April 24, 2007
April
24,
2007
XxXxxxxxxx
& Xxxxx, LLP
000
Xxxxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
Gentlemen:
Each
of
the undersigned hereby request that you act as escrow agent (the “Escrow
Agent”)
in
connection with the Waiver, Rescission and Settlement Agreement the
(“Settlement
Agreement”)
dated
the date hereof by and between the undersigned (the “Investors”)
and
Spatialight, Inc., a New York corporation (“SpatiaLight”).
Except as otherwise specifically provided herein, the obligations of the
Investors hereunder shall be several and not joint. Unless otherwise defined
herein, the capitalized terms utilized herein shall have the meanings ascribed
to such terms in the Settlement Agreement.
As
used
in this Escrow Agreement, the following terms have the meanings set forth
below:
“Common
Shares” means the common stock, $.01 par value per share, of
SpatiaLight.
“Remaining
Settlement Liability” means, on any date, the difference between the Settlement
Amount (as set forth in the Settlement Agreement) and the gross proceeds
received as of that date by an Investor from the sale of Common Shares
originally acquired by an Investor pursuant to the November 2006 Financing,
the
February 2007 Financing, or the February 2007 Wavier.
“VWAP”
means, on any date, the five day volume weighted average price of the Common
Shares for transactions on the NASDAQ Stock Market if the Common Shares are
then
trading on the NASDAQ Stock Market or the OTC Bulletin Board if the Common
Shares are not then traded on the NASDAQ Stock Market but are traded on the
OTC
Bulletin Board for the five (5) trading days immediately preceding such date,
or
if the Common Shares are not then traded on the NASDAQ Stock Market or the
OTC
Bulletin Board, the most recent bid price for the Common Shares as reported
by
the Pink Sheets, LLC.
Each
Investor and SpatiaLight will deliver to the Escrow Agent and the Escrow Agent
is hereby authorized and directed to receive and hold the following Common
Shares (the “Escrow
Shares”)
and to
distribute the Escrow Shares as set forth in this Escrow Agreement:
a.
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On
the date of this Escrow Agreement, each Investor has delivered to
Escrow
Agent a certificate or certificates in the name of such Investor
representing the number of Common Shares set forth on Exhibit A (the
“Investor
Contributed Shares”),
representing all of the Common Shares acquired by such Investor pursuant
to the November 2006 Financing, the February 2007 Financing or the
February 2007 Waiver that have not previously been sold by such Investor
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XxXxxxxxxx
& Xxxxx, LLP
April
24,
2007
Page
2
b.
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On
the date of this Escrow Agreement, SpatiaLight has delivered to the
Escrow
Agent a certificate or certificates in the name of each Investor
representing the number of Common Shares (the “Initial
SpatiaLight Contributed Shares”)
equal to the difference between (i) the Remaining Settlement Liability
with respect to each Investor, divided
by
the VWAP on the date of this Escrow Agreement, and (ii) the Investor
Contributed Shares from such Investor.
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c.
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If
at the end of any calendar month during the term of the Escrow Agreement,
the number of Escrow Shares (excluding for the purposes of this
computation, the Escrow Shares that are then saleable pursuant to
an
effective registration statement or Rule 144(k)) multiplied
by
the VWAP on that date is less than the greater of (i) $300,000 or
(ii) 50%
of the Remaining Settlement Liability for any Investor, SpatiaLight
will
deliver to the Escrow Agent a certificate or certificates in the
name of
such Investor representing the number of Common Shares (the “Additional
SpatiaLight Contributed Shares”)
necessary so that the total number of Escrow Shares plus the number
of
previously distributed Escrow Shares then held by such Investor shall
be
equal to the Remaining Settlement Liability for such Investor,
divided
by the
VWAP on such date; provided,
however, that
SpatiaLight shall not have any obligation under this paragraph to
issue
Additional SpatiaLight Contributed Shares in excess of the number
of
authorized and unissued and unreserved Common Shares on the date
of the
issuance.
