ESCROW AGREEMENT
EXHIBIT
10.1
This
Escrow Agreement (this “Agreement”),
dated
as of August 8, 2007, is entered into by and among Surge Global Energy, Inc.,
a
Delaware corporation (“Company”),
Gemini Master Fund, Ltd. (“Investor”)
and
Xxxxxx Xxxxx Bank, a California banking association, as escrow agent
(“Escrow
Agent”).
R
E C I T A L S:
WHEREAS, the Investor holds a Convertible Note Due May 1, 2008 in the original principal amount of $1,150,000 issued by the Company (the “Note”), and the Investor has submitted to the Company a Mandatory Redemption Notice (as defined in the Note) electing to compel the Company to redeem the Note; and
WHEREAS,
pursuant to the terms of that certain Redemption Agreement dated as of even
date
herewith between the Company and the Investor, the parties thereto have agreed
to postpone redemption of the Note and the Company has agreed to deposit
$1,380,000 (“Mandatory
Redemption Price”)
into
an escrow account held by Escrow Agent in accordance with the terms
hereof;
A
G R E E M E N T:
NOW
THEREFORE, in consideration of the foregoing premises and the mutual covenants
set forth in this Agreement, and for other good and valuable consideration,
the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Appointment
of Escrow Agent.
The
Company and the Investor hereby appoint Escrow Agent to act as escrow agent
hereunder, and Escrow Agent hereby accepts such appointment and agrees to act
as
escrow agent and to hold, safeguard and disburse the Escrow Fund (as defined
below) pursuant to the terms and conditions hereof.
2. Escrow
of Funds.
(a) Deposit
into Escrow.
Immediately upon execution of this Agreement, the Company shall deposit with
Escrow Agent an amount equal to One Million Three Hundred Eighty Thousand
Dollars ($1,380,000) in immediately available funds (“Deposited
Funds”).
The
“Escrow
Fund”
is
the
Deposited Funds as increased by any interest thereon. Escrow Agent will provide
acknowledgment upon receipt of funds. Upon receipt by Escrow Agent, Escrow
Agent
shall hold the Escrow Fund in escrow for the benefit of the Company and the
Investor in accordance with this Agreement. This Agreement shall not become
effective until the Escrow Agent receives the Deposited Funds.
(b) Investment
of Funds.
Except
as the Company and the Investor may from time to time otherwise jointly instruct
Escrow Agent in writing, the Escrow Fund shall be invested in an interest
bearing account with Escrow Agent, at a rate agreed to by the Escrow Agent
and
Company, until disbursement of the entire Escrow Fund. The parties hereto agree
that (i) all interest accrued on the Escrow Fund shall be paid to the Company
(regardless of whether the Escrow Fund is distributed to the Company or the
Investor), and (ii) for tax reporting purposes, all interest and/or other
taxable income earned on the Escrow Fund in any tax year shall be taxable to
the
Company, unless disbursed to the Investor, in which case is shall be taxable
to
the Investor. Escrow Agent agrees to provide to the Company and/or the Investor
(as applicable) the appropriate form to report such interest and/or other
taxable income earned (i.e.,
1099
Misc., etc.).
3. Disbursements.
(a) Principal.
Following receipt by Escrow Agent of a written notice from the Investor
(“Direction
Notice”)
in the
form of Exhibit A hereto (which may be by fax or a digital image file (e.g.
PDF)
to the address set forth in Section 6 below):
(1) If
the
Investor has elected to redeem
the Note,
then
Escrow Agent shall distribute the
Mandatory Redemption Price
to the
Investor from the Escrow Fund on either November 1, 2007 or December 31, 2007,
as may be indicated in the Direction Notice;
or
(2)
If the
Investor has elected to
revoke
the Mandatory Redemption Notice,
then
Escrow Agent shall promptly distribute the
Mandatory Redemption Price
to the
Company from the Escrow Fund.
(b) Interest.
