ESCROW AGREEMENT
Exhibit 10.4
THIS
ESCROW AGREEMENT (this “Escrow Agreement”) is
made as of February 9, 2010, by and among Worldwide Energy and Manufacturing
USA, Inc. a Colorado corporation (the “Company”), the
purchasers signatory hereto (each a “Purchaser” and
together the “Purchasers”) and
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, with an address at 00 Xxxxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 (the “Escrow
Agent”). Capitalized terms used but not
defined herein shall have the meanings set forth in the Securities Purchase
Agreement referred to in the first recital.
W I T N E
S S E T H:
WHEREAS,
the Purchasers will be purchasing from the Company, severally and not jointly
with the other Purchasers, in the aggregate, up to $1,000,000 of shares of
Common Stock and Warrants of the Company on the Closing Date as set forth in the
Securities Purchase Agreement, dated as of the date hereof, between the
Purchasers and the Company (the “Purchase Agreement”),
which securities will be issued under the terms contained herein and in the
Purchase Agreement; and
WHEREAS,
it is intended that the sale of the securities pursuant to the Purchase
Agreement shall be consummated in accordance with the requirements set forth in
Regulation D promulgated under the Securities Act of 1933, as amended;
and
WHEREAS,
the Company may be obligated to deliver to each Purchaser such number of Make
Good Shares pursuant to the terms herein;
WHEREAS,
the Company and the Purchasers have agreed that up to 222,223 shares of Common
Stock shall be deposited by the Company in escrow with the Escrow Agent pursuant
to the terms herein; and
WHEREAS,
the Company and the Purchasers have requested that the Escrow Agent hold the
Make Good Shares in escrow upon the terms set forth herein.
NOW,
THEREFORE, in consideration of the covenants and mutual promises contained
herein and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged and intending to be legally bound
hereby, the parties agree as follows:
TERMS OF
THE ESCROW
The
parties hereby agree to establish an escrow account with the Escrow Agent
whereby the Escrow Agent shall hold the Make Good Shares.
1. Appointment of Escrow Agent.
The Company and the Purchasers hereby appoint Sichenzia Xxxx Xxxxxxxx Xxxxxxx
LLP as Escrow Agent to act in accordance with the terms and conditions set forth
in this Escrow Agreement, and Escrow Agent hereby accepts such appointment and
agrees to act in accordance with such terms and conditions.
2. Establishment of Escrow. On or
before April 22, 2010, the Company shall issue and deliver, or cause to be
delivered, to the Escrow Agent a number of shares of Common Stock equal to the
number of Shares purchased by the Purchasers pursuant to the Purchase Agreement
(the “Make Good
Shares”) in certificated form, along with medallion guaranteed stock
powers (or such other signed instrument of transfer acceptable to the Company’s
transfer agent to enable the transfer of such Make Good Shares in accordance
with Section 4). The Company and the Purchasers hereby agree that the
Company’s obligation to transfer shares of Common Stock to Purchasers pursuant
to the terms of the Purchase Agreement and this Escrow Agreement shall not
continue to run to the benefit of any Purchaser who shall have transferred or
sold all or any portion of its Shares.
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3. Representations and Warranties of the
Company. The Company hereby represents and warrants to the
Purchasers as follows:
a. The
Make Good Shares are validly issued, fully paid and nonassessable shares of the
Company, and free and clear of all pledges, liens and
encumbrances. Upon any transfer of Make Good Shares to Purchasers
hereunder, Purchasers will receive full right, title and authority to the Make
Good Shares as holders of Common Stock.
b. Performance
of this Escrow Agreement and compliance with the provisions hereof will not
violate any provision of any applicable law and will not conflict with or result
in any breach of any of the terms, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon, any of the properties or assets of the Company pursuant to the
terms of any indenture, mortgage, deed of trust or other agreement or instrument
binding upon the Company, other than such breaches, defaults or liens which
would not have a material adverse effect taken as a whole.
