ESCROW AGREEMENT
This Escrow Agreement (the "Escrow Agreement") is made as of this 28th day of
October, 2004, by and among Silicon Valley Law Group a law corporation (the
"Escrow Agent"), Xxxx Xxx Xxxxx (Xxxxxxxx), an individual residing in
Switzerland ("Lender"), and Human BioSystems, a California corporation (the
"Company"). Capitalized terms not defined herein shall have the meanings
ascribed to them in the Loan Agreement (as defined below). RECITALS
A. Lender and the Company have entered into that certain Loan Agreement,
dated as of October 28, 2004 (the "Loan Agreement") whereby Lender is loaning an
aggregate of Two Million Three Hundred Thousand Euros (E 2,300,000) (the
"Loan"). Repayment of the Loan is secured by an aggregate of twenty-three
million (23,000,000) shares of Reg S restricted common stock (the "Shares").
B. The parties hereto desire to set forth the terms and conditions pursuant
to which the funds to repay the Loan and the Shares will be placed and held in
escrow and the terms and conditions for their release from escrow.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants
contained herein, and intending to be legally bound, hereby agree as follows:
1. Escrow of Escrow Funds and Shares Prior to Due Date of Loan. Pursuant
to the Loan Agreement, no later than five (5) business days before the due date
of the Loan, the Company shall deposit into escrow funds in an amount equal to
the unpaid balance of the Loan (including accrued but unpaid interest thereon)
(the "Escrow Funds"), and Lender shall deposit into escrow the Shares. The
Escrow Funds and the Shares shall be held and distributed by the Escrow Agent in
accordance with the terms and conditions of this Escrow Agreement.
2. Escrow of Escrow Funds and Shares Upon Prepayment of Loan. Pursuant to
the Loan Agreement, no later than five (5) business days before any prepayment
of the Loan, the Company shall deposit into escrow funds in an amount equal to
the amount of the Loan to be prepaid (the "Prepayment Funds"). The Escrow Agent
shall then notify Lender of the deposit, and Lender shall deposit into escrow
Shares with a value equal to such prepayment (the "Prepayment Shares"). The
Prepayment Funds and the Shares shall be held and distributed by the Escrow
Agent in accordance with the terms and conditions of this Escrow Agreement.
3. Rights and Obligations of the Parties. The Escrow Agent shall be
entitled to such rights and shall perform such duties of the escrow agent as set
forth herein (collectively, the "Duties"), in accordance with the terms and
conditions of this Escrow Agreement. The Company and Lender shall be entitled
to their respective rights and shall perform their respective duties and
obligations as set forth herein. This Escrow Agreement shall become effective
immediately upon delivery of this Escrow Agreement to the Escrow Agent.
4. Conditions for Release From Escrow.
(a) Default by the Company Under Loan Agreement. In the event that the
Company shall fail to repay the Loan, including accrued but unpaid interest
thereon, on or before November 1, 2007, Lender shall notify Escrow Agent in
writing of such default. No later than ten (10) days after receipt of such
written notice, Escrow Agent shall release to Lender that portion of the Shares
which represents the unpaid principal and accrued but unpaid interest. The
balance, if any, of the Shares shall be returned to the Company.
(b) Repayment in Full of Loan. Upon receipt by the Escrow Agent of the
Escrow Funds and the Shares, Escrow Agent shall release the Escrow Funds to the
Lender and all of the Shares to the Company.
(c) Prepayment of Loan. Upon receipt by the Escrow Agent of the Prepayment
Funds and the Prepayment Shares, Escrow Agent shall release the Prepayment Funds
to the Lender and the Prepayment Shares to the Company.
(d) Failure to Place Shares or Prepayment Shares in Escrow. In the event
that the Lender fails to place the Shares or the Prepayment Shares into escrow
pursuant to the terms of this Escrow Agreement, Lender shall be declared in
default, the Escrow Funds or the Prepayment Funds, as the case may be, shall be
promptly returned to the Company and the Shares or the Prepayment Shares, as the
case may be, will be deemed cancelled. The Company will promptly notify its
transfer agent of such cancellation.
5. Duties of Escrow Agent. The Duties of the Escrow Agent shall include
the following:
5.1. The Escrow Agent shall temporarily hold and safeguard the Escrow Funds,
the Shares, the Prepayment Funds and the Prepayment Shares, shall treat all of
them as a trust fund in accordance with the terms of this Escrow Agreement and
not as the property of Lender or of the Company, and shall hold and dispose of
the Escrow Funds, the Shares, the Prepayment Funds and the Prepayment Shares
only in accordance with the terms hereof.