Contemporaneously with any distribution of the Mandatory Redemption Price
hereunder, the Escrow Agent shall distribute any and all accrued interest on
the
Escrow Fund to the Company. Upon disbursement of the entire Escrow Fund in
accordance herewith, the escrow hereunder shall terminate.
4. Duties
of Escrow Agent
(a) Degree
of Care.
Escrow
Agent shall not be under any duty to give the Escrow Fund held by it hereunder
any greater degree of care than it gives its own similar property and shall
not
be required to invest any funds held hereunder except as directed in this
Agreement. Uncollected funds held hereunder shall not earn or accrue
interest.
(b) No
Liability for Actions or Omissions.
Escrow
Agent shall not be liable for actions or omissions hereunder, except for its
own
gross negligence or willful misconduct and, except with respect to claims based
upon such gross negligence or willful misconduct that are successfully asserted
against Escrow Agent, the other parties hereto shall jointly and severally
indemnify and hold harmless Escrow Agent (and any successor Escrow Agent) from
and against any and all losses, liabilities, claims, actions, damages and
expenses, including reasonable attorneys’ fees and disbursements, arising out of
and in connection with this Agreement. Without limiting the foregoing, Escrow
Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in accordance
with
the terms hereof, including, without limitation, any liability for any delays
(not resulting from its gross negligence or willful misconduct) in the
investment or reinvestment of the Escrow Fund or any loss of interest incident
to any such delays.
2
(c) Reliance
by Escrow Agent.
Escrow
Agent shall be entitled to rely upon any order, judgment, certification, demand,
notice, instrument or other writing delivered to it hereunder without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of the service thereof. Escrow Agent may
act in reliance upon any instrument or signature believed by it to be genuine
and may assume that the person purporting to give receipt or advice or make
any
statement or execute any document in connection with the provisions hereof
has
been duly authorized to do so. Escrow Agent may conclusively presume that the
undersigned representative of any party hereto which is an entity other than
a
natural person, or any other individual designated in writing by such
representative, has full power and authority to instruct Escrow Agent on behalf
of that party unless written notice to the contrary is delivered to Escrow
Agent.
(d) Advice
of Counsel.
Escrow
Agent may act pursuant to the advice of counsel with respect to any matter
relating to this Agreement and shall not be liable for any action taken or
omitted by it in good faith in accordance with such advice.
(e) No
Interest in Escrow Fund.
Escrow
Agent does not have any interest in the Escrow Fund deposited hereunder but
is
serving as escrow holder only and has only possession thereof. Any payments
of
income from the Escrow Fund shall be subject to withholding regulations then
in
force with respect to United States taxes. The Company will provide Escrow
Agent
with appropriate Internal Revenue Service Forms W-9 for tax identification
number certification, or nonresident alien certification. To the extent that
the
Escrow Agent becomes liable for the payment of any taxes in respect of income
derived from the investment of funds held or payments made hereunder, Escrow
Agent shall satisfy such liability from the Escrow Fund. The Company agrees
to
indemnify and hold Escrow Agent harmless from and against any taxes, additions
for late payment, interest, penalties and other expenses that may be assessed
against Escrow Agent on or with respect to any payment or other activities
under
this Agreement unless any such tax, addition for late payment, interest,
penalties and other expenses shall arise out of or be caused by the actions
of,
or failure to act by, Escrow Agent. The provisions of this Article 4 shall
survive notwithstanding any termination of this Agreement or the resignation
of
Escrow Agent.
(f) No
Representation By Escrow Agent.
Escrow
Agent makes no representation as to the validity, value, genuineness or
collectability of any security or other document or instrument held by or
delivered to it.
(g) No
Advice.
Escrow
Agent shall not be called upon to advise any party as to the wisdom in selling
or retaining or taking or refraining from any action with respect to any
securities or other property deposited hereunder.
3
(h) Resignation
of Escrow Agent.
