INVESTOR AND PUBLIC RELATIONS ESCROW AGREEMENT
Exhibit
10.5
This
Agreement, dated as of October 31, 2008 (this “Agreement”),
is
entered into by and among Lihua International, Inc., a Delaware corporation
(the
“Company”),
Loeb
& Loeb, LLP (the “Escrow
Agent”)
and
Vision Opportunity China LP, a closed-ended investment company incorporated
in
Guernsey (“Vision”),
as
the representative of each of the investors set forth on Exhibit
A
attached
hereto (together with Vision, each, a “Purchaser”,
and
collectively, the “Purchasers”).
The
principal address of each party hereto is set forth on Exhibit
A.
WITNESSETH:
WHEREAS,
the Company made a private offering to the Purchasers (the “Offering”)
for
the sale of units (the “Offering
Securities”),
each
composed of one share of the Company’s newly-designated Series A Convertible
Preferred Stock and a warrant to purchase .22 shares of the Company’s common
stock, par value $0.0001 per share (the “Common
Stock”),
in
reliance upon available exemptions from the registration requirements of the
U.S. Securities Act of 1933, as amended, in an aggregate amount of Fifteen
Million Dollars ($15,000,000) (the “Offering
Amount”);
and
WHEREAS,
in connection with the Offering, the Company entered into a Securities Purchase
Agreement dated as of the date hereof (the “Securities
Purchase Agreement”),
by
and among the Company and the Purchasers; and
WHEREAS,
the Company has agreed to deposit on the Closing Date (as defined in the
Securities Purchase Agreement) an aggregate amount of Seven Hundred Fifty
Thousand Dollars ($750,000) from the Offering Amount (the “Public
Relations Escrowed Funds”
or
“Escrowed
Funds”)
with
the Escrow Agent, to be held and disbursed by the Escrow Agent pursuant to
the
terms, and subject to the conditions of, this Agreement; and
WHEREAS,
the Escrow Agent is willing to hold the Public Relations Escrowed Funds in
escrow pursuant to and subject to the terms and conditions of this
Agreement.
NOW,
THEREFORE, in consideration of the mutual promises herein contained and
intending to be legally bound, the parties hereby agree as follows:
1. Appointment
of Escrow Agent.
The
Company and Vision hereby appoint Loeb & Loeb LLP as escrow agent in
accordance with the terms and subject to the conditions set forth herein and
the
Escrow Agent hereby accepts such appointment.
2. Delivery
of the Escrowed Funds.
a. The
Company hereby directs that the Escrow Agent provide instructions to Xxxxxx
& Xxxxxx, LLP, as escrow agent for the General Escrow Agreement, dated as of
even date herewith, for the transfer and deposit on the Closing Date of the
Public Relations Escrowed Funds into the escrow account as follows (the “Escrow
Account”) maintained by the Escrow Agent by wire transfer in accordance with the
wire transfer instructions set forth below:
Bank:
Citi Private Bank
Address:
000 Xxxxx Xxxxxx
Xxx
Xxxx,
XX 00000
ABA
No.:
000000000
SWIFT:
CITI US 33
Account
No.: 00000000
Reference:
213426-10001
Attn:
Xxxxxxxx Xxxxxxxx, Esq.
3. Escrow
Agent to Hold and Disburse the Public Relations Escrowed Funds.
The
Escrow Agent will deposit the Public Relations Escrowed Funds into a
non-interest bearing escrow account and disburse the Public Relations Escrowed
Funds pursuant to the terms of this Agreement, as follows:
a. One
Hundred Twenty Five Thousand Dollars ($125,000) from the Public Relations
Escrowed Funds shall be released to the Company once the Company appoints a
Vice
President of Investor Relations pursuant to Section 3.28 of the Securities
Purchase Agreement, and upon the Escrow Agent’s receipt of joint written notice
from the Company and Vision in the form of Exhibit
B
hereto.