4. Disbursement
of Make Good Shares.
a. The
Company shall achieve at least $4,000,000 in Adjusted EBITDA, on a consolidated
basis with each of the Subsidiaries for the fiscal year ending December 31,
2010, as disclosed in the Company’s Form 10-K for the fiscal year ending
December 31, 2010 (the “2010 EBITDA
Milestone”, the date of disclosure of such 2010 EBITDA Milestone,
including any permitted extensions, the “2010 EBITDA Milestone
Date” and such 10-K, the “2010
10-K”). If the Company fails to achieve the 2010 EBITDA
Milestone, then, in accordance with the terms of this Escrow Agreement, the
Escrow Agent will transfer to the Purchasers from such escrow account, on a
pro-rata basis (based on such Purchaser’s Subscription Amount and the aggregate
Subscription Amount under the Purchase Agreement), an aggregate number of shares
of Common Stock equal to the following formula:
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E
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Minus
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C
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((A
/ B) X D)
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For the
purposes of the foregoing formula:
A = 2010
Adjusted EBITDA
B = 2010
EBITDA Milestone
C = Total
number of Shares issued to the Purchasers
D =
$4.50
E = Total
Subscription Amount
In the
event that the Company fails to file the 2010 10-K with the Commission on or
before the last date that such form is required to be filed (after any permitted
extensions under the Exchange Act), the Company shall be irrevocably deemed to
have failed to achieve the 0000 XXXXXX Milestone, and the 2010 EBITDA Milestone
Date shall be deemed to be the last date that the Company was permitted to file
the 2010 10-K (after any permitted extensions under the Exchange
Act). In addition, notwithstanding anything herein to the contrary,
in the event that the Company reports an Adjusted EBITDA for the fiscal year
ending December 31, 2010 of $2,000,000 or less or the Company fails to file its
2010 10-K with the Commission on or before the last date that such form is
required to be filed (after any permitted extensions under the Exchange Act),
all of the Make Good Shares shall be issued pro-rata to the Purchasers (based on
such Purchaser’s Subscription Amount and the aggregate Subscription Amount under
the Purchase Agreement)
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(b) On
or before April 22, 2010, the Company shall issue and deliver Make Good Shares
to the Escrow Agent for deposit in the escrow account pursuant to this Escrow
Agreement.
(c) The
parties hereto acknowledge that, as of the date hereof and pursuant to the 2008
Share Escrow Agreement, Company counsel as escrow agent holds in escrow
1,620,954 shares of Common Stock that were deposited by Xxxxx and Xxxxx Xxxx
(such shares, “2008
Escrow Shares”) and the parties agree that the 2008 Escrow Shares shall
not constitute Make Good Shares for purposes of the Purchase Agreement and this
Escrow Agreement. For purposes herein, “2008 Share Escrow
Agreement” means the Escrow Agreement, dated as of June 23, 2008, by and
among the Company, the purchasers signatory thereto, Xxxxx and Xxxxx Xxxx, and
Company Counsel as escrow agent.
(d) Within
five days after the determination of the number of Make Good Shares to which the
Purchasers are entitled calculated in the manner set forth above, the Purchasers
and the Company shall give joint written instructions to the Escrow Agent and
the Escrow Agent shall, within five Business Days after receipt of such written
instructions, deliver to the Purchasers on a “pro rata” basis (based on such
Purchaser’s Subscription Amount and the aggregate Subscription Amount under the
Purchase Agreement) such number of Make Good Shares. If none or less
than all of the Make Good Shares are delivered to the Purchasers, the Escrow
Agent shall return the undistributed Make Good Shares to the Company pursuant to
the joint instructions of the Purchasers and the Company.
