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FUNDS ESCROW AGREEMENT
This Agreement (this "Agreement") is dated as of the 8th day
of June 2006 among RELIANT HOME WARRANTY CORPORATION, a Florida corporation (the
"Company"), Laurus Master Fund, Ltd. (the "Purchaser"), and Loeb & Loeb LLP (the
"Escrow Agent"):
W I T N E S S E T H:
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WHEREAS, the Purchaser has advised the Escrow Agent that (a)
the Company and the Purchaser have entered into a Security and Purchase
Agreement (the "Security Agreement") for the sale by the Company to the
Purchaser of a secured non-convertible revolving note (the "Secured
Non-Convertible Revolving Note"), (b) the Company has issued to the Purchaser a
common stock purchase warrant (the "Warrant") in connection with the issuance of
the Secured Non-Convertible Revolving Note, and (c) the Company and the
Purchaser have entered into a Registration Rights Agreement covering the
registration of the Company's common stock underlying the Secured
Non-Convertible Revolving Note and the Warrant (the "Registration Rights
Agreement");
WHEREAS, the Company and the Purchaser wish to deliver to the
Escrow Agent copies of the Documents (as hereafter defined) and, following the
satisfaction of all closing conditions relating to the Documents, the Purchaser
to deliver the Escrowed Payment (as hereafter defined), in each case, to be held
and released by 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 meanings set forth below.
(a) "Agreement" means this Agreement, as amended, modified and/or
supplemented from time to time by written agreement among the
parties hereto.
(b) "Disbursement Letter" means that certain letter delivered to the
Escrow Agent by the Company, acceptable in form and substance to
the Purchaser, setting forth wire instructions and amounts to be
funded at the Closing.
(c) "Documents" means copies of the Disbursement Letter, the Security
Agreement, the Secured Convertible Note, the Secured
Non-Convertible Revolving Note, the Warrant and the Registration
Rights Agreement].
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(d) "Escrowed Payment" means $1,056,115.93.
(e) "Servicing Payment" means the servicing payment to be paid to
Laurus Capital Management, LLC, the fund manager, as set forth on
Schedule A hereto.
1.2 Entire Agreement. This Agreement constitutes the entire agreement among
the parties hereto with respect to the arrangement with the Escrow
Agent and supersedes all prior agreements, understandings, negotiations
and discussions of the parties, whether oral or written with respect to
the arrangement with the Escrow Agent. There are no warranties,
representations and other agreements made by the parties in connection
with the arrangement with the Escrow Agent 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, in each case only by a written
instrument signed by all parties hereto, 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 Law Governing this Agreement; Consent to Jurisdiction. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
With respect to any suit, action or proceeding relating to this
Agreement or to the transactions contemplated hereby ("Proceedings"),
each party hereto irrevocably submits to the exclusive jurisdiction of
the courts of the County of New York, State of New York and the United
States District court located in the county of New York in the State of
New York. Each party hereto hereby irrevocably and unconditionally (a)
waives trial by jury in any Proceeding relating to this Agreement and
for any related counterclaim and (b) waives any objection which it may
have at any time to the laying of venue of any Proceeding brought in
any such court, waives any claim that such Proceedings have been
brought in an inconvenient forum and further waives the right to
object, with respect to such Proceedings, that such court does not have
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jurisdiction over such party. As between the Company and the Purchaser,
the prevailing party shall be entitled to recover from the other party
its reasonable attorneys' fees and costs. In the event that any
provision of this Agreement is determined by a court of competent
jurisdiction to be invalid or unenforceable, then the remainder of this
Agreement shall not be affected and shall remain in full force and
effect.
1.7 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and, therefore,
stipulates that the rule of construction that ambiguities are to be
resolved against the drafting party shall not be applied in the
interpretation of this Agreement to favor any party against the other.
ARTICLE II
APPOINTMENT OF AND DELIVERIES TO THE ESCROW AGENT
2.1 Appointment. The Company and the Purchaser hereby irrevocably designate
and appoint the Escrow Agent as their escrow agent for the purposes set
forth herein, and the Escrow Agent by its execution and delivery of
this Agreement hereby accepts such appointment under the terms and
conditions set forth herein.
2.2 Copies of Documents to Escrow Agent. On or about the date hereof, the
Purchaser and the Company shall deliver to the Escrow Agent copies of
the Documents executed by such parties.
2.3 Delivery of Escrowed Payment to Escrow Agent. Following the
satisfaction of all closing conditions relating to the Documents (other
than the funding of the Escrowed Payment), the Purchaser shall deliver
to the Escrow Agent the Escrowed Payment. At such time, the Escrow
Agent shall hold the Escrowed Payment as agent for the Company, subject
to the terms and conditions of this Agreement.
2.4 Intention to Create Escrow Over the Escrowed Payment. The Purchaser and
the Company intend that the Escrowed Payment shall be held in escrow by
the Escrow Agent and released from escrow by the Escrow Agent only in
accordance with the terms and conditions of this Agreement.
