FUNDS ESCROW AGREEMENT
Execution
Copy
This
Agreement (“Agreement”) is dated as of the 24th day of August, 2005 among
Magnetech Integrated Services Corp., an Indiana 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:
WHEREAS,
the Purchaser has advised the Escrow Agent that (a) the Company and the
Purchaser have entered into a Security and Purchase Agreement (the "Security
Agreement")
for
the sale by the Company to the Purchaser of a secured convertible minimum
borrowing note (the "Minimum
Borrowing Note"),
a
secured revolving note (the “Revolving
Note”)
and
secured convertible term note (the “Term
Note”),
(b)
the Company has issued to the Purchaser a common stock purchase warrant (the
“Warrant”)
in
connection with the issuance of the Term Note, Minimum Borrowing Note and
the
Revolving Note, (c) the Company has issued to the Purchaser shares of its
common
stock (the “Grant
Shares”)
in
connection with the issuance of the Term Note, Minimum Borrowing Note and
the
Revolving Note, and (d) the Company and the Purchaser have entered into a
Registration Rights Agreement covering the registration of the Grant Shares
and
the Company’s common stock underlying the Minimum Borrowing Note, the Term Note
and the Warrant (the “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 Security and Purchase Agreement,
the Term Note, the Minimum Borrowing Note, the Revolving Note, the Warrant,
the
Registration Rights Agreement and the Grant Shares.
(e) “Escrowed
Payment" means $7,000,000.
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
2
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 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 and/or Purchaser, as applicable.
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")
3
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) and Xxxx Xxxxxxx or Xxxx Xxxxxx (each of whom is an officer
of
the Company) 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 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
4
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 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 pay the Escrow Agent
a fee
of $2,500 as complete compensation, subject to Section 4.1(b), for 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)
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
5
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.
(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
6
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.
(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):
|
(a)
|
If
to the Company, to:
|
Magnetech
Integrated Services Corp.
|
||
|
0000
X. Xxxxxx Xxxxxx
|
||||
|
Xxxxx
Xxxx, Xxxxxxx 00000
|
||||
|
Facsimile:
000-000-0000
|
||||
|
Attention:
Chief Financial Officer
|
||||
|
With
a copy to:
|
Xxxxxx
& Xxxxxxxxx, LLP
|
|||
|
600
1st
Source Center
|
||||
|
000
Xxxxx Xxxxxxxx
|
||||
|
Xxxxx
Xxxx, Xxxxxxx 00000
|
||||
|
Facsimile:
000-000-0000
|
||||
|
Attention:
Xxxxxxx X. Xxxxx, Esq.
|
||||
|
(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
|
||||
|
Facsimile:
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.
|
7
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.
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.
8
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
and year first above written.
|
COMPANY:
|
||
|
MAGNETECH
INTEGRATED SERVICES CORP.
|
||
|
By:
|
/s/ Xxxx X. Xxxxxxx | |
|
Name:
|
Xxxx X. Xxxxxxx | |
|
Title:
|
President | |
|
PURCHASER:
|
||
|
LAURUS
MASTER FUND, LTD.
|
||
|
By:
|
/s/ Xxxxx Grin | |
|
Name:
|
Xxxxx Grin | |
|
Title:
|
Director | |
|
ESCROW
AGENT:
|
||
|
LOEB
& LOEB LLP
|
||
|
By:
|
/s/ Xxxxx X. Xxxxxxxx | |
|
Name:
|
Xxxxx X. Xxxxxxxx | |
|
Title:
|
Partner | |
9
SCHEDULE
A TO FUNDS ESCROW AGREEMENT
|
PURCHASER
|
PRINCIPAL
NOTE AMOUNT
|
|
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
|
Term
Note in an aggregate principal amount of $3,000,000
Minimum
Borrowing Note in an aggregate principal amount of $4,000,000;
and
Revolving
Note in an aggregate principal amount of
$7,000,000
|
|
FUND
MANAGER
|
CLOSING
PAYMENT
|
|
LAURUS
CAPITAL MANAGEMENT, L.L.C.
000
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Fax:
000-000-0000
|
Closing
payment payable in connection with investment by Laurus Master
Fund, Ltd.
for which Laurus Capital Management, L.L.C. is the
Manager.
|
|
TOTAL
|
$360,000
|
WARRANTS:
|
WARRANT
RECIPIENT
|
WARRANTS
IN CONNECTION WITH OFFERING
|
|
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
|
Warrant
execisable into 7,352,941 shares of common stock of the Company
issuable
in connection with the Minimum Borrowing Note, Term Note and the
Revolving
Note.
|
|
TOTAL
|
Warrants
exercisable into 7,352,941 shares of common stock of the
Company
|
10
GRANT
SHARES:
|
SHARE
RECIPIENT
|
SHARES
IN CONNECTION WITH OFFERING
|
|
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
|
6,163,588
shares of common stock of the Company issuable in connection with
the
Minimum Borrowing Note, Term Note and the Revolving
Note.
|
|
TOTAL
|
6,163,588
shares of common stock of the
Company
|
11
