ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is entered into as of this
29th day September, 1997 between American Custom Components, Inc., a Nevada
corporation (the "COMPANY"), Generation Capital Associates (the "PURCHASER"),
and MRC Legal Services Corporation, as escrow agent (the "Escrow Agent"). The
COMPANY, PURCHASER, and the Escrow Agent shall from time to time be referred to
herein as the "Parties."
R E C I T A L S
A. The COMPANY has agreed to sell, and PURCHASER to purchase, a Convertible
Promissory Note or Notes (the "Notes") in the original aggregate principal
amount of up to $1,000,000.00, convertible by its terms into the common stock of
the COMPANY ("Common Stock") at such Conversion Percentage (as specified in the
Conversion Notice) of the greater of (i) 83% of the closing bid price of the
stock for the date immediately preceding the Effective Date of the Conversion
Notice (defined below) or (ii) $4.98, subject to adjustment, as further set
forth in the Note. Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Note and, in turn, the Conversion Notice attached
thereto and the terms and provisions of which are incorporated herein by
reference.
B. The COMPANY and PURCHASER have delivered to the Escrow Agent the Note or
Notes to be held, in escrow under the terms hereof.
C. As a condition to the Notes, the COMPANY has agreed to deposit with the
Escrow Agent 201,000 shares of Common Stock, subject to adjustment (the
"Conversion Shares"), for delivery to PURCHASER upon any partial or total
conversion of the Notes.
D. Escrow Agent has agreed to act as the escrow agent hereunder, in
accordance with the terms and conditions set forth in this Escrow Agreement
NOW THEREFORE, for and in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. RECITALS. The Recitals set forth above are true and correct and
incorporated herein by this reference.
2. APPOINTMENT OF ESCROW AGENT. The Parties hereby mutually appoint and
designate the Escrow Agent to receive, hold and release, as escrow agent the
Conversion Shares and the Escrow Agent hereby accepts such appointment and
designation.
3. ESCROW DELIVERY. Within three business days from the date of the
issuance and delivery to the Escrow Agent of the Note; the COMPANY shall deliver
or cause to be delivered certificates representing the Conversion Shares to the
Escrow Agent, in increments to enable Escrow Agent to meet its obligations
hereunder.
4. CONDITIONS OF ESCROW.
4.1. THE ESCROW DEPOSIT. Escrow Agent shall hold and release the
Conversion Shares as follows:
a. RELEASE FROM ESCROW. The Escrow Agent shall release and
distribute the Conversion Shares as follows:
i. To PURCHASER or COMPANY, as the case may be, pursuant to,
and upon receipt by Escrow Agent of, joint written
instructions executed by PURCHASER and the COMPANY; or
ii. To PURCHASER, not later than one business day after
receipt from PURCHASER of such notice via overnight
courier for next day delivery, such number of Conversion
Shares equal to such amount of the outstanding principal
of, and accrued but unpaid interest on, the Note, in
whole or in part, as specifically provided by PURCHASER
in a Notice of Conversion which complies with the terms
of, and the form of which is attached to, the Note, which
notice is delivered to the Escrow Agent at the time and
as further set forth in the Note, at a conversion price
set forth in the Note; provided that, the parties agree
that PURCHASER shall specify, and Escrow Agent shall
send, such number of additional Conversion Shares with
respect to the accrued interest converted under the Note
as necessary to round up to the nearest even multiple of
1000 (the "Excess Conversion Shares") and Purchaser shall
thereafter promptly send to the COMPANY such Excess
Conversion Shares. PURCHASER may continue to convert such
amounts outstanding under the Note until the maturity
thereof (as may be extended by PURCHASER in accordance
with the terms of the Note), resulting from the
conversion of all remaining principal amount of the Note;
Escrow Agent agrees to insert on the Principal Reduction
Grid such outstanding amounts converted and the
outstanding amount remaining under the Note in accordance
with the amounts so provided to Escrow Agent by PURCHASER
as reflected in each Conversion Notice, as further set
forth in the Note and deliver to Purchaser a copy of such
revised Principal Reduction Grid; Escrow Agent also
agrees as soon as reasonably practicable after receipt of
the Conversion Notice, the Escrow Agent will transmit by
facsimile a copy of such Conversion Notice; or
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iii. To the COMPANY, the balance of any remaining Conversion
Shares upon presentation of evidence satisfactory to the
Escrow Agent that (i) the principal amount of the Note as
well as any and all accrued but unpaid interest has been
fully convened or paid in cash by the Company, as the
case may be, pursuant to the terms thereof or (ii) the
Note has been repaid by the COMPANY to PURCHASER pursuant
to the terms thereof.
