ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") made and
entered into this 5th day of June, 2001, between Covenant EcoNet,
Inc., a Nevada corporation, whose address is 00 Xxxxxxxxx Xxxxx, XX,
Xxxxxxxxxx, X.X. 00000 (hereinafter referred to as the "Issuer") and
The Law Firm of Xxxxxx-Xxxxxxx, P.C. (hereinafter referred to as the
"Escrow Agent"), (collectively, "the Parties").
W I T N E S S E T H, T H A T:
WHEREAS, the Issuer intends to offer a minimum of 500,000 shares
and a maximum of 5,000,000 shares of its common stock in an initial
public offering with a proposed offering price of $1.00 per share
pursuant to a registration statement filed with the United States
Securities and Exchange Commission on or about June 5, 2001, (the
"IPO"); and
WHEREAS, as a condition of registration, the Issuer has stated that
the funds received in the IPO shall be placed in a non-interest bearing
escrow account and shall thereafter be released in accordance with the
terms of this Agreement, and
WHEREAS, the Issuer is desirous of having the Escrow Agent hold
such amounts in escrow, and
WHEREAS, the Escrow Agent is willing to act as Escrow Agent for
the purpose and consideration stated herein, and
WHEREAS, an account in the name of "Covenant EcoNet Escrow
Account" shall be opened at Xxxxx National Bank, located in
Washington, D.C., for the sole purpose of the Issuer's offering.
NOW, THEREFORE, in consideration of the premises and the
agreements herein contained, the parties mutually agree as follows:
1. Recitals. The parties acknowledge that each of the foregoing
-------- recitals is true and correct. The foregoing recitals are
hereby incorporated into this Agreement and made a material part hereof
by this express reference.
2. Named Escrow Agent. Law Firm of Xxxxxx-Xxxxxxx, P.C. has
------------------ consented to act as Escrow Agent and to accept
for collection funds representing payment for the purchase price of the
securities ("Investor Funds").
3. Investor Funds. The Escrow Agent hereby acknowledges that
-------- all amounts received in connection with the Issuer's
offering shall be deemed the "Investor Funds."
4. Receipt. Upon collection of the Investor Funds, the funds
------- collected shall be deposited into Issuer's Escrow Account
located at Xxxxx National Bank pursuant to the terms and conditions of
this Agreement. Investor Checks for purchase of the securities shall be
made payable by the Investor to "Covenant EcoNet Escrow Account" or
wired to said account.
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5. Delivery. The Escrow Agent shall hold the Investor Funds in
-------- escrow and shall deliver the same as follows:
(a) In the event the Issuer is unable to raise the minimum of
$500,000 by the close of the Issuer's IPO, the Escrow Agent
shall return such investor's funds immediately, without interest
and without reduction for any commission fees, costs or
expenses.
(b) The Escrow Agent, upon receipt of a written instruction signed on
behalf of the Issuer, shall deliver the Investor Funds as directed
in such instruction.
(c) In the event that a prospective investor revokes his or her
subscription subsequent to the receipt and collection of
Investors' Funds by the Escrow Agent within the required time
provided by state law, the Issuer shall provide written
notification to Escrow Agent of such revocation. Upon receipt
of any such notice of revocation of a prospective investor's
subscription, the Escrow Agent shall return such investor's
funds within four banking days, without interest or reduction for
any costs or expenses.
(d) The Escrow Agent, upon receipt of an order of a court or
arbitration panel, shall deliver the Investor Funds as directed in
such order.
6. Duties. The duties of the Escrow Agent shall be limited to the
------ safekeeping of the Investor Funds and to deliver the same
in accordance with this Agreement. Escrow Agent undertakes to
perform only such duties as are expressly set forth herein, and no
implied duties or obligations shall be read into this Agreement against
Escrow Agent. Escrow Agent shall deposit the Investor Funds in such
non-interest bearing account as is offered by the Escrow Agent's bank
and selected by the Issuer as set forth in a written instruction signed by
the Issuer. Escrow Agent shall have no liability for the services
rendered by the Escrow Agent's bank nor for any early withdrawal or
other penalty imposed by the bank for the withdrawal of any part of the
Investor Funds in accordance with any instructions provided to the
Escrow Agent in accordance with Section 5. Upon Escrow Agent's
delivery of the Investor Funds in accordance with the provisions hereof,
the escrow shall terminate, and Escrow Agent shall thereupon be
released of all liability hereunder in connection therewith. The Law
Firm of Xxxxxx-Xxxxxxx, P.C. shall not and cannot represent the Issuer or
investors in any dispute.
7. Reliance. Escrow Agent may act in reliance upon any writing or
-------- instrument or signature which it, in good faith, believes
to be genuine, and may assume the validity and accuracy of any
statement or assertion contained in such a writing or instrument and may
assume that any person purporting to give any writing, notice, advice or
instruction in connection with the provisions hereof has been duly
authorized to do so. Escrow Agent shall not be liable in any manner for
the sufficiency or correctness as to form, manner and execution, or
validity of any instrument delivered pursuant to this Agreement, nor as
to the identity, authority, or right of any person executing the same; and
its duties hereunder shall be limited to the safekeeping of the Investor
Checks received by it as such escrow holder, and for the disposition of
the same in accordance with the terms of this Agreement.
