ESCROW AGREEMENT
This
ESCROW AGREEMENT (this “Agreement”)
made
as of October 25, 2006 by and among, EVER LEADER HOLDINGS LIMITED, a company
incorporated under the laws of Hong Kong (“Ever
Leader”),
APPLIED SPECTRUM TECHNOLOGIES, INC., a Delaware corporation (the “Company”),
and
XXXXXXX SECURITIES, LLC, a Delaware limited liability company (the “Investor
Agent”),
whose
addresses and other information appear on the Information Sheet (as defined
herein) attached to this Agreement, and XXXXXX STREET STATE BANK, 00 Xxxxx
Xxxxxx, Xxxxxx, Xxxxxxxx 00000 (the “Escrow
Agent”).
WITNESSETH:
WHEREAS:
A.
On
September 7, 2006, Applied Spectrum entered into a definitive share exchange
agreement whereby it will acquire all of the shares and equity ownership
of the
Company from the Company's shareholders in exchange for common stock, $0.001
par
value (the "Common Stock") of Applied Spectrum (the "Exchange").
B.
Applied Spectrum has offered for sale (the "Offering")
certain shares of Common Stock (the "Shares")
and
attached warrants ("Warrants")
to
purchase shares of common stock (the "Securities")
in
accordance with that certain Securities Purchase Agreement, dated as of the
date
hereof (the "Securities
Purchase Agreement"),
by
and among Applied Spectrum, Ever Leader and the investors signatory thereto
(the
"Investors"),
in
connection with and conditioned upon the consummation of the Exchange and
certain other conditions set forth in the Securities Purchase
Agreement.
C.
Investors must have funded a minimum of $10,000,000 aggregate gross proceeds
for
the Securities (the “Minimum
Amount”)
into
the Escrow Account (as defined below) in order to close the offering of the
Securities (the “Offering”)
on or
prior to November 30, 2006; provided that such termination date may be extended
by mutual agreement of Ever Leader, the Company and the Investor Agent by
notice
to the Escrow Agent until December 31, 2006.
D.
Ever
Leader, the Company and the Investor Agent propose to establish an escrow
account (the “Escrow
Account”),
to
hold the Purchase Price (as defined in the Securities Purchase Agreement)
from
each investor (the “Subscription
Funds”),
and
the Escrow Agent is willing to act
as
escrow agent for the Offering and to establish an account into which the
Subscription Funds received by the Escrow Agentin accordance with the terms
and
subject to the conditions hereinafter set forth.
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained, Ever Leader, the Company, the Investor Agent and the Escrow Agent
hereby agree as follows:
1.
Information
Sheet. Certain information regarding the Company, Ever Leader, the Investor
Agent, the fees payable to the Escrow Agent, the terms of the Offering and
time
periods relevant to this Agreement is set forth on the information sheet
which
is attached to this Agreement as Exhibit A and is incorporated by reference
herein and made a part hereof (the “Information
Sheet”).
2.
Establishment
of the Escrow Account.
2.1
The
Escrow Agent shall establish a non-interest-bearing bank account at the branch
of the Escrow Agent selected by the Escrow Agent, and bearing the title set
forth on the Information Sheet (the “Escrow
Account”).
The
purpose of the Escrow Account is for (a) the deposit of all Subscription
Funds
which are received by the Escrow Agent by check or wire transfer from
prospective purchasers of the Securities, (b) the holding of amounts of
Subscription Funds which are collected through the banking system and (c)
the
disbursement of collected Subscription Funds, all as described
herein.
2.2
On
or
before the date of the initial deposit in the Escrow Account pursuant to
this
Agreement, the Investor Agent shall notify the Escrow Agent of the date of
the
commencement of the Offering (the “Effective
Date”),
and
the Escrow Agent shall not be required to accept any amounts for credit to
or
deposit in the Escrow Account prior to its receipt of such
notification.