ARTICLE III
RELEASE OF ESCROW
3.1 Release of Escrow. Subject to the provisions of Section 4.2, the Escrow
Agent shall release the Escrowed Payment from escrow as follows:
(a) Upon receipt by the Escrow Agent of (i) oral instructions from
David Grin and/or Eugene Grin (each of whom is a director of the
Purchaser) consenting to the release of the Escrowed Payment from
escrow in accordance with the Disbursement Letter following the
Escrow Agent's receipt of the Escrowed Payment, (ii) the
Disbursement Letter, and (iii) the Escrowed Payment, the Escrowed
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Payment shall promptly be disbursed in accordance with the
Disbursement Letter. The Disbursement Letter shall include,
without limitation, Escrow Agent's authorization to retain from
the Escrowed Payment Escrow Agent's fee for acting as Escrow Agent
hereunder and the Servicing Payment for delivery to Laurus Capital
Management, LLC in accordance with the Disbursement Letter.
(b) 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") relating to the Escrowed Payment,
the Escrow Agent shall remit the Escrowed Payment 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 is a
court of competent jurisdiction and that the Court Order is final
and non-appealable.
3.2 Acknowledgement of Company and Purchaser; Disputes. The Company and the
Purchaser acknowledge that the only terms and conditions upon which the
Escrowed Payment are to be released from escrow are as set forth in
Sections 3 and 4 of this Agreement. The Company and the Purchaser
reaffirm their agreement to abide by the terms and conditions of this
Agreement with respect to the release of the Escrowed Payment. Any
dispute with respect to the release of the Escrowed Payment shall be
resolved pursuant to Section 4.2 or by written agreement between the
Company and Purchaser.
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 Purchaser and the Company acknowledge and agree that the
Escrow Agent (i) shall not be required to inquire into whether the
Purchaser, the Company or any other party is entitled to receipt
of any Document or all or any portion of the Escrowed Payment;
(ii) shall not be called upon to construe or review any Document
or any other document, instrument or agreement entered into in
connection therewith; (iii) shall be obligated only for the
performance of such duties as are specifically assumed by the
Escrow Agent pursuant to this Agreement; (iv) 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 the Escrow
Agent 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 propriety or validity or the service thereof; (v)
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; (vi) shall
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not be responsible for the identity, authority or rights of any
person, firm or company executing or delivering or purporting to
execute or deliver this Agreement or any Document or any funds
deposited hereunder or any endorsement thereon or assignment
thereof; (vii) 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 (viii) may
consult counsel satisfactory to Escrow Agent (including, without
limitation, Loeb & Loeb, LLP or such other counsel of Escrow
Agent's choosing), 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 Purchaser and the 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 rights or powers conferred upon Escrow Agent by this
Agreement. The Purchaser and the Company hereby, jointly and
severally, indemnify and hold harmless the Escrow Agent and any of
Escrow Agent's partners, employees, agents and representatives
from and against any and all actions taken or omitted to be taken
by Escrow Agent or any of them hereunder and any and all claims,
losses, liabilities, costs, damages and expenses suffered and/or
incurred by the Escrow Agent arising in any manner whatsoever out
of the transactions contemplated by this Agreement and/or any
transaction related in any way hereto, including the fees of
outside counsel and other costs and expenses of defending itself
against any claims, losses, liabilities, costs, damages and
expenses arising in any manner whatsoever out the transactions
contemplated by this Agreement and/or any transaction related in
any way hereto, except for such claims, losses, liabilities,
costs, damages and expenses incurred by reason of the Escrow
Agent's gross negligence or willful misconduct. The Escrow Agent
shall owe a duty only to the Purchaser and the Company under this
Agreement and to no other person.
(c) The Purchaser and the Company shall jointly and severally
reimburse the Escrow Agent for its reasonable out-of-pocket
expenses (including counsel fees (which counsel may be Loeb &
Loeb, LLP or such other counsel of the Escrow Agent's choosing)
incurred in connection with the performance of its duties and
responsibilities hereunder, which shall not (subject to Section
4.1(b)) exceed $4,000.
(d) The Escrow Agent may at any time resign as Escrow Agent hereunder
by giving five (5) business days prior written notice of
resignation to the Purchaser and the Company. Prior to the
effective date of resignation as specified in such notice, the
Purchaser and Company will issue to the Escrow Agent a joint
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instruction authorizing delivery of the Documents and the Escrowed
Payment to a substitute Escrow Agent selected by the Purchaser and
the Company. If no successor Escrow Agent is named by the
Purchaser and the Company, the Escrow Agent may apply to a court
of competent jurisdiction in the State of New York for appointment
of a successor Escrow Agent, and deposit the Documents and the
Escrowed Payment with the clerk of any such court, and/or
otherwise commence an interpleader or similar action for a
determination of where to deposit the same.
