ESCROW AGREEMENT
This
Escrow Agreement (the “Agreement”) is made and entered into on July 3, 2008, by
and among Knight Energy Corp., a Maryland corporation (the “Company”),and HD
Special-Situations, LP (the “Lender”), and Xxxxx X. Xxxxxxxx, a duly licensed
attorney who practices law in the State of California, as escrow agent (the
“Escrow Agent”).
A.
Capitalized terms used and not otherwise defined herein have the meanings set
forth in the Note Purchase Agreement entered into between the Company and the
Lender dated concurrently herewith (the “Note Purchase Agreement”).
B
Pursuant to the Note Purchase Agreement, at the Closing, the Company has agreed
to sell, and the Lender has agreed to purchase, the Note.
C.
The
Lender and the Company have agreed to effectuate the Closing utilizing an escrow
arrangement as described in this Agreement.
D.
It is
a condition of the Company’s obligation to sell, and the Lender’s obligation to
purchase, the Note, that this Agreement be executed and delivered.
E.
The
Escrow Agent is willing to act hereunder on the terms and conditions set forth
herein.
NOW,
THEREFORE, in consideration of their respective promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties hereby agree as follows:
1.
Escrow
Account.
On or
before the Closing Date, by wire transfer of immediately available funds in
United States Dollars, the Lender shall deposit the Purchase Price with the
Escrow Agent, to be held by the Escrow Agent in a separate non-interest bearing
account (the “Escrow Account”), established at Bank of America (the “Bank”),
subject to the provisions of this Agreement. At the request of the Company
or
the Lender, the Escrow Agent shall provide the requesting party with copies
of
all Bank statements, notices and other writings that he receives from the Bank
in connection with the Escrow Account.
2.
Disbursement
of Funds and Documents.
2.1
Closing
Procedures.
The
Closing shall take place in the following manner:
(a)
The
Company and the Lender shall each deliver to the Escrow Agent via facsimile
or
other electronic transmission (to be promptly followed by delivery of original
documents via courier service or Federal Express) complete originals of all
documents as provided in Sections 2.2
and
2.3 below, as applicable (the “Escrowed Documents”). Pending such delivery, each
party hereby agrees that a facsimile or other electronic transmission of a
document permitted to be delivered
hereunder, once delivered to the Escrow Agent, shall be binding upon such party
in the same
manner as would an original to the full extent permitted by applicable
law.
(ii)
Upon
receipt of the requisite documents via facsimile or otherwise from a party,
the
Escrow Agent shall, in turn, send via facsimile (to be promptly followed by
delivery of original documents via courier service or Federal Express) such
documents to the other parties. In addition, upon receipt by the Escrow Agent
of
the Purchase Price and the original Note, the Escrow Agent shall (i) disburse
the Purchase Price as provided in the Disbursement Instructions and (ii) deliver
the original Note to the Lender via courier service. Anything herein to the
contrary notwithstanding, the Escrow Agent shall not disburse the Purchase
Price
prior to taking physical possession of the original Note; likewise, the Escrow
Agent shall not release the original Note prior to receipt in the Escrow Account
of the Purchase Price.
2.2
Items
to be Delivered by the Company to the Escrow Agent.
On or
before the Closing Date, the Company shall deliver to the Escrow Agent on behalf
of the Lender each of the following documents: (i) three (3) fully executed
originals of the Note Purchase Agreement, (ii) one (1)
original fully executed Note, (iii) three (3) fully executed originals of this
Agreement, (iv) three (3)
fully
executed originals of the Amendment, (v) one (1) fully-executed original of
the
Amendment to Deed of Trust, (vi) three (3) fully executed originals of the
Subsidiary Amendment, (vii) three (3) fully executed originals of the
Disbursement Instructions and (viii) three (3) fully executed originals of
such
other items as may be specified in the Note Purchase Agreement to be delivered
by the Company.
2.3
Items
to be Delivered by the Lender to the Escrow Agent.
