ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement") is made and entered into
as of the 1st day of December, 2000 by and between ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, (collectively, the
"Principal Shareholders"), Cosmo Communications Corporation (the
"Company"), Master Light Enterprises Limited (the "Purchaser"),
and ▇▇▇▇▇▇▇▇, August & ▇▇▇▇▇▇▇▇▇, LLP (the "Escrow Agent").
RECITALS
WHEREAS, the Principal Shareholders have offered to sell to the
Purchaser, in the aggregate, one million three hundred forty-seven
thousand four hundred twenty 1,347,420 shares of the Company's common
stock (the "Shares"), representing fifty-one percent (51%) of the
issued and outstanding shares of the Company as of the date hereof;
and
WHEREAS, the Purchaser and the Principal Shareholders have entered
into that certain letter agreement, dated November ___, 2000, (the
"Letter Agreement") which provides, among other things, that the
amount of Fifty Thousand Six Hundred Eighty-Three Dollars ($50,683),
representing the full purchase price for the Shares (the "Purchase
Price"), is to be held in an escrow account with the Escrow Agent
pending the Second Closing (as defined therein); and
WHEREAS, the Principal Shareholders desire to place in escrow the
Purchase Price, and the Escrow Agent agrees to hold and distribute
such Purchase Price subject to and in accordance with the
instructions of the parties, pending the Second Closing;
NOW, THEREFORE, the parties, intending to be legally bound, hereby
agree as follows (capitalized terms used but not otherwise defined
herein shall have the respective meanings given to them in the Letter
Agreement).
ARTICLE I
DIRECTIONS
1.01 ESCROWED PROPERTY. Upon the execution of this Agreement and the
consmmation of the First Closing, each of (a) the fully-executed
original of this Agreement, including the attachments thereto and
(b) cash in the full amount of the Purchase Price (collectively,
the "Escrowed Property") shall be deposited by the parties with
the Escrow Agent for distibution in accordance with the
instructions attached thereto (the "Instructions").
1.02 INSTRUCTIONS. The Escrow Agent shall hold and disburse the
Escrowed Property pursuant to the Instructions, which Instructions
are hereby incorporated herein by reference as an integral part of
this Agreement. The parties agree that the Escrowed Property is
to be held in an interest bearing account but will not be invested.
1.03 ACCEPTANCE BY ESCROW AGENT. The Escrow Agent agrees to act as the
escrow agent in accordance with this Agreement and to perform the
duties of the Escrow Agent as contemplated herein.
ARTICLE II
COMPENSATION OF THE ESCROW AGENT
2.01 The parties hereby agree as follows:
(a) as the sole compensation to the Escrow Agent for the
performance of its duties hereunder, the Escrow Agent shall be
entitled to retain for its own account all interest earned on the
Escrowed Property during the Term of this Agreement; and
(b) the Escrow Agent shall be entitled to be reimbursed for
any and all out-of-pocket expenses incurred by it in the
performance of its duties during the Term of this Agreement.
2.02 The Escrow Agent shall have a first and prior lien upon the
Escrowed Property to secure the payments described under Section
2.01(a) and (b) above. If any such payment is not timely received
by the Escrow Agent, the parties each hereby authorize and direct
the Escrow Agent to deduct such payment from the Escrowed Property.
All such payments due but not paid within thirty (30) days shall
thereafter accrue interest at the rate of ten percent (10%) per
annum. In addition, the Escrow Agent shall have the right, but
not the obligation, to set off any other amounts owed to it by
the Parties, or any of them, against the Escrowed Property, and
is hereby authorized and directed to debit the Escrow Account by
all such amounts at any time, and from time to time, during the
Term hereof.
ARTICLE III
PROVISIONS CONCERNING ESCROW AGENT
3.01 AUTHORITY OF THE PARTIES. The Escrow Agent shall be under no
duty or obligation to ascertain the identity, authority, and/or
rights of any of the parties or their respective employees,
affiliates or agents.
3.02 OTHER AGREEMENTS. The Escrow Agent shall not itself be party
to, or bound by, any agreement among the Parties hereto, other
than this Agreement, and the Escrow Agent shall have no duty to
know or inquire as to the performance or nonperformance of any
provision of any such agreement.
3.03 DEPOSITED ESCROWED PROPERTY. The Escrow Agent assumes no
responsibility for the validity or sufficiency of any instrument
held as Escrowed Property, except as may be expressly and
specifically set forth in this Agreement.