Escrow
Agent (and any successor Escrow Agent) may at any time resign as such by
delivering the Escrow Fund to any successor Escrow Agent jointly designated
by
the other parties hereto in writing, or to any court of competent jurisdiction,
whereupon Escrow Agent shall be discharged of and from any and all further
obligations arising in connection with this Agreement. The resignation of Escrow
Agent will take effect on the earlier of (i) the appointment of a successor
(including a court of competent jurisdiction) or (ii) the day which is thirty
(30) days after the date of delivery of its written notice of resignation to
the
other parties hereto. If, at that time, Escrow Agent has not received a
designation of a successor Escrow Agent, Escrow Agent’s sole responsibility
after that time shall be to retain and safeguard the Escrow Fund until receipt
of a designation of successor Escrow Agent or a joint written disposition
instruction by the other parties hereto or a court order.
(i) Adverse
Claims Against Escrow Fund.
In the
event of any disagreement between the other parties hereto resulting in adverse
claims or demands being made in connection with the Escrow Fund or in the event
that Escrow Agent is in doubt as to what action it should take hereunder, Escrow
Agent shall be entitled to retain the Escrow Fund until Escrow Agent shall
have
received (i) a court order directing delivery of the Escrow Fund or (ii) a
written agreement executed by the Company and the Investor directing delivery
of
the Escrow Fund, in which event Escrow Agent shall disburse the Escrow Fund
in
accordance with such order or agreement. Any court order shall be accompanied
by
a legal opinion by counsel for the presenting party satisfactory to Escrow
Agent
to the effect that the order is final and nonappealable. Escrow Agent shall
act
on such court order and legal opinion without further question or delay. Escrow
Agent may, in its sole and absolute discretion, interplead the Escrow Fund
or
that portion of Escrow Fund it then holds with any court of competent
jurisdiction and name the Company and the Investor in such interpleader action.
Upon filing the interpleader action, the Escrow Agent shall be relieved of
all
liability as to the Escrow Fund and shall be entitled to recover from the
Company its reasonable attorneys’ fees and other costs incurred in commencing
and maintaining such action. The Company and the Investor by signing this
Agreement submit themselves to the jurisdiction of such court. In no event
shall
the institution of such interpleader action impair the rights of Escrow Agent
described elsewhere this Agreement. Such interpleader action shall be filed
in a
court of competent jurisdiction in accordance with Section 7 below.
(j) Compensation
of Escrow Agent.
The
Company shall pay Escrow Agent compensation (as payment in full) for the
services to be rendered by Escrow Agent hereunder in the amount equal to $1,250
at the time of execution of this Agreement plus $100 per disbursement plus
any
out-of-pocket expenses incurred. The Company further agrees to reimburse Escrow
Agent for all reasonable expenses, disbursements and advances incurred or made
by Escrow Agent in performance of its duties hereunder (including reasonable
fees, expenses and disbursements of its counsel) prior to the distribution
of
any property held by Escrow Agent under this Agreement. If the property held
by
Escrow Agent under this Agreement is insufficient to pay any such compensation
and reimbursement to which Escrow Agent is entitled, the Company shall be liable
for such compensation and reimbursement.
4
(k) Consent
to Use of Name.
No
printed or other matter in any language (including, without limitation,
prospectuses, notices, reports and promotional material) that mentions Escrow
Agent’s name or the rights, powers or duties of Escrow Agent shall be issued by
the other parties hereto or on such parties’ behalf unless Escrow Agent shall
first have given its specific written consent thereto. Notwithstanding the
above, Escrow Agent hereby expressly consents to the mention of Escrow Agent’s
name in any securities filings required to be made by law.
5. Limited
Responsibility.
This
Agreement expressly sets forth all the duties of Escrow Agent with respect
to
any and all matters pertinent hereto. No implied duties or obligations shall
be
read into this Agreement against Escrow Agent. Escrow Agent shall not be bound
by the provisions of any agreement among the other parties hereto except this
Agreement.
