ESCROW AGREEMENT
AGREEMENT made as of this 24th day of October, 1997 by and among
KRANTOR CORPORATION, a corporation having its principal offices at 000 Xxxx
Xxxxxxxx Xxxxx, Xxxx Xxxx, Xxx Xxxx 00000 (the "Issuer" or the "Company"),
BAYTREE ASSOCIATES, INC., a New York corporation having its principal offices at
00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Baytree" or "Placement Agent") and
THE GLOBE TRUST COMPANY LIMITED, a Bermuda trust company having its principal
offices at The Xxxxxx Xxxxx, 00 Xxxxxxxxxx Xxxxxx Xxxxxxxx, Xxxxxxx (xxx "Escrow
Agent").
WITNESSETH
WHEREAS, the Issuer proposes to offer the sale to certain selected
persons (the "Offering") certain Debentures convertible into Common Stock of the
Issuer, $0.01 par value per share (the "Shares") and certain warrants (the
"Investor Warrants"), and proposes to issue to the Placement Agent certain
warrants as part of a fee for its efforts with regard to the offering (the
"Placement Agent Warrants").
WHEREAS, The Company has agreed to seek registration with the
Securities and exchange Commission and up to five states requested by the Holder
of sufficient common stock of the Company as will include the underlying Common
Stock Common Stock into which the Debentures are convertible and the Investor
Warrants and Placement Agent Warrants exercisable, and in furtherance of such
registration the Company has agreed to establish The Globe Trust Company Limited
(the "Escrow Account") which shall be administered by the Escrow Agent (the
"Escrow Agent") appointed by the Company and the Placement Agent, into which
Escrow Account the Company shall deliver shares (the "Escrow Stock"), which will
have previous thereto been issued to the Holders of the Debentures, Investor
Warrants and Placement Agent Warrants, in the amount of 1,000,000 shares (which
will likely be in excess of the amount of such stock into which the Debentures
and Investor Warrants shall be convertible/exercisable) which shall be delivered
into the Escrow Account prior to the Company receiving funds from the Offering,
and although the Company shall register all of such stock that which is not
necessary to transfer to the Holders for exercise/conversion of all Securities
may be redeemed by the Company as further agreed to and specified in the
Subscription Agreement and should $1,000,000 shares be an insufficient amount of
shares into which the Debentures and Investor/Placement Agent warrants are
convertible/exercisable, the Company shall immediately deliver such remainder of
shares as is needed to cure the deficiency into the Escrow Account which shares
shall be registered in the same form and manner as the Shares originally placed
in the Escrow Account; and the Escrow Agent is willing to establish such escrow
account on the terms and subject to the conditions hereinafter set forth.
E-35
WHEREAS, the Company wishes to establish the Escrow Account in which to
deliver the Escrow Stock being advised to establish such escrow account and have
such administered in accord with this Agreement, to allow the Company to
effectuate registration of the Escrow Stock for delivery to the Holders of the
Securities, which Escrow Account would be terminated and the Escrow Stock
delivered to the Holders and/or redeemed by the Company in accord with rights
established in the Defining Documents, at the time all the Securities have been
eliminated through conversion/exercise and/or termination in accord with the
terms and conditions therein; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agrees as follows:
1. ESTABLISHMENT OF THE ESCROW ACCOUNT.
1.1 The parties hereto shall establish an Escrow Account at the offices of
the Escrow Agent, and bearing the designation set forth in Section 2.2 below
(the "Escrow Account")
1.2 The Period of the Escrow Account which shall be deemed to commence on
October 24, 1997 (the "Commencement Date"), and shall continue until fully
disbursed pursuant to Section 3 herein.
