ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of November 22,
1998, by and among Accord Advanced Technologies, Inc., a Nevada corporation (the
"Company"), Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP (the "Escrow Agent") and the
parties who have executed this Agreement as the Purchaser (individually, the
"Purchaser" and collectively, the "Purchasers").
RECITALS
A. Simultaneously with the execution of this Agreement, the
Purchasers have entered into a Convertible Debenture Purchase Agreement, dated
as of the date hereof (the "Purchase Agreement"), pursuant to which the
Purchasers have agreed to purchase certain debentures (the "Debentures") of the
Company.
B. The Escrow Agent is willing to act as escrow agent pursuant
to the terms of this Agreement with respect to the Purchase Price (as defined in
the Purchase Agreement) to be paid for the Debentures and the delivery of one or
more debentures representing the Debentures registered in the names of the
Purchasers as set forth in the Purchase Agreement (the "Debentures" and,
together with the Ancillary Closing Documents (as defined below), of one or more
warrants representing the Warrants registered in the name of GEM Management Ltd.
or its assigns as set forth in the Purchase Agreement (the "Warrants") and with
respect to shares to be issued by the Company in respect of conversion of the
Debentures or the exercise of the Warrants, (collectively, the "Consideration")
C. Upon the closing of the transaction contemplated by the
Purchase Agreement (the "Closing") and the occurrence of an event described in
Section 2 below, the Escrow Agent shall cause the distribution of the Purchase
Price, Ancillary Closing Documents, the Debentures and the Warrants in
accordance with the terms of this Agreement.
D. All capitalized terms used but not defined herein shall
have the meanings ascribed thereto in the Purchase Agreement.
NOW, THEREFORE, IT IS AGREED:
1. DEPOSIT OF CONSIDERATION. (a) The Purchasers shall deposit with the Escrow
Agent a copy of the Purchase Agreement, and this Escrow Agreement or a
counterpart thereof, each executed by the Purchasers, and the Purchase Price.
The Company shall deliver to the Escrow Agent (i) the Purchase Agreement or a
counterpart thereof signed by the Company, (ii) this Escrow Agreement or a
counterpart thereof signed by the Company, (iii) certificates (in denominations
of no more than 25,000 and free of any restrictive legends) registered in the
names of the Purchasers representing a number of common shares of the Company
equal to 1,700,000, held for the purpose of honoring conversions by the
Purchasers of the Debentures (the "Debenture Escrow Shares"), rounded up to
the nearest 25,000 shares, (iv) the Debentures, registered in the names of the
Purchasers, (v) Common Stock Purchase Warrants, for the purchase of 200,000
shares, registered in the name of GEM Management, Ltd. or its assigns, (vi)
stock certificates (in denominations of no more than 25,000, free of any
restrictive legends) registered in the name of Gem Management, Ltd. or its
assigns representing a number of common shares of the Company equal to 200,000
held for the purpose of honoring the exercise of the Common Stock Purchase
Warrants, upon the completion of the purchase of $530,000 of Debentures (the
Warrant Escrow Shares") (the Debenture Escrow Shares and the Warrant Escrow
Shares collectively, the "Escrow Shares"), and (vii) wiring instructions for
transfer of the Purchase Price by the Escrow Agent into an account specified by
the Company for such purpose. In addition, the Company shall deposit or cause to
be deposited with the Escrow Agent an opinion of the Company's counsel addressed
to the Purchasers in the form of Exhibit D attached to the Purchase Agreement,
the executed power of attorney in the form of Exhibit F attached to the Purchase
Agreement and the schedules to the Purchase Agreement (such opinion and
schedules being hereinafter referred to as the "Ancillary Closing Documents").
(i) The Purchase Price shall be delivered by the
Purchasers to the Escrow Agent by wire transfer to the following account:
Bank of New York
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 100 17
ABABA 021000018
Xxxxxx Gottbetter & Xxxxxxxx, LLP
Acct# 0000000000
Reference: XXXX
(11) The Debentures, Warrants and Escrow Shares and
Ancillary Closing Documents shall be delivered by the Company to the Escrow
Agent at its address for notice indicated in Section 6(a)(ii).