6. Notices.
All
notices, requests, demands and other communications provided for by this
Agreement shall be in writing and shall be deemed to have been given when hand
delivered, when received if sent by facsimile or email or by same day or
overnight recognized commercial courier service or three business days after
being mailed in any general or branch office of the United States Postal
Service, enclosed in a registered or certified postpaid envelope, addressed
to
the address of the parties stated below or to such changed address as such
party
may have fixed by notice:
If
to the
Company:
00000
Xx
Xxxxxx Xxxx, Xxx. 000
Xxx
Xxxxx, Xxxxxxxxxx 00000
Attn:
Xxxx Xxxxxx
Facsimile:
(000) 000-0000
Email:
Xxxx@XxxxxXxxxxxXxxxxx.xxx
With
a copy to (if applicable) (other than Direction Notice):
Xxxx,
Forward, Xxxxxxxx & Scripps, LLP
00000
Xx
Xxxxxx Xxxx Xxx. 000
Xxx
Xxxxx, Xxxxxxxxxx 00000
Attn:
Xxxxxx X. Xxxxxxxx
Facsimile:
(000) 000-0000
If
to
the
Investor:
Gemini
Master Fund, Ltd.
c/o
Gemini Strategies, LLC
00000
Xx
Xxxxxx Xxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000-0000
Attn: Xxxxxx
Xxxxxxx
Fax:
(000)
000-0000
5
With
a copy to:
Xxxxx
X.
Xxxxxxx, P.C.
00
Xxxxxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Fax:
(000)
000-0000
Email:
xxxxxxxx@xxxxxxxx.xxx
If
to
Escrow Agent:
Xxxxxx
Xxxxx Bank
00000
Xx
Xxxxxx Xxxx, Xxx. 000
Xxx
Xxxxx, Xxxxxxxxxx 00000
Attn:
Teofla Rich, SVP
Facsimile:
000-000-0000
Email:
XXxxx@XxxxxxXxxxxXxxx.xxx
7. Jurisdiction;
Service of Process.
Any
action, suit, contest, litigation or similar proceeding (a “Proceeding”)
relating to this Agreement or the enforcement of any provision of this Agreement
may be brought or otherwise commenced only in any state or federal court located
in the County of San Diego, State of California. Each party to this Agreement:
(a) expressly and irrevocably consents and submits to the jurisdiction of each
state and federal court located in the County of San Diego, State of California
(and each appellate court located in the County of San Diego, State of
California) in connection with any such Proceeding; (b) agrees that each state
and federal court located in the County of San Diego, State of California shall
be deemed to be a convenient forum; and (c) agrees not to assert (by way of
motion, as a defense or otherwise), in any such Proceeding commenced in any
state or federal court located in the County of San Diego, State of California,
any claim that such party is not subject personally to the jurisdiction of
such
court, that such Proceeding has been brought in an inconvenient forum, that
the
venue of such Proceeding is improper or that this Agreement or the subject
matter of this Agreement may not be enforced in or by such court.
8. Execution
of Agreement.
This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. The exchange
of copies of this Agreement and of signature pages by facsimile transmission
or
PDF shall constitute effective execution and delivery of this Agreement as
to
the parties and may be used in lieu of the original Agreement for all purposes.
Signatures of the parties transmitted by facsimile or PDF shall be deemed to
be
their original signatures for any purposes whatsoever.
9. Section
Headings, Construction.
The
headings of sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation.
6
10. Waiver.
The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power or privilege under this Agreement or the documents referred to
in
this Agreement will operate as a waiver of such right, power or privilege,
and
no single or partial exercise of any such right, power or privilege will
preclude any other or further exercise of such right, power or privilege or
the
exercise of any other right, power or privilege. To the maximum extent permitted
by applicable law: (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one party, in
whole
or in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will
be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to
take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
11. Entire
Agreement and Modification.
This
Agreement supersedes all prior agreements among the parties with respect to
its
subject matter and constitutes (along with the documents referred to in this
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Agreement may
not
be amended except by a written agreement executed by the Company, the Investor
and Escrow Agent.