2.3 The
“Offering
Period,”
which
shall be deemed to commence on the Effective Date, shall continue until the
date
set forth on the Information Sheet. The Offering Period shall be extended
by the
written agreement of Ever Leader, the Company and the Investor Agent (an
“Extension
Period”)
only
if the Escrow Agent shall have received written notice thereof signed by
Ever
Leader, the Company and the Investor Agent prior to the expiration of the
Offering Period. The Extension Period, which shall be deemed to commence
on the
next calendar day following the expiration of the Offering Period, shall
expire
on the date set forth on the Information Sheet. The last day of the Offering
Period, or the last day of the Extension Period (if the Escrow Agent has
received written notice thereof as herein above provided), is referred to
herein
as the “Termination
Date”.
Except
as provided in Section 4.3 hereof, after the Termination Date, the Escrow
Agent
shall not accept any additional amounts representing payments by prospective
purchasers.
3.
Deposits
to the Bank Account.
3.1
Subscription
Funds from prospective investors shall be delivered to the Escrow Agent by
check
or wire transfer in accordance with the delivery or wire transfer instructions
set forth on the Information Sheet. The Investor Agent and the Company shall
promptly deliver to the Escrow Agent any Subscription Funds which they may
receive from a prospective Investor. Upon the Escrow Agent’s receipt of such
Subscription Funds, they shall be credited to the Escrow Account. All checks
delivered to the Escrow Agent shall be made payable to “Xxxxxxx - Ever Leader
Escrow Account.” Any check payable other than as required by the immediately
preceding sentence shall be returned to the Investor Agent by noon of the
next
business day following receipt of such check by the Escrow Agent, and such
check
shall be deemed not to have been delivered to the Escrow Agent pursuant to
the
terms of this Agreement. If the Investor Agent rejects the subscription of
any
prospective investor, the Investor Agent shall notify the Escrow Agent of
such
rejection, and the Escrow Agent shall promptly refund to such prospective
Investor the amount of payments received from such prospective investor which
is
then held in the Fund or which thereafter clears the banking system, without
interest thereon or deduction therefrom,
by
drawing a check on the Escrow Account for the amount of such payments made
payable to the prospective investor and delivering the check to the Investor
Agent for delivery to the prospective investor.
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3.2
Promptly
after receiving Subscription Funds as described in Section 3.1, the Escrow
Agent
shall deposit the same into the Escrow Account. Amounts of monies so deposited
are hereinafter referred to as “Escrow
Amounts”.
The
Escrow Agent shall cause the Bank to process all Escrow Amounts for collection
through the banking system.
3.3
The
Escrow Agent shall not be required to accept in the Escrow Account any amounts
representing payments by prospective purchasers, whether by check or wire,
except during the Escrow Agent’s regular business hours.
3.4
Only
those Escrow Amounts which have been deposited in the Escrow Account and
which
have cleared the banking system and have been collected by the Escrow Agent
are
herein referred to as the “Fund.”
3.5
If
the
Escrow Agent receives a written notice signed by Ever Leader, the Company
and
the Investor Agent stating that the Offering has been terminated prior to
the
Termination Date, the Escrow Agent shall refund any portion of the Fund that
has
not been disbursed in accordance with Article 4 hereof to the prospective
Investors as provided in Section 4.1.
3.6 The
parties acknowledge and understand that amounts in the Fund in excess of
$100,000 will not be insured by the Federal Deposit Insurance Corporation.
The
Company and the Investor Agent have advised all potential Investors of the
foregoing.
3.7 In
no
event shall the Escrow Agent be required to receive, retain or otherwise
handle
subscription documents or other information relating to the Offering and
any
such information shall be returned to the Investor Agent promptly upon receipt
by the Escrow Agent.
4.
Disbursement
from the Bank Account.
