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EXHIBIT 4.06
ESCROW AGREEMENT
ESCROW ACCOUNT #'S 000 000 0000 & 000 000 0000
This Escrow Agreement ("Agreement"), dated as of September 26, 2000, is
entered into by and among Xxxxxxx Energy Systems of America, Inc., a Utah
corporation (the "Company"), AJW Partners, LLC, and New Millennium Capital
Partners II, LLC, (collectively, the "Purchasers" and each a "Purchaser") and
Xxxx X.
Xxxxxxxxx, Esq. (the "Escrow Agent").
WHEREAS, pursuant to that certain Secured Convertible Debenture Purchase
Agreement ("Purchase Agreement"), dated as of the date hereof, between the
Company and the Purchasers, the Company proposes to sell an aggregate principal
amount of $1,500,000 of the Company's 10% Secured Convertible Debentures, due
September 26, 2001 (the "Debentures") to the Purchasers on the terms and
conditions set forth in the Purchase Agreement;
WHEREAS, the Debentures are being sold to the Purchasers by the Company in
a private placement transaction ("Transaction") pursuant to Section 4(2) of the
Securities Act of 1933, as amended;
WHEREAS, the Company and the Purchasers have agreed that the Purchasers
will deposit certain funds in the Escrow Accounts reflected on Attachment C and
Attachment D hereto to facilitate the closing of the sale of the Debentures and
for reservation of certain funds on behalf of the Company for use by the Company
in the event of certain contingencies;
WHEREAS, the Company and the Purchasers have agreed that the Transaction
will close on two separate dates, the first closing (the "First Closing"), which
is expected to be for $500,000 of aggregate gross proceeds (the "First Closing
Proceeds") to occur on September 26, 2000 or on such other date as may be
mutually agreed to by the parties (the "First Closing Date") and the second
closing (the "Second Closing"), which is expected to be for an additional
$1,000,000 of aggregate gross proceeds (the "Second Closing Proceeds"), to occur
within thirty days after the date on which a registration statement to be filed
by the Company in connection with the resale by the Purchasers of shares of
common stock underlying the Debentures is declared effective by the Securities
and Exchange Commission (the "Second Closing Period"); and
WHEREAS, Attachment A hereto ("Attachment A") identifies those documents
which the Escrow Agent must receive in order to effect the First Closing
(collectively, the "Closing Documents");
NOW, THEREFORE, it is hereby agreed as follows:
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1. DEPOSIT OF FUNDS IN ESCROW ACCOUNT. Simultaneously with the execution of
this Agreement, the Purchasers shall deposit the First Closing Proceeds in the
Escrow Account. Such First Closing Proceeds and any Second Closing Proceeds
received during the Second Closing Period, may be commingled with monies
previously and subsequently deposited in the Escrow Account in connection with
the purchase of the Debentures and other transactions entered into, from time to
time, by the Purchasers. The Escrow Agent agrees to leave open the Escrow
Account until such time as the Second Closing has occurred, up to a maximum of
one year after the First Closing Date.
2. THIRD-PARTY BENEFICIARIES. This Agreement is intended for the benefit of
the parties hereto and their respective successors and assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any other person.
3. RESPONSIBILITIES OF THE COMPANY. On or prior to the First Closing Date,
the Company shall deliver to the Escrow Agent, via facsimile, copies of the
signature pages of the Closing Documents identified on Attachment A as Items "A"
through "E" duly executed by the Company.
4. RESPONSIBILITIES OF THE ESCROW AGENT. The Escrow Agent's
responsibilities shall include the following:
(a) On or prior to the First Closing Date, receive copies of all duly
executed signature pages of the Closing Documents from the Company and the
Purchasers;
(b) Receive funds from the Purchasers in a total amount equal to the
gross proceeds, as follows: the First Closing Proceeds on or prior to the First
Closing Date and the Second Closing Proceeds at any time during the Second
Closing Period.