2. TERM OF ESCROW DEPOSIT AND DELIVERY OF ESCROW STOCK.
2.1 All Escrow Stock once issued by the Company shall be deposited into the
Escrow Account to be held by Escrow Agent in accord with the terms and
conditions of this Agreement. Upon written notice (the "Notice") from the
Company to the Escrow Agent that the record owner of such stock has opted to
exercise his rights under the terms of the Securities to convert and/or
exercise under the terms of the applicable Securities, and specifying in
such Notice the amount of the portion of the Escrow Stock to be delivered to
the Investor in exchange on the conversion/exercise, the Escrow Agent shall
follow such instructions as are given by the Company in the Notice and
deliver the said portion of the Escrow Stock in accord with such
instructions
2.2 The account particulars required to effect the transfer to the Escrow
Account are:
Correspondent Bank:
FED ABA:
CHIPS ABA:
S.W.I.F.T. Code:
Beneficiary Bank:
SWIFT Code:
Beneficiary A/C Name:
Beneficiary A/C Number:
2.3 The investor, Baytree and the Company acknowledges that the above
account is with the Bank of Bermuda Limited, an established custodial bank
which is not FDIC insured.
E-36
3. DISBURSEMENT FROM THE ESCROW ACCOUNT.
3.1 Upon conversion and exercise of all of the Debentures and
Investor/Placement Agent Warrants and upon disbursement of all the Escrow
Stock pursuant to the terms of this Agreement, the Escrow Agent shall be
relieved of any and all further obligations and released from any and all
liability under this Agreement. It is expressly agreed and understood that
in no event, shall the aggregate amount of Shares disbursed exceed the
amount received by the Escrow Agent nor shall the Escrow Agent have any
liability should the Shares be an insufficient amount of Shares into which
the Debentures and Investor/Placement Agent Warrants are
convertible/exercisable.
4. VOTING OF THE ESCROW STOCK PENDING DELIVERY TO INVESTORS.
4.1 As to any and all of the Escrow Stock, while it is on deposit with the
Escrow Agent in the Escrow Account, and prior to any Notice from the Company
for its delivery to the Investor, voting rights regarding such stock shall
be exercised by the Escrow Agent or Escrow Agent may abstain from voting
such stock, as directed by the Placement Agent (or in the absence thereof as
the Escrow Agent in his discretion may determine) and investor by his
signature provide on this Agreement acknowledges and agrees to allow Escrow
Agent to bote or abstain from voting the stock, acknowledging that such
rights would otherwise be rights exercisable by the investor who stands as
the record owner of such stock. The Escrow Agent may vote the said stock on
any matters which may come before the shareholders of the Company at any
shareholders' meeting and will exercise their best judgment from time to
time to select suitable directors to the end that the affairs of the
corporation shall be properly managed.
4.2 The Escrow Agent may vote on all stock in person or by such person or
persons as they shall select as their proxy.
4.3 No Escrow Agent shall be liable for any error of judgment or mistake of
law, or other mistake, or for anything, save only his or her own wilful
misconduct or gross negligence.
5. Legends.
A legend may be placed on the certificates representing the Escrow Stock and
on the stock records of the Company notifying of the voting rights, and of
other rights and restrictions as provided in this Agreement, for so long as
the Escrow Stock to which such voting rights and/or other rights and
restrictions apply remain in the Escrow Account.
6. RIGHT OF HOLDER TO DIVIDEND, ETC.
The owners of records of the Escrow Stock shall be and continue to be while
said stock is being held in the Escrow Account entitled, until distribution
of stock as provided for herein, to receive from time to time, payments
equal to the dividends, if any, declared and distributed by the Company to
the record owners of the stock being held in the Escrow Account, and all
Escrow Stock shall be freely transferable by said record owners subject to
the conditions and restrictions on such stock provided by this Agreement and
the debentures and Investor/Placement Agent Warrants, where applicable,
provided, however that the prior to any such transfer the stock shall be
registered or an exemption from registration available to allow the
transfer.
E-37
7. RIGHTS, DUTIES AND RESPONSIBILITIES OF ESCROW AGENT.
It is understood and agreed that the duties of the Escrow Agent are purely
ministerial in nature, and that:
7.1 The Escrow Agent shall not be required to keep records of any
information with respect to transfers by the Issuer or Baytree except as to
the amount of such transfer, however, the Escrow Agent shall notify the
Issuer and Baytree within a reasonable time of any discrepancy between the
amount set forth in any Notice of Conversion and the amount delivered to the
Escrow Agent therewith. Such amount need not be transferred from the Escrow
Account until such discrepancy has been resolved.
