ESCROW AGREEMENT
ESCROW AGREEMENT ("ESCROW AGREEMENT") dated as of March 20, 2002 by and
among PACIFIC SANDS, INC., a Nevada corporation ("PSI"), and
________________________ _______________________________________ ("PURCHASER"),
and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ESQ., having a principal place of business at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ ("ESCROW AGENT").
WHEREAS:
A. The Purchaser and PSI entered into a Securities Subscription
Agreement dated as of March 29, 2002 ("AGREEMENTS"), in which, inter alia, the
Purchaser agreed to purchase PSI's 8% Series A Senior Subordinated Convertible
Redeemable Debentures ("DEBENTURES");
B. Pursuant to the Agreement, the Debentures are to be delivered to the
Escrow Agent to hold and administer in accordance with the terms and conditions
of this Escrow Agreement.
NOW THEREFORE, in consideration of the respective premises, mutual
covenants and agreements of the parties hereto, and other good and valuable
consideration, the receipt and sufficiency of which we hereby acknowledged, the
parties hereto agree as follows:
1. APPOINTMENT OF ESCROW AGENT. Escrow Agent is hereby appointed as
escrow agent and the Escrow Agent hereby accepts such appointment. The Escrow
Agent shall act in accordance with the instructions set forth in this Escrow
Agreement and any further instructions given to it by written instrument signed
by PSI and Purchaser.
2. INITIAL FUNDING. On the date hereof, the Purchaser shall transfer to
PSI the aggregate sum of __________________________________ less any fees which
PSI has agreed to pay by virtue of a separate agreement.
3. Issuance and Delivery of the Debentures and Resolution to the Escrow
Agent.
(a) On the date hereof, PSI shall issue in the name of the Purchasers
and deposit with the Escrow Agent the Debentures in the face amount of
________________________, as provided in the Agreements. If PSI is not paid the
full Purchase Price for the Debentures, as provided in this Escrow Agreement,
then the Debenture, or any portion of the Debentures which is not paid for at
the time when payment is due to be made, shall be canceled by PSI, and the
Escrow Agent, upon written notice of such cancellation from PSI, shall promptly
return the Debentures to PSI. Upon such cancellation and return of the
Debentures, the parties shall have no further obligations or liabilities each to
the other under this Escrow Agreement, the Agreements or the Debentures.
(b) On the date hereof, PSI shall deliver to the Escrow Agent a
resolution in the form annexed hereto as EXHIBIT A ("RESOLUTION"), instructing
PSI's transfer agent, Corporate Stock Transfer, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("TRANSFER AGENT") to issue to Purchaser shares of PSI's common
stock registered in the name of Purchaser, without restrictive legend as
provided in Section 5(b) of the Agreement, in an amount equal up to
$___________, or at some lesser amount as the Escrow Agent, in his sole
discretion may direct the Transfer Agent, at a price per share which is 75% of
the closing bid price of PSI's common stock as reported on the National
Association of Securities Dealers Electronic Bulletin Board for the trading day
immediately preceding the date of receipt of the Resolution by Transfer Agent,
and providing that PSI shall not change its transfer agent from the Transfer
Agent, without the express written consent and directive of the Escrow Agent.
The Resolution may be invoked by the Escrow Agent on as many occasions as
necessary to effectuate the provisions of this Escrow Agreement. The Resolution
may be delivered by the Escrow Agent to the Transfer Agent in the event that,
for any reason whatsoever, PSI fails to honor any Notice of Conversion as
provided in the Debentures and this Escrow Agreement, or PSI commits a material
breach of the Agreements, the Debentures, or this Escrow Agreement, or in the
event that PSI changes or attempts to change its transfer agent from the
Transfer Agent without the express written consent of the Purchaser. Upon
written demand from the Purchaser, Escrow Agent shall deliver the resolution to
the Transfer Agent as provided in this Section 3(b). Delivery of the Resolution
to the Transfer Agent and the issuance of shares by the Transfer Agent in
accordance with the Resolution shall not preclude the Purchaser from exercising
any and all other remedies available to the Purchaser against PSI for a breach
of the Agreements, the Debentures, or this Escrow Agreement. Escrow Agent shall
be entitled to honor any such written demand from the Purchaser and shall ignore
any demand or instructions to the contrary from PSI.
4. CUSTODY AND DISPOSITION OF THE DEBENTURES. The Escrow Agent shall
hold and dispose of the Debentures only in accordance with the terms of this
Escrow Agreement.