3.04 LATE PAYMENT OR PERFORMANCE. The Escrow Agent may accept any
payment or performance required under this Agreement after the
date such payment or performance is due, unless subsequent to
such date, but prior to the actual date of payment or performance,
the Escrow Agent is instructed in writing by the affected party
not to accept such payment or performance.
3.05 ESCHEAT. Each party hereto is advised that under California
law, Escrowed Property which is presumed abandoned may escheat
to the State. The Escrow Agent shall have no liability to any
party or their respective heirs, legal representatives,
successors, or assigns, should any or all of the Escrowed
Property become so escheatable or escheat by operation of law.
3.06 NON-LIABILITY. The Escrow Agent shall not be liable for any
act or omission while acting in good faith and in the exercise
of its own best judgment. Any act or omission by the Escrow
Agent pursuant to the advice of its attorneys shall be
conclusive (but not the only) evidence of good faith. The
Escrow Agent shall have the right to consult with independent
counsel at the expense of the parties whenever any question
arises concerning this Agreement, and shall incur no liability
for any delay reasonably required to obtain such advice of
counsel. The Escrow Agent shall not be liable for the
alteration, modification or elimination of any right permitted
or given under the instructions set forth in Appendix A and/or
in any document deposited under this Agreement pursuant to any
statute of limitations or by reason of laches. The Escrow
Agent shall have no further responsibility or liability
whatsoever to the Principal Shareholders following a partial
or complete distribution of the Escrowed Property pursuant to
this Agreement. The Escrow Agent shall not incur any liability
with respect to any act or omission in reliance upon any
document, including any written notice or instructions provided
for in this Escrow Agreement. In performing its obligations
hereunder, the Escrow Agent shall be entitled to presume,
without inquiry, the due execution, validity and effectiveness
of all documents it receives, and also the truth and accuracy
of any information contained therein. The Escrow Agent shall
not be responsible or liable for any diminution of principal of
the Escrowed Property. Notwithstanding the foregoing, nothing
in this Agreement shall release the Escrow Agent from liability
to the Principal Shareholders for any act or omission involving
the Escrow Agent's gross negligence or willful misconduct.
3.07 Conflict and Waiver. The parties are not bound by or subject
to any contract, agreement, law, court order or judgment,
administrative ruling, regulation or any other item which
prohibits or restricts such party from entering into and
performing this Agreement in accordance with its terms, or
requiring the consent of any third party prior to the entry into
or performance of this Agreement in accordance with its terms by
such party. No waiver of any provision of this Agreement shall
be deemed to be or shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
The performance of escrow duties on behalf of these parties
shall not be, and shall in no way be construed to be, the
performance of legal services of any kind or nature to any
party hereto by the Escrow Agent.
3.08 Indemnification. Except for any act or omission by the Escrow
Agent that constitutes gross negligence or willful misconduct,
the parties each agree to indemnify and hold harmless the Escrow
Agent from and against any liability, cost, or expense whatsoever,
including, but not limited to, attorneys' fees incurred by reason
of accepting the Agreement and/or Escrowed Property.
ARTICLE IV
GENERAL TERMS AND CONDITIONS
4.01 Extension of Benefits. This Agreement shall be binding upon,
insure to the benefit of, and be enforceable by, the respective
heirs, legal representatives, successors, and assigns of the
parties hereto.
4.02 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
California applicable to the performance and enforcement of
contracts made within such state, without giving effect to the
law of conflicts of laws applied thereby. In the event that any
dispute shall occur between the parties arising out of or
resulting from the construction, interpretation, enforcement or
any other aspect of this Agreement, the parties hereby agree to
accept the exclusive jurisdiction of the Courts of the State of
California sitting in and for the County of Orange. In the event
either party shall be forced to bring any legal action to protect
or defend its rights hereunder, then the prevailing party in such
proceeding shall be entitled to reimbursement from the non-pre-
vailing party of all fees, costs and other expenses (including,
without limitation, the reasonable expenses of its attorneys)
in bringing or defending against such action.
4.03 Notices. Any notice required or permitted hereunder shall be
given in writing and shall be conclusively deemed effectively
given upon either (a) personal delivery; (b) one day after
facsimile transmission to the facsimile number indicated below
and evidenced by a written record of completed transmission to
such number; or (c) five days after deposit in the United States
mail, by registered or certified mail, postage prepaid, addressed
to the following address, or to such other address as the party
may designate by ten (10) days' advance written notice to the
other party:
If to the Purchaser: Master Light Enterprises Limited.
5/F. ▇▇▇▇▇ ▇▇▇
Industrial Building
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇
With a copy (which shall
not constitute notice) to: Feldhake, August & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. August, Esq.