4.1 Subject
to Section 4.3
below,
if by the close of regular banking hours on the Termination Date the Escrow
Agent determines that the amount in the Fund is less than the Minimum Amount,
as
indicated by the amount funded into the Escrow Account at such time, then,
the
Escrow Agent shall promptly refund to each prospective Investor the amount
of
payment received from such prospective investor which is then held in the
Fund
or which thereafter clears the banking system, without interest thereon or
deduction therefrom,
by
drawing a check on the Escrow Account for the amount of such payments made
payable to the prospective investor and delivering the check to the Investor
Agent for delivery to the prospective investor. In such event, the Escrow
Agent
shall promptly notify Ever Leader, the Company and the Investor Agent of
its
distribution of the Fund.
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4.2 Subject
to Section 4.3
below,
if at any time prior to the close of regular banking hours on the Termination
Date, the Escrow Agent determines that the amount of the Fund
equals
or exceeds the Minimum Amount, the Escrow Agent shall promptly notify Ever
Leader, the Company and the Investor Agent of such fact. Upon receipt of
a joint
written instruction letter by Ever Leader, the Company and the Investor Agent
that the conditions to closing of the Offering has been met and providing
instructions as to the disbursement of the Fund, the Escrow Agent shall promptly
disburse such amounts from the Fund, by drawing checks or initiating wire
transfers from the Escrow Account, in accordance with all written instructions
signed by Ever Leader, the Company and the Investor Agent.
4.3 This
Section 4.3 applies only if a Collection Period has been provided for by
the
appropriate indication on the Information Sheet. If the Escrow Agent has
received at the close of business on the Termination Date any Subscription
Amounts which have not yet been deposited into the Escrow Account or which
have
not yet cleared the banking system and which, when added to the Fund, would
cause the amount of the Fund to equal or exceed the Minimum Amount, the
“Collection
Period”
(consisting of the number of business days set forth on the Information Sheet)
shall be utilized to allow such amounts to be deposited and to clear the
banking
system. During the Collection Period, the Investor Agent (and the Company)
shall
not deposit, and the Escrow Agent shall not accept, any additional Subscription
Funds; provided, however, that such amounts as were received by the Investor
Agent (or the Company) by the close of business on the Termination Date may
be
deposited with the Escrow Agent by noon of the next business day following
the
Termination Date and shall be deemed to have been received by the Escrow
Agent
prior to the close of business on the Termination Date. If, at the close
of
business on the last day of the Collection Period, the amount of the Fund,
after
the addition of amounts that cleared the banking system during the Collection
Period, is less than the Minimum Amount, the Escrow Agent shall promptly
notify
Ever Leader, the Company and the Investor Agent of such fact and shall promptly
return all amounts then in the Fund, and any amounts which thereafter clear
the
banking system, to the prospective Investors as provided in Section 4.1
hereof.
4.4 Upon
disbursement of the Fund pursuant to the terms of this Article 4, the Escrow
Agent shall be relieved of further obligations and released from all liability
under this Agreement. It is expressly agreed and understood that in no event
shall the aggregate amount of disbursements made by the Escrow Agent exceed
the
amount of the Fund.
4.5 Escrow
Agent agrees to prohibit any debit transactions and/or debit items from posting
to the Escrow Account prior to disbursement of the Fund.
5.
Rights,
Duties and Responsibilities of Escrow Agent. It is understood and agreed
that
the duties of the Escrow Agent are purely ministerial in nature, and
that:
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5.1 The
Escrow Agent acts only as an
agent
and a
depository
in
accordance with the express terms and conditions of this Agreement
and is
not a party to or bound by any agreement or undertaking other than this
Agreement unless such agreement or undertaking is in writing and signed by
the
Escrow Agent. If this Agreement is in conflict with the terms and conditions
of
any other agreement to which Ever Leader, the Company or the Investor Agent
is a
party or which otherwise relates to the Exchange or the Offering, the terms
and
conditions set forth herein are controlling.
5.2
The
Escrow Agent shall notify the Investor Agent of all Escrow Amounts which
have
been deposited in the Escrow Account as and when received by the Escrow Agent.
The Escrow Agent shall make Escrow Account balance, deposit and disbursement
information available to the Investor Agent via the Internet.
