ANNEX II
TO
SECURITIES PURCHASE AGREEMENT
JOINT ESCROW INSTRUCTIONS
Dated as of the date of the
Securities Purchase Agreement to
Which These Joint Escrow
Instructions Are Attached
Krieger & Prager LLP
39 Broadway, Suite 1440
New York, New York 10006
Attention: Samuel M. Krieger, Esq.
Dear Mr. Krieger:
These Joint Escrow Instructions are attached as Annex II to that certain
Securities Purchase Agreement of even date herewith (the "Agreement") between
Conspiracy Entertainment Holdings, Inc., a Utah corporation (the "Company") and
the one or more Lenders named therein (each, a "Lender"). Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
provided in the Agreement.
As escrow agent for both the Company and each of the Lenders, you
(hereafter, the "Escrow Agent") are hereby authorized and directed to hold the
documents and funds (together with any interest thereon, the "Escrow Funds")
delivered to the Escrow Agent pursuant to the terms of the Agreement in
accordance with the following instructions:
1. (a) The Escrow Agent shall, as promptly as practicable, notify the
Company orally or in writing of receipt of the Purchase Price for the
Purchased Securities from or on behalf of each Lender and notify the
Lender orally or in writing of receipt of the Certificates. As promptly as
practicable upon the Escrow Agent's receipt of the relevant Purchase Price
from the Lenders and, from the Company, the Certificates and opinion of
counsel of the Company (or, with respect to any one or more of them,
receipt of notice, whether oral or in written form, from the Company or a
Lender that the respective conditions precedent to the purchase and sale
have been satisfied or waived) (collectively, the "Release Conditions"),
the Escrow Agent shall release, as contemplated below and after reduction
by the amounts referred to below in this Section 1, the relevant Escrow
Funds to or upon the order of the Company, and shall release the relevant
Certificates to the Lender.
(b) The term "Placement Agent's Compensation" means (i) a cash
amount (the "Placement Agent's Fee") equal to five and one-half percent
(5.5%) of the Total Purchase Price, (ii) 300,000 shares of Common Stock
issued to the Placement Agent or its designees (collectively, "Placement
Agent Shares"), with piggy-back rights, and (iii) if any Warrant initially
issued to a Lender is exercised by a Holder in whole or in part, a cash
fee equal to ten percent (10%) of the corresponding cash Exercise Price
paid for the Warrant Shares subject to such exercise, which shall be paid
within five (5) Trading Days after the Company's receipt of such Exercise
Price. The Placement Agent Shares shall be delivered to the Escrow Agent
within five (5) Trading Days after the Closing Date.
(c) The term "Escrow Agent Fee" means $10,000, which represents the
legal and escrow fees payable to the Escrow Agent in connection with the
preparation of the Transaction Agreements and acting as escrow agent under
these Joint Escrow Instructions. The term does not include the Investor
Counsel Registration Statement Review Fee (as defined below) or any
amounts payable to the Escrow Agent pursuant to any other provisions of
the Transaction Agreements or pursuant to the terms of these Joint Escrow
Instructions other than this Section 1.