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d.
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The
number of Investor Contributed Shares, SpatiaLight Contributed Shares
and
Remaining Settlement Liability, as of the date hereof, for each Investor
is set forth on Exhibit A.
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e.
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The
certificates under paragraphs b and c above shall be in denominations
of
200,000 shares unless a certificate for a lesser denomination is
required
to be delivered in order for the correct number of Escrow Shares
to be
held in escrow pursuant to this Escrow Agreement.
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It
is a
condition of this Escrow Agreement that the Escrow Shares shall be held and
delivered according to the following terms:
1. (a)
From
time to time after the date of this Escrow Agreement, within three (3) business
days (four (4) business days commencing after the delivery of the Remaining
Settlement Liability Notice, as described below) after written notice from
an
Investor to SpatiaLight and the Escrow Agent (each, a “Distribution
Notice”),
the
Escrow Agent shall deliver a certificate or certificate(s) to or at the
direction of such Investor for the number of Escrow Shares specified in the
Distribution Notice; provided
however, that
an
Investor shall not be entitled to request and the Escrow Agent shall not deliver
to an Investor Common Shares with an aggregate value (based on the VWAP on
the
date of the Distribution Notice and the number of shares requested) in excess
of
the Remaining Settlement Liability, except as described in paragraph (b) below
or which, when added to all other Common Shares then owned by such Investor
would exceed 9.99% of the total Common Shares then outstanding. Each
Distribution Notice shall state: (i) the number of Common Shares then
outstanding based upon the SEC Documents and the number of shares issued
pursuant to this Escrow Agreement and the Equity Credit Agreement since the
last
SEC Document; (ii) the number of previously delivered Escrow Shares then
beneficially owned by such Investor and all its affiliates and a certification
that after the distribution the Investor will not beneficially own more than
9.99% of the total outstanding Common Stock; (iii) an accounting of all sales
of
Common Shares by such Investor and all of its affiliates (including transaction
confirmations and monthly statements) since the date of this Agreement or the
date of the last Distribution Notice if later; (iv) the number of Escrow Shares
to be distributed and the date of the proposed distribution; and (v) the
Remaining Settlement Liability as of the date of the notice, showing the
computation of the same. The Escrow Agent may conclusively rely on the
Distribution Notice and shall have no duty of investigation in connection
therewith.
XxXxxxxxxx
& Xxxxx, LLP
April
24,
2007
Page
3
(b)
Each
Distribution Notice, shall be in the form annexed hereto as Exhibit B and shall
be for a minimum of the lesser of (i) 200,000 shares or (ii) the Maximum Share
Distribution set forth on Exhibit A with respect to the Investor submitting
such
Distribution Notice; provided
however
in the
event that the Remaining Settlement Liability is less than the product of the
lesser of the two forgoing amounts and the VWAP, then the Distribution Notice
may be for such lesser number of shares. In the event that the Escrow Agent
holds certificates in denominations in excess of the amount set forth in the
Distribution Notice, then the Escrow Agent may deliver a certificate for shares
in excess of the amount set forth in the Distribution Notice and the Investor
shall promptly deliver a certificate for such excess to
SpatiaLight.
(c)
In
the event that the number of Escrow Shares then held by the Escrow Agent is
less
than the number of shares set forth in the Distribution Notice, then the Escrow
Agent shall deliver to the Investor the number of Escrow Shares, then held
in
escrow by the Escrow Agent. The Escrow Agent shall not deliver the Investor
Contributed Shares to an Investor pursuant to this paragraph until such time
as
such shares are eligible for resale pursuant to Rule 144(k) or an effective
registration statement.
