Exhibit 10.3
ESCROW AGREEMENT
ESCROW AGREEMENT made as of August 8, 2003 by and among the Issuer
and the Placement Agent whose names and addresses appear on signature page of
this Escrow Agreement and Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., ▇▇▇
▇▇▇▇▇ ▇▇▇., ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, facsimile no. 212-983-3115 (the "Escrow Agent").
WITNESSETH:
WHEREAS, the Issuer proposes to sell $6,995,000 in aggregate
principal amount of Secured Bridge Notes ("Tranche I Closing") and a certain
number of shares of the Issuer's Common Stock constituting Investors' Shares
("Tranche II Closing") (the Secured Bridge Notes and Investors' Shares shall be
collectively referred to as the "Securities"), pursuant to the terms of a
Securities Purchase Agreement (the "Securities Purchase Agreement") by and among
the Issuer and the investors identified therein (the "Investors") in a private
offering to accredited investors (the "Offering") at any time prior to November
15, 2003 (the "Offering Period");
WHEREAS, the aggregate proceeds anticipated to be raised in
connection with the Tranche I Closing and the Tranche II Closing is a minimum of
$15,200,000 and a maximum of $18,200,000 (subject to an overallotment of up to
$5,000,000), which amounts do not include the Placement Agent's fees in respect
of the Offering which are being reinvested in the Issuer pusuant to the
Placement Agent Agreement;
WHEREAS, in connection with the Tranche II Closing it is
anticipated that the Secured Bridge Notes and the Issuer's outstanding Class D
Notes in the aggregate principal amount of $1,200,000 (collectively, the "Issued
Securities") will be reinvested in the Tranche II Closing and that the evidence
of such notes shall be deposited with the Escrow Agent or delivered to the
Issuer in connection with the Tranche II Closing;
WHEREAS, the Issuer and the Placement Agent propose to establish
an escrow account (the "Escrow Account"), to which subscription monies which are
received by the Escrow Agent from the Placement Agent or directly from Investors
in connection with this private offering of the Securities are to be credited,
and the Escrow Agent is willing to establish the Escrow Account on the terms and
subject to the conditions hereinafter set forth; and
WHEREAS, the Escrow Agent has an agreement with Fleet Bank to
establish a special, segregated bank account into which the subscription monies,
which are received by the Escrow Agent from the Placement Agent or directly from
Investors and credited to the Escrow Account, are to be deposited and disbursed;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto hereby agree as follows: Terms.
Each capitalized term not otherwise defined in this Escrow Agreement shall have
the meaning set forth for such term in the Securities Purchase Agreement.
Establishment of the Bank Account. The Escrow Agent shall establish a special,
segregated interest-bearing bank account at the branch of Fleet Bank selected by
the Escrow Agent (heretofore defined as the "Bank Account"). The purpose of the
Bank Account is for (a) the deposit of all subscription monies (checks, cash or
wire transfers) which are received by the Placement Agent from Investors and are
delivered by the Placement Agent to the Escrow Agent, (b) the holding of amounts
of subscription monies which are collected through the banking system directly
from Investors, and (c) the disbursement of collected funds, all as described
herein. On or before the date of the initial deposit in the Bank Account
pursuant to this Escrow Agreement, the Placement Agent shall notify the Escrow
Agent in writing of the date of the commencement of the Offering (the "Effective
Date"), and the Escrow Agent shall not be required to accept any amounts for
credit to the Escrow Account or for deposit in the Bank Account prior to its
receipt of such notification.
The Offering Period shall be deemed to commence on the date hereof and shall
continue until the earlier of the (a) September 15, 2003 if the Tranche I
Closing has not yet occurred, and (b) 90 days following the date of the Tranche
I Closing if the Tranche II Closing has not yet occurred (or if such date is not
a regular business day, then the following business day). The last day of the
Offering Period, is referred to herein as the "Termination Date." Deposits to
the Bank Account.