(d) Subject to the other provisions hereof, on the Closing Date and
on the date when certain occurrences described below occur, the Escrow
Agent shall release Escrow Property and distribute it in accordance with
the following instructions:
(I) On the Closing Date, the Escrow Agent shall:
(A) release the Certificates to the respective Lenders;
(B) release, to or upon the order of the Placement Agent, the
Placement Agent's Fee;
(C) release, to or upon the order of the Escrow Agent, the
Escrow Agent Fee;
(D) release, to or upon the order of Sichenzia Ross Friedman
Ference LLP ("Company Counsel"), an amount equal to $10,000
(of which, $5,000 is on account of Company Counsel's fees in
connection with the closing of the transactions contemplated
by the Transaction Agreements and $5,000 is on account of the
Company Counsel's fees in connection with the preparation and
filing of an Information Statement reflecting the Authorized
Share Amendment referred to in Annex VI);
(E) release, to Krieger & Prager, LLP, to be held in reserve
pending release as provided below, an amount (the "Reserved
Escrow Funds") equal to the aggregate of the following sums:
(x) an amount equal to $45,000 (the "Company Counsel
Registration Fee Reserve"), to be applied to the fee
(the "Company Counsel Registration Fee") payable by the
Company to Company Counsel, to be released as described
below; and
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(y) an amount (the "Investor Counsel Registration
Statement Review Fee") equal to $5,000, to be applied to
satisfaction of the fees payable pursuant to the
Company's obligations under Section 5 of the
Registration Rights Agreement; and
(F) release, to a trust or escrow account maintained by
Company Counsel, as designated by Company Counsel, the amount
of $444,250, to be released as contemplated by the relevant
note to the Schedule of Use of Proceeds attached as Annex IX
to the Agreement; provided, however, that (1) prior to the
disbursement of the funds referred to in this subparagraph
(F), Company Counsel shall provide a copy of the escrow
agreement attached hereto as Exhibit 1 (the "SRFF Escrow
Agreement"), executed by Company Counsel, and (2) after making
a disbursement of any of the funds referred to in this
subparagraph (F), Company Counsel will provide the Escrow
Agent with a copy of the Notice of Disbursement (as defined in
the SRFF Escrow Agreement); and
(G) release the balance of the Escrow Funds to the Company (to
be wired to an account in the Company's name).
(II) When Investors' Counsel (as defined in the Registration Rights
Agreement) provides comments to the Company on the Company's draft of the
Registration Statement, the Escrow Agent will release the Investor Counsel
Registration Statement Review Fee to the Investor's Counsel.
(III) Upon "receipt of proof" of filing of the Registration
Statement with the SEC in proper form (which "receipt of proof" shall be
based on the availability of such filed Registration Statement on
EDGAR(1), the Escrow Agent shall release, out of the Company Counsel
Registration Fee Reserve, to or upon the order of Company Counsel, an
amount equal to $22,500, to be applied to the Company Counsel Registration
Fee.
(IV) Upon written confirmation from Company Counsel that the
Effective Date has occurred, the Escrow Agent shall release, to or upon
the order of Company Counsel, the remaining balance of the Company Counsel
Registration Fee Reserve, to be applied to the balance of the Company
Counsel Registration Fee.
(e) If the relevant Certificates for the Closing Date are not
deposited with the Escrow Agent within five (5) days after receipt by the
Company of notice of receipt by the Escrow Agent of the Purchase Price
funds from the Lenders, the Escrow Agent shall notify the Lenders and each
Lender shall be entitled to cancel the purchase and demand repayment of
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1 Company Counsel shall advise the Escrow Agent of such filing, which is
subject to confirmation of such filing based on its availability on the
SEC website or on 10kwizard.com or freeedgar.com.
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the funds. If the Purchase Price funds are not deposited as cleared funds
with the Escrow Agent by the Closing Date, the Escrow Agent shall notify
the Company and the Company shall be entitled to cancel the purchase and
demand return of the relevant Certificates deposited in escrow.
(f) Notwithstanding the Escrow Agent's receipt of the Release
Conditions with respect to the Closing Date, if the Company or the Lender
notifies the Escrow Agent before the release of the relevant Escrow
Property that the conditions precedent to the obligations of the Company
or the Lender, as the case may be, under the Agreement with respect to the
purchase and sale of Securities to be effected on such Closing Date were
not satisfied or waived, then the Escrow Agent shall return the relevant
Escrow Funds to the Lender and shall return such Certificates to the
Company.
(g) Prior to return of any Escrow Funds to a Lender, the Lender
shall furnish such tax reporting or other information as shall be
appropriate for the Escrow Agent to comply with applicable United States
laws.
(h) The Escrow Agent shall deposit all funds received hereunder in
the Escrow Agent's attorney escrow account at The Bank of New York or at
such other bank at which the Escrow Agent then maintains other escrow
accounts; the interest earned on such account shall be deemed the property
of the party depositing the funds in escrow.