5.3
The
Escrow Agent shall not be responsible for or be required to enforce any of
the
terms or conditions of the selling agreement or any other agreement between
the
Investor Agent, the Company and Ever Leader, nor shall the Escrow Agent be
responsible for the performance by the Investor Agent, the Company or Ever
Leader of their respective obligations under this Agreement.
5.4
The
Escrow Agent shall not be required to keep records of any information with
respect to payments deposited by the Investor Agent, Company or prospective
Investors except as to the amount of such payments.
5.5
The
Escrow Agent shall be entitled to rely upon the accuracy, act in reliance
upon
the contents, and assume the genuineness of any notice, instruction,
certificate, signature, instrument or other document which is given to the
Escrow Agent pursuant to this Agreement without the necessity of the Escrow
Agent verifying the truth or accuracy thereof. The Escrow Agent shall not
be
obligated to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or instructions
or to
execute any such certificate, instrument or other document.
5.6 In
the
event of any disagreement or presentation of adverse claims or demands in
connection with this Agreement, the Escrow Agent, at its option, may refuse
to
comply with any claim or demand and refrain from delivering the Fund or any
part
thereof until all differences have been resolved by agreement or pursuant
to a
final adjudication by a court of competent jurisdiction. If any disagreement
arises or results in adverse demands being made in connection with this
Agreement, the Escrow Agent may interplead the Fund,
less
its fees, expenses, and advances,
in the
District Court for the City and County of Denver, State of Colorado. Escrow
Agent shall then be fully discharged of its duties as Escrow Agent. The
undersigned, for themselves, heirs, successors and assigns, do hereby submit
themselves to the jurisdiction of said court and do hereby appoint the Clerk
of
said Court as their agent for service of process in any such
proceedings.
5.7
The
Escrow Agent shall not be liable for any action taken or omitted hereunder,
or
for the misconduct of any employee, agent or attorney appointed by it, except
in
the case of willful misconduct or gross negligence. The Escrow Agent shall
be
entitled to consult with counsel of its own choosing and shall not be liable
for
any action taken, suffered or omitted by it in reasonable reliance upon the
advice of such counsel.
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5.8 In
case
any property held by the Escrow Agent hereunder shall be attached, garnished
or
levied upon under any order of any court or the delivery thereof shall be
stayed
or enjoined by any order of any court, or any other order, judgment or decree
shall be made or entered by any court affecting such property or any part
thereof or any acts of the Escrow Agent, the Escrow Agent is hereby authorized,
in its exclusive discretion, to obey and comply with all writs, orders,
judgments, or decrees so entered or issued, whether with or without
jurisdiction, and, if the Escrow Agent obeys and complies with any such writ,
order, judgment or decree, it shall not be liable to any of the parties hereto,
their successors, heirs or personal representatives or to any other person,
firm
or corporation, by reason of such compliance notwithstanding such writ, order,
judgment or decree be subsequently reversed, modified, annulled, set aside
or
vacated.
5.9 The
Escrow Agent shall have no responsibility at any time to ascertain whether
or
not any security interest exists in the Escrow Amounts, the Fund or any part
thereof or to file any financing statement under the Uniform Commercial Code
with respect to the Fund or any part thereof.
6. Amendment;
Resignation or Removal of Escrow Agent; Successor Escrow Agent.
6.1 This
Agreement may be altered or amended only with the written consent of Ever
Leader, the Company, the Investor Agent and the Escrow Agent.
6.2 The
Escrow Agent may resign and be discharged from its duties hereunder at any
time
by giving written notice of such resignation to Ever Leader, the Company
and the
Investor Agent specifying a date when such resignation shall take effect
and
upon delivery of the Fund to the successor escrow agent designated by Ever
Leader, the Company or the Investor Agent in writing. Such successor escrow
agent shall become the Escrow Agent hereunder upon the resignation date
specified in such notice. If Ever Leader, the Company or the Investor Agent
fails to designate a successor Escrow Agent within thirty (30) days after
such
notice, then the resigning Escrow Agent shall promptly refund the amount
in the
Fund to each prospective Investor, without interest thereon or deduction.
