FUNDS ESCROW AGREEMENT
This Agreement is dated as of the ____ day of September, 2005 among SVC
Financial Services, Inc., a Colorado corporation (the "Company"), the parties
identified on Schedule A hereto (each a "Subscriber", and collectively
"Subscribers"), and Grushko & Xxxxxxx, P.C. (the "Escrow Agent"):
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Subscribers have entered into a Subscription
Agreement calling for the sale by the Company to the Subscriber of secured
Promissory Notes and Warrants for an aggregate purchase price of up to
$1,500,000; and
WHEREAS, the parties hereto require the Company to deliver the Notes and
Warrants against payment therefor, with such Notes, Warrants and the Escrowed
Funds to be delivered to the Escrow Agent to be held in escrow and released by
the 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. Capitalized terms used and not otherwise defined herein
that are defined in the Subscription Agreement shall have the meanings given to
such terms in the Subscription Agreement. Whenever used in this Agreement, the
following terms shall have the following respective meanings:
(a) "Agreement" means this Agreement and all amendments made hereto and
thereto by written agreement between the parties;
(b) "Broker" shall mean the entity identified on Schedule 8 to the
Subscription Agreement;
(c) "Broker's Fee" shall have the meaning set forth in Section 8(a) of the
Subscription Agreement;
(d) "Broker's Warrants" shall have the meaning set forth in Section 8(b)
of the Subscription Agreement;
(e) "Collateral Agent Agreement" shall have the meaning set forth in
Section 3 of the Subscription Agreement;
(f) "Escrowed Payment" means an aggregate cash payment of up to $1,500,000
which is, collectively, the Initial Closing Purchase Price and Second Closing
Purchase Price;
1
(g) "Guaranty" shall have the meaning set forth in Section 3 of the
Subscription Agreement;
(h) "Initial Closing Date" shall have the meaning set forth in Section
1(a) of the Subscription Agreement;
(i) "Initial Closing Legal Opinion" means the original signed legal
opinion referred to in Section 6 of the Subscription Agreement;
(j) "Initial Closing Notes" shall have the meaning set forth in Section
1(a) of the Subscription Agreement;
(k) "Initial Closing Purchase Price" shall mean up to $750,000;
(l) "Initial Closing Warrants" shall have the meaning set forth in Section
1(a) of the Subscription Agreement;
(m) "Legal Fees" shall have the meaning set forth in Section 8(c) of the
Subscription Agreement;
(n) "Second Closing Certificate" shall have the meaning set forth in
Section 1(d) of the Subscription Agreement;
(o) "Second Closing Date" shall have the meaning set forth in Section 1(b)
of the Subscription Agreement;
(p) "Second Closing Legal Opinion" shall have the meaning set forth in
Section 1(d) of the Subscription Agreement;
(q) "Second Closing Notes" shall have the meaning set forth in Section
1(b) of the Subscription Agreement;
(r) "Second Closing Purchase Price" shall mean up to $750,000;
(s) "Second Closing Warrants" shall have the meaning set forth in Section
1(b) of the Subscription Agreement;
(t) "Security Agreement" shall have the meaning set forth in Section 3 of
the Subscription Agreement and shall refer to the Security Agreements to be
executed by the Company and include the certificates evidencing ownership of the
Subsidiaries as described on Annex 1 to the Security Agreement;
(u) "Subscription Agreement" means the Subscription Agreement (and the
exhibits thereto) entered into or to be entered into by the parties in reference
to the sale and purchase of the Initial Closing Notes, Second Closing Notes, and
Warrants;
(v) "Warrants" " shall have the meaning set forth in the recitals of the
Subscription Agreement;
(w) Collectively, the executed Subscription Agreement, Initial Closing
Notes, Initial Closing Warrants, Initial Closing Legal Opinion, Second Closing
Notes, Second Closing Warrants,
Second Closing Legal Opinion, Second Closing Certificates, Security Agreement,
Guaranty, Collateral Agent Agreement, Broker's Fee, and Broker's Warrants are
referred to as "Company Documents"; and
(x) Collectively, the Escrowed Payment and the executed Subscription
Agreement are referred to as "Subscriber Documents".
1.2. Entire Agreement. This Agreement along with the Company Documents and
the Subscriber Documents constitute the entire agreement between the parties
hereto pertaining to the Company Documents and Subscriber Documents and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. 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, the
Company Documents and the Subscriber Documents.
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, only by a written instrument signed by all parties, 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. 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. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individuals executing this Agreement
and other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party (which
shall be the party which receives an award most closely resembling the remedy or
action sought) shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Agreement or
any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.
1.7. Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof
3
or thereof, this being in addition to any other remedy to which any of them may
be entitled by law or equity. Subject to Section 1.6 hereof, each of the Company
and Subscriber hereby waives, and agrees not to assert in any such suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction
of such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. Nothing
in this Section shall affect or limit any right to serve process in any other
manner permitted by law.