Partner
If to the Company: Cosmo Communications Corporation
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇
President
If to the Principle Shareholders: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
4.04 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties with respect to
the subject matter of this Agreement.
4.05 Amendment. This Agreement may be amended, modified, superseded,
rescinded, or canceled only by a written instrument executed
by all of the parties.
4.06 Waivers. The failure of any party to the Agreement at any
time or times to require performance of any provision under
this Agreement shall in no manner affect the right at a later
time to enforce the same performance. A waiver by any party
to the Agreement of any such condition or breach of any term,
covenant, representation, or warranty contained in this
Agreement, in any one or more instances, shall neither be
construed as a further or continuing waiver of any such
condition or breach nor a waiver of any other condition or
breach of any other term, covenant, representation, or warranty
contained in this Agreement.
4.07 Headings. Section headings of this Agreement have been inserted
for convenience of reference only and shall in no way restrict
or otherwise modify any of the terms or provisions of this
Agreement.
4.08 Counterparts. This Agreement may be executed in one or more
counterparts each of which when executed shall be deemed to be
an original, and such counterparts shall together constitute
one and the same instrument.
4.09 Resignation or Removal of Escrow Agent. The Escrow Agent may
resign at any time by furnishing notice of its resignation to
the Principal Shareholders. The Principal Shareholders may
remove the Escrow Agent at any time by furnishing to the
Escrow Agent a written notice of its removal. Such resignation
or removal, as the case may be, shall be effective upon delivery
of such notice.
The Escrow Agent, by affixing its signature, hereby agrees to hold,
administer, and dispose of the Escrowed Property in accordance with the
terms, conditions, and instructions of this Agreement and any valid
amendments thereto, including those set forth in Appendix A.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the parties have signed this Agreement effective as
of the date and year first above written.
THE ESCROW AGENT:
▇▇▇▇▇▇▇▇, AUGUST & ▇▇▇▇▇▇▇▇▇ LLP
By:
Title:
THE PRINCIPAL SHAREHOLDERS: WITNESS:
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/
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▇▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
COSMO COMMUNICATIONS CORPORATION
By: /s/
-----------------
Title:
MASTER LIGHT ENTERPRISES LIMITED
By: /s/
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Title:
APPENDIX A
INSTRUCTIONS
I. First Closing and Investment of Funds. At the consummation of
the First Closing, which shall occur at the offices of ▇▇▇▇▇▇▇▇,
August & ▇▇▇▇▇▇▇▇▇ LLP, the following items shall be deposited
with the Escrow Agent:
A. Fifty Thousand Six Hundred Eighty Three Dollars ($50,683.00),
representing the "Purchase Price," for the purchase by the
Purchaser of a total of one million three hundred forty seven
thousand four hundred twenty (1,347,420) shares of the Company's
common stock from the Principal Shareholders, pledged to the
Purchaser to secure the respective obligations of the Principal
Shareholders to be performed at or before the Second Closing;
and
B. a fully executed copy of this Escrow Agreement.
II. Disbursement and Continuation of Escrow to Second Closing.
At the consummation of the Second Closing, the following items
shall be deposited with the Escrow Agent for the duration of the
Term of this Agreement:
A. the renewal of the pledge of the Purchase Price in accordance
with the terms of the Escrow Agreement;
B. a stock pledge, in favor of the Purchaser, with respect to nine
hundred eighty thousand nine hundred twenty six (980,926) shares
of the Company's common stock which will be owned by the
Principal Shareholders as of that date;
C. an aggregate of nine hundred forty seven thousand one hundred
forty seven (947,147) shares of the Company's common stock owned
by the Principal Shareholders to be returned to the Company
(to be held in its treasury); and
D. a continuing security interest granted to the Purchaser in the
assets currently comprising the collateral security pledged to
secure the obligations of the Company with respect to the bridge
loan extended by Starlight Marketing
Development Ltd., which amount shall be credited toward the purchase
price for the Company's shares at the time of the Second Closing.
III. Distributions; Termination of Escrow Fund. In the event that
the Continuing Obligations are fulfilled by the date which is two
(2) years from the date of the Second Closing, then as of the
date such Continuing Obligations have been fully satisfied, all
pledges and other security interests in escrow shall be released
and fully discharged. In the event that the Continuing Obligations
are not fulfilled by the date which is two (2) years from the date
of the Second Closing, then as of such date all collateral pledged
to the Purchaser hereunder shall become the property of the
Purchaser, without further consideration, as will be specifically
set forth in the collateral documents to be entered into between
the parties at the Second Closing and deposited, originally signed,
into the Escrow.