2. The Escrow Agent's duties hereunder may be altered, amended, modified
or revoked only by a writing signed by the party to be charged therewith.
3. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
the Escrow Agent to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be personally liable for any
act the Escrow Agent may do or omit to do hereunder as the Escrow Agent while
acting in good faith, and any act done or omitted by the Escrow Agent pursuant
to the advice of the Escrow Agent's attorneys-at-law shall be conclusive
evidence of such good faith.
4. The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
5. The Escrow Agent shall not be liable in any respect on account of the
identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
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6. The Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary to advise the Escrow Agent
properly in connection with the Escrow Agent's duties hereunder, may rely upon
the advice of such counsel, and may pay such counsel reasonable compensation
therefor. The Escrow Agent has acted as legal counsel for the Lenders and/or the
Placement Agent and/or their respective affiliates, and may continue to act as
legal counsel for any one or more of such parties, from time to time,
notwithstanding its duties as the Escrow Agent hereunder. Each of the Company
and each Lender consents to the Escrow Agent acting in such capacity as legal
counsel for a Lender and/or the Placement Agent or any of their respective
affiliates and waives any claim that such representation represents a conflict
of interest on the part of the Escrow Agent. Each of the Company and each Lender
understands that the Lender and the Escrow Agent are relying explicitly on the
foregoing provision in entering into these Joint Escrow Instructions.
7. The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written notice to the Company and
each Lender. In the event of any such resignation, the Lenders and the Company
shall appoint a successor Escrow Agent.
8. If the Escrow Agent reasonably requires other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
9. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the documents or the
Escrow Funds held by the Escrow Agent hereunder, the Escrow Agent is authorized
and directed in the Escrow Agent's sole discretion (1) to retain in the Escrow
Agent's possession without liability to anyone all or any part of said documents
or the Escrow Funds until such disputes shall have been settled either by mutual
written agreement of the parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but the Escrow Agent shall be under no
duty whatsoever to institute or defend any such proceedings or (2) to deliver
the Escrow Funds and any other property and documents held by the Escrow Agent
hereunder to a state or federal court having competent subject matter
jurisdiction and located in the State and City of New York in accordance with
the applicable procedure therefor.
10. The Company and the Lender agree jointly and severally to indemnify
and hold harmless the Escrow Agent from any and all claims, liabilities, costs
or expenses in any way arising from or relating to the duties or performance of
the Escrow Agent hereunder other than any such claim, liability, cost or expense
to the extent the same shall (a) have been tax obligations in connection with
Escrow Agent's fee hereunder, or (b) have been determined by final, unappealable
judgment of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the Escrow Agent, or (c) be a liability, or
arise from liability, to either the Company or the Lender.
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11. Any notice required or permitted hereunder shall be given in manner
provided in the Section headed "NOTICES" in the Agreement, the terms of which
are incorporated herein by reference.
12. By signing these Joint Escrow Instructions, the Escrow Agent becomes a
party hereto only for the purpose of these Joint Escrow Instructions; the Escrow
Agent does not become a party to the Agreement. The Company and the Lender have
become parties hereto by their execution and delivery of the Agreement, as
provided therein.
13. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns and shall
be governed by the laws of the State of New York without giving effect to
principles governing the conflicts of laws. A facsimile transmission of these
instructions signed by the Escrow Agent shall be legal and binding on all
parties hereto.
14. The parties hereto hereby waive a trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other in respect of any matter arising out of or in connection with these Joint
Escrow Instructions.
15. The rights and obligations of any party hereto are not assignable
without the written consent of the other parties hereto. These Joint Escrow
Instructions constitute the entire agreement amongst the parties with respect to
the subject matter hereof.
16. The Company agrees that (x) the Placement Agent is a third party
beneficiary of the provisions of (i) Section 1(b) hereof and (ii) clause (I)(B)
in Section 1(d) hereof, and (y) such provisions can not be amended or revoked
without the prior written consent of the Placement Agent.
ACCEPTED BY ESCROW AGENT:
KRIEGER & PRAGER LLP
By:
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Date:
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