ARTICLE II
DELIVERIES TO THE ESCROW AGENT
2.1. Initial Closing Company Deliveries. On or about the date hereof, the
Company shall deliver to the Escrow Agent the executed Subscription Agreement,
the Initial Closing Notes, Initial Closing Warrants, Initial Closing Legal
Opinion, Security Agreement, Guaranty, and Collateral Agent Agreement
(collectively, the "Initial Closing Company Documents").
2.2. Second Closing Company Deliveries. On or prior to the Second Closing
Date the Company will deliver to the Escrow Agent the Second Closing Notes,
Second Closing Warrants, Second Closing Certificate, and Second Closing Legal
Opinion (collectively, the "Second Closing Company Documents").
2.3. Subscriber Deliveries. On or before the Initial Closing Date, each
Subscriber shall deliver to the Escrow Agent such Subscriber's portion of the
Initial Closing Purchase Price and the executed Subscription Agreement. On or
before the Second Closing Date, each Subscriber will deliver such Subscriber's
portion of the Second Closing Purchase Price to the Escrow Agent. The Escrowed
Payment will be delivered pursuant to the following wire transfer instructions:
Citibank, N.A.
0000 0xx Xxxxxx
Xxx Xxxx, XX 00000, XXX
ABA Number: 0210-00089
For Credit to: Grushko & Xxxxxxx, XXXX Trust Account
Account Number: 00000000
2.4. Intention to Create Escrow Over Company Documents and Subscriber
Documents. The Subscriber and Company intend that the Company Documents and
Subscriber Documents shall be held in escrow by the Escrow Agent pursuant to
this Agreement for their benefit as set forth herein.
2.5. Escrow Agent to Deliver Company Documents and Subscriber Documents.
The Escrow Agent shall hold and release the Company Documents and Subscriber
Documents only in accordance with the terms and conditions of this Agreement.
ARTICLE III
RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS
3.1. Release of Escrow. Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Company Documents and Subscriber Documents as
follows:
4
(a) On the Initial Closing Date, the Escrow Agent will simultaneously
release the Initial Closing Company Documents to the Subscriber and release the
Subscription Agreement and the Initial Closing Purchase Price to the Company
except that (i) the Broker's Fee, Broker's Warrants and the $5,000 fee described
in Section 8(a) of the Subscription Agreement, in connection with the Initial
Closing will be released to the Broker; (ii) the Legal Fees (less any amounts
paid prior to the Initial Closing Date) in connection with the Initial Closing
will be released to the Subscriber's attorneys; and (iii) the original Security
Agreement, Collateral Agent Agreement and Guaranty will be released to the
Collateral Agent.
(b) On the Second Closing Date, the Escrow Agent will simultaneously
release the Second Closing Company Documents to the Subscriber and release the
Second Closing Purchase Price to the Company.
(c) All funds to be delivered to the Company shall be delivered pursuant
to the wire instructions to be provided in writing by the Company to the Escrow
Agent.
(d) Notwithstanding the above, upon receipt by the Escrow Agent of joint
written instructions ("Joint Instructions") signed by the Company and the
Subscriber, it shall deliver the Company Documents and Subscriber Documents in
accordance with the terms of the Joint Instructions.
(e) Notwithstanding the above, 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"), the Escrow Agent shall deliver the Company
Documents and Subscriber Documents 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 has competent
jurisdiction and that the Court Order is final and non-appealable.
3.2. Acknowledgement of Company and Subscriber; Disputes. The Company and
the Subscriber acknowledge that the only terms and conditions upon which the
Company Documents and Subscriber Documents are to be released are set forth in
Sections 3 and 4 of this Agreement. The Company and the Subscriber reaffirm
their agreement to abide by the terms and conditions of this Agreement with
respect to the release of the Company Documents and Subscriber Documents. Any
dispute with respect to the release of the Company Documents and Subscriber
Documents shall be resolved pursuant to Section 4.2 or by agreement between the
Company and Subscriber.
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 Subscriber and Company acknowledge and agree that the Escrow Agent
(i) shall not be responsible for or bound by, and shall not be required to
inquire into whether either the Subscriber or Company is entitled to receipt of
the Company Documents and Subscriber Documents pursuant to, any other agreement
or otherwise; (ii) shall be obligated only for the performance of such duties as
are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii)
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; (iv) may
assume that any person believed by the Escrow Agent in good faith
5
to be authorized to give notice or make any statement or execute any document in
connection with the provisions hereof is so authorized; (v) 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 (vi) may consult
counsel satisfactory to Escrow Agent, 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 Subscriber and 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 Subscriber and Company, jointly and severally,
agree to indemnify and hold harmless the Escrow Agent and any of Escrow Agent's
partners, employees, agents and representatives for any action taken or omitted
to be taken by Escrow Agent or any of them hereunder, including the fees of
outside counsel and other costs and expenses of defending itself against any
claim or liability under this Agreement, except in the case of gross negligence
or willful misconduct on Escrow Agent's part committed in its capacity as Escrow
Agent under this Agreement. The Escrow Agent shall owe a duty only to the
Subscriber and Company under this Agreement and to no other person.