7.2 The Escrow Agent shall be under no duty or responsibility to enforce
collection of the Escrow Stock from the Company
7.3 The Escrow Agent shall be entitled to rely upon the accuracy, act in
reliance upon the contents, and assume the genuineness, of any notice,
instructing, certificate, signature, instrument or other document which is
given to the Escrow Agent verifying the truth or accuracy thereof. The
Escrow Agent shall not be obligated to make any inquiry as to the authority,
capacity, existence of identity of any person purporting to give any such
notice or instructions or to execute any such certificate, instrument or
other document. The Escrow Agent shall be entitled to assume that facsimile
and photostatic copies upon which it relies conform in all respects with the
originals thereof.
7.4 In the event that the Escrow Agent shall be uncertain as to its duties
or rights hereunder or shall receive instructions with respect to the Escrow
Account which, in its sole determination, are in conflict either with other
instruments received by it or with any provisions of this Agreement, then,
in such event, it shall be entitled to hold the Fund, or a portion thereof
in the Escrow Account pending the resolution of such uncertainty to the
Escrow Agent's sole satisfaction, by final judgement of a court or courts of
competent jurisdiction or otherwise, or the Escrow Agent, at its sole
option, may deposit the Escrow Stock with the Clerk or Registrar of the
court of competent jurisdiction in a proceeding to which all parties in
interest are joined. Upon the deposit by the escrow Agent of the Escrow
Stock with the Clerk or Registrar of any court, the Escrow Agent shall be
relieved of any and all further obligations and released from any and all
liability hereunder.
7.5 The Escrow Agent shall not be liable for any action taken or omitted
hereunder, or for the misconduct of any employee, agent or attorney
appointed by it, except in the case of willful misconduct or gross
negligence. The Escrow Agent shall be entitled to consult with the counsel
of its own choosing and shall not be liable for any action taken, suffered
or omitted by it in accordance with the advice of such counsel.
8. AMENDMENT REGISTRATION.
This Agreement may be altered or amended only with written consent of the
Issuer, Baytree an the escrow Agent. The Escrow Agent may resign for
reasonable cause upon three (3) business days' written notice to the Issuer
and Baytree. Should the Escrow Agent resign as herein provided, it shall not
be required to accept any Escrow Stock, make any disbursement or otherwise
dispose of the Escrow Stock, but its only duty shall be to hold the Escrow
Stock for a period of not more than five (5) business days following the
E-38
effective date of such resignation, at which time (a) if a successor escrow
agent shall have been appointed and written notice thereof (including the
name and address of such successor escrow agent) shall have been given to
the resigning Escrow Agent, the Escrow Agent shall deliver over to the
successor escrow agent the Escrow Stock, less any portion thereof previously
delivered out in accordance with this Agreement, or (b) if the resigning
Escrow Agent shall not have received written notice thereof (including the
name and address of such successor escrow agent) shall have been given to
the resigning Escrow Agent, the Escrow Agent shall deliver over to the
successor escrow agent the Escrow Stock, less any portion thereof previously
paid out in accordance with this Agreement; or (c) if the resigning Escrow
Agent shall not have received written notice signed by the Issuer, Baytree
and a successor escrow Agent, then the resigning Escrow Agent shall promptly
refund the amount in the Escrow Account to each prospective purchaser, or
the Company pursuant to written instructions received by Baytree and the
Company and the resigning Escrow Agent shall notify the Issuer and Baytree
in writing of its liquidation and distribution of the Escrow Account;
whereupon, in either case, the Escrow Agent shall be relieved of all further
obligations and released from any and all liability under this Agreement.
Without limiting the provisions of Section 10 hereof, the resigning Escrow
Agent shall be entitled to be reimbursed by the Issuer and the Issuer shall
be liable for any expenses incurred in connection with the Escrow Agent's
resignation, the transfer of the fund to a successor escrow agent of the
distribution of the Fund pursuant to this Section 8.
9. FEES AND EXPENSES.
The Escrow Agent shall be entitled to, and the Issuer shall pay to the
escrow Agent, the Escrow Agent Fee of which shall be paid simultaneously
with the delivery of Escrow Stock.