(d)
If at
the end of any calendar month during the term of the Escrow Agreement, the
number of Escrow Shares then held by the Escrow Agent plus the number of Escrow
Shares previously distributed to each Investor that remain in the possession
of
such Investors multiplied
by
the
VWAP on that date is greater than 150% of the Remaining Settlement Liability,
then within five (5) Trading Days of the receipt of written notice (the
“Excess
Share Notice”),
as
described below, and provided that the Escrow Agent has not received a written
objection thereto by the applicable Investor, the Escrow Agent shall deliver
to
SpatiaLight a certificate or certificates in the name of such Investor
representing the number of Common Shares necessary so that the total number
of
Escrow Shares that do not bear a restrictive legend then held by the Escrow
Agent plus the number of previously distributed Escrow Shares then held by
such
Investor shall be equal to the Remaining Settlement Liability for such Investor,
divided
by the
VWAP
on such date (the “Excess
Shares”).
The
Excess Share Notice shall contain the calculation of Excess Shares set forth
in
this Section 1(d) and shall be sent by SpatiaLight to the Investor and the
Escrow Agent. In the event of an objection by an Investor within three (3)
Trading Days of the receipt of the Excess Share Notice, the Escrow Agent shall
continue to hold the number of disputed Excess Shares and shall return to
SpatiaLight the number of undisputed Excess Shares. In the event that the
certificates held by the Escrow Agent are not in the exact denomination of
the
number of Excess Shares, then the Escrow Agent shall deliver to SpatiaLight
an
approximate the number of Excess Shares and SpatiaLight shall cause the Transfer
Agent to deliver to the Escrow Agent certificates in smaller denominations
such
that the Escrow Agent can deliver to SpatiaLight the appropriate number of
Excess Shares.
XxXxxxxxxx
& Xxxxx, LLP
April
24,
2007
Page
4
2. At
anytime after the Remaining Settlement Liability for an Investor is less than
$200,000, SpatiaLight may send to the Escrow Agent a notice (the “Remaining
Settlement Liability
Notice”).
The
Remaining Settlement Liability Notice shall contain instructions to the Escrow
Agent not to release Escrow Shares until the third (3rd)
business day following the Escrow Agent’s receipt of the Remaining Settlement
Liability Notice. Following the delivery of the Remaining Settlement Liability
Notice, if SpatiaLight does not provide the Escrow Agent with written objection
to any proposed distribution as set forth in a Distribution Notice, within
two
(2) business days of receiving the Distribution Notice, the Escrow Agent shall
distribute Escrow Shares to an Investor in the amount and on the date set forth
in the Distribution Notice. If SpatiaLight provides the Escrow Agent with a
written objection to the distribution of Escrow Shares, within two (2) business
days of receiving the Distribution Notice, the Escrow Agent shall not make
any
distribution of Escrow Shares (or shall make a distribution of such lesser
amount that SpatiaLight indicates would not be objectionable) and the dispute
shall be resolved in accordance with paragraph 12 below.
3. Notwithstanding
any other provision of this Escrow Agreement, except in the event of a default
by SpatiaLight under this Escrow Agreement or the Settlement Agreement, no
Investor shall submit to the Escrow Agent a Distribution Notice relating to
a
number of Escrow Shares in excess of the amount which, when added to all
previous Escrow Shares distributed pursuant to this Escrow Agreement that are
then beneficially owned by such Investor, would exceed the Maximum Share
Distribution set forth on Exhibit A with respect to such Investor.
4. Except
as
expressly set forth in this Escrow Agreement, the Escrow Agent shall disregard
any and all instructions and warnings given by any of the parties hereto or
by
any other person or corporation, excepting only orders or process of courts
of
law, and is 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, the Escrow Agent shall not be liable to any of the parties
hereto or to any other person, firm or corporation by reason of such decree
being subsequently reversed, modified, annulled, set aside, vacated or found
to
have been entered without jurisdiction.