An additional Two Hundred Fifty Thousand Dollars ($250,000) from the Public
Relations Escrowed Funds shall be released to the Company once the Company
has
complied with all Nasdaq Corporate Governance standards, including, but not
limited to, appointment of three (3) independent directors who are acceptable
to
the Company, Vision and CMHJ Technology Fund II, L.P., the establishment of
an
audit committee of at least three (3) members that has adopted a formal written
charter of the Audit Committee pursuant to Section 3.29 of the Securities
Purchase Agreement and upon the Escrow Agent’s receipt of joint written notice
from the Company and Vision in the form of Exhibit
C
hereto.
The remaining Three Hundred Seventy Five Thousand Dollars ($375,000) from the
Public Relations Escrowed Funds shall be released to the Company as invoices
become due for the purpose of any investor and public relations activities
pursuant to Section 3.27 of the Securities Purchase Agreement and upon the
Escrow Agent’s receipt of joint written notice from the Company and Vision in
the form of Exhibit
D
hereto.
b. If
the
Company fails to timely comply with its obligations set forth in any of Sections
3.27, 3.28, 3.29, 3.31 or 3.32 of the Securities Purchase Agreement, then upon
written request from Vision, the amount of the liquidated damages payable under
any such section, as applicable, shall be distributed from the Public Relations
Escrowed Funds to the Purchasers in the manner set forth in the Securities
Purchase Agreement. Within fifteen (15) business days after the release of
the
liquidated damages amount to the Purchasers from the Escrow Account, the Company
shall replenish the Escrow Account and deposit an amount equal to the amount
of
liquidated damages paid, back into the Escrow Account.
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c. In
the
event this Agreement, the Escrowed Funds, or the Escrow Agent, in its capacity
as escrow agent under this Agreement, becomes the subject of litigation, or
if
the Escrow Agent determines it is necessary do so for any other reason relating
to litigation arising out of this Agreement, the Offering or the Securities
Purchase Agreement, each of the Company and the Purchasers authorizes the Escrow
Agent, at its option if not otherwise so required, to deposit the Public
Relations Escrowed Funds with the clerk of the court in which the litigation
is
pending, and thereupon the Escrow Agent shall be relieved and discharged of
any
further responsibility with regard thereto to the extent determined by any
such
court. Each of the Company, and the Purchasers further authorizes the Escrow
Agent, if it receives conflicting claims to any of the Escrowed Funds, is
threatened with litigation, in its capacity as escrow agent under this
Agreement, or if the Escrow Agent determines it is necessary to do so for any
other reason relating to this Agreement, to interplead all interested parties
in
any court of competent jurisdiction and to deposit the Public Relations Escrowed
Funds with the clerk of that court and thereupon the Escrow Agent shall be
relieved and discharged of any further responsibility hereunder to the parties
from which they were received to the extent determined by such
court.
4. Exculpation
and Indemnification of Escrow Agent.
a. The
Escrow Agent shall have no duties or responsibilities other than those expressly
set forth herein. The Escrow Agent shall have no duty to enforce any obligation
of any person to make any payment or delivery, or to direct or cause any payment
or delivery to be made, or to enforce any obligation of any person to perform
any other act. The Escrow Agent shall be under no liability to the other parties
hereto or anyone else, by reason of any failure, on the part of any party hereto
or any maker, guarantor, endorser or other signatory of a document or any other
person, to perform such person’s obligations under any such document. Except for
amendments to this Agreement referenced below, and except for written
instructions given to the Escrow Agent by the Escrowing Parties relating to
the
Escrowed Funds, the Escrow Agent shall not be obligated to recognize any
agreement between or among any of the Escrowing Parties, notwithstanding that
references thereto may be made herein and the Escrow Agent has knowledge
thereof.
b. The
Escrow Agent shall not be liable to the Company, any Purchaser or to anyone
else
for any action taken or omitted by it, or any action suffered by it to be taken
or omitted, in good faith and acting upon any order, notice, demand,
certificate, opinion or advice of counsel (including counsel chosen by the
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 believed by the Escrow Agent to be genuine and
to
be signed or presented by the proper person or persons. The Escrow Agent shall
not be bound by any of the terms thereof, unless evidenced by written notice
delivered to the Escrow Agent signed by the proper party or parties and, if
the
duties or rights of the Escrow Agent are affected, unless it shall give its
prior written consent thereto.
c. The
Escrow Agent shall not be responsible for the sufficiency or accuracy of the
form, or of the execution, validity, value or genuineness of, any document
or
property received, held or delivered to it hereunder, or of any signature or
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable to
the
Company, any Purchaser or to anyone else in any respect on account of the
identity, authority or rights, of the person executing or delivering or
purporting to execute or deliver any document or property or this Agreement.