10. INDEMNIFICATION AND CONTRIBUTION.
10.1 The Issuer agrees to indemnify the Escrow Agent and its partners,
associates, counsel, employees and agents (jointly and severally the
"Indemnities") against any liability, cost, damage and expenses, including,
without limitation, reasonable counsel fees, which the Indemnities may
suffer or incur by reason of any action, claim or proceeding brought against
Indemnities arising out of or relating in any way to this Agreement or any
transaction to which this Agreement related, unless such action, claim or
proceeding is the result of the willful misconduct or gross negligence of
the Indemnities.
10.2 If the Indemnification provided for in the Section 10 is applicable,
for any reason is held to be unavailable, the Issuer shall contribute such
amounts as are just and equitable to pay, or to reimburse the Indemnities
for, the aggregate of any and all losses, liabilities, costs, damages and
expenses, including counsel fees, actually incurred by the Indemnities as a
result of or in connection with, any amount paid in settlement, of any
action, claim or proceeding arising out of or relating in any way to any
actions or omissions of the Issuer.
E-39
10.3 The provisions of this Section 10 shall survive any termination of this
Agreement, whether by disbursement and not exclusive, and are in addition to
any and all other rights and remedies granted and permitted under and
pursuant to law.
11. CUMULATIVE RIGHTS.
The rights and remedies granted to the Escrow Agent in this Agreement are
cumulative and not exclusive, and are in addition to any and all other
rights and remedies granted and permitted under and pursuant to law.
12. NO WAIVER
The failure of any of the signatories hereto to enforce any provision hereof
on any occasion shall not be deemed to be a waiver of any proceeding or
succeeding breach of such provisions or any other provision.
13. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement and understanding of the
signatories hereto and no amendment modification or waiver of any provision
herein shall be effective unless in writing, executed by the party charged
therewith.
14. GOVERNING LAW
This Agreement shall be construed, interpreted and enforced in accordance
with and shall be governed by the laws of the State of New York without
regard to the principals of conflicts of laws.
15. BINDING EFFECT
This Agreement shall bind and inure to the benefit of the parties, their
successors and assigns.
16. NOTICES
Any notice or other communication under the provisions of this Agreement
shall be in writing and shall be given by postage prepaid, registered or
certified mail, return receipt requested, by hand delivery with receipt
acknowledged, or by a recognized overnight courier service, directed to the
Issuer and Baytree at the addressed set forth above, and to the Escrow Agent
at its address set forth above to the attention of or to any new address of
which any party hereto shall have informed the others by the giving of
notice in the manner provided herein. Such notice or communication shall be
effective if shipped by mail, four (4) days after it is mailed.
17. UNENFORCEABILITY: SEVERABILITY
If any provisions of this Agreement is found to be void or unenforceable by
a court of competent jurisdiction, the remaining provisions of this
Agreement, shall, nevertheless, be binding upon the parties with the same
force and effect as though the unenforceable part had been severed and
deleted.
E-40
18. NO THIRD PARTY RIGHTS
The representations, warranties and other terms and provisions of this
Agreement are for the exclusive benefit of the parties hereto, and no other
person shall have any right or claim against any party by reason of any of
terms and provisions or be entitled to enforce any of those terms and
provisions against and party.
19. COUNTERPARTS
This Agreement may be executed in counterparts, all of which shall be deemed
to be duplicate originals.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and year first above written.
THE GLOBE TRUST COMPANY LIMITED
---------------------------------
(ESCROW AGENT)
By:/s/
---------------------------------
KRANTOR CORPORATION
By:/s/
---------------------------------
BAYTREE ASSOCIATES, INC.
By:/s/
---------------------------------
E-41
INVESTOR SIGNATURE PAGE
The undersigned is a Subscriber, Investor and/or Holder of certain of the Escrow
Stock being held by the Escrow Agent pursuant to the terms of this Escrow
Agreement (as those terms are defined in the Subscription Agreement executed by
me) and by my signature provided hereon I evidence may agreement with the terms
of this Agreement and I realize specifically that, although I am the record
owner of the Securities to which this Agreement relates and which are issued to
me in furtherance of an in accord with the Subscription Agreement I executed,
while those securities are within the possession of the Escrow Agent, I realize
and have agreed that said Escrow Agent shall have the right to vote or abstain
from voting those securities the same as I otherwise would have the right to do
as the record owner thereof.
---------------------------------
(Investor)
E-42