In
addition to the Purchase Price, on or before the Closing Date, the Lender shall
deliver to the Escrow Agent on behalf of the Company each of the following
documents: (i) three (3) fully executed originals of the Note Purchase
Agreement, (ii) three (3) fully executed originals of this Agreement, (iii)
three (3) fully executed originals of the Amendment, (iv) three (3) fully
executed originals of the Subsidiary Amendment, (v) three (3) fully executed
originals of the Disbursement Instructions and (vi) three (3)
fully
executed copies of such other items as may be specified in the Note Purchase
Agreement to be delivered by the Lender.
2.4
Controversies.
If any
controversy arises between any of the parties hereto, or between any of the
parties hereto and any person not a party hereto, as to whether or not or to
whom the EscrowAgent shall deliver the PurchasePrice, the Escrowed Documents,
or
any portion thereof, or as to any other matter arising out of or relating to
this Escrow Agreement, the Escrow Agent shall not be required to determine
the
same and need not make any delivery of the Purchase Price, the Escrowed
Documents, or any portion thereof, but may retain the same until the rights
of
the parties to the dispute have been finally determined by written agreement
or
by final judgment of a court of competent jurisdiction after all appeals have
been finally determined (or the time for further appeals has expired without
an
appeal having been made). The Escrow Agent shall deliver that portion of the
Purchase Priceand/orEscrowed Documentscovered bysuch agreement or final judgment
within five (5) days after the Escrow Agent receives a copy thereof. The Escrow
Agent shall assume that no
such
controversy has arisen unless and until he receives written notice from the
Lender or the Company
which refers specifically to this Agreement and identifies the controversy
and
the adverse claimants.
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2.5
No
Other Disbursements.
No
portion of the Purchase Price and/or the Escrowed Documents shall be disbursed
or otherwise transferred except in accordance with this Section 2, Section
4 or
Section 5.1(b).
3.
Escrow Agent.
The
acceptance by the Escrow Agent of his duties hereunder is subject tothefollowing
terms and conditions, which the parties to this Agreement hereby agree shall
govern and control with respect to the rights, duties,liabilities andindemnities
of theEscrow Agent:
(a)
The
Escrow Agent shall not be responsible or liable in any manner whatsoever for
(i)
the sufficiency, correctness, genuineness or validity of any cash, investments
or other amounts deposited with or held by the Escrow Agent, (ii) acting upon
any written notice, certificate, instruction, request or other document believed
by the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties or (iii) any act done hereunder, except in the case
of
the Escrow Agent’s willful misconduct or bad faith.
(b)
The
Escrow Agent shall not be obligated or permitted to investigate the correctness
or accuracy of any document or to determine whether or not the signatures
contained in any document are genuine or to require documentation or evidence
substantiating any such document or signature.
(c)
The
Escrow Agent shall have no duties as Escrow Agent except those that are
expressly set forth herein, and in any permitted amendment hereof; provided,
however, that no such amendment shall affect the Escrow Agent’s duties unless
the EscrowAgent shall have given written consent thereto.
(d)
The
Company and the Lender specifically acknowledge that (i) the Escrow Agent is
a
practicing attorney in California and (ii) the Escrow Agent has drafted the
documents for this transaction only on behalf of HD Special-Situations, LP
and
has acted as counsel in this transaction only for HD Special-Situations, LP.
The
Company represents that it has retained legal counsel of its choosing with
respect to the transactions contemplated herein and in the Note Purchase
Agreement, and is satisfied in its sole discretion with the form and content
of
the documentation drafted by the Escrow Agent. The Company hereby waives any
objection to the Escrow Agent acting as described herein based upon conflict
of
interest or lack of impartiality. The Escrow Agent agrees to act impartially
and
in accordance with the terms of this Agreement and the parties’ respective
instructions, so long as they are not in conflict with the terms of this
Agreement.
4.
Termination.
This
Agreement shall terminate on the earlier of (i) the date on which the Purchase
Price, the Escrowed Documents and other items described herein shall have been
fully disbursed
in accordance with the terms and conditions of this Agreement or (ii) any other
date agreed to
by the
Lender and the Company.
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5.
Miscellaneous.