(e) Notwithstanding
anything to the contrary set forth herein, only those Purchasers who own the
Shares issued hereunder and remain shareholders of the Company at the time that
any of the Make Good Shares become deliverable hereunder shall be entitled to
their pro rata portion of the Make Good Shares calculated based on their
ownership interest at the time when the applicable Make Good Shares become
deliverable
(f) For
clarity and avoidance of doubt, all references to share prices and shares of
Common Stock in this Section shall be subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur after the date of this Escrow
Agreement
5. Duration. This Escrow
Agreement shall terminate on the distribution of all the Make Good Shares to
either the Purchasers or back to the Company, as the case may be. The
Company agrees to provide the Escrow Agent written notice of the filing with the
Commission of any financial statements or reports referenced
herein.
6. Make Good
Shares. If any Make Good Shares are deliverable to the
Purchasers pursuant to the Purchase Agreement and in accordance with this Escrow
Agreement, (i) the Company covenants and agrees to execute all such instruments
of transfer (including stock powers and assignment documents) as are customarily
executed to evidence and consummate the transfer of the Make Good Shares from
the Company to the Purchasers and (ii) following its receipt of the documents
referenced in Section 6(i), the Company covenants and agrees to promptly reissue
such Make Good Shares in the applicable Purchaser’s name and deliver the same as
directed by such Purchaser. Until such time as (if at all) the Make
Good Shares are required to be delivered pursuant to the Purchase Agreement and
in accordance with this Escrow Agreement, any dividends payable in respect of
the Make Good Shares and all voting rights applicable to the Make Good Shares
shall be retained by the Company. Should the Escrow Agent receive
dividends or voting materials, such items shall be passed immediately on to the
Company and shall not be invested or held for any time longer than is needed to
effectively re-route such items to the Company.
7. Interpleader. Should
any controversy arise among the parties hereto with respect to this Escrow
Agreement or with respect to the right to receive the Make Good Shares, Escrow
Agent shall have the right to consult counsel and/or to institute an appropriate
interpleader action to determine the rights of the parties. Escrow Agent is also
hereby authorized to institute an appropriate interpleader action upon receipt
of a written letter of direction executed by the parties so directing Escrow
Agent. If Escrow Agent is directed to institute an appropriate interpleader
action, it shall institute such action not prior to thirty (30) days after
receipt of such letter of direction and not later than sixty (60) days after
such date. Any interpleader action instituted in accordance with this Section 7
shall be filed in any court of competent jurisdiction in the State of New York,
and the Make Good Shares in dispute shall be deposited with the court and in
such event Escrow Agent shall be relieved of and discharged from any and all
obligations and liabilities under and pursuant to this Escrow Agreement with
respect to the Make Good Shares and any other obligations
hereunder.
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8. Exculpation
and Indemnification of Escrow Agent
a. Escrow
Agent is not a party to, and is not bound by or charged with notice of any
agreement out of which this escrow may arise. Escrow Agent acts under
this Escrow Agreement as a depositary only and is not responsible or liable in
any manner whatsoever for the sufficiency, correctness, genuineness or validity
of the subject matter of the escrow, or any part thereof, or for the form or
execution of any notice given by any other party hereunder, or for the identity
or authority of any person executing any such notice. Escrow Agent will have no
duties or responsibilities other than those expressly set forth
herein. Escrow Agent will be under no liability to anyone by reason
of any failure on the part of any party hereto (other than Escrow Agent) or any
maker, endorser or other signatory of any document to perform such person's or
entity's obligations hereunder or under any such document. Except for
this Escrow Agreement and instructions to Escrow Agent pursuant to the terms of
this Escrow Agreement, Escrow Agent will not be obligated to recognize any
agreement between or among any or all of the persons or entities referred to
herein, notwithstanding its knowledge thereof. Escrow Agent will not
be liable for any action taken or omitted by it, or any action suffered by it to
be taken or omitted, absent gross negligence or willful
misconduct. Escrow Agent may rely conclusively on, and will be
protected in acting upon, any order, notice, demand, certificate, or opinion or
advice of counsel (including counsel chosen by Escrow Agent), statement,
instrument, report or other paper or document (not only as to its due execution
and the validity and effectiveness of its provisions, but also as to the truth
and acceptability of any information therein contained) which is reasonably
believed by Escrow Agent to be genuine and to be signed or presented by the
proper person or persons. The duties and responsibilities of the
Escrow Agent hereunder shall be determined solely by the express provisions of
this Escrow Agreement and no other or further duties or responsibilities shall
be implied, including, but not limited to, any obligation under or imposed by
any laws of the State of New York upon fiduciaries.
