ESCROW AGREEMENT
THIS AGREEMENT dated the 22nd day of October, 1997, between Xxxx
Communications, Inc., a Delaware corporation (the "Company"), Austost Anstalt
Xxxxxx, Xxxxxxx Funds S.A., (the "Holders") and Grushko & Xxxxxxx (the
"Escrow Agent"):
W I T N E S S E T H:
WHEREAS, the Company and the Holders have entered into a
Subscription Agreement dated the date hereof (together with all exhibits
thereto, the "Subscription Agreement") calling for the issuance and sale to
the Holders of the Company's Convertible Note; and
WHEREAS, Section 9 of the Subscription Agreement requires the
Company to deposit the Escrowed Stock (as hereinafter defined) with the
Escrow Agent to be held in escrow and released by the Escrow Agent in
accordance with the terms and conditions of this Agreement; and
WHEREAS, the Escrow Agent is willing to serve as escrow agent
pursuant to the terms and conditions of this Agreement;
NOW THEREFORE, the parties agree as follows:
ARTICLE I
INTERPRETATION
1.1 Definitions. Whenever used in this Agreement, the following
terms shall have the following respective meanings:
(a) "Agreement" means this Agreement and all amendments
made hereto and thereto by written agreement between the parties;
(b) "Escrowed Stock" means the 2,300,000 shares of Common
Stock of the Company, $.000l par value, represented by certificates
registered in the name of the Holders, to be delivered on the Closing Date,
as the term is defined in the Subscription Agreement, to the Escrow Agent in
the names and denominations as set forth in Schedule A attached hereto, and
to be held in escrow by the Escrow Agent.
1.2 Entire Agreement. This Agreement together with the
Subscription Agreement and Convertible Note constitute the entire agreement
between the parties hereto pertaining to the Escrowed Stock and supersedes
all prior agreements, understandings, negotiations and discussions, whether
oral or written of the parties. There are no warranties, representations and
other agreements made by the parties in connection with the subject matter
hereof except as specifically set forth in this Agreement.
1.3 Extended Meanings. In this Agreement words importing the
singular number include the plural and vice versa; words importing the
masculine gender include the feminine and neuter genders. The word "person"
includes an individual, body corporate, partnership, trustee or trust or
unincorporated association, executor, administrator or legal representative.
1.4 Waivers and Amendments. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by all
parties or, in the case of a waiver, by the party waiving compliance. Except
as expressly stated herein, no delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any waiver on the part of any party of any right, power or
privilege hereunder preclude any other or future exercise of any other right,
power or privilege hereunder.
1.5 Headings. The division of this Agreement into articles,
sections, subsections and paragraphs and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
without regard to principles of conflict of laws.
1.7 Consents to Service of Process. The Company and the Holder
each hereby irrevocably consent to the exclusive jurisdiction of the courts
of the State of New York and of any federal court located in the State of New
York, each as may have competent jurisdiction, in connection with any action,
submit or other proceeding arising out of or relating to this Agreement or
any action taken or omitted hereunder, and waive personal service of any
summons, complaint or other process and agree that the service hereto may be
made by certified or registered mail directed to such person at such person's
address for purpose of notice hereunder.
ARTICLE II
STOCK TO BE DELIVERED TO THE ESCROW AGENT
2.1 Delivery of Company's Stock to Escrow Agent. As required
under Section 9 of the Subscription Agreement, the Company shall deliver to
the Escrow Agent the Escrowed Stock prior to the Closing Date. Such
additional common stock of the Company as is required to be delivered to the
Escrow Agent pursuant to Sections 2(0) and 9 of the Subscription Agreement
shall be delivered to the Escrow Agent and shall be Escrowed Stock.
2.2 Intention to Create Escrow Over Escrowed Stock. The
Holders and Company intend that the Escrowed Stock shall be held in escrow by
the Escrow Agent pursuant to this Agreement for their respective benefits as
set forth herein.
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2.3 Escrow Agent to Hold Escrowed Stock. The Escrow Agent
shall hold and release the Escrowed Stock only in accordance with the terms
and conditions of this Agreement.