The Placement Agent shall promptly deliver to the Escrow Agent all monies which
it receives from Investors, which monies shall be in the form of checks, cash,
or wire transfers. Upon the Escrow Agent's receipt of such monies, they shall be
credited to the Escrow Account. All checks delivered to the Escrow Agent shall
be made payable to "▇▇▇▇▇, ▇▇▇▇▇ et al., Escrow Agent for Diomed Holdings, Inc."
Any check payable other than to the Escrow Agent as required hereby shall be
returned to the Investor, or if the Escrow Agent has insufficient information to
do so, then to the Placement Agent (together with any Subscription Information,
as defined below or other documents delivered therewith) by noon of the next
business day following receipt of such check by the Escrow Agent, and such check
shall be deemed not to have been delivered to the Escrow Agent pursuant to the
terms of this Escrow Agreement. All wire transfers of funds delivered to the
Escrow Account shall be sent as follows:
Bank Name: Fleet Bank
ABA No.: ▇▇▇▇▇▇▇▇▇
Bank Address: ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Account Name: Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C. Client
Group Account
Account No.: ▇▇▇▇▇▇▇▇
Reference: Sunrise/Diomed 22379001
Promptly (and in any event prior to noon on the next business day) after
receiving subscription monies as described in Section 3.1, the Escrow Agent
shall deposit the same into the Bank Account. Amounts of monies so deposited are
hereinafter referred to as "Escrow Amounts". The Escrow Agent shall cause Fleet
Bank to process all Escrow Amounts for collection through the banking system.
Simultaneously with each deposit to the Escrow Account, the Placement Agent (or
the Issuer, if such deposit is made by the Issuer) shall inform the Escrow Agent
in writing of the name and address of the Investor, the respective amounts of
Secured Bridge Notes and Investors' Shares subscribed for by such Investor and
the aggregate dollar amount of such subscription (collectively, the
"Subscription Information"). The Escrow Agent shall not be required to accept
for credit to the Escrow Account or for deposit into the Bank Account checks
which are not accompanied by the appropriate Subscription Information. Wire
transfers and cash representing payments by Investors shall not be deemed
deposited in the Escrow Account until the Escrow Agent has received in writing
the Subscription Information identified on Schedules 1 and 2 of the Securities
Purchase Agreement required with respect to such payments.
The Escrow Agent shall not be required to accept in the Escrow Account any
amounts representing payments by Investors, whether by check, cash or wire,
except during the Escrow Agent's regular business hours. Those Escrow Amounts
which have been deposited in the Bank Account and which have cleared the banking
system and have been collected by the Escrow Agent, are herein referred to as
the "Fund." If the Offering is terminated before the Termination Date, the
Escrow Agent shall refund any portion of the Fund prior to disbursement of the
Fund in accordance with Article 4 hereof upon instructions in writing signed by
both the Issuer and the Placement Agent.
Disbursement from the Bank Account.
If by the close of regular banking hours on the Termination Date the Escrow
Agent has not received written instructions signed by both the Issuer and the
Placement Agent then the Escrow Agent shall promptly (i) refund to each Investor
the amount of payment received from such Investor which is then held in the Fund
or which thereafter clears the banking system, with interest thereon, by drawing
checks on the Bank Account for the amounts of such payments and transmitting
them to the Investors and (ii) return any Issued Securities to the Investors
that had delivered these Issued Securities to the Escrow Agent. In such event,
the Escrow Agent shall promptly notify the Issuer and the Placement Agent of its
distribution of the Fund.
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If at any time up to the close of regular banking hours on the Termination Date
the Escrow Agent shall have the received written instructions signed by both the
Issuer and the Placement Agent with respect to either the Tranche I Closing or
the Tranche II Closing, then the Escrow Agent shall promptly disburse all or a
portion of the Fund in accordance with such instructions, subject to the
following provisions of this Section 4.2.