5. The
Escrow Agent shall be obligated only for the performance of such duties as
are
specifically set forth herein and may rely upon and shall be protected in
relying upon or refraining from acting upon any instrument reasonably believed
by the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be liable in any respect
on
account of the identity, authorities or rights of the parties executing or
delivering or purporting to execute or deliver any documents or papers deposited
or called for hereunder. The Escrow Agent shall not be personally liable for
any
act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while
acting in good faith, except for fraud or willful misconduct and any act done
or
omitted by the Escrow Agent pursuant to the advice of the Escrow
Agent=s
attorney shall be evidence of such good faith; provided
that, such
attorney is not a member or affiliate of the Escrow Agent. Any expense of the
Escrow Agent in connection with obtaining any such advice shall be paid by
SpatiaLight and the Investors, jointly and severally.
XxXxxxxxxx
& Xxxxx, LLP
April
24,
2007
Page
5
6. In
the
event of a dispute regarding the distribution of the Escrow Shares, the Escrow
Agent shall be entitled to employ such legal counsel and other experts as the
Escrow Agent may deem necessary to properly advise the Escrow Agent in
connection with the Escrow Agent=s
duties
hereunder, may rely upon the advice of such counsel, and may pay such counsel
reasonable compensation therefor.
7. The
Escrow Agent=s
duties
hereunder may be altered, amended, modified or revoked only by a writing signed
by each of the parties hereto and the Escrow Agent.
8. This
Escrow Agreement shall terminate and the Escrow Agent shall deliver to
SpatiaLight’s transfer agent any Escrow Shares then in the possession of the
Escrow Agent and the Investor shall deliver to SpatiaLight any previously
distributed Escrow Shares in Investor’s possession upon the acknowledgement by
an Investor or the entry of an order, decree, judgment or other determination
by
a court or other judicial body with jurisdiction over the parties that the
Remaining Settlement Liability is zero. Upon delivery of such remaining Escrow
Shares to SpatiaLight, the Escrow Agent’s responsibilities hereunder shall
terminate.
9.
This
Escrow Agreement shall terminate and the Escrow Agent shall deliver to
SpatiaLight’s transfer agent any Escrow Shares then in the possession of the
Escrow Agent if SpatiaLight (a) makes an assignment for the benefit of
creditors; (b) files a voluntary bankruptcy petition; (c) becomes the subject
of
an order for relief or is declared insolvent in any federal or state bankruptcy
or insolvency proceedings; (d) files a petition or answer seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, termination, or similar relief under any law; (e) files an answer
or other pleading admitting or fails to contest the material allegations of
a
petition filed against it in a proceeding of the type described in clauses
(a)
through (d); (e) seeks, consents to, or acquiesces in the appointment of a
trustee, receiver, or liquidator of all or any substantial part of its
properties; or (f) has commenced against it a proceeding seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any law and one hundred twenty (120) days have expired without
dismissal thereof or with respect to which, without SpatiaLight's consent or
acquiescence, a trustee, receiver, or liquidator of all or any substantial
part
of its properties has been appointed and ninety (90) days have expired without
the appointment's having been vacated or stayed, or ninety (90) days have
expired after the date of expiration of a stay, if the appointment has not
previously been vacated.
10. The
Escrow Agent may resign, with respect to any individual Investor, by written
notice to such Investor and SpatiaLight. In the event of any such resignation,
such Investor and SpatiaLight shall appoint a successor escrow agent with
respect to such Investor and shall notify the Escrow Agent of such appointment.
Upon receipt of the notice of appointment of a successor escrow agent, the
Escrow Agent shall promptly deliver to such successor escrow agent all Escrow
Shares relating to such Investor, whereupon the Escrow Agent=s
responsibilities hereunder shall terminate with respect to such
Investor.
XxXxxxxxxx
& Xxxxx, LLP
April
24,
2007
Page
6
11. If
the
Escrow Agent reasonably requires other or further instruments in connection
with
this Escrow Agreement or obligations in respect hereto, the necessary parties
hereto shall join in furnishing such instruments.