ARTICLE III
RELEASE OF ESCROWED STOCK
3.1 Subject to the provisions of Section 4.2, the Escrow Agent
shall release the Escrowed Stock as follows:
(a) Upon receipt by the Escrow Agent of a notice ("Notice
of Conversion") signed by a Holder, reciting that a Holder is converting the
Note principal and interest or part thereof and stating the terms of said
conversion in accordance with the terms of the Subscription Agreement, the
Escrow Agent shall promptly deliver a copy of such Notice of Conversion to
the Company. If the Escrow Agent does not receive from the Company within
three (3) business days after notice is given to the Company by the Escrow
Agent, a written notice of objection stating the reasons for the objection
in accordance with the terms of the Subscription Agreement ("Notice of
Objection") signed by the Company, or if the Escrow Agent shall within such
period receive a written consent signed by the Company to such conversion,
then the Escrow Agent shall deliver to the Holders that number of shares of
Escrowed Stock as is called for in the Notice of Conversion together with a
self-liquidating legend attached to each share certificate. If the Escrow
Agent receives Notice of Objection from the Company within such three (3)
business day period, the Escrow Agent shall continue to hold the Escrowed
Stock until otherwise authorized and directed to distribute the same pursuant
to the provisions of Sections 3.1(c) or 3.1(d). As a precondition to the
release of any Escrowed Shares to Holder, the Escrow Agent must receive the
original Convertible Note no later than the third business day after its
receipt of the Notice of Conversion. Upon its receipt of the original
Convertible Note (or any reissued originally executed Convertible Note), the
Escrow Agent will immediately request to the Company in writing that the
Company issue a new Convertible Note for the unconverted portion of the
Convertible Note. Within three business days after receipt by the Escrow
Agent of such reissued Convertible Note, the reissued Convertible Note will
be transmitted to the Holder and the original Convertible Note will be
transmitted to the Company by the Escrow Agent. If such reissued Convertible
Note is not received by the Escrow Agent within three (3) business days of
request by the Escrow Agent, then the Escrow Agent will, in consultation with
the Company and pursuant to the Company's written instructions, indicate on
the signature page of the original Convertible Note, the amount of principal
and interest, if applicable, of the Note converted and the Conversion Date,
and return the original Convertible Note to the Holder.
(b) Upon receipt by the Escrow Agent of a notice ("Notice
of Return") signed by the Company stating that the Company is entitled to
receipt of the Escrowed Stock or any portion thereof, in accordance with the
provisions of the Subscription Agreement, and stating the reasons therefor,
the Escrow Agent shall promptly send a copy of such Notice of Return to the
affected Holders. If the Escrow Agent does not receive from the affected
Holders within three (3) business days after notice is given to the affected
Holders by the Escrow Agent, a writ-
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ten Notice of Objection stating the reasons for the objection in accordance
with the terms of the Subscription Agreement signed by the affected Holders,
or if the Escrow Agent shall within such period receive a written consent
signed by the affected Holders, then the Escrow Agent shall deliver the
Escrowed Stock or such portion thereof to the Company in accordance with the
Notice of Return. If the Escrow Agent receives a Notice of Objection from
the affected Holders within such three (3) day period, then the Escrow Agent
shall continue to hold the Escrowed Stock until otherwise authorized and
directed to distribute the same pursuant to the provision of Sections 3.1(c)
or 3.1(d).
(c) Upon receipt by the Escrow Agent of a joint written
instruction (a "Joint Instruction") signed by the Company and the Holders, it
shall deliver the Escrowed Stock in accordance with the terms of the Joint
Instruction.
(d) Upon receipt by the Escrow Agent of a final and
non-appealable judgment, order, decree or award of a court of competent
jurisdiction (a "Court Order"), the Escrow Agent shall deliver the Escrowed
Stock in accordance with the Court Order. Any Court Order shall be
accompanied by an opinion of counsel for the party presenting the Court Order
to the Escrow Agent (which opinion shall be satisfactory to the Escrow Agent)
to the effect that the court issuing the Court Order has competent
jurisdiction and that the Court Order is final and non-appealable.