b. The
Company hereby indemnifies and holds harmless the Escrow Agent and any of its
principals, partners, agents, employees and affiliates from and against any
expenses, including reasonable attorneys' fees and disbursements, damages or
losses suffered by Escrow Agent in connection with any claim or demand, which,
in any way, directly or indirectly, arises out of or relates to this Escrow
Agreement or the services of Escrow Agent hereunder; except, that if
Escrow Agent is guilty of willful misconduct, gross negligence or fraud under
this Escrow Agreement, then Escrow Agent will bear all losses, damages and
expenses arising as a result of such willful misconduct, gross negligence or
fraud. Promptly after the receipt by Escrow Agent of notice of any
such demand or claim or the commencement of any action, suit or proceeding
relating to such demand or claim, Escrow Agent will notify the other parties
hereto in writing. For the purposes hereof, the terms “expense” and
“loss” will include all amounts paid or payable to satisfy any such claim or
demand, or in settlement of any such claim, demand, action, suit or proceeding
settled with the express written consent of the parties hereto, and all costs
and expenses, including, but not limited to, reasonable attorneys' fees and
disbursements, paid or incurred in investigating or defending against any such
claim, demand, action, suit or proceeding. The provisions of this
Section shall survive the termination of this Escrow Agreement.
9. Records. Escrow
Agent shall maintain accurate records of all transactions
hereunder. Promptly after the termination of this Escrow Agreement or
as may reasonably be requested by the parties hereto from time to time before
such termination, Escrow Agent shall provide the parties hereto, as the case may
be, with a complete copy of such records, certified by Escrow Agent to be a
complete and accurate account of all such transactions. The
authorized representatives of each of the parties hereto shall have access to
such books and records at all reasonable times during normal business hours upon
reasonable notice to Escrow Agent and at the requesting party’s
expense.
10. Notice. All
notices, communications and instructions required or desired to be given under
this Escrow Agreement must be in writing and shall be deemed to be duly given if
sent by registered or certified mail, return receipt requested, or overnight
courier, to the addresses listed on the signature page hereto.
11. Execution in
Counterparts. This Escrow Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. Assignment and
Modification. This Escrow Agreement and the rights and
obligations hereunder of any of the parties hereto may not be assigned without
the prior written consent of the other parties hereto and the
Purchasers. Subject to the foregoing, this Escrow Agreement will be
binding upon and inure to the benefit of each of the parties hereto and their
respective successors and permitted assigns. No other person will
acquire or have any rights under, or by virtue of, this Escrow
Agreement. No portion of the Make Good Shares shall be subject to
interference or control by any creditor of any party hereto, or be subject to
being taken or reached by any legal or equitable process in satisfaction of any
debt or other liability of any such party hereto prior to the disbursement
thereof to such party hereto in accordance with the provisions of this Escrow
Agreement. This Escrow Agreement may be amended or modified only in
writing signed by all of the parties hereto
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MISCELLANEOUS
13.1 No waiver
or any breach of any covenant or provision herein contained shall be deemed a
waiver of any preceding or succeeding breach thereof, or of any other covenant
or provision herein contained. No extension of time for performance
of any obligation or act shall be deemed an extension of the time for
performance of any other obligation or act.
13.2 This
Escrow Agreement shall be binding upon and shall inure to the benefit of the
permitted successors and permitted assigns of the parties hereto.