(b) Until termination of this Agreement as set forth in
Section 2, all additional amounts of the Purchase Price paid by or which becomes
payable between the Company and the Purchasers shall be deposited with the
Escrow Agent.
(c) The Escrow Agent agrees to hold the Consideration received
by it in accordance with the terms and conditions set forth herein until it has
received all of the consideration;
(d) The Purchasers and the Company understand that the
Purchase Price delivered to the Escrow Agent pursuant to Section I (a) shall be
held in escrow in a non-interest bearing XXXX account until the Closing. The
Purchase Price will be returned promptly to the Purchasers if all of the
Consideration is not received on or before November 30, 1998. After all of
2
the Consideration has been received by the Escrow Agent, the parties hereto
hereby authorize and instruct the Escrow Agent to promptly effect the Closing.
2. TERMS OF ESCROW.
(a) The Escrow Agent shall hold the Consideration in escrow
until the earlier to occur of (1) the receipt by the Escrow Agent of the total
amount of the Purchase Price from the Purchaser or (ii) the receipt by the
Escrow Agent of a notice, executed by each of the Company and the Purchaser,
stating that the Purchase Agreement has been terminated or otherwise directing
the disposition of the Consideration.
(b) If the Escrow Agent receives the items referenced in
clause (i) of Section 2(a) prior to its receipt of the notice referenced in
clause (ii) of Section 2(a), then, the Escrow Agent shall deliver as soon as
practicable, but in no event later than three (3) business days, the Debentures,
Warrants and the Ancillary Closing Documents executed by the Company to the
Purchasers or the holders of the Warrants (the "Warrant Holders") and shall
deliver immediately to the Company the Purchase Price.
(c) If the Escrow Agent receives the notice referenced in
clause (11) of Section 2(a) prior to its receipt of the items referenced in
clause (1) of Section 2(a), then the Escrow Agent shall promptly deliver the
Purchase Price, Debentures, Warrants and Ancillary Closing Documents as
specified in such notice. The parties agree that if such notice is silent as to
the delivery of such items, the Escrow Agent shall promptly upon receipt of such
notice return (i) the Purchase Price to the Purchasers, (ii) the Debentures and
Warrants to the Company and (ill) the Ancillary Closing Documents to the party
that delivered the same.
(d) If the Escrow Agent, prior to delivering or causing to be
delivered the Consideration in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold the Consideration
until such time as the Escrow Agent shall receive (1) written instructions
jointly executed by the Purchasers and the Company, directing distribution of
such Consideration, or (11) a certified copy of a judgment, order or decree of a
court of competent jurisdiction, final beyond the right of appeal, directing the
Escrow Agent to distribute said Consideration to any party hereto or as such
judgment, order or decree shall otherwise specify (including any such order
directing the Escrow Agent to deposit the Consideration into the court rendering
such order, pending determination of any dispute between any of the parties). In
addition, the Escrow Agent shall have the right to deposit any of the
Consideration with a court of competent jurisdiction without liability to any
party if said dispute is not resolved within 30 days of receipt of any such
notice of objection, dispute or otherwise.