3.2 Acknowledgment of Company and Holders Disputes. The
Company and the Holders acknowledge that the only terms and conditions upon
which the Escrowed Stock are to be released are set forth in Section 3 and 4
of this Agreement. The Company and the Holders reaffirm their agreement to
abide by the terms and conditions of this Agreement with respect to the
release of the Escrowed Stock. Any dispute with respect to the release of
the Escrowed Stock shall be resolved pursuant to Section 4.2 or by agreement
between the Company and Holders.
ARTICLE IV
CONCERNING THE ESCROW AGENT
4.1 Duties and Responsibilities of the Escrow Agent. The
Escrow Agent's duties and responsibilities shall be subject to the following
terms and conditions:
(a) The Holders and Company acknowledge and agree that
the Escrow Agent (i) shall not be responsible for or bound by, and shall not
be required to inquire into whether either the Holders or Company is entitled
to receipt of the Escrowed Stock pursuant to, the Subscription Agreement or
otherwise; (ii) shall be obligated only for the performance of such duties as
are specifically assumed by the Escrow Agent pursuant to this Agreement;
(iii) may rely on and shall be protected in acting or refraining from acting
upon any written notice, instruction, instrument, statement, request or
document furnished to it hereunder and believed by it in good faith to be
genuine and to have been signed or presented by the proper person or party,
without being required to determine the authenticity or correctness of any
fact stated therein or the pro-
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priety or validity or the service thereof; (iv) may assume that any person
purporting to give notice or make any statement or execute any document in
connection with the provisions hereof has been duly authorized to do so; (v)
shall not be under any duty to give the property held by Escrow Agent
hereunder any greater degree of care than Escrow Agent gives its own similar
property; and (vi) may consult counsel satisfactory to Escrow Agent, the
opinion of such counsel to be full and complete authorization and protection
in respect of any action taken, suffered or omitted by Escrow Agent hereunder
in good faith and in accordance with the opinion of such counsel.
(b) The Holders and Company acknowledge that the Escrow
Agent is acting solely as a stakeholder at their request and that the Escrow
Agent shall not be liable for any action taken by Escrow Agent in good faith
and believed by Escrow Agent to be authorized or within the right or powers
conferred upon Escrow Agent by this Agreement. The Holders and Company,
jointly and severally, agree to indemnity and hold harmless the Escrow Agent
and any of Escrow Agent's partners, employees, agents and representatives for
any action taken or omitted to be taken by Escrow Agent or any of them
hereunder, including the reasonable fees and costs of outside counsel in
defending itself against any claim or liability under this Agreement, except
in the case of gross negligence or willful misconduct on Escrow Agent's part
committed in its capacity as Escrow Agent under this Agreement. The Escrow
Agent shall owe a duty only to the Holders and Company under this Agreement
and to no other person.
(c) The holders and Company jointly and severally agree
to reimburse the Escrow Agent for its reasonable out-of-pocket expenses
(including reasonable counsel fees) incurred in connection with the
performance of its duties and responsibilities hereunder.
(d) The Escrow Agent may at any time resign as Escrow
Agent hereunder by giving thirty (30) days' prior written notice of
resignation to the Holders and the Company Prior to the effective date of the
resignation as specified in such notice, the Holders and Company will issue
to the Escrow Agent a Joint Instruction authorizing delivery of the Escrowed
Stock to a substitute Escrow Agent selected by the Holders and Company. If
no successor Escrow Agent is named by the Holders and Company, the Escrow
Agent may apply to a court of competent jurisdiction in the state of New York
or any federal court located in the state of New York for appointment of a
successor Escrow Agent.
(e) The Escrow Agent does not have and will not have any
interest in the Escrowed Stock, but is serving only as escrow holder, having
only possession thereof. The Escrow Agent shall not be liable for any loss
resulting from the making or retention of any investment in accordance with
this Escrow Agreement.
(f) This Agreement sets forth exclusively the duties of
the Escrow Agent with respect to any and all matters pertinent thereto and no
implied duties or obligations shall be read into this Agreement.
(g) The Escrow Agent shall be permitted to act as counsel
for the Holders or the Company, as the case may be, in any dispute as to the
disbursement of the Escrowed Stock or
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in any other dispute between the Holders and Company, whether or not the
Escrow Agent is then holding the Escrowed Stock and continues to act as the
Escrow Agent hereunder.