5. CONVERSION OF DEBENTURES.
(a) As provided in paragraph 4 of the Debentures, Purchaser may give
Notice of Conversion of the Debentures to PSI by facsimile to the number set
forth in Section 10 below. Conversion of Debentures may take place at any time
until the Maturity Date of the Debentures, as defined in the Debentures. As
provided in paragraph 4 of the Debentures, within 10 business days of receipt of
a Notice of Conversion, PSI shall deliver to the Purchaser giving such notice,
or to an account designated by such Purchaser in the Notice of Conversion,
certificates representing the shares of common stock to which the Purchaser
shall be entitled by reason of the conversion ("CERTIFICATES"). Notwithstanding
anything to the contrary contained in paragraph 4 of the Debentures, PSI may
demand, in writing, that the Purchaser pay outstanding principal amounts of the
Debentures ("DEMAND") even though Purchasers have not convened all or any amount
of the Debentures into shares of common stock, as provided in subsections (A)
and (B) below. The Demand is a provision for payment of the Debenture only.
Conversions of the Debentures into shares of common stock shall be done in
accordance with paragraph 4 of the Debentures, and may be in an amount which is
no less than $10,000 but not necessarily as much as the Demand. However, a
Demand may only be made in aggregate increments of $100,000, commencing 20
business days from the Closing Date of the purchase of the Debentures, as set
forth in the Agreement, each Demand being no less than 20 business days from the
last Demand, and provided that the closing bid price of PSI's common stock for
the previous 5 consecutive trading days has nor fallen below $.05 per share. On
any single trading day, Purchaser may sell in the aggregate common stock equal
to the greater of (i) 10% of the total trading volume of PSI's common stock at
any time during a day when PSI's common stock trades or (ii) 6,000 shares of
common stock (either (i) or (ii) being "MAXIMUM SALES"). However, in the event
that Purchaser does not accomplish Maximum Sales on any trading day, the
difference between the Maximum Sales and the dollar amount of sales actually
done shall cumulate ("CUMULATIVE SALES") and Purchaser may accomplish the
Cumulative Sales on any other trading day even if the Maximum Sales have been
done on such day.
(b) if PSI fails to timely deliver Certificates, as provided in Section
5(a) above, then PSI shall pay Purchaser $150 per day for each day late in
delivering Certificates up to and including the 10th late day, and $500 per day
for each day late in delivering the Certificates after the 10th late day
("LIQUIDATED DAMAGES"). Any Liquidated Damages incurred by PSI shall be payable
immediately and in cash upon demand in writing by Purchaser, or its agent, to
PSI. However, such Liquidated Damages may be deducted from any amounts owed to
PSI by Purchaser pursuant to this Section 5. Notwithstanding anything contained
in the Agreement to the contrary, including but not limited to the provisions of
Section 6 regarding the registration of restricted Conversion Shares, Purchaser
shall be required to pay the Liquidated Damages set forth in this Section 5(b).
6. BANKRUPTCY. In the event any proceeding under the Bankruptcy Laws of
the United States or any proceedings under any state laws for the protection of
debtors or creditors, are filed, voluntarily or involuntarily, by or on behalf
of PSI, then the Purchasers shall not be required to make any payment under the
Debenture or to honor any Demand and PSI shall be required nonetheless to honor
all notices of conversion.
7. INDEMNIFICATION Purchaser and PSI agree, jointly and severally to
indemnify, defend and hold harmless the Escrow Agent from and against any and
all costs (including, without limitation, legal fees and expenses), liabilities,
claims and losses arising out of or in connection with this Escrow Agreement or
any action or failure to act by the Escrow Agent under this Escrow Agreement,
except as provided in paragraph 8 below.
8. CONCERNING THE ESCROW AGENT. To induce the Escrow Agent to act
hereunder, it is further agreed by the undersigned that:
(a) This Escrow Agreement expressly sets forth all the duties of the
Escrow Agent with respect to any and all matters pertinent hereto. No implied
duties or obligations on the part of the Escrow Agent shall be read into this
Escrow Agreement. The Escrow Agent shall not be bound by the provisions of any
agreement among the other parties hereto except this Escrow Agreement.
(b) The Escrow Agent shall not be liable for any action or failure to
act in its capacity as Escrow Agent hereunder unless such action or failure to
act shall constitute willful misconduct on the part of the Escrow Agent, in
which case there shall be no indemnification obligations.
(c) The Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing delivered
to it hereunder without being required to determine the authenticity or the
correctness or 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 to be genuine and may assume, unless he has actual
knowledge to the contrary, that any person purporting to give notice or receipt
or advice or make any statement or execute any document in Connection with the
provisions hereof has been duly authorized to do so.