(e) The Escrow Agent does not have and will not have any interest in
the Documents and the Escrowed Payment, but is serving only as
escrow agent, having only possession thereof.
(f) The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith and reasonably believed by it to be
authorized hereby or within the rights or powers conferred upon it
hereunder, nor for action taken or omitted by it in good faith,
and in accordance with advice of counsel (which counsel may be
Loeb & Loeb, LLP or such other counsel of the Escrow Agent's
choosing), and shall not be liable for any mistake of fact or
error of judgment or for any acts or omissions of any kind except
to the extent any such liability arose from its own willful
misconduct or gross negligence.
(g) 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.
(h) The Escrow Agent shall be permitted to act as counsel for the
Purchaser or the Company, as the case may be, in any dispute as to
the disposition of the Documents and the Escrowed Payment, in any
other dispute between the Purchaser and the Company, whether or
not the Escrow Agent is then holding the Documents and/or the
Escrowed Payment and continues to act as the Escrow Agent
hereunder.
(i) 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 Documents
and/or the Escrowed Payment, 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 Documents and the Escrowed Payment pending receipt of a joint
instruction from the Purchaser and the Company, (ii) commence an
interpleader or similar action, suit or proceeding for the
resolution of any such dispute; and/or (iii) deposit the Documents
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and the Escrowed Payment 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 Purchaser 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 Documents and the Escrowed
Payment. The Escrow Agent shall have the right to retain counsel
if it becomes involved in any disagreement, dispute or litigation
on account of this Agreement or otherwise determines that it is
necessary to consult counsel which counsel may be Loeb & Loeb, LLP
or such other counsel of the Escrow Agent's choosing.
(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
Purchaser and the Company or to any other person, firm, company or
entity by reason of such compliance.
ARTICLE V
GENERAL MATTERS
5.1 Termination. This escrow shall terminate upon disbursement of the
Escrowed Payment in accordance with the terms of this Agreement or
earlier upon the agreement in writing of the Purchaser and the Company
or resignation of the Escrow Agent in accordance with the terms hereof.
5.2 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed
to have been duly given one (1) day after being sent by telecopy (with
copy delivered by overnight courier, regular or certified mail):
(a) If to the Company, to:
Reliant Home Warranty Corporation
350 Bay Street
Suite 250
Toronto, Ontario
M5H 2S6
Attention: Kevin Hamilton
(b) If to the Purchaser, to:
Laurus Master Fund, Ltd.
M&C Corporate Services Limited,
P.O. Box 309 GT, Ugland House
South Church Street, George Town
Grand Cayman, Cayman Islands
Fax: 345-949-8080
Attention: John Tucker, Esq.
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(c) If to the Escrow Agent, to:
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
Fax: (212) 407-4990
Attention: Scott J. Giordano, Esq.
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 Interest. The Escrowed Payment shall not be held in an interest bearing
account nor will interest be payable in connection therewith.
5.4 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 inure
to the benefit of and be binding upon the parties hereto and their
respective legal representatives, successors and assigns.
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.
5.6 Counterparts/Execution. This Agreement may be executed in any number of
counterparts and by 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 agreement. This Agreement may be executed by facsimile
transmission.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
COMPANY:
RELIANT HOME WARRANTY CORPORATION
By:
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Name
Title
PURCHASER:
LAURUS MASTER FUND, LTD.
By:
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Name
Title
ESCROW AGENT:
LOEB & LOEB LLP
By:
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Name
Title
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SCHEDULE "A"
TO FUNDS ESCROW AGREEMENT
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PURCHASER PRINCIPAL NOTE AMOUNT
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LAURUS MASTER FUND, LTD., Secured Non-Convertible Revolving Note in an aggregate
M&C Corporate Services Limited, principal amount of $25,000,000
P.O. Box 309 GT,
Ugland House, South Church Street,
George Town, Grand Cayman, Cayman Islands
Fax: 345-949-8080
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TOTAL $25,000,000
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FUND MANAGER SERVICING PAYMENT
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LAURUS CAPITAL MANAGEMENT, L.L.C. Servicing payment payable in connection with investment
825 Third Avenue, 14th Floor by Laurus Master Fund, Ltd. for which Laurus Capital
New York, New York 10022 Management, L.L.C. is the Manager.
Fax: 212-541-4434
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TOTAL $900,000
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WARRANTS
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WARRANT RECIPIENT WARRANTS IN CONNECTION WITH OFFERING
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LAURUS MASTER FUND, LTD. Warrant exercisable into 36,128,286 shares of common
M&C Corporate Services Limited, stock of the Company issuable in connection with the
P.O. Box 309 GT, Secured Non-Convertible Revolving Note.
Ugland House, South Church Street,
George Town, Grand Cayman, Cayman Islands
Fax: 345-949-8080
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TOTAL Warrants exercisable into 36,128,286 shares of common
stock of the Company
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