(c) The Subscriber and Company jointly and severally agree to reimburse
the Escrow Agent for outside counsel fees, to the extent authorized hereunder
and incurred in connection with the performance of its duties and
responsibilities hereunder.
(d) The Escrow Agent may at any time resign as Escrow Agent hereunder by
giving five (5) days prior written notice of resignation to the Subscriber and
the Company. Prior to the effective date of the resignation as specified in such
notice, the Subscriber and Company will issue to the Escrow Agent a Joint
Instruction authorizing delivery of the Company Documents and Subscriber
Documents to a substitute Escrow Agent selected by the Subscriber and Company.
If no successor Escrow Agent is named by the Subscriber and 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 to deposit the Company
Documents and Subscriber Documents with the clerk of any such court.
(e) The Escrow Agent does not have and will not have any interest in the
Company Documents and Subscriber Documents, but is serving only as escrow agent,
having only possession thereof. The Escrow Agent shall not be liable for any
loss resulting from the making or retention of any investment in accordance with
this Escrow Agreement.
(f) 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.
(g) The Escrow Agent shall be permitted to act as counsel for the
Subscriber in any dispute as to the disposition of the Company Documents and
Subscriber Documents, in any other dispute between the Subscriber and Company,
whether or not the Escrow Agent is then holding the Company Documents and
Subscriber Documents and continues to act as the Escrow Agent hereunder.
6
(h) 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 Company Documents and Subscriber
Documents, 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 Company Documents and Subscriber Documents pending receipt
of a Joint Instruction from the Subscriber and Company, or (ii) deposit the
Company Documents and Subscriber Documents 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 Subscriber 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 Company Documents and
Subscriber Documents. 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.
(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 Subscriber and Company or to
any other person, firm, corporation or entity by reason of such compliance.
ARTICLE V
GENERAL MATTERS
5.1. Termination. This escrow shall terminate upon the release of all of
the Company Documents and Subscriber Documents or at any time upon the agreement
in writing of the Subscriber and Company.
5.2. Notices. 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 express 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:
(a) If to the Company, to:
7
SVC Financial Services, Inc.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxxxxxx Xxxxx, CEO and President
Fax: (000) 000-0000
With a copy by telecopier only to:
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxx, Esq.
Fax: (000) 000-0000
(b) If to the Subscriber, to: the addresses and fax numbers listed on Schedule A
hereto.
(c) If to the Escrow Agent, to:
Grushko & Xxxxxxx, P.C.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
(d) If to the Broker, to:
Xxxxxx Xxxxxxx & Co., Inc.
00 Xxxxxx Xxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxxxx
Fax: (000) 000-0000
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. In the
event the Escrowed Payment is deposited in an interest bearing account, the
Subscriber shall be entitled to receive any accrued interest thereon, but only
if the Escrow Agent receives from the Subscriber the Subscriber's United States
taxpayer identification number and other requested information and forms.
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 enure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.
8
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 instrument. This Agreement
may be executed by facsimile transmission and delivered by facsimile
transmission.
5.7. Agreement. Each of the undersigned states that he has read the
foregoing Funds Escrow Agreement and understands and agrees to it.
SVC FINANCIAL SERVICES, INC.
the "Company"
By:_________________________________
"SUBSCRIBERS"
-------------
----------------------------------------- ------------------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT WHALEHAVEN CAPITAL FUND LIMITED
ESCROW AGENT:
------------------------------------
GRUSHKO & XXXXXXX, P.C.
9
SCHEDULE A TO FUNDS ESCROW AGREEMENT
------------------------------------
-------------------------------------------------------------------------------------------------
SUBSCRIBER INITIAL CLOSING PURCHASE PRICE SECOND CLOSING PURCHASE PRICE
-------------------------------------------------------------------------------------------------
ALPHA CAPITAL AKTIENGESELLSCHAFT $375,000.00 $375,000.00
Xxxxxxxxx 0
0000 Xxxxxxxxxxx
Xxxxx, Lichtenstein
Fax: 000-00-00000000
-------------------------------------------------------------------------------------------------
WHALEHAVEN CAPITAL FUND LIMITED $375,000.00 $375,000.00
0xx Xxxxx, 00 Xxx-Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx XX00
Fax: (000) 000-0000
-------------------------------------------------------------------------------------------------
TOTAL $750,000.00 $750,000.00
-------------------------------------------------------------------------------------------------
10
