a legal capacity by Xxxxxx X.
XxXxxxx, and have had the opportunity to consult with their own legal advisors
prior to the signing of this Agreement. The Company acknowledges that the Escrow
Agent is not rendering securities advice to the Company or Dutchess with respect
to this proposed transaction. The Escrow Agent has acted as legal counsel for
Dutchess in the past but not in relation to this transaction and may continue to
act as legal counsel for the Dutchess in the future, from time to time,
notwithstanding his duties as the Escrow Agent hereunder. The Company consents
to Xxxxxx X. XxXxxxx acting as the Escrow Agent and waives any claim that such
representation represents a conflict of interest on the part of the Escrow
Agent. The Company understands that Dutchess and Escrow Agent are relying
explicitly on the foregoing provisions contained in this Section in entering
into this Agreement.
1.12 The Escrow Agent is hereby expressly authorized to disregard any
and all warnings given by any of the Parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the Parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
1.13 The Escrow Agent shall not be liable in any respect on account of
the identity, authorities or rights of the Parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
1.14 If the Escrow Agent reasonably requires other or further documents
in connection with this Agreement, the necessary Parties hereto shall join in
furnishing such documents.
1.15 It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the documents
or the Shares held by the Escrow Agent hereunder, the Escrow Agent is authorized
and directed in the Escrow Agent's sole discretion (a) to retain in the Escrow
Agent's possession without liability to anyone all or any part of said documents
or the Shares until such disputes shall have been settled either by mutual
written agreement of the Parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under no
duty whatsoever to institute or defend any such proceedings or (b) to deliver
the Shares and any other property and documents held by the Escrow Agent
hereunder to a state or federal court having competent subject matter
jurisdiction and located in the State of Connecticut in accordance with the
applicable procedure therefor.
ARTICLE 2
---------
MISCELLANEOUS
2.1 No waiver of 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.
2.2 Notices. Any notices or other communications required or
--------
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending Party); or (iii) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the Party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to Borrower to:
Securac Corp.
2500, 000 0xx Xxxxxx X.X.
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Attention: Xxxx Xxxxxxx, CFO
Phone: 000-000-0000
Fax: 000-000-0000
If to Dutchess to:
Dutchess Private Equities Fund II, L.P.
00 Xxxxxxxxxxxx Xxxxxx
Xxxxx 0
Xxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
If to Escrow Agent to:
Xxxxxx X. XxXxxxx, Esq.
00 Xxxxxx Xxxxxx - Xxxxx 000
Xxx Xxxxxx, XX 00000
Phone: 000-000-0000
Fax 000-000-0000
2.3 This Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and assigns of the Parties hereto.
2.4 This Escrow 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
Escrow 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.
2.5. Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the feminine.
This Escrow Agreement shall not be construed as if it had been prepared by one
of the Parties, but rather as if all the Parties had prepared the same. Unless
otherwise indicated, all references to Articles are to this Escrow Agreement.
2.6 The Company and Dutchess acknowledge and confirm that they are
not being represented in a legal capacity by Xxxxxx X. XxXxxxx, and they have
had the opportunity to consult with their own legal advisors prior to the
signing of this agreement.
2.7 The Parties hereto expressly agree that this Escrow Agreement
shall be governed by, interpreted under, and construed and enforced in
accordance of the laws of the State of Connecticut. Any action to enforce,
arising out of, or relating in any way to, any provisions of this Escrow
Agreement shall be brought through the American Arbitration Association at the
designated locale of Stamford, Connecticut.
2.8 This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Escrow Agreement, once executed by
a Party, may be delivered to the other Parties hereto by telephone line
facsimile transmission bearing the signature of the Party so delivering this
Escrow Agreement and such copy shall be deemed and original.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the 30th day of September, 2005.
SECURAC CORP.
By: /s/Xxxx Xxxxx Xxxxxxx
---------------------
Xxxx Xxxxxxx, CFO
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
By: /s/Xxxxxxx X. Xxxxxxxx
------------------------
Xxxxxxx X. Xxxxxxxx , Managing Member
XXXXXX X. XXXXXXX, ESCROW AGENT
By: /s/Xxxxxx X. XxXxxxx, Esq.
---------------------
Xxxxxx X. XxXxxxx, Esq.