5.2. The Escrow Agent shall deliver the Escrow Funds, the Shares, the
Prepayment Funds and the Prepayment Shares pursuant to the terms and conditions
of this Agreement.
6. Exculpatory Provisions.
6.1. 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 to be
genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall not be liable for forgeries or false impersonations. The
Escrow Agent shall not be liable for any act done or omitted hereunder as escrow
agent except for gross negligence or willful misconduct. The Escrow Agent
shall, in no case or event, be liable for any representations or warranties of
Lender or the Company or for punitive, incidental or consequential damages. Any
act done or omitted pursuant to the advice or opinion of counsel shall be
conclusive evidence of the good faith of the Escrow Agent.
6.2. 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, 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 of any
court the Escrow Agent shall not be liable to any of the parties hereto or to
any other person by reason of such compliance, notwithstanding any such order,
judgment, decree or ruling being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
6.3. The Escrow Agent shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver the Shares or any documents or papers deposited
or called for thereunder.
6.4. The Escrow Agent shall not be liable for the outlawing of any rights
under any statute of limitations with respect to this Escrow Agreement or any
documents deposited with the Escrow Agent.
7. Alteration of Duties. The Duties may be altered, amended, modified or
revoked only by a writing signed by all of the parties hereto.
8. Resignation and Removal of the Escrow Agent. The Escrow Agent may
resign as Escrow Agent at any time with or without cause by giving at least
thirty (30) days prior written notice to each of Lender and the Company, such
resignation to be effective thirty (30) days following the date such notice is
given.
9. Further Instruments. If the Escrow Agent reasonably requires other or
further instruments in connection with performance of the Duties, the necessary
parties hereto shall join in furnishing such instruments.
10. Fees of Escrow Agent. The fees and charges of the Escrow Agent
hereunder shall be paid by the Company; Lender shall reimburse the Company for
such fees and charges from the proceeds of the Loan.
11. Disputes. It is understood and agreed that should any dispute arise
with respect to the delivery and/or ownership or right of possession of the
Escrow Funds, the Shares, the Prepayment Funds or the Prepayment Shares held by
the Escrow Agent hereunder, the Escrow Agent is authorized and directed to act
in accordance with a judgment or court order. Absent such order or judgment,
Escrow Agent shall perform its duties described in this Agreement.
12. Indemnification. In consideration of the Escrow Agent's acceptance of
this appointment, Lender and the Company, jointly and severally, agree to
indemnify and hold the Escrow Agent harmless as to any liability incurred by it
to any person, firm or corporation by reason of its having accepted such
appointment or in carrying out the terms hereof, and to reimburse the Escrow
Agent for all the Escrow Agent's costs and expenses, including, among other
things, counsel fees and expenses, reasonably incurred by reason of any matter
as to which an indemnity is paid; provided, however, that no indemnity need be
paid in case of the Escrow Agent's gross negligence, willful misconduct or
breach of this Escrow Agreement.
13. General.
13.1. All notices and other communications hereunder shall be made at the
addresses, in the manner and with the effect provided in the Loan Agreement.
13.2. The captions in this Escrow Agreement are for convenience only and shall
not be considered a part of or affect the construction or interpretation of any
provision of this Escrow Agreement.
13.3. This Escrow Agreement may be executed in any number of counterparts,
each of which when so executed shall constitute an original copy hereof, but all
of which together shall constitute one agreement.
13.4. No party may, without the prior express written consent of each other
party, assign this Escrow Agreement in whole or in part. This Escrow Agreement
shall be binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto.
13.5. This Escrow Agreement shall be governed by and construed in accordance
with the laws of the State of California as applied to contracts made and to be
performed entirely within the State of California. The parties to this Escrow
Agreement hereby agree to submit to personal jurisdiction in the State of
California.
13.6. This Agreement, including all exhibits hereto, and the Loan Agreement
constitute the entire agreement between Lender and Borrower regarding the Loan.
Where there is a conflict between the terms of this Agreement and the Loan
Agreement, this Agreement shall prevail.
13.7. Waiver. Lender hereby acknowledges and agrees that Escrow Agent serves
as outside legal counsel to the Company. Accordingly, Lender hereby
acknowledges and agrees that Escrow Agent may continue to serve as the Company's
outside legal counsel for any dispute related to this Escrow Agreement, the Loan
Agreement or any related agreement or document thereto.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the
date first above written.
LENDER /s/ Xxxx Xxx Xxxxx
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Xxxx Xxx Xxxxx
THE COMPANY: Human BioSystems
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx
Its: President/CEO
ESCROW AGENT: Silicon Valley Law Group
By: /s/ Xxxxxxx X. Xxxxx
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Xxxxxxx X. Xxxxx
Its: Director