(e) At any time, and from time to time during the term of this
Agreement, the Purchasers and/or the Warrant Holders may deliver to the Escrow
Agent written notice (a "Conversion Notice" or the "Notice of Exercise") that it
has elected to convert the Debentures
3
registered in the names of such Purchasers, in whole or in part, in accordance
with the terms of the Debentures (including, without limitation; giving the
required notice to the Company and tendering to the Company the Debenture(s) to
be converted), or that it has elected to exercise the Warrants registered in the
names of such Warrant Holder, in whole or in part, in accordance with the terms
of the Warrants (including, without limitation; giving the required notice to
the Company and tendering to the Company the Warrant(s) to be exercised), and
the Conversion Notice to be in the form annexed as Exhibit A hereto and the
Notice of Exercise to be in the form annexed as Exhibit B hereto. A fee of $350
shall accompany every Conversion Notice or Notice of Exercise delivered to the
Escrow Agent. A copy of the Conversion Notice or Notice of Exercise shall be
delivered by the Purchasers or the Warrant Holders, as the case may be, to the
Company and its counsel simultaneously, and evidence of such delivery to the
Company shall be provided to the Escrow Agent. The Conversion Notice or Exercise
Notice shall specify the number of Escrow Shares to be released by the Escrow
Agent. The Company shall confirm or object to the Escrow Agent the number of
Escrow Shares to be released, within two business day of the receipt of the
Conversion Notice or Notice of Exercise. If the Company falls to confirm or
object to the number of Escrow Shares to be released within the said time, then
the Company shall be deemed to have confirmed the number of Escrow Shares set
forth in the Purchasers' or Warrant Holders' Notice. In the event of a dispute,
the Parties agree that the Escrow Agent shall determine the number of Escrow
Shares to be released. The Escrow Agent shall be entitled but not obligated, at
his sole discretion, to verify the computation of the number of Escrow Shares to
be released through information provided by Bloomberg Information Service or
similar stock price quotation service. Within two business days, the Escrow
Agent will release from escrow and deliver to the Purchasers unlegended
certificates or instruments representing the number of Escrow Shares issuable to
the Purchasers or the Warrant Holders in accordance with such conversion or
exercise. In the event that the certificates evidencing the Escrow Shares held
by the Escrow Agent are not in denominations appropriate for such delivery to
the Purchasers or the Warrant Holders, the Escrow Agent shall request the
Company to cause its transfer agent and registrar to reissue certificates in
smaller denominations. The Escrow Agent shall, however, immediately release to
the Purchasers or the Warrant Holders certificates representing such lesser
number of shares as the denominations in his possession will allow that is
closest to but no more than the actual number to be released to the Purchasers
or the Warrant Holders. Upon his receipt of the reissued shares in lesser
denominations from the Company's transfer agent, the Escrow Agent shall release
to the Purchasers or the Warrant Holders, the balance of the shares due to the
Purchasers or the Warrant Holders.
(f) The Escrow Agent agrees to notify in writing the Company
and its counsel each time it releases Escrow Shares to the Purchasers (including
the certificate numbers) or the Warrant Holders. Until any such release and
notification to the Company, the Escrow Shares shall not be deemed to be validly
issued and outstanding shares of capital stock of the Company.
(g) The Company agrees that, at any time the conversion price
of the Debentures is such that the number of Debenture Escrow Shares is less
than 200% of the number that would be needed to satisfy full conversion of all
of the Debentures given the then current conversion price (the "Full Conversion
Shares") and upon five days written notice of such to the
4
Company by the Purchasers, it will issue additional share certificates, without
legend and in the names of the Purchasers, and deliver same to the Escrow Agent,
such that the new number of Debenture Escrow Shares is equal to 200% of the Full
Conversion Shares.
3. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.
(a) The parties hereto agree that the duties and obligations
of the Escrow Agent are only such as are herein specifically provided and no
other. The Escrow Agent's duties are as a depositary only, and the Escrow Agent
shall incur no liability whatsoever, except as a direct result of its willful
misconduct or gross negligence.
(b) The Escrow Agent may consult with counsel of its choice,
and shall not be liable for any action taken, suffered or omitted by it in
accordance with the advice of such counsel.
(c) The Escrow Agent shall not be bound in any way by the
terms of any other agreement to which the Purchasers and the Company are
parties, whether or not it has knowledge thereof, and the Escrow Agent shall not
in any way be required to determine whether or not any other agreement has been
complied with by the Purchasers and the Company, or any other party thereto. The
Escrow Agent shall not be bound by any modification, amendment, termination,
cancellation, rescission or supersession of this Agreement unless the same shall
be in writing and signed jointly by each of the Purchasers and the Company, and
agreed to in writing by the Escrow Agent.