5. DISBURSEMENT OF FUNDS.
For each closing, the Escrow Agent shall release the relevant portion
of the gross proceeds from the sale of the Debentures in such closing pursuant
to this Section only at such time as it has received an instruction letter,
substantially in the form attached hereto as Attachment B, executed by a
representative of the Purchasers and upon receipt of such letter, the Escrow
Agent shall:
(a) For the First Closing, release funds via wire transfer to the
Company (pursuant to wire instructions provided to the Escrow Agent by the
Company), in the amount of $500,000 of the First Closing Proceeds, less (i)
$25,000, such amount representing payment of certain expenses and (ii) $250,000,
which represents an amount to be reserved in the Escrow Account for use by the
Company upon certain contingencies. Such reserved amount shall be released by
the Escrow Agent to the Company upon the earlier to occur of (i) any contingency
which the parties mutually agree would necessitate the release of such reserved
funds to the Company or (ii) the date on which a registration statement to be
filed by the Company in connection with the resale by the Purchasers of shares
of common stock underlying the Debentures is declared effective by the
Securities and Exchange Commission. Upon the occurrence of a Second Closing,
funds shall be released via wire transfer to the Company in the amount of
$1,000,000, representing the Second Closing Proceeds;
(b) For the First Closing only, release funds via wire transfer to
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP ("Xxxxxxxx Xxxxxxxxx"), counsel
for the Purchasers (pursuant to wire instructions provided to the Escrow Agent
by Xxxxxxxx Xxxxxxxxx), in the amount of $25,000.00 (such amount representing
the Purchasers' expense allocation).
6. WAIVER OF RIGHTS TO PROCEEDS. The Escrow Agent waives all rights in and
claims of any sort against the subscription proceeds, including but not limited
to any liens, statutory or otherwise, or right of set-off.
7. NOTICES. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be sent by facsimile, with an
original by overnight courier, and addressed as follows:
Convertible Debenture Purchase Agreement
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if to the Company, to:
XxXxxxx Energy Systems of America, Inc.
00000 Xxx 000, XXX 000-X
Xxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
if to the Purchasers, to:
AJW Partners, LLC
000 Xxxxx Xxxxxx, Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx
and
New Millennium Capital Partners II, LLC
000 Xxxxx Xxxxxx, Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxxx
if to the Escrow Agent, to:
Xxxx X. Xxxxxxxxx, Esq.
00000 Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxxxx, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the others in the above-referenced manner. Notice by
facsimile shall be deemed received upon confirmation of transmission.
8. CONCERNING THE ESCROW AGENT. To induce the Escrow Agent to act
hereunder, it is further agreed by the Company and the Purchasers that:
(a) The Escrow Agent shall not be under any duty to give the funds it
receives hereunder any greater degree of care than it gives its own similar
property and shall not be liable, except for its own gross negligence and
reckless or willful misconduct.
(b) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument, or other writing delivered
to it hereunder believed by it in good faith to be genuine without being
required to determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of the service thereof. The Escrow Agent
may act in reliance upon any instrument or signature believed by it in good
faith to be genuine and may assume, if in good faith, that any person purporting
to give notice or receipt or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so.
(c) The Escrow Agent will act in good faith and in the exercise of its
own best judgment in carrying out its duties hereunder.
(d) The Escrow Agent at any time may be discharged from its duties and
obligations hereunder by the delivery to it of notice of termination signed by
the Purchasers and the Company. The Escrow Agent at any time may resign by
giving written notice to such effect to the Purchasers and the Company. Upon any
such termination or resignation, the Escrow Agent shall deliver any and all
property in escrow at that time to a successor escrow agent designated by the
Purchasers and the Company in
Convertible Debenture Purchase Agreement
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writing, whereupon the Escrow Agent shall be discharged of any and all further
obligations arising in connection with this Agreement. The Escrow Agent shall be
paid any outstanding fees and expenses prior to transferring assets to a
successor escrow agent.