(d) The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Escrow Agreement and shall not be liable
for any action taken or omitted in accordance with such advice, except as
provided in paragraph 8(b) above.
(e) The Escrow Agent does not have any interest in the Debentures or
Conversion Shares or any other property deposited hereunder but is serving as
escrow holder only and having only possession thereof, and is not charged with
any duty or responsibility to determine the validity or enforceability of any
such documents.
(f) The Escrow Agent (and any successor Escrow Agent) may at any time
resign as such by delivering the Debentures to any successor Escrow Agent,
jointly designated by the other parties hereto in writing, or to any court of
competent jurisdiction, whereupon the Escrow Agent shall be discharged of and
from any and all further obligations arising in connection with this Escrow
Agreement thereafter. The resignation of the Escrow Agent will take effect on
the earlier of (a) the appointment of a successor (including a court of
competent jurisdiction) or (b) the day which is 30 days after the date of
delivery of its written notice of resignation to the other parties hereto. If at
that time the Escrow Agent has not received a designation of a successor Escrow
Agent, the Escrow Agent's sole responsibility after that time shall be to
safekeep the Debentures and not make delivery or disposition thereof until
receipt of a designation of successor Escrow Agent or a joint written
disposition instruction by the other parties hereto or a final order of a court
of competent jurisdiction.
(g) In the event of any disagreement among the parties hereto resulting
in adverse claims or demands being made in connection with the Debentures, or in
the event that the Escrow Agent otherwise determines that the Debentures should
be retained, then the Escrow Agent shall retain the Debentures until the Escrow
Agent shall have received (i) a final nonappealable order of a court of
competent jurisdiction directing delivery of the Debentures, or (ii) a written
agreement executed by the other parties hereto directing delivery of the
Debentures, in which case the Escrow Agent shall promptly deliver the Debentures
in accordance with such order or agreement. Any court order referred to in (i)
above shall be accompanied by a legal opinion by counsel for the presenting
party reasonably satisfactory to the Escrow Agent to the effect that said court
order is final and nonappealable. The Escrow Agent shall act on such court order
and legal opinion without further question.
(h) This Escrow Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their respective successors (including
successors by way of merger) and assigns, heirs, administrators and
representatives and shall not be enforceable by or inure to the benefit of any
third party except as provided in paragraph (g) with respect to a resignation by
the Escrow Agent.
(i) This Escrow Agreement may be modified by a writing signed by all
the parties hereto, and no waiver hereunder shall be effective unless in a
writing signed by the party to be charged.
(j) PSI acknowledges and agrees that in any dispute involving the
Agreement, Debentures or this Escrow Agreement, that Escrow Agent may represent
Purchaser's interests and shall not have a conflict of interest due to the fact
that Escrow Agent is also acting as an escrow agent pursuant to this Escrow
Agreement and PSI hereby waives any right which it may have had to assert a
conflict of interest in the absence of this Section 8(j).
9. GOVERNING LAW. This Escrow Agreement shall be governed in all
respects by the internal laws of the State of California. The parties agree to
submit to the jurisdiction and venue of any state or federal court in San
Francisco having subject matter jurisdiction over the matter. Service may be
made by certified mail, return receipt requested, to the parties at the
addresses set forth in paragraph 10 below, but the parties shall not be
precluded from making service in any other manner permitted by law.
10. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be delivered by hand or sent by U.S.
Express Mail, Fedex or some other reliable overnight courier service for next
day delivery. Each such notice or other communication shall for all purposes of
this Escrow Agreement be treated as effective or having been given when
delivered if delivered personally, or, if sent by overnight express mail
service, 1 day after the same has been deposited with the U.S. Postal Service,
Fedex or the overnight courier. All such notices must also be sent by facsimile
on the same day to the parties as fo1lows:
if to PSI:
Pacific Sands, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
if to Purchaser:
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Fax:
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If to Escrow Agent:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
11. COUNTERPARTS. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
12. ESCROW AGENT FEES. PSI shall pay the fees and expenses of the
Escrow Agent in performing its obligations and in connection with the
preparation of the transaction documents as per agreement of PSI with the Escrow
Agent which shall be 2% of the amount paid into escrow ("FEE"). Such fee shall
be paid at the time of the receipt of funds by Escrow Agent.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be duly executed and delivered, as of the day and year first above
written.
PSI: PACIFIC SANDS, INC.
By: _______________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President
Purchaser:
By:_______________________________
Its: _____________________________
As to Escrow Only:
ESCROW AGENT:
______________________________
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ESQ.