The
Escrow Agent shall have no responsibility with respect to the use or application
of the Escrowed Funds pursuant to the provisions hereof.
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d. The
Escrow Agent shall have the right to assume, in the absence of written notice
to
the contrary from the proper person or persons, that a fact or an event, by
reason of which an action would or might be taken by the Escrow Agent, does
not
exist or has not occurred, without incurring liability to the Company, any
Purchaser or to anyone else for any action taken or omitted to be taken or
omitted, in good faith and in the exercise of its own best judgment, in reliance
upon such assumption.
e. To
the
extent that the Escrow Agent becomes liable for the payment of taxes, including
withholding taxes, in respect of income derived from the investment of the
Public Relations Escrowed Funds, or any payment made hereunder, the Escrow
Agent
may pay such taxes; and the Escrow Agent may withhold from any payment of the
Public Relations Escrowed Funds such amount as the Escrow Agent estimates to
be
sufficient to provide for the payment of such taxes not yet paid, and may use
the sum withheld for that purpose. The Escrow Agent shall be indemnified and
held harmless against any liability for taxes and for any penalties in respect
of taxes, on such investment income or payments in the manner provided in
Section 4(f).
f. The
Escrow Agent will be indemnified and held harmless by the Company from and
against all expenses, including all counsel fees and disbursements, or loss
suffered by the Escrow Agent in connection with any action, suit or proceeding
involving any claim, or in connection with any claim or demand, which in any
way, directly or indirectly, arises out of or relates to this Agreement, the
services of the Escrow Agent hereunder, except for claims relating to gross
negligence or reckless misconduct by the Escrow Agent or breach of this
Agreement by the Escrow Agent, or the monies or other property held by it
hereunder. Promptly, but no later than three (3) business days, after the
receipt by the Escrow Agent of notice of any demand or claim or the commencement
of any action, suit or proceeding, the Escrow Agent shall, if a claim in respect
thereof is to be made by the Escrow Agent against the Company, notify the
Company in writing, but the failure by the Escrow Agent to give such notice
shall not relieve the Company from any liability which the Company may have
to
the Escrow Agent hereunder, unless the failure of the Escrow Agent to give
such
notice prejudices or otherwise impairs the Company’s ability to defend any
demand, claim, action suit or proceeding. Notwithstanding any obligation to
make
payments and deliveries hereunder, the Escrow Agent may retain and hold for
such
time as it deems necessary such amount of monies or property as it shall, from
time to time, reasonably deem sufficient to indemnify itself for any such loss
or expense.
g. For
purposes hereof, the term “expense or loss” shall include all amounts paid or
payable to satisfy any claim, demand or liability, or in settlement of any
claim, demand, action, suit or proceeding settled with the express written
consent of the Escrow Agent, and all costs and expenses, including, but not
limited to, counsel fees and disbursements, paid or incurred in investigating
or
defending against any such claim, demand, action, suit or
proceeding.
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5. Termination
of Agreement and Resignation of Escrow Agent.
a. This
Agreement shall terminate upon disbursement of all of the Public Relations
Escrowed Funds provided that the rights of the Escrow Agent and the obligations
of the Company and the Purchasers under Section 4 shall survive the termination
hereof.
b. The
Escrow Agent may resign at any time and be discharged from its duties as Escrow
Agent hereunder by giving the Company and Vision at least ten (10) business
days
written notice thereof (the “Notice
Period”).