With respect to the Tranche I Closing, the written instructions delivered in
accordance with the above shall include, but not be limited to, instructions
with respect to the following: (i) the Escrow Agent shall wire transfer in
immediately available funds $6,500,000 (net of any amounts properly identified
in the instructions) to the Issuer's account designated in writing to the Escrow
Agent; (ii) the Issuer shall issue Secured Bridge Notes in the aggregate
principal amount of $6,995,000; (iii) the Escrow Agent shall receive its entire
fee pursuant to Section 8 hereof; (iv) the Placement Agent shall receive its
entire placement agent fee in accordance with its Placement Agent Agreement, as
may be amended from time to time, including the reimbursement of its expenses
and delivery of Secured Bridge Notes in partial satisfaction of such fees, if
any, and (v) legal counsel to the Investors shall receive its or their fees and
expenses.
With respect to the Tranche II Closing, the written instructions delivered in
accordance with the above shall include, but not be limited to, instructions
with respect to the following: (i) the Escrow Agent shall wire transfer in
immediately available funds any remaining amount contained in the Fund, net of
any amounts properly identified in the instructions; (ii) the Issuer shall
cancel the Secured Bridge Notes previously issued (including, without
limitation, notes issued to the Placement Agent (or its designees) as fees under
the Placement Agent Agreement) and issue that number of shares of Common Stock
of the Issuer as shall be identified in the instructions; (iii) interest which
has accrued on the Investors' respective Escrow Amounts shall be refunded to
each Investor by drawing checks on the Bank Account for the amounts of such
interest and transmitting them to the Investors or, if instructed by the
Placement Agent, delivered to the Issuer as consideration for additional
Investors' Shares, and (iv) such other fees and expenses shall be distributed as
may be due and owing to the parties.
Upon disbursement of the Fund pursuant to the terms of this Article 4, the
Escrow Agent shall be relieved of further obligations and released from all
liability under this Escrow Agreement. It is expressly agreed and understood
that in no event shall the aggregate amount of payments made by the Escrow Agent
exceed the amount of the Fund.
Rights, Duties and Responsibilities of Escrow Agent. It is understood and agreed
that the duties of the Escrow Agent are purely ministerial in nature, and that:
The Escrow Agent shall notify the Placement Agent and the Issuer, on a daily
basis, of the Escrow Amounts which have been deposited in the Bank Account and
of the amounts, constituting the Fund, which have cleared the banking system and
have been collected by the Escrow Agent. In addition, the Escrow Agent shall,
from time to time, upon written request therefor from any Investor, notify such
requesting Investor within one business day following receipt of such request,
of the Escrow Amounts which have been deposited in the Bank Account by such
requesting Investor and of the aggregate amounts constituting the Fund, which
have cleared the banking system and have been collected by the Escrow Agent.
The Escrow Agent shall not be responsible for or be required to enforce any of
the terms or conditions of the Securities Purchase Agreement or any other
agreement between the Placement Agent and the Issuer nor shall the Escrow Agent
be responsible for the performance by the Placement Agent or the Issuer of their
respective obligations under this Escrow Agreement.
The Escrow Agent shall not be required to accept from the Placement Agent (or
the Issuer) any Subscription Information pertaining to Investors unless such
Subscription Information is accompanied by checks, cash or wire transfers
meeting the requirements of Section 3.1, nor shall the Escrow Agent be required
to keep records of any information with respect to payments deposited by the
Placement Agent or any Investor (or the Issuer) except as to the amount of such
payments; however, the Escrow Agent shall notify the Placement Agent within a
reasonable time of any discrepancy between the amount set forth in Schedule I
and the amount delivered to the Escrow Agent therewith. Such amount need not be
accepted for deposit in the Escrow Account until such discrepancy has been
resolved.
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The Escrow Agent shall be under no duty or responsibility to enforce collection
of any check delivered to it hereunder. The Escrow Agent, within a reasonable
time, shall return to the Placement Agent or Investor, as the case may be, any
check received which is dishonored, together with the Subscription Information,
if any, which accompanied such check.