(e) In the event that there shall be any reasonable uncertainty on the
part of the Escrow Agent as to the meaning or applicability of any of the
provisions hereof, the Escrow Agent's duties, rights or responsibilities
hereunder or any written instructions received by the Escrow Agent pursuant
hereto, the Escrow Agent shall be entitled to refuse to comply with any and all
claims, demands or instructions with respect to such Escrow Account so long as
such dispute or conflict shall continue. Escrow Agent shall be entitled to
refuse to act until either (i) such conflicting or adverse claims or demands
shall have been determined by a final order, judgment or decree of a court of
competent jurisdiction, which order, judgment or decree is not subject to
appeal, or (ii) settled by agreement between the conflicting parties as
evidenced in a writing satisfactory to the Escrow Agent. In addition, the Escrow
Agent shall be entitled, in its sole discretion, at any time thereafter, to
deposit the funds then being held by it in escrow into any court having
appropriate jurisdiction, and upon making such deposit, the Escrow Agent shall
thereupon be relieved of and discharged and released from any and all liability
hereunder and with respect to the Escrow Amount or any portion thereof so
deposited.
9. MISCELLANEOUS.
(a) This Agreement shall be construed in accordance with and governed
by the laws of the State of New York (without reference to its rules as to
conflicts of law).
(b) This Agreement may only be modified by a writing signed by all of
the parties hereto. No waiver hereunder shall be effective unless in a writing
signed by the party to be charged.
(c) The paragraph headings herein are for convenience only and shall
not affect the construction, or be deemed to embellish, add to, modify, or
qualify the meaning of the contents hereof.
(d) This Agreement may be executed in one or more counterparts but all
such separate counterparts shall constitute one and the same instrument.
Executed signature pages of each such counterpart may be affixed to a single
copy of this Agreement and together constitute an original.
(e) Facsimile signatures shall be binding on the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
XXXXXXX ENERGY SYSTEMS OF AMERICA, INC.
By:
-------------------------------------
Name:
Title:
AJW PARTNERS, LLC
By: SMS Group, LLC
By:
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Name: Xxxxx X. Xxxxxxxx
Title:
Convertible Debenture Purchase Agreement
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NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By:
-------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title:
By:
-------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Escrow Agent
Convertible Debenture Purchase Agreement
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ESCROW AGREEMENT - ATTACHMENT A
CLOSING DOCUMENTS
Item
Reference Document Name Required Signatures
--------- ------------- -------------------
A. Debenture Purchase Agreement Company, Purchasers
B. Registration Rights Agreement Company, Purchasers
C. Security Agreement Company, Purchasers
D. IP Security Agreement Company, Purchasers
E. Convertible Debenture Company
Convertible Debenture Purchase Agreement
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ESCROW AGREEMENT - ATTACHMENT B
FORM OF ESCROW INSTRUCTION LETTER
Xxxx X. Xxxxxxxxx, Esq.
00000 Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Re: Xxxxxxx Energy Systems - Escrow Account #'s 000 000 0000 & 000 000 0000
Dear Xx. Xxxxxxxxx:
Pursuant to the escrow agreement (the "Agreement") dated as of September
26, 2000 by and among Xxxxxxx Energy Systems, Inc., the Purchasers and the Xxxx
Xxxxxxxxx, Esq., you are hereby instructed to break escrow and release funds.
Thank you for your assistance.
Sincerely,
AJW PARTNERS, LLC
By: SMS Group, LLC
By:
-------------------------------
Name: Xxxxx X. Xxxxxxxx
Title:
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By:
-------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title:
Convertible Debenture Purchase Agreement
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ATTACHMENT C
WIRE TRANSFER INSTRUCTIONS
XXXX XXXXXXXXX, ESQ.
FOR: AJW PARTNERS, LLC
Account Name: Xxxx Xxxxxxxxx Attorney Fund Account I
Account Number: 000 000 0000
Bank Name: Union Bank of California
The Private Bank- Xxxxxxx Xxxxx
Xxxxxx, XX 00000
ABA Number: 122 000 496
Convertible Debenture Purchase Agreement
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ATTACHMENT D
WIRE TRANSFER INSTRUCTIONS
XXXX XXXXXXXXX, ESQ.
FOR: NEW MILLENIUM CAPITAL PARTNERS II, LLC
Account Name: Xxxx Xxxxxxxxx Attorney Fund Account II
Account Number: 000 000 0000
Bank Name: Union Bank of California
The Private Bank- Xxxxxxx Xxxxx
Xxxxxx, XX 00000
ABA Number: 122 000 496
Convertible Debenture Purchase Agreement
