EXHIBIT 10.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "AGREEMENT") is made as of May 31, 2002, by and
among Pacific Magtron International Corp., a corporation incorporated under the
laws of Nevada (the "COMPANY"), the Purchasers signatory hereto (each an
"Purchaser" and together the "PURCHASERS"), and Xxxxxxx Xxxxxxxxx LLP, with an
address at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000 (the "ESCROW Agent").
CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN SHALL HAVE THE MEANINGS SET FORTH
IN THE SECURITIES PURCHASE AGREEMENT REFERRED TO IN THE FIRST RECITAL.
W I T N E S S E T H:
WHEREAS, the Purchasers will be purchasing from the Company, in the
aggregate, up to US$1,000,000 of the Company's Preferred Stock (the "PREFERRED
STOCK") and Warrants as set forth in the Securities Purchase Agreement (the
"PURCHASE AGREEMENT") dated the date hereof between the Purchasers and the
Company, which will be issued as per the terms contained herein and in the
Purchase Agreement; and
WHEREAS, it is intended that the purchase of the securities be consummated
in accordance with the requirements set forth by Sections 4(2) and/or 4(6)
and/or Regulation D promulgated under the Securities Act of 1933, as amended;
and
WHEREAS, the Company and the Purchasers have requested that the Escrow
Agent hold the purchase price with respect to the Closing in escrow until the
Escrow Agent has received the Release Notice in the form attached hereto from
the Company and each Purchaser;
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
The parties hereby agree to establish an escrow account with the Escrow
Agent whereby the Escrow Agent shall hold the funds for the purchase of up to
US$1,000,000, in the aggregate, of the Preferred Stock and the Warrants at the
Closing as contemplated by the Purchase Agreement.
1.1. FIRST CLOSING.
(a) Upon the Escrow Agent's receipt of the purchase price for the
First Closing into its master escrow account, together with executed
counterparts of this Agreement, the Purchase Agreement and the Registration
Rights Agreement, it shall telephonically advise the Company, or the
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Company's designated attorney or agent, of the amount of funds it has
received into its master escrow account.
(b) Wire transfers to the Escrow Agent shall be made as follows:
Chase Manhattan Bank, NA
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000 XXX
ABA Routing Number: 000000000
Account Number: 987074342668
Name of Account: Xxxxxxx Xxxxxxxxx LLP Master Escrow Account
Remark: PMIC
(c) The Company, upon receipt of said notice, shall deliver to the
Escrow Agent the certificates representing the applicable Preferred Stock
and the Warrants to be issued to each Purchaser at the First Closing
together with:
(i) a copy of the filed Certificate of Designations;
(ii) the original executed Registration Rights Agreement
substantially in the form of EXHIBIT B to the Purchase
Agreement;
(iii) the original executed Instructions to Transfer Agent
substantially in the form of EXHIBIT E to the Purchase
Agreement;
(iv) the original executed opinions of Xxxxxxx & Xxxxx LLP in
the form of EXHIBIT D to the Purchase Agreement;
(v) a warrant issued to X.X. Xxxxxxxx ("XXXXXXXX") to purchase
up to a number of shares of Common Stock equal to $100,000
divided by the Closing Price on the Trading Day immediately
prior to the First Closing Date otherwise identical to that
of the Warrant (the "MH WARRANT"); and
(vi) an original counterpart of this Escrow Agreement.
(d) In the event that the foregoing items are not in the Escrow
Agent's possession within three (3) Trading Days of the Escrow Agent
notifying the Company that the Escrow Agent has custody of the purchase
price applicable to such Preferred Stock and Warrants, then each Purchaser
shall have the right to demand the return of their purchase price.
(e) Once the Escrow Agent receives a Release Notice in the form
attached hereto as EXHIBIT X executed by the Company and each Purchaser, it
shall wire 90% of that amount of funds necessary to purchase the applicable
Preferred Stock and the Warrants, net of $15,000 for the legal,
administrative and due diligence costs and expenses of the Purchasers to
Xxxxxxx Xxxxxxxxx LLP, per the written instructions of the Company, 7% per
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the instructions of Purchasers as an original purchase price refund and the
remaining 3% per the instructions of Xxxxxxxx.
(f) Once the funds (as set forth above) have been sent per the
Company's instructions, the Escrow Agent shall then arrange to have the
Purchase Agreement, the Warrants, the MH Warrant, the Preferred Stock, the
copy of the Certificate of Designations, the Registration Rights Agreement,
the Escrow Agreement, the opinion of counsel and the Instructions to
Transfer Agent delivered to the appropriate parties.
1.2. SECOND CLOSING.
(a) Upon the Escrow Agent's receipt of the purchase price for the
Second Closing into its master escrow account it shall telephonically
advise the Company, or the Company's designated attorney or agent, of the
amount of funds it has received into its master escrow account.
(b) The Company, upon receipt of said notice, shall deliver to the
Escrow Agent the certificates representing the applicable Preferred Stock
to be issued to each Purchaser at the Second Closing
(c) In the event that the certificate of Preferred Stock are not in
the Escrow Agent's possession within three (3) Trading Days of the Escrow
Agent notifying the Company that the Escrow Agent has custody of the
purchase price applicable to such Preferred Stock and Warrants, then each
Purchaser shall have the right to demand the return of their purchase
price.