12. If
any
dispute arises with respect to the delivery and/or ownership or right of
possession of the Escrow Shares or in the event that the Escrow Agent resigns
and a successor escrow agent is not appointed within five (5) days after written
notice, the Escrow Agent is authorized and directed in the Escrow
Agent=s
sole
discretion (a) to retain in the Escrow Agent=s
possession without liability to anyone, all or any part of said Escrow Shares
until (i) a successor escrow agent is appointed or (ii) such disputes shall
have
been settled either by mutual written agreement of the parties concerned or
by a
final order, decree or judgment of a court of competent jurisdiction after
the
time for appeal has expired and no appeal has been perfected, but the Escrow
Agent shall be under no duty whatsoever to institute or defend any such
proceedings, as the case may be or (b) to deliver the Escrow Shares to a state
or federal court having competent subject matter jurisdiction and located in
the
State and City of New York in accordance with the applicable procedure therefor
and interplead the parties to determine to whom the disputed Escrow Shares
should be delivered, whereupon the Escrow Agent shall have no further obligation
with respect to such Escrow Shares.
13. Each
of
the parties hereto agree jointly and severally to indemnify and hold harmless
the Escrow Agent from any and all claims, liabilities, costs or expenses in
any
way arising from or relating to the duties or performance of the Escrow Agent
hereunder other than any such claim, liability, cost or expense to the extent
same shall have been determined by final, unappealable judgment of a court
of
competent jurisdiction to have resulted from fraud, gross negligence or willful
misconduct of the Escrow Agent.
14. Notwithstanding
anything contained herein to the contrary, the parties acknowledge that the
Escrow Agent is counsel for one of the Investors and nothing herein contained
shall affect or impair the Escrow Agent’s ability to act as counsel for any of
the Investors in connection with any dispute with SpatiaLight in connection
with
the transactions contemplated hereby or otherwise.
15. Any
notice required or permitted hereunder shall be given in writing.
16. By
signing this Escrow Agreement, the Escrow Agent does not become a party to
any
other agreement.
17. This
instrument shall be binding upon and inure to the benefit of the parties hereto,
and their respective successors and permitted assigns and shall be governed
by
the laws of the State of New York without giving effect to principles governing
the conflicts of laws. A facsimile transmission of these instructions or a
Distribution Notice, which may be signed in counterpart, shall be legal and
binding on all parties hereto.
XxXxxxxxxx
& Xxxxx, LLP
April
24,
2007
Page
7
18. Any
reference to the number of shares or the VWAP for the Common Shares in this
Agreement shall be adjusted from time to time as necessary to reflect the effect
of any stock splits, stock dividends, reverse splits, combinations, exchanges,
or other similar transactions.
19. In
connection with the Escrow Agent’s performance of services hereunder, the Escrow
Agent shall receive an escrow fee in an amount equal to the product of: (i)
0.5%
and (ii) the proceeds from the sale of Escrow Shares distributed during each
month. The escrow fee shall be payable monthly by SpatiaLight and the failure
of
SpatiaLight to pay the invoice, which failure shall continue for a period of
thirty (30) days after the payment is due, the Escrow Agent may recover the
full
amount of such fee from SpatiaLight.
SPATIALIGHT:
By:
Xxxxx X. Xxxxxx
Name:
Xxxxx X. Xxxxxx
Title:
CEO
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XxXxxxxxxx
& Xxxxx, LLP
April
24,
2007
Page
8
INVESTORS:
SOUTHRIDGE
PARTNERS LP
By:
/s/ Xxxxx Xxxxx
Name:
Xxxxx Xxxxx
Title:
Address:
Southridge Partners LP
00
Xxxxx Xxxxxx
Xxxxxxxxxx,
XX 00000
SOUTHSHORE
CAPITAL FUND LTD.
By:
/s/ Xxxxx Xxxx
Name:
Xxxxx Xxxx
Title:
Address:
Southshore Capital Fund Ltd.
Xxxxxxx
Xxxxx, 0xx
Xxxxx
Xxxxxxxxxx
Xxxxx
P.O.