Subject to the preceding sentence, the Escrow Agent shall continue to serve
until its successor accepts the escrow and receives the Fund. Ever Leader,
the
Company and the Investor Agent shall have the right at any time to remove
the
Escrow Agent and substitute a new escrow agent by giving notice thereof to
the
Escrow Agent then acting. Upon its resignation and delivery of the Fund as
set
forth in this Section 6, the Escrow Agent shall be discharged of and from
any
and all further obligations arising in connection with the escrow contemplated
by this Agreement. Without limiting the provisions of Section 8 hereof, the
resigning Escrow Agent shall be entitled to be reimbursed by Ever Leader,
the
Company and the Investor Agent for any expenses incurred in connection with
its
resignation, transfer of the Fund to a successor escrow agent or distribution
of
the Fund pursuant to this Section 6.
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6.3 Any
corporation or association into which the Escrow Agent may be merged or to
which
all or substantially all of the Escrow Agent’s corporate trust line of business
may be transferred shall become the Escrow Agent under this Agreement without
further act upon notice to Ever Leader, the Company and the Investor
Agent.
7.
Representations
and Warranties. Ever Leader, the Company and the Investor Agent hereby severally
represent and warrant to the Escrow Agent that:
7.1
No
party
other than the parties hereto and the prospective purchasers have, or shall
have, any lien, claim or security interest in the Escrow Amounts or the Fund
or
any part thereof.
7.2
No
financing statement under the Uniform Commercial Code is on file in any
jurisdiction claiming a security interest in or describing (whether specifically
or generally) the Escrow Amounts or the Fund or any part thereof.
7.3 The
[Subscription Information] submitted with each deposit shall, at the time
of
submission and at the time of the disbursement of the Fund, be deemed a
representation and warranty that such deposit represents a bona fide payment
by
the purchaser described therein for the amount of Securities set forth in
such
Subscription Information.
7.4
All
of
the information contained in the Information Sheet is, as of the date hereof,
and will be, at the time of any disbursement of the Fund, true and
correct.
7.5 Reasonable
controls have been established and required due diligence performed to comply
with "Know Your Customer" regulations, USA Patriot Act, Office of Foreign
Asset
Control (OFAC) regulations and the Bank Secrecy Act.
8.
Fees
and
Expenses. Ever Leader, the Company and the Investor Agent jointly and severally
agree to pay the Escrow Agent the Escrow Agent Fees set forth on the Information
Sheet, payable as and when stated therein and to reimburse the Escrow Agent
for
any reasonable expenses incurred in connection with this Agreement, including,
but not limited to, reasonable counsel fees.
9.
Indemnification
and Contribution.
9.1
Ever
Leader, the Company and the Investor Agent (collectively referred to as the
“Indemnitors”)
jointly and severally agree to indemnify the Escrow Agent and its officers,
directors, employees, agents and shareholders (collectively referred to as
the
“Indemnitees”)
against, and hold them harmless of and from, any and all loss, liability,
cost,
damage and expense, including without limitation, reasonable counsel fees
and
amounts paid in settlement (collectively referred to as “Losses”),
which
the Indemnitees may suffer or incur by reason of any action, claim or proceeding
brought against the Indemnitees arising out of or relating in any way to
this
Agreement or any transaction to which this Agreement relates, except to the
extent such action, claim or proceeding is the result of the willful misconduct
or gross negligence of the Indemnitees.
7
9.2
To
the
extent the indemnification provided for in Section 9.1 is unavailable to
an
Indemnitee or insufficient in respect of any Loss of such Indemnitee, then
each
Indemnitor shall contribute to the amount paid or payable by such Indemnitee
as
a result of such Loss (a) in such proportion as is appropriate to reflect
the
relative benefits received by the Indemnitors, on the one hand, and the
Indemnitee or Indemnitees, on the other, from the