b. CONFLICTING INSTRUCTIONS. If a controversy arises between the
Parties concerning the release of the Conversion Shares
hereunder, they shall notify the Escrow Agent. In that event (or,
in the absence of such notification, if in the sole and exclusive
judgment of the Escrow Agent such controversy exists, including,
without limitation, a controversy concerning the Note or this
Escrow Agreement or the rights and obligations or the propriety
of any action contemplated by the Escrow Agent hereunder), the
Escrow Agent shall not be required to resolve such controversy or
take an action but may, in its sole discretion, be entitled to
await resolution of the controversy by joint instructions from
the Parties or by receipt of an order, decree, writ, judgment or
other paper from a court of competent jurisdiction directing
disposition of the Conversion Shares. Upon receipt of written
instructions from any of PURCHASER or the COMPANY, the Escrow
Agent may, in its sole discretion, also institute an interpleader
action in the Superior Court of Orange County, California (the
"Court") or in a federal court in the State of California. If a
suit is commenced against the Escrow Agent, it may answer by way
of interpleader and name, PURCHASER and COMPANY, as additional
parties to such action, and the Escrow Agent may tender the
Conversion Shares into such court for determination of the
respective rights, titles and interests of the PURCHASER and the
COMPANY. Upon such tender, the Escrow Agent shall be entitled to
receive from the Company its reasonable attorneys' fees and
expenses incurred in connection with said interpleader action or
in any related action or suit (including appeal). As between
PURCHASER and COMPANY, such fees, expenses and other sums shall
be paid by the party which fails to prevail in the proceedings
brought to determine the appropriate distribution of the
Conversion Shares. If and when the Escrow Agent shall so
interplead such Parties, or either of them, and deliver the
Conversion Shares to the clerk of such court, all of its duties
hereunder shall cease, and it shall have no further obligation in
this regard. Nothing herein shall prejudice any right or remedy
of the Escrow Agent. The exclusive venue for all actions under
this Escrow Agreement shall be Orange County, California.
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5. CONCERNING ESCROW AGENT.
5.1. ESCROW AGENT'S DUTIES.
a. ESCROW AGENT'S RIGHT TO RELY: DUTIES. The Escrow Agent may act
in reliance upon any writing or instrument or signature which it,
in its sole discretion, believes to be genuine, including
facsimile signatures; may assume the validity and accuracy of any
statements or assertions contained in such 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. The Escrow Agent shall
not be liable in any manner or otherwise be responsible to any
party to this Escrow Agreement, or to any other individual or
entity, including, without limitation, the COMPANY or PURCHASER,
(i) for the sufficiency or correctness as to form, manner of
execution, or validity of any written instructions delivered to
it, including without limitation, the number of Conversion Shares
specified by Purchaser in the Conversion Notice to be issued
pursuant to such request (for which the Parties expressly agree
Escrow Agent shall have no liability to such Parties), nor (ii)
as to the identity, authority, or rights of any person executing
the same, nor (iii) for the period of time, including without
limitation any delay which occurs as a result of the transfer
agent, to send and/or transfer to Purchaser certificates
representing Conversion Shares; provided that, Escrow Agent will
send such certificates to PURCHASER or the transfer agent, as the
case may be, no later than one business day after receipt from
PURCHASER of the Conversion Notice via overnight courier for next
day delivery as soon as reasonably practicable as stated
elsewhere herein. The 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 Escrow Agreement as
against the Escrow Agent. PURCHASER acknowledges that the Escrow
Agent has represented COMPANY and its affiliates on numerous
matters and by signing this Escrow Agreement below hereby
acknowledges and consents to the continued representation by the
Escrow Agent of COMPANY and its affiliates, including, if
necessary and without limitation, the Escrow Agent's
representation of COMPANY in connection with the Agreement, the
Notes and this Escrow Agreement.
b. INDEMNIFICATION. The 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.
The Escrow Agent shall otherwise not be liable for any mistakes
of fact or error of judgment, or for any acts or omissions of any
kind unless caused by its willful misconduct or gross negligence
and each of the COMPANY and
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PURCHASER jointly and severally agrees to indemnify and hold
harmless the Escrow Agent from any claims, demands, causes of
action, liabilities, damages or judgments, including the cost of
defending any action against it, together with any reasonable
attorneys' fees of any nature (including appeal) incurred
therewith in connection with Escrow Agent's undertakings pursuant
to the terms and conditions of this Escrow Agreement, unless such
act or omission is a result of the willful misconduct or gross
negligence of the Escrow Agent.
c. NO IMPLIED DUTIES. Escrow Agent shall have no implied
obligations or responsibilities hereunder, nor shall it have any
obligation or responsibility to collect funds or seek the deposit
of money or property, nor is the Escrow Agent a party to any
other agreement entered into among PURCHASER and/or the COMPANY,
except for additional escrow agreements, the terms and conditions
of which are identical to those set forth herein ("Additional
Escrow Agreements").