Box 972
Road
Town, Tortola
BVI
XXXXXX
DIVERSIFIED STRATEGY
MASTER
FUND, LLC, ENA
By:
/s/ Xxxxxxx X' Xxxx
Name:
Xxxxxxx X' Xxxx
Title:
Address:
Enable Capital Management
Xxx
Xxxxx Xxxxxxxx, Xxxxx 000
Xxx
Xxxxxxxxx, XX 00000
ENABLE
OPPORTUNITY PARTNERS LP
By:
Xxxxxxx X' Xxxx
Name:
Xxxxxxx X' Xxxx
Title:
Address:
Enable Capital Management
Xxx
Xxxxx Xxxxxxxx, Xxxxx 000
Xxx
Xxxxxxxxx, XX 00000
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XxXxxxxxxx
& Xxxxx, LLP
April
24,
2007
Page
9
ENABLE
GROWTH PARTNERS LP
By:
/s/ Xxxxxxx X' Xxxx
Name:
Xxxxxxx X' Xxxx
Title:
Address:
Enable Capital Management
Xxx
Xxxxx Xxxxxxxx, Xxxxx 000
Xxx
Xxxxxxxxx, XX 00000
IROQUOIS
MASTER FUND LTD.
By:
/s/ Xxxxxx Xxxxxxxxx
Name:
Xxxxxx Xxxxxxxxx
Title:
Address:
Iroquois Master Fund Ltd.
000
Xxxxxxxxx Xxxxxx,
00xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
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ACCEPTED
BY:
ESCROW
AGENT
XXXXXXXXXX
& XXXXX, LLP
By:
_________________________________
Name:
Title:
EXHIBIT
A
NUMBER
OF CONTRIBUTED SHARES AND
REMAINING
LIABILITY
Investor
|
Investor
Contributed Shares
|
SpatiaLight
Contributed Shares
|
Remaining
Settlement Liability
|
Maximum
Share
Distribution
|
Southridge
Partners LP
|
1,521,361
|
2,194,388
|
$1,523,457
|
375,000
|
Southshore
Capital Fund Ltd.
|
213,787
|
1,025,030
|
$507,915
|
125,000
|
Xxxxxx
Diversified Strategy Master Fund, LLC, ENA
|
73,358
|
111,369
|
$75,738
|
25,000
|
Enable
Opportunity Partners LP
|
146,716
|
222,740
|
$151,477
|
50,000
|
Enable
Growth Partners LP
|
1,247,085
|
1,893,291
|
$1,287,554
|
425,000
|
Iroquois
Master Fund Ltd.
|
800,000
|
1,171,090
|
$808,147
|
500,000
|
EXHIBIT
B
FORM
OF DISTRIBUTION NOTICE
Pursuant
to Paragraph 1 of that certain Escrow Agreement by and among the undersigned,
SpatiaLight, Inc., a New York corporation (“SpatiaLight”), and XxXxxxxxxx &
Xxxxx as escrow agent, the undersigned hereby requests the distribution of
________________ (the “Distribution Amount”) shares of SpatiaLight common stock,
$.01 par value per share (the “Common Shares”) on ______________,
20__.
Number
of Common Shares Outstanding
|
__________________
|
Number
of Common Shares Issued Since Last SEC Report
|
__________________
|
Total
Common Shares Outstanding
|
__________________
|
Previously
Delivered Common Shares Presently Owned
|
__________________
|
Shares
to be Issued under this Distribution Notice
|
__________________
|
Other
Shares Owned
|
__________________
|
Total
|
__________________
|
Initial
Settlement Liability
|
$__________________
|
Proceeds
from Sale of Common Shares
|
$__________________
|
Remaining
Settlement Liability
|
$__________________
|
The
undersigned represents and warrants that the number of Common Shares presently
owned plus the Distribution Amount will be less than 9.99% of the outstanding
Common Shares as of the date hereof. In addition, the undersigned represents
and
warrants that the aggregate VWAP of the Distribution Amount is less than the
Remaining Settlement Liability.
INVESTOR:
___________________________________
By:
________________________________
Name:
Title:
|