As
soon as practicable after its resignation, the Escrow Agent shall, if it
receives notice from the Company and Vision within the Notice Period, turn
over
to a successor escrow agent appointed by the Company and Vision all Public
Relations Escrowed Funds (less such amount as the Escrow Agent is entitled
to
continue to retain and hold in escrow pursuant to Section 4(f) and to retain
pursuant to Section 7) upon presentation of the document appointing the new
escrow agent and its acceptance thereof. If no new agent is so appointed within
the Notice Period, the Escrow Agent shall return the Escrowed Funds to the
parties from which they were received without interest or
deduction.
6. Form
of Payments by Escrow Agent.
a. Any
payments of the Public Relations Escrowed Funds by the Escrow Agent pursuant
to
the terms of this Agreement shall be made by wire transfer unless directed
to be
made by check by the Escrowing Parties.
b. All
amounts referred to herein are expressed in United States Dollars and all
payments by the Escrow Agent shall be made in such dollars.
7. Compensation.
Escrow
Agent shall not be entitled to any compensation for its services
rendered under this Agreement.
8. Notices.
All
notices, demands, consents, requests, instructions and other communications
to
be given or delivered or permitted under or by reason of the provisions of
this
Agreement or in connection with the transactions contemplated hereby shall
be in
writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of such
delivery (as evidenced by the receipt of the personal delivery service), (ii)
if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing), or
(iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance with
this Section 8), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
second business day the notice is sent (as evidenced by a sworn affidavit of
the
sender). All such notices, demands, consents, requests, instructions and other
communications will be sent to addresses or facsimile numbers as applicable
set
forth on Exhibit
A
hereto.
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9. Further
Assurances.
From
time to time on and after the date hereof, the Company, Vision and each of
the
other Purchasers, if applicable, shall deliver or cause to be delivered to
the
Escrow Agent such further documents and instruments and shall do and cause
to be
done such further acts as the Escrow Agent shall reasonably request (it being
understood that the Escrow Agent shall have no obligation to make any such
request) to carry out more effectively the provisions and purposes of this
Agreement, to evidence compliance herewith or to assure itself that it is
protected in acting hereunder.
10. Consent
to Service of Process.
The
Company, the Escrow Agent and each Purchaser hereby irrevocably consent to
the
jurisdiction of the courts of the State of New York and of any Federal court
located in such state in connection with any action, suit or proceedings arising
out of or relating to this Agreement or any action taken or omitted hereunder,
and waives personal service of any summons, complaint or other process and
agrees that the service thereof may be made by certified or registered mail
directed to it at the address listed on Exhibit
A
hereto.
11. Miscellaneous.
a. This
Agreement shall be construed without regard to any presumption or other rule
requiring construction against the party causing such instrument to be drafted.
The terms “hereby,” “hereof,” “hereunder,” and any similar terms, as used in
this Agreement, refer to the Escrow Agreement in its entirety and not only
to
the particular portion of this Agreement where the term is used. The word
“person” shall mean any natural person, partnership, corporation, government and
any other form of business of legal entity. All words or terms used in this
Agreement, regardless of the number or gender in which they were used, shall
be
deemed to include any other number and any other gender as the context may
require. This Agreement shall not be admissible in evidence to construe the
provisions of any prior agreement.
b. This
Agreement and the rights and obligations hereunder of the Company and each
Purchaser may not be assigned without the consent of the Escrow Agent, other
than by laws of descent or operation of law. This Agreement and the rights
and
obligations hereunder of the Escrow Agent may be assigned by the Escrow Agent,
with the prior consent of the Company. This Agreement shall be binding upon
and
inure to the benefit of each party’s respective successors, heirs and permitted
assigns. No other person shall acquire or have any rights under or by virtue
of
this Agreement. This Agreement may not be changed orally or modified, amended
or
supplemented without an express written agreement executed by the Escrow Agent,
the Company and Vision, which consent shall not be unreasonably withheld. This
Agreement is intended to be for the sole benefit of the parties hereto and
their
respective successors, heirs and permitted assigns, and none of the provisions
of this Agreement are intended to be, nor shall they be construed to be, for
the
benefit of any third person.
c. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York. The representations and warranties contained
in
this Agreement shall survive the execution and delivery hereof and any
investigations made by any party. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect any of the
terms thereof.