(h) The provisions of this Section 4.1 shall survive the
resignation of the Escrow Agent or the termination of this Agreement.
4.2 Dispute Resolution: Judgments. Resolution of disputes
arising under this Agreement shall be subject to the following terms and
conditions:
(a) If any dispute shall arise with respect to the
delivery, ownership, right of possession or disposition of the Escrowed
Stock, or if the Escrow Agent shall in good faith be uncertain as to its
duties or rights hereunder, the Escrow Agent shall be authorized, without
liability to anyone, to (i) refrain from taking any action other than to
continue to hold the Escrowed Stock pending receipt of a Joint Instruction
from the Holders and Company, or (ii) deposit the Escrowed Stock with any
court of competent jurisdiction in the state of New York, in which event the
Escrow Agent shall give written notice thereof to the Holders and the Company
and shall thereupon be relieved and discharged from all further obligations
pursuant to this Agreement. The Escrow Agent may, but shall be under no duty
to, institute or defend any legal proceedings which relate to the Escrowed
Stock. The Escrow Agent shall have the right to retain counsel if she
becomes involved in any disagreement, dispute or litigation on account of
this Agreement or otherwise determines that it is necessary to consult
counsel.
(b) The Escrow Agent is hereby expressly authorized to
comply with and obey any Court Order. In case the Escrow Agent obeys or
complies with a Court Order, the Escrow Agent shall not be liable to the
Holders and Company or to any other person, firm, corporation or entity by
reason of such compliance.
ARTICLE V
GENERAL MATTERS
5.1 Termination. This escrow shall terminate upon the release
of all of the Escrowed Stock or at any time upon the agreement in writing of
the Holders and Company.
5.2 Notices. Any notice herein required or permitted to be
given shall be in writing and may be personally delivered or sent by fax
transmission (with copy sent by regular, certified or registered mail or by
overnight courier).
(a) If to the Company, to:
Xxxx Communications, Inc.
0000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxx 00000
Fax: (000)000-0000
Attn: Xxxxxx Xxxxxx, President
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(b) If to the Holders to:
Austost Anstalt Xxxxxx
7440 Fuerstentum
Xxxxxxxxxxx Xxxxxxxxxxx 000
Fax: 000-000-000000000
Balmore Funds X.X.
Xxxxxxxx Morax
X.X. Xxx 0000
Xxxxxx, Xxxxxxxxxxx 0000
Fax: 000-000-000-0000
(c) If to the Escrow Agent, to:
Grushko & Xxxxxxx
Attorneys at Law
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000)000-0000
or to such other address as any of them shall give to the others by notice
made pursuant to this Section 5.2.
5.3 Assignment: Binding Agreement. Neither this Agreement nor
any right or obligation hereunder shall be assignable by any party without
the prior written consent of the other parties hereto. This Agreement shall
enure to the benefit of and be binding upon the parties hereto and their
respective legal representatives, successors and assigns.
5.4 Counterparts/Execution. This Agreement maybe executed in
any number of counterparts and by the different signatories hereto on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. This Agreement may be executed by facsimile transmission.
5.5 Invalidity. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal, or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby, it being intended that all of the rights and privileges
of the parties hereto shall be enforceable to the fullest extent permitted by
law.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
XXXX COMMUNICATIONS, INC.
BY: /s/ Xxxxxx Xxxxxx President and CEO
AUSTOST ANSTALT XXXXXX
BY: /s/Austost Anstalt Xxxxxx
XXXXXXX FUNDS S.A.
BY:/s/
ESCROW AGENT
/s/ Grushko & Xxxxxxx
GRUSHKO & XXXXXXX
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SCHEDULE A
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HOLDERS NOTE (PRINCIPAL AMOUNT) NUMBER OF SHARES TO BE
ESCROWED
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Austost Anstalt $500,000.00 1,150,000
Xxxxxx
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Balmore Funds S.A. $500,000.00 1,150,000
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TOTALS 1,000,000.00 2,300,000.00
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