(d) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, it shall
be entitled to refrain from taking any action, other than to keep safely all
property held in escrow, until it shall jointly be directed otherwise in writing
by the Purchasers and the Company or by a final judgment of a court of competent
jurisdiction.
(e) The Escrow Agent shall be fully protected in relying upon
any written notice, demand, certificate or document which it, in good faith,
believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder, or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement.
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal
proceedings which may be instituted against it or in respect of the
Consideration.
5
(g)If the Escrow Agent at any time, in its sole discretion,
deems it necessary or advisable to relinquish custody of the Consideration, it
may do so by delivering the same to any other escrow agent mutually agreeable to
the Purchasers and the Company and, if no such escrow agent shall be selected
within three days of the Escrow Agent's notification to the Purchasers and the
Company of its desire to so relinquish custody of the consideration, then the
Escrow Agent may do so by delivering the Consideration to the clerk or other
proper officer of a court of competent jurisdiction as may be permitted by law.
The fee of any court officer shall be borne by the Company. Upon such delivery,
the Escrow Agent shall be discharged from any and all responsibility or
liability with respect to the Consideration and the Company and the Purchasers
shall promptly pay to the Escrow Agent all monies which may be owed it for its
services hereunder, including, but not limited to, reimbursement of its
out-of-pocket expenses pursuant to paragraph (i) below.
(h) This Agreement shall not create any fiduciary duty on the
Escrow Agent's part to the Purchasers or the Company, nor disqualify the Escrow
Agent from representing either party hereto in any dispute with the other,
including any dispute wiht respect to the Consideration. The parties understand
that the Escrow Agent has acted and will continue to act as counsel to the
Company.
(i) The Escrow Agent represents that it is counsel to at least
on of the Purchasers. The parties agree that the Escrow Agent's engagement as
provided for herein is not and shall not be objectionable for any reason.
(j) Upon the performance of this Agreement, the Escrow Agent
shall be deemed released and discharged of any further obligations hereunder.
4. FEES, EXPENSES AND COMMISSIONS
(a) The Escrow Agent fee of $5,000, and all reasonable
out-of-pocket expenses paid or incurred by the Escrow Agent in the
administration of its duties hereunder, including, but not limited to, postage,
all outside counsel to the Escrow Agent and advisors' and agents' fees and all
taxes or other governmental charges, if any, shall be paid from the gross
proceeds from the sale of the Debentures held in escrow. The Escrow Agent shall
retain the sum of $300 from the gross proceeds from the sale of the Debentures
for out-of-pocket expenses, and the Company agrees to pay the Escrow Agent any
out-of-pocket expenses in excess of the $300, upon receipt of an invoice from
the Escrow Agent for such excess amount. The Escrow Agent is directed to pay
itself such Escrow Agent fee and out-of-pocket expenses in the amount of $300
from the escrow, at Closing. The Company is to receive prior written notice in
the event the Escrow Agent engages outside counsel.
6
(b) A management fee of an aggregate of six percent (6%) of
the gross proceeds from the sale of the Debentures, will be paid to GEM
Advisors, Inc. from the funds held in escrow.
(c) The document production fee of $5,000 pursuant to the
terms of the retainer agreement dated November 5, 1998 among Xxxxxx Xxxxxxxxxx &
Xxxxxxxx, LLP ("KGL"), the Company and GEM Advisors, Inc., will be paid to KGL
from the funds held in escrow.
5. INDEMNIFICATION.
(a) The Purchasers hereby indemnify and hold free and harmless
Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amounts paid in
settlement) resulting from claims asserted by the Company against Escrow Agent
with respect to the performance of any of the provisions of this Agreement.
(b) The Company hereby indemnifies and holds free and harmless
Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amount paid in
settlement) resulting from claims asserted by the Purchasers against Escrow
Agent with respect to the performance of any of the provisions of this
Agreement.