The Escrow Agent shall be entitled to rely upon the accuracy, act in reliance
upon the contents, and assume the genuineness of any notice, instruction,
certificate, signature, instrument or other document which is given to the
Escrow Agent pursuant to this Escrow Agreement without the necessity of the
Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall not
be obligated to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or instructions or to
execute any such certificate, instrument or other document.
If the Escrow Agent is uncertain as its duties or rights hereunder or shall
receive instructions with respect to the Bank Account, the Escrow Amounts or the
Fund which, in its sole determination, are in conflict either with other
instructions received by it or with any provision of this Escrow Agreement, it
shall be entitled to hold the Escrow Amounts, the Fund, or a portion thereof, in
the Bank Account pending the resolution of such uncertainty to the Escrow
Agent's sole satisfaction, by final judgment of a court or courts of competent
jurisdiction or otherwise; or the Escrow Agent, at its sole option, may deposit
the Fund (and any other Escrow Amounts that thereafter become part of the Fund)
with the Clerk of a court of competent jurisdiction in a proceeding to which all
parties in interest are joined. Upon the deposit by the Escrow Agent of the Fund
with the Clerk of any court, the Escrow Agent shall be relieved of all further
obligations and released from all liability hereunder. The Escrow Agent shall
not be liable for any action taken or omitted hereunder, or for the misconduct
of any employee, agent or attorney appointed by it, except in the case of
willful misconduct or gross negligence. The Escrow Agent shall be entitled to
consult with counsel of its own choosing and shall not be liable for any action
taken, suffered or omitted by it in accordance with the advice of such counsel.
The Escrow Agent shall have no responsibility at any time to ascertain whether
or not any security interest exists in the Escrow Amounts, the Fund or any part
thereof or to file any financing statement under the Uniform Commercial Code
with respect to the Fund or any part thereof.
Amendment; Resignation. This Escrow Agreement may be altered or amended only
with the written consent of the Issuer, the Placement Agent and the Escrow
Agent. The Escrow Agent may resign for any reason upon ten (10) business days'
written notice to the Issuer and the Placement Agent. After giving notice of its
resignation as aforesaid, the Escrow Agent shall hold the Escrow Amounts until
they clear the banking system and the Fund for a period of not more than five
(5) business days following the effective date of such resignation, at which
time (a) if a successor escrow agent shall have been appointed and written
notice thereof (including the name and address of such successor escrow agent)
shall have been given to the resigning Escrow Agent by the Issuer, the Placement
Agent and such successor escrow agent, then the resigning Escrow Agent shall pay
over to the successor escrow agent the Fund, less any portion thereof previously
paid out in accordance with this Escrow Agreement; or (b) if the resigning
Escrow Agent shall not have received written notice signed by the Issuer, the
Placement Agent and a successor escrow agent, then the resigning Escrow Agent
shall promptly refund the amount in the Fund to each Investor, without interest
thereon or deduction therefrom, and the resigning Escrow Agent shall promptly
notify the Issuer and the Placement Agent in writing of its liquidation and
distribution of the Fund; whereupon, in either case, the Escrow Agent shall be
relieved of all further obligations and released from all Liability under this
Escrow Agreement. Without limiting the provisions of Section 8 hereof, the
resigning Escrow Agent shall be entitled to be reimbursed by the Issuer and the
Placement Agent for any expenses incurred in connection with its resignation,
transfer of the Fund to a successor escrow agent or distribution of the Fund
pursuant to this Section 6.
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Representations and Warranties. The Issuer and the Placement Agent hereby
severally represent and warrant to the Escrow Agent that:
No party other than the parties hereto and the Investors have, or shall have,
any lien, claim or security interest in the Escrow Amounts or the Fund or any
part thereof other then with respect to the evidence of notes which may be held.