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12. Execution
of Counterparts.
This
Agreement may be executed in any number of counterparts, by facsimile or other
form of electronic transmission, each of which shall be deemed to be an original
as of those whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding
when
one or more of the counterparts hereof, individually or taken together, are
signed by all parties hereto.
[THE
REMAINDER OF THE PAGE IS INTENTIONALLY LEFT BLANK.]
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IN
WITNESS WHEREOF, the parties have executed and delivered this Agreement on
the
day and year first above written.
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Loeb
& Loeb, LLP
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By:
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/s/
Xxxxxxxx
Xxxxxxxx
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Name:
Xxxxxxxx Xxxxxxxx, Esq.
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Title:
Partner
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LIHUA
INTERNATIONAL, INC.
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By:
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/s/
Xxx Xxxxxxx
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Name:
Xxx Xxxxxxx
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Title:
Chief Executive Officer and President
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[PURCHASER]
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By:
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Name:
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Title:
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[PURCHASER]
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By:
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Name:
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Title:
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EXHIBIT
A TO THE
SECURITIES
PURCHASE AGREEMENT
LIST
OF PURCHASERS
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EXHIBIT
B
DISBURSEMENT
REQUEST
Pursuant
to that Investor and Public Relations Escrow Agreement dated as of October
31,
2008, among Lihua International, Inc. (the “Company”),
Vision Opportunity China LP and Loeb & Loeb, LLP, as Escrow Agent, the
Company hereby certifies that the Company has appointed a Vice President of
Investor Relations, and hereby requests disbursement of funds in the amount
of
one hundred twenty-five thousand dollars ($125,000) from the escrow funds
maintained by Loeb & Loeb LLP in the following manner.
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Please
disburse to:
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Amount
to disburse:
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Form
of distribution:
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Payee:
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Name:
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Address:
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City/State:
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Zip:
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Statement
of event or condition which calls for this request for
disbursement:
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LIHUA
INTERNATIONAL, INC.
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Date:
_________________________
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By:
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Name:
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Title:
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[PURCHASER]
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Date:
_________________________
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By:
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Name:
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Title:
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EXHIBIT
C
DISBURSEMENT
REQUEST
Pursuant
to that Investor and Public Relations Escrow Agreement dated as of October
31,
2008, among Lihua International, Inc. (the “Company”),
Vision Opportunity China LP and Loeb & Loeb, LLP, as Escrow Agent, the
Company hereby certifies that the Company has complied with the Nasdaq Corporate
Governance standards, and hereby requests disbursement of funds in the amount
of
two hundred fifty thousand dollars ($250,000) from the escrow funds maintained
by Loeb & Loeb LLP in the following manner.
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Please
disburse to:
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Amount
to disburse:
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Form
of distribution:
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Payee:
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Name:
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Address:
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City/State:
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Zip:
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Statement
of event or condition which calls for this request for
disbursement:
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LIHUA
INTERNATIONAL, INC.
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Date:
_________________________
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By:
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Name:
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Title:
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[PURCHASER]
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Date:
_________________________
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By:
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Name:
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Title:
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EXHIBIT
D
DISBURSEMENT
REQUEST
Pursuant
to that Investor and Public Relations Escrow Agreement dated as of October
31,
2008, among Lihua International, Inc. (the “Company”),
Vision Opportunity China LP and Loeb & Loeb, LLP, as Escrow Agent, the
Company hereby certifies that the Company has hired _________________________
as
its investor relations firm, and hereby requests disbursement of funds in the
amount and manner described below.
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Please
disburse to:
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Amount
to disburse:
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Form
of distribution:
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Payee:
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Name:
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Address:
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City/State:
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Zip:
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Statement
of event or condition which calls for this request for
disbursement:
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LIHUA
INTERNATIONAL, INC.
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Date:
_________________________
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By:
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Name:
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Title:
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[PURCHASER]
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Date:
_________________________
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By:
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Name:
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Title:
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