(d) Once the Escrow Agent receives a Release Notice in the form
attached hereto as EXHIBIT X executed by the Company and each Purchaser, it
shall wire 90% of that amount of funds necessary to purchase the applicable
Preferred Stock and the Warrants per the written instructions of the
Company, 7% per the instructions of Purchasers as an original purchase
price refund and the remaining 3% per the instructions of Xxxxxxxx.
(e) Once the funds (as set forth above) have been sent per the
Company's instructions, the Escrow Agent shall then arrange to have the
Preferred Stock delivered to the appropriate parties.
ARTICLE 2
MISCELLANEOUS
2.1. No waiver or 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 an extension of the time
for performance of any other obligation or act.
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2.2. All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent as set forth in the Purchase Agreement.
2.3. This Escrow Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and permitted 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 both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.
2.6. The parties hereto expressly agree that this Escrow Agreement shall be
governed by, interpreted under and construed and enforced in accordance with the
laws of the State of New York. Any action to enforce, arising out of, or
relating in any way to, any provisions of this Escrow Agreement shall only be
brought in a state or Federal court sitting in New York City.
2.7. The Escrow Agent's duties hereunder may be altered, amended, modified
or revoked only by a writing signed by the Company, each Purchaser and the
Escrow Agent.
2.8. 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 attorneys-at-law shall be conclusive
evidence of such good faith.
2.9. 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.
2.10. The Escrow Agent shall not be liable in any respect on account of the
identity, authorization or rights of the parties executing or delivering or
purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder.
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2.11. The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor which shall be paid by the Escrow Agreement unless
otherwise provided for in Section 3.14. THE ESCROW AGENT HAS ACTED AS LEGAL
COUNSEL FOR THE PURCHASERS, AND MAY CONTINUE TO ACT AS LEGAL COUNSEL FOR THE
PURCHASERS, FROM TIME TO TIME, NOTWITHSTANDING ITS DUTIES AS THE ESCROW AGENT
HEREUNDER. THE COMPANY CONSENTS TO THE ESCROW AGENT IN SUCH CAPACITY AS LEGAL
COUNSEL FOR THE PURCHASERS AND WAIVES ANY CLAIM THAT SUCH REPRESENTATION
REPRESENTS A CONFLICT OF INTEREST ON THE PART OF THE ESCROW AGENT. THE COMPANY
UNDERSTANDS THAT THE PURCHASERS AND THE ESCROW AGENT ARE RELYING EXPLICITLY ON
THE FOREGOING PROVISION IN ENTERING INTO THIS ESCROW AGREEMENT.
2.12. The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company and
the Purchasers. In the event of any such resignation, the Purchasers and the
Company shall appoint a successor Escrow Agent.
2.13. If the Escrow Agent reasonably requires other or further instruments
in connection with this Escrow Agreement or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
2.14. 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 escrow funds held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed in the Escrow Agent's sole discretion (1) to retain in
the Escrow Agent's possession without liability to anyone all or any part of
said documents or the escrow funds until such disputes shall have been settled
either by mutual written agreement of the parties concerned by a final order,
decree or judgment or 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 (2)
to deliver the escrow funds 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 City of New York in accordance with the
applicable procedure therefor.
2.15. The Company and each Purchaser agree jointly and severally to
indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims, liabilities, costs or expenses in
any way arising from or relating to the duties or performance of the Escrow
Agent hereunder or the transactions contemplated hereby or by the Purchase
Agreement other than any such claim, liability, cost or expense to the extent
the same shall have been determined by final, unappealable judgment of a court
of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Escrow Agent.
[SIGNATURE PAGE FOLLOWS]
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[SIGNATURE PAGE TO ESCROW AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
this __ day of May, 2002.
PACIFIC MAGTRON INTERNATIONAL CORP.
By: /s/ Xxxxxxxx X. Xx
------------------------------------
Name: Xxxxxxxx X. Xx
Title: Chairman of the Board and
President
PURCHASERS:
XXXXXXXXXXX X.X.
By:
------------------------------------
Name:
Title:
ESCROW AGENT:
XXXXXXX XXXXXXXXX LLP
By:
------------------------------------
Name:
Title:
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EXHIBIT X TO
ESCROW AGREEMENT
RELEASE NOTICE
The UNDERSIGNED, pursuant to the Escrow Agreement, dated as of May 31, 2002
among Pacific Magtron International Corp., the Purchasers signatory thereto and
Xxxxxxx Xxxxxxxxx LLP, as Escrow Agent (the "Escrow Agreement"; capitalized
terms used herein and not defined shall have the meaning ascribed to such terms
in the Escrow Agreement), hereby notify the Escrow Agent that each of the
conditions precedent to the purchase and sale of the Preferred Stock set forth
in the Securities Purchase Agreement have been satisfied. The Company and the
undersigned Purchaser hereby confirm that all of their respective
representations and warranties contained in the Purchase Agreement remain true
and correct and authorize the release by the Escrow Agent of the funds and
documents to be released at the Closing as described in the Escrow Agreement.
This Release Notice shall not be effective until executed by the Company and the
Purchaser.
This Release Notice may be signed in one or more counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the undersigned have caused this Release Notice to be
duly executed and delivered as of this __ day of May, 2002.
PACIFIC MAGTRON INTERNATIONAL CORP.
By:
------------------------------------
Name:
Title:
PURCHASERS:
XXXXXXXXXXX X.X.
By:
------------------------------------
Name:
Title:
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