5.2. OTHER MATTERS. Escrow Agent (and any successor escrow agent or agents)
reserves the right to resign as the Escrow Agent at any time, provided fifteen
(15) days' prior written notice is given to the other parties hereto. If a
notice of appointment of a successor escrow agent is not delivered to the Escrow
Agent within thirty (30) days after notice of resignation, the Escrow Agent may
petition any court of competent jurisdiction to name a successor escrow agent,
and the Escrow Agent herein shall be fully relieved of all liability to any and
all parties upon the transfer of all cash or property in its possession under
the Escrow Agreement to the successor escrow agent either designated or
appointed by such court. The Parties reserve the right to jointly remove the
Escrow Agent at any time, provided fifteen (15) days' prior written notice is
given to the Escrow Agent. In the event or litigation of dispute by the Parties
in which the performance of the duties of the Escrow Agent is at issue, the
Escrow Agent shall take no action until such action is agreed in writing by the
Parties or if it is agreed in writing by the parties or directed by receipt of
an order, decree, writ, judgment or other paper from a court of competent
jurisdiction.
6. TERMINATION. This Escrow Agreement shall be terminated upon the release
of the Conversion Shares in accordance with the terms and conditions of Section
4 hereof, or otherwise by written mutual consent signed by all parties hereto.
7. NOTICE. Notices to be given hereunder shall be in writing and shall be
deemed to have been sufficiently given if delivered personally or sent by
overnight courier or messenger or sent by registered or certified mail (air mail
if overseas), return receipt requested, or by telex, facsimile transmission,
telegram or similar means of communication. Notice shall be deemed to have been
received on the date and time of personal delivery, telex, facsimile
transmission, telegram or similar means of communication, or if sent by
overnight courier or messenger, shall be deemed to have been received on the
next delivery day after deposit with the courier or messenger, of if sent by
certified or registered mail, return receipt requested, shall be deemed to
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have been received on the third business day after the date of mailing.
Notices shall be given to the following addresses:
If to the Company:
American Custom Components, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchaser:
Generation Capital Associates, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Escrow Agent:
Law offices of M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
8. BENEFIT AND ASSIGNMENT. This Escrow Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns as permitted hereunder. No person or entity other than the parties
hereto is or shall be entitled to bring any action to enforce any provision in
this Escrow Agreement. Such Escrow Agreement shall be solely for the benefit of,
and shall be enforceable only by, the parties hereto or their respective
successors and assigns.
9. ENTIRE AGREEMENT, AMENDMENT. This Escrow Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements, commitments or understandings
with respect to such matters; provided that as between the COMPANY and Escrow
Agent, the Parties recognize and agree that there will exist from time to time
Additional Escrow Agreements. This Escrow Agreement may not be changed orally,
but only by an instrument in writing signed by the party against whom
enforcement of any waiver, change modification, extension or discharge is
sought.
10. GOVERNING LAW; VENUE. This Escrow Agreement shall be governed and
construed under and in accordance with the laws of the State of California. Each
of COMPANY and PURCHASER hereby irrevocably and unconditionally: (a) submits for
itself and its property in any legal action or proceeding relating to this
Escrow Agreement, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive jurisdiction of any Federal or State courts
located in Orange County, California, and appellate courts from any thereof; (b)
consents that any such action or proceeding may be brought in such courts and
waives any
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objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same; (c) agrees that
service of process in any such action or proceeding may be effected by mailing a
copy thereof by registered or certified mail (or any substantially similar form
of mail), postage prepaid, to it at its address set forth herein or at such
other address of which Escrow Agent shall have been notified pursuant thereto;
and (d) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to ▇▇▇ in
any other jurisdiction.
11. WAIVERS OF JURY TRIAL. THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS ESCROW AGREEMENT OR FOR ANY COUNTERCLAIM THEREIN.
12. SIGNATURE IN COUNTERPARTS. This Escrow Agreement may be executed in
separate counterparts, none of which need contain the signature of all parties,
each of which shall be deemed to be an original and all of which taken together
constitute one and the same instrument. It shall not be necessary in making
proof of this Escrow Agreement to producer or account for more than the number
of counterparts containing the respective signatures of, or on behalf of, all of
the parties hereto. Facsimile signatures shall be considered as original
signatures for purposes hereof
13. ATTORNEY'S FEES. Should any action be commenced between the parties to
this Escrow Agreement concerning the matters set forth in this Escrow Agreement
or the right and duties of either in relation thereto, the prevailing party in
such action shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum as and for its Attorney's Fees and Costs.
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IN WITNESS WHEREOF, each of the parties has caused this Escrow Agreement to
be duly executed and delivered in its came and on its behalf, all as of
September 29, 1997.
AMERICAN CUSTOM COMPONENTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇ Walk
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▇▇▇▇▇▇ ▇▇▇▇ Walk,
Chief Executive Officer
GENERATION CAPITAL ASSOCIATES
By: /s/ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, General Partner
ESCROW AGENT:
MRC LEGAL SERVICES CORPORATION
By: /s/ M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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M. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President
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