No financing statement under the Uniform Commercial Code is on file in any
jurisdiction claiming a security interest in or describing (whether specifically
or generally) the Escrow Amounts or the Fund or any part thereof. The
Subscription Information contained in Schedules 1 and 2 of the Securities
Purchase Agreement shall, at the time of submission and at the time of the
disbursement of the Fund, be deemed a representation and warranty that such
deposit represents a bona fide payment by the purchaser described therein for
the amount of Securities set forth in such Schedule 1.
Fees and Expenses. The Escrow Agent shall be entitled to a fee equal to $7,500,
payable upon request in writing from the Escrow Agent to the Issuer. In
addition, if any controversy arises under this Escrow Agreement, the Issuer
agrees to reimburse the Escrow Agent for any reasonable expenses incurred in
connection with this Escrow Agreement, including, but not limited to, reasonable
counsel fees.
Indemnification and Contribution.
The Issuer (the "Indemnitor") agrees to indemnify the Escrow Agent and its
officers, directors, employees, agents and shareholders (collectively referred
to as the "Indemnitees") against, and hold them harmless of and from, any and
all loss, liability, cost, damage and expense, including without limitation,
reasonable counsel fees, which the Indemnitees may suffer or incur by reason of
any action, claim or proceeding brought against the Indemnitees arising out of
or relating in any way to this Escrow Agreement or any transaction to which this
Escrow Agreement relates, unless such action, claim or proceeding is the result
of the willful misconduct or gross negligence of the Indemnitees.
If the indemnification provided for in Section 9.1 is applicable, but for any
reason is held to be unavailable, the Indemnitor shall contribute such amounts
as are just and equitable to pay, or to reimburse the Indemnitees for, the
aggregate of any and all losses, liabilities, costs, damages and expenses,
including counsel fees, actually incurred by the Indemnitees as a result of or
in connection with, and any amount paid in settlement of, any action, claim or
proceeding arising out of or relating in any way to any actions or omissions of
the Indemnitor.
The provisions of this Article 9 shall survive any termination of this Escrow
Agreement, whether by disbursement of the Fund, resignation of the Escrow Agent
or otherwise.
Governing Law and Assignment. This Escrow Agreement shall be construed in
accordance with and governed by the laws of the State of New York and shall be
binding, upon the parties hereto and their respective successors and assigns;
provided, however, that any assignment or transfer by any party of its rights
under this Escrow Agreement or with respect to the Escrow Amounts or the Fund
shall be void as against the Escrow Agent unless (a) written notice thereof
shall be given to the Escrow Agent; and (b) the Escrow Agent shall have
consented in writing to such assignment or transfer.
Notices. All notices required to be given in connection with this Escrow
Agreement shall be in writing and sent by reputable overnight courier with
receipt confirmed or by hand delivery with receipt acknowledged, addressed, if
to the Issuer or the Placement Agent, at their respective addresses set forth on
the signature page, and if to the Escrow Agent, at its address set forth above,
to the attention of ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇. Notices given by facsimile
transmission shall be effective upon confirmed receipt of such transmission but
only if a hard copy of the notice so transmitted is also sent to the recipient
by First Class U.S. Mail, postage prepaid.
5
Severability. If any provision of this Escrow Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Escrow Agreement or the
application of such provision to persons or circumstances other than those to
which it is held invalid or unenforceable shall not be affected thereby and
shall be valid and enforceable to the fullest extent permitted by law.
Execution in Several Counterparts. This Escrow Agreement may be executed in
several counterparts or by separate instruments, and all of such counterparts
and instruments shall constitute one agreement, binding on all of the parties
hereto.
Entire Agreement; Amendments. This Escrow Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings (written or oral) of the
parties in connection therewith. This Escrow Agreement may not be amended except
by a written instrument executed by all of the parties.
[Signature page Follows]
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IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement
as of the day and year first above written.
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY & POPEO, P.C.
By: __________________________
Name:
Title:
DIOMED HOLDINGS, INC.
By: __________________________
Name:
Title:
SUNRISE SECURITIES CORP.
By: __________________________
Name:
Title:
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