13.3 This
Escrow Agreement is the final expression of, and contains the entire agreement
between, the parties with respect to the subject matter hereof and supersedes
all prior understandings with respect thereto. This Escrow Agreement
may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein. Except as expressly set forth herein, all
fees and expenses of the Escrow Agent in connection with this Escrow Agreement
and the performance of its duties hereunder shall be paid by the
Company.
13.4 Whenever
required by the context of this Escrow Agreement, the singular shall include the
plural and masculine shall include the feminine. This Escrow
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if all parties had prepared the same. Unless
otherwise indicated, all references to Articles are to this Escrow
Agreement.
13.5 The
parties hereto expressly agree that this Escrow Agreement shall be governed by,
interpreted under and construed and enforced in accordance with the laws of the
State of New York. Any action to enforce, arising out of, or relating
in any way to, any provisions of this Escrow Agreement shall only be brought in
a state or Federal court sitting in New York City.
13.6 The
Escrow Agent’s duties hereunder may be altered, amended, modified or revoked
only by a writing signed by the Company, each Purchaser and the Escrow
Agent.
13.7 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 in the absence of gross negligence, fraud and willful
misconduct, 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, in the absence of gross negligence, fraud and willful
misconduct.
13.8 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.
13.9 The
Escrow Agent shall not be liable in any respect on account of the identity,
authorization or rights of the parties executing or delivering or purporting to
execute or deliver the Purchase Agreement or any documents or papers deposited
or called for thereunder in the absence of gross negligence, fraud and willful
misconduct.
13.10 The
Escrow Agent shall be entitled to employ such legal counsel and other experts as
the Escrow Agent may deem necessary properly to advise the Escrow Agent in
connection with the Escrow Agent’s duties hereunder, may rely upon the advice of
such counsel, and may pay such counsel reasonable compensation; provided that
the costs of such compensation shall be borne by the Escrow Agent.
13.11 The
Escrow Agent’s responsibilities as escrow agent hereunder shall terminate if the
Escrow Agent shall resign by giving written notice to the Company and the
Purchasers. In the event of any such resignation, the Purchasers and
the Company shall appoint a successor Escrow Agent and the Escrow Agent shall
deliver to such successor Escrow Agent any escrow funds and other documents held
by the Escrow Agent.
13.12 If the
Escrow Agent reasonably requires other or further instruments in connection with
this Escrow Agreement or obligations in respect hereto, the necessary parties
hereto shall join in furnishing such instruments.
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13.13 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 by a final order, decree or judgment
or 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 City of New York in accordance with the
applicable procedure therefore
13.14 The
Company and each Purchaser agree jointly and severally to indemnify and hold
harmless the Escrow Agent and its partners, employees, agents and
representatives 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 or the transactions contemplated hereby or by the Purchase Agreement
other than any such claim, liability, cost or expense to the extent the same
shall have been determined by final, unappealable judgment of a court of
competent jurisdiction to have resulted from the gross negligence, fraud or
willful misconduct of the Escrow Agent.
13.15 The
Escrow Agent shall be permitted to act as counsel for the Company in any
transaction and/or dispute including any dispute between the Company and the
Purchasers, whether or not the Escrow Agent is then holding the documents or
escrow funds held by the Escrow Agent hereunder.
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IN
WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of
date first written above.
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WORLDWIDE
ENERGY AND MANUFACTURING USA, INC.
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By:__________________________________________
Name:
Xxxxx Xxxx
Title: Chief
Executive Officer
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With
a copy to (which shall not constitute notice):
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ESCROW
AGENT:
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SICHENZIA
XXXX XXXXXXXX XXXXXXX LLP
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By:__________________________________________
Name:
Title:
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[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOR PURCHASERS FOLLOW]
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[SIGNATURE
PAGE OF PURCHASERS TO WEMU ESCROW AGREEMENT]
Name of
Investing Entity: _________________________________________________
Signature of Authorized Signatory of
Investing entity: __________________________
Name of
Authorized Signatory: _____________________________________________
Title of
Authorized Signatory:
______________________________________________
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