EXHIBIT 10.24
FUNDS ESCROW AGREEMENT
This Agreement (this "Agreement") is dated as of the 30th the day of June
2005 among WINDSWEPT ENVIRONMENTAL GROUP, INC., a Delaware 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 Securities Purchase Agreement (the
"SECURITIES PURCHASE AGREEMENT") for the sale by the Company to the Purchaser of
a secured convertible term note (the "TERM NOTE"), (b) the Company has issued to
the Purchaser an common stock purchase option (the "OPTION") in connection with
the issuance of the Term Note, (c) the Company has issued to the Purchaser a
common stock purchase warrant (the "WARRANT") in connection with the issuance of
the Term Note, and (d) the Company and the Purchaser have entered into a
Registration Rights Agreement covering the registration of the Company's common
stock underlying the Term Note, the Option 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, and "Transaction Fee"
means the transaction fee to be paid to Purchaser pursuant to 2(c) of the
Securities Purchase Agreement, each 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
Securities Purchase Agreement, the Term Note, the Option, the Warrant and the
Registration Rights Agreement.
(e) "Escrowed Payment" means $ 5,000,000.
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 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,
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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 to the extent it is a party thereto.
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") 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) indicating that all closing conditions
relating to the Documents have been
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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 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
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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 reimburse
the Escrow Agent for its reasonable out-of-pocket expenses (including
counsel fees (which counsel may be Loeb & Loeb LLP or such other counsel of the
Escrow Agent's choosing) incurred in connection with the performance of its
duties and responsibilities hereunder, which shall not (subject to Section
4.1(b)) exceed $2,000.
(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 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
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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 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
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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: Windswept Environmental Group, Inc.
000 Xxxxxxxxxxx Xxxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
Facsimile: 000-000-0000
With a copy to: Davidoff Xxxxxx & Xxxxxxx LLP
000 Xxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Facsimile: 000-000-0000
(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, Fax: 345-
949-8080
(c) If to the Escrow Agent, to:
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Loeb & Loeb LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
COMPANY:
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By: /s/ Xxxxxxx X'Xxxxxx
---------------------------------------
Name: Xxxxxxx X'Xxxxxx
Title: President
PURCHASER:
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Grin
---------------------------------------
Name: Xxxxx Grin
Title: Director
ESCROW AGENT:
LOEB & LOEB LLP
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxxx
Title: Partner
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SCHEDULE A TO FUNDS ESCROW AGREEMENT
------------------------------------
----------------------------------------------- ------------------------------------------------------
PURCHASER PRINCIPAL NOTE AMOUNT
----------------------------------------------- ------------------------------------------------------
LAURUS MASTER FUND, LTD., Term Note in an aggregate principal amount
M&C Corporate Services Limited, X.X. Xxx 000 of $5,000,000
GT, Xxxxxx House, South Church Street, Xxxxxx
Town, Grand Cayman, Cayman Islands, Fax:
000-000-0000
----------------------------------------------- ------------------------------------------------------
TOTAL $5,000,000
----------------------------------------------- ------------------------------------------------------
----------------------------------------------- ------------------------------------------------------
FUND MANAGER CLOSING PAYMENT
----------------------------------------------- ------------------------------------------------------
LAURUS CAPITAL MANAGEMENT, L.L.C. Closing payment payable in connection with
000 Xxxxx Xxxxxx, 00xx Floor investment by Laurus Master Fund, Ltd. for which
Xxx Xxxx, Xxx Xxxx 00000 Laurus Capital Management, L.L.C. is the Manager.
Fax: 000-000-0000
----------------------------------------------- ------------------------------------------------------
TOTAL $126,750
----------------------------------------------- ------------------------------------------------------
----------------------------------------------- ------------------------------------------------------
LAURUS MASTER FUND, LTD. TRANSACTION FEE
----------------------------------------------- ------------------------------------------------------
LAURUS MASTER FUND, LTD. Transaction Fee payable in connection with
C/o Laurus Capital Management, LLC investment by Laurus Master Fund, Ltd.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
----------------------------------------------- ------------------------------------------------------
TOTAL $1,750,000
----------------------------------------------- ------------------------------------------------------
----------------------------------------------- ------------------------------------------------------
OPTION RECIPIENT OPTION IN CONNECTION WITH OFFERING
----------------------------------------------- ------------------------------------------------------
LAURUS MASTER FUND, LTD. Option execisable into 30,395,179 shares of common M&C
Corporate Services Limited, X.X. Xxx 000 stock of the Company issuable in connection
GT, Xxxxxx Xxxxx, Xxxxx Xxxxxx Xxxxxx, Xxxxxx with the Term Note.
Town, Grand Cayman, Cayman Islands, Fax:
000-000-0000
Fax: 000-000-0000
----------------------------------------------- ------------------------------------------------------
TOTAL OPTION EXERCISABLE INTO 30,395,179 SHARES OF COMMON
STOCK OF THE COMPANY
----------------------------------------------- ------------------------------------------------------
----------------------------------------------- ------------------------------------------------------
WARRANT RECIPIENT WARRANTS IN CONNECTION WITH OFFERING
----------------------------------------------- ------------------------------------------------------
LAURUS MASTER FUND, LTD. Warrants execisable into 13,750,000 shares of common
M&C Corporate Services Limited, X.X. Xxx 000 stock of the Company issuable in connection with the
GT, Xxxxxx Xxxxx, Xxxxx Xxxxxx Xxxxxx, Xxxxxx
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Town, Grand Cayman, Cayman Islands, Fax:
000-000-0000
Fax: 000-000-0000
----------------------------------------------- ------------------------------------------------------
TOTAL WARRANTS EXERCISABLE INTO 13,750,000 SHARES OF
COMMON STOCK OF THE COMPANY
----------------------------------------------- ------------------------------------------------------
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