(c) The Purchasers and the Company, Jointly and severally,
hereby indemnify and hold the Escrow Agent harmless from and against any and all
losses, damages, taxes, liabilities and expenses that may be incurred by the
Escrow Agent, arising out of or in connection with its acceptance of appointment
as the Escrow Agent hereunder and/or the performance of its duties pursuant to
this Agreement, the Purchase Agreement, the Debentures and the Warrants,
including, but not limited to, all legal costs and expenses of the Escrow Agent
incurred defending itself against any claim or liability in connection with its
performance hereunder, provided that the Escrow Agent shall not be entitled to
any indemnity for any losses, damages, taxes, liabilities or expenses that
directly result from its willful misconduct or gross negligence.
6. MISCELLANEOUS.
(a) All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by telecopier, upon receipt of proof of sending thereof,
(111) if sent by Express Mail, Federal Express or other express delivery service
(receipt requested), the next business day or (iv) if mailed by first-class
registered or certified mail, return receipt requested, postage prepaid, upon
receipt, in each case if delivered to the following addresses:
7
(i) If to the Company: with a copy to:
Xxxxxx Xxxxxx Xxxxxxx Xxxxx, Esq.
President Xxxxxx Xxxxx LLP
Accord Advanced 00 Xxxx Xxxxxx
Technologies, Inc. 25th Floor
0000 Xxxxx Xxx Xxxxxx Xxx Xxxx, XX 00000
Xxxxx, XX 00000 Tel:(000) 000-0000
Tel:(000) 000-0000 Fax:(000) 000-0000
Fax:(000) 000-0000
(ii) If to the Purchaser:
At the address set forth in the Purchase Agreement
(iii) If to the Escrow Agent:
Xxxxxx Gottbetter & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
or at such other address as any of the parties to this Agreement may hereafter
designate in the manner set forth above to the others.
(b) This Agreement shall be construed and enforced in
accordance with the law of the State of New York applicable to contracts entered
into and performed entirely within New York.
(c) This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
8
7. TERMINATION OF ESCROW.
This Escrow Agreement shall begin upon the date hereof and
shall terminate either pursuant to Section 2(a) or (d) or upon the earlier of
(1) the conversion of the full amount of the Debentures and the exercise of the
total number of Warrants; or (11) the Maturity Date of the Debentures. Upon the
termination of the Escrow Agreement, the Escrow Agent shall return any
unconverted Debenture Escrow Shares or unexercised Warrant Escrow Shares to the
Company.
[ SIGNATURE PAGE FOLLOWS ]
9
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed the day and year first above written.
Escrow Agent: The Company:
Xxxxxx Gottbetter & Xxxxxxxx, LLP ACCORD ADVANCED TECHNOLOGIES, INC.
By: /s/ Xxxxxx Xxxxxx
-------------------------------- --------------------------------
Name: Xxxxxx Xxxxxx
Title: President
Purchasers:
By:
--------------------------------
Name:
Title:
10
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture No.
into shares of Common Stock, $.001 per share (the "Common Stock"), of Accord
Advanced Technologies, Inc. (the "Company") according to the conditions hereof,
as of the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. A fee of $350 will
be charged to the Holder for any conversion by the Escrow Agent. No other fees
will be charged to the Holder, except for such transfer taxes, if any.
Conversion calculations:
-----------------------------------------------------
Date to Effect Conversion
-----------------------------------------------------
Principal Amount of Debentures to be Converted
-----------------------------------------------------
Interest to be Converted or Paid (indicate Shares of
Cash)
-----------------------------------------------------
Applicable Conversion Price (to the nearest hundredth
-----------------------------------------------------
Signature
-----------------------------------------------------
Name
-----------------------------------------------------
Address
EXHIBIT B
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares of the
Common Stock $_ per value, of Accord Advanced Technologies, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name as is specified
below:
3. The undersigned represents it is acquiring the shares
solely for its own account and not with a view toward the resale or distribution
thereof except in compliance with applicable securities laws.
----------------------
(Signature)
---------------------
(Date)