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8. Disputes. In the event of any dispute regarding any action
-------- taken, or proposed to be taken, by Escrow Agent with
respect to the Investor Funds held by Escrow Agent pursuant to this
Agreement, and the Issuer and investors or prospective investors shall
have instituted litigation or arbitration proceedings, Escrow Agent shall
deliver such escrow amount as the arbitrators or court so directs. If no
such arbitration or litigation proceeding has been instituted, Escrow
Agent, in its sole discretion, may cause that such escrow amount to be
placed into the registry of a court of competent jurisdiction pursuant to
an action of interpleader commenced by Escrow Agent, and the Issuer
and investors or prospective investors, jointly and severally, agree to pay
directly, or to reimburse Escrow Agent for, any and all expenses so
incurred by Escrow Agent, including, but not limited to, any reasonable
attorneys' fees incurred by Escrow Agent in any such action.
9. Indemnification. The Issuer acknowledges that Escrow Agent is
--------------- acting hereunder solely as a convenience to the
Issuer. The Issuer hereby agrees to indemnify Escrow Agent and hold it
harmless from any and all claims, liabilities, losses, actions, suits or
proceedings at law or in equity, or any other expense, fees, or charges of
any character or nature, which it may incur or with which it may be
threatened by reason of its acting as escrow agent under this Agreement;
and in connection therewith, to indemnify Escrow Agent against any and
all expenses, including attorneys' fees and the cost of defending any
action, suit or proceeding or resisting any claim.
10. Right To Counsel. Escrow Agent may consult with counsel of
----------------- its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such
counsel. Escrow Agent shall otherwise not be liable for any mistakes of
fact or errors of judgment, or for any acts or omissions of any kind
unless caused by its willful misconduct or gross negligence.
11. Compensation. Any services performed by Escrow Agent as
------------- the escrow agent under this Agreement shall be paid
for by the Issuer at Escrow Agent's usual and customary rates for its
services. Provided, however, that in the event a dispute arises
hereunder, any services performed by Escrow Agent as the escrow agent
in connection with said dispute shall be paid for as the parties may agree
or as awarded by a court or arbitrator of competent jurisdiction.
12. Resignation. Escrow Agent may resign at any time upon the
------------ giving of ten (10) days written notice to the Issuer.
Thereupon, the Investor Funds may be transferred from Escrow Agent to
a successor Escrow Agent, providing the successor Escrow Agent shall
be qualified to serve as such. If a successor Escrow Agent is not
appointed by the Issuer within ten (10) days after notice of resignation,
Escrow Agent may petition any court of competent jurisdiction to name
a successor Escrow Agent; and Escrow Agent herein shall be fully
relieved of all liability under this Agreement to any and all parties, upon
the transfer of the Investor Checks to the successor Escrow Agent either
designated by the parties or appointed by the court.
Notices. All notices, requests, demands and other communications
------- under this Agreement to a party hereto shall be in writing and
shall be deemed to have been duly given when delivered by registered or
certified mail, return receipt requested, postage prepaid, or
hand-delivered personally addressed to such party, or by telecopier, to
the following:
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To Issuer: Covenant EcoNet, Inc.
00 Xxxxxxxxx Xxxxx, XX
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
To Escrow Agent: Law Firm of Xxxxxx-Xxxxxxx, P.C.
0000 X Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx Xxxxxx-Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Any party may change the address to which notices and other
communications are to be directed to it or him by giving notice of such
change to the other parties in the manner provided in this subsection.
13 Governing Law And Venue. This Agreement shall in all
----------------------- respects be subject to and governed by the
internal laws of the District of Columbia without regard to principles of
choice of laws, conflict of laws or comity. The parties agree that any
action brought to enforce, set aside or interpret this Agreement shall be
in the District of Columbia.
14. Parties Bound And Benefited. The rights created by this
--------------------------- Agreement shall inure to the benefit
of, and the obligations created hereby shall be binding upon, the
respective legal representatives, successors and assigns of the Issuer and
Escrow Agent. No other person shall have any rights under this
Agreement, whether as a third party beneficiary or otherwise, unless
consented to in writing by all parties to this Agreement.
15. Entire Agreement, Amendments And Waivers. This
---------------------------------------- Agreement contains the
entire agreement among the parties pertaining to the subject matter
hereof and supersedes all prior and contemporaneous agreements,
negotiations, discussions, arrangements or understandings with respect
thereto. No amendment, supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party
against which the same is to be enforced. No waiver of any of the
provisions of this Agreement shall constitute a waiver of any other
provision hereof, nor shall any such waiver constitute a continuing
waiver unless otherwise expressly provided.
16. Headings. The section headings contained in this Agreement
--------- are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
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17. No Construction Against Drafter. The parties hereto hereby
-------------------------------- acknowledge and agree that this
Agreement has been fully negotiated by all parties with advice of
counsel and therefore shall not be more strictly construed against any
party.
18. Severability. In the event any clause or provision of this
------------- Agreement is held to be illegal, invalid or
unenforceable under present or future laws effective during the term
hereof, then and in that event, it is the intention of the parties hereto that
the remainder of this Agreement shall not be affected thereby; and it is
also the intention of the parties to this Agreement that in lieu of each
clause or provision of this Agreement that is held to be illegal, invalid or
unenforceable, there shall be added as a part of this Agreement a legal,
valid and enforceable clause or provision as similar in terms of such
illegal, invalid or unenforceable clause or provision as may be possible.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
ESCROW AGENT:
LAW FIRM OF XXXXXX-XXXXXXX, P.C.
By: /S/
--------------------------------
Xxxxx Xxxxxx-Xxxxxxx, Esq.
Principal
THE ISSUER:
Covenant EcoNet, Inc.
A Nevada corporation
By: /S/
--------------------------------
Xxxxxx X. Xxxxx
President and Chairman
and
By: /S/
--------------------------------
Xxxxxx X. Xxxxx
By: /S/
Secretary and Treasurer
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