12. Governing
Law.
This
Agreement shall be governed by and interpreted and enforced in accordance with
the laws of the State of California, USA, without regard to the conflict of
laws
rules thereof.
13. Miscellaneous.
(a) Authority.
Each
party hereto hereby represents and warrants to the other parties that the
execution and delivery by such party of this Agreement, and the performance
by
such party of its obligations hereunder, have been duly and validly authorized
by such party, with no other action on the part of such party being necessary.
This Agreement has been duly and validly executed and delivered by such party
and constitutes a legal, valid and binding obligation of such party enforceable
against such party in accordance with its terms.
(b) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(c) Assignment;
Successors.
The
Investor may assign this Agreement or its respective rights or obligations
hereunder in connection with any transfer of the Note. This Agreement shall
be
binding upon each party’s respective successors.
***
Signatures
Appear on the Next Page***
7
IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of
the date first written above.
COMPANY:
By:
/s/
Xxxxxxx Xxxxxx
Name:
Xxxxxxx Xxxxxx
Title:
CFO
INVESTOR:
GEMINI
MASTER FUND, LTD.
By:
GEMINI
STRATEGIES, LLC, as investment manager
By:
/s/
Xxxxx
Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
Managing Director
ESCROW
AGENT:
XXXXXX
XXXXX BANK
By:
/s/
Xxxxxxx Xxxx
Name:
Teofla
Rich
Title:
SVP
8
Exhibit
A
DIRECTION
NOTICE
Date:
____________________
00000
Xx
Xxxxxx Xxxx, Xxx. 000
Xxx
Xxxxx, Xxxxxxxxxx 00000
Attn:
Xxxx Xxxxxx
Facsimile:
(000) 000-0000
Email:
Xxxx@XxxxxXxxxxxXxxxxx.xxx
Xxxxxx
Xxxxx Bank
00000
Xx
Xxxxxx Xxxx, Xxx. 000
Xxx
Xxxxx, Xxxxxxxxxx 00000
Attn:
Teofla Rich, SVP
Facsimile:
000-000-0000
Email:
XXxxx@XxxxxxXxxxxXxxx.xxx
Reference
is made to (1) that certain Redemption Agreement (“Redemption Agreement”) dated
as of August
8,
2007
between Surge Global Energy, Inc. (“Company”) and Gemini Master Fund, Ltd.
(“Investor”), and (2) that certain Escrow Agreement (“Escrow Agreement”) dated
as of August
8,
2007
among the Company, the Investor and Xxxxxx Xxxxx Bank, as escrow agent (“Escrow
Agent”). Initially capitalized terms used in this Direction Notice but not
defined herein shall have the meanings ascribed to them in the Escrow
Agreement.
Pursuant
to the Escrow Agreement, Gemini Master Fund, Ltd. elects to:
1.
Redeem
the Note for the Mandatory Redemption Price and hereby
directs the Escrow Agent to distribute the Mandatory
Redemption Price to the Investor by wire transfer to the following account
on:
—
November 1, 2007
—
December 31, 0000
Xxxxx
Xxxxxxxxx Xxxx, X.X.
ABA# 000-000-000
F/A/O
Goldman
Xxxxx & Co., N.Y.
A/C#
000-0-000000
F/F/C
Gemini
Master Fund, Ltd.
FFC#
002-36198
2.
Revoke
the Mandatory Redemption Notice and hereby
directs the Escrow Agent to distribute the Mandatory
Redemption Price to the Company by transfer to the Company’s bank account held
at the Escrow Agent (A/C # 0339002522).
3.
Extend
the Revised Mandatory Redemption Date (as defined in the Redemption Agreement)
until December 31, 2007.1
GEMINI
MASTER FUND, LTD.
By:
GEMINI
STRATEGIES, LLC, as investment manager
By:
_______________________________
Xxxxxx
Xxxxxxx, President
1
If
this election is made, this Direction Notice will only be delivered to
the
Company until another election is made.