5.1
Indemnification
of the Escrow Agent.
(a)
The
Company and the Lender each agree, jointly and severally, to indemnify the
Escrow Agent for, and to defend and hold the Escrow Agent harmless against,
any
loss, damage, claim, liability, cost or expense (including, but not limited
to,
reasonable attorney’s fees and costs of investigation) arising out of or in
connection with the performance of this Agreement, including the costs and
expenses of defending against any claim or liability in connection with the
exercise or performance of any of the Escrow Agent’s powers or duties hereunder.
The foregoing notwithstanding, this indemnification shall not apply to a party
with respect to a direct claim against the Escrow Agent by such party alleging
in good faith either gross negligence, willful misconduct or bad faith on the
Escrow Agent's part or a breach of this Agreement by the Escrow Agent, which
claim results in a final non-appealable judgment against the Escrow Agent with
respect to such claim.
(b)
In
the event of any dispute as to the nature of the rights or obligations of the
Lender, the Company and/or the Escrow Agent hereunder, the Escrow Agent may
at
any time or from time to time interplead and/or deliver all of the Purchase
Price and/or the Escrowed Documents with or to a court of competent jurisdiction
sitting in Los Angeles, California, or in any appropriate federal court, in
accordance with the procedural rules thereof. The Escrow Agent shall give notice
of such action to the Company and the Lender. Upon such interpleader or
delivery, the Escrow Agent shall immediately and automatically be relieved
and
discharged from all further obligations and responsibilities hereunder.
5.2
Entire
Agreement; Amendments.
This
Agreement contains the entire understanding of the parties with respect to
the
matters covered herein and supercedes all prior agreements, negotiations and
understandings, written or oral, with respect to such matters. Except as
specifically set forth herein, neither the Company, the Lender nor the Escrow
Agent makes any representation, warranty, covenant or undertaking with respect
to such matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
5.3
Notices.
Any
notices required or permitted to be given under the terms of this Agreement
shall be in writing and sent by U. S. Mail or delivered personally or by a
courier service or via facsimile (if via facsimile, to be followed within one
(1) business day by an original of the notice document via overnight delivery
service) and shall be effective (i) five (5) days after being placed in the
mail, if mailed, certified or registered, return receipt requested, (ii) upon
receipt, if delivered personally or (iii) one (1) day after facsimile
transmission or delivery to a courier service for overnight delivery, in each
case properly addressed to the party to receive the same. The addresses
for such notices shall be as set forth in the Note Purchase Agreement or, in
the
case of the Escrow
Agent, as set forth under the Escrow Agent’s signature on this
Agreement.
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5.4
Successors
and Assigns.
This
Agreement shall bind and inure to the benefit of the parties hereto and their
respective permitted successors and assigns; provided, however, that the Escrow
Agent shall not assign his duties under this Agreement.
5.5
Governing
Law.
This
Agreement shall be governed by and construed and interpreted in accordance
with
the laws of the State of California as applied to contracts made and to be
fully
performed in such state, without regard to the conflicts of laws provisions
thereof.
5.6
Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be an
original, and all of which together shall constitute one and the same agreement.
5.7
No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
5.8
Remedies.
No
provision of this Agreement providing for any specific remedy to a party shall
be construed to limit such party to the specific remedy described, and any
other
remedy that would otherwise be available to such party at law or in equity
shall
be so available. No delay or omission of either party hereto in exercising
any
right or remedy hereunder shall constitute a waiver of such right or remedy,
and
no waiver as to any obligation shall operate as a continuing waiver or as a
waiver of any subsequent breach.
5.9
Survival.
The
provisions of Section 5.1 above shall survive the Closing of the Note Purchase
Agreement.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized persons on the date first written above.
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HDSPECIAL-SITUATIONS,
LP
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By:
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Title:
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Xxxxx
X. Xxxxxxxx
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Address:
0000 Xxxxx Xxxx, #000
Xxxxxx
Xxxxx, Xxxxxxxxxx 00000
Telephone:
(000) 000-0000
Telecopier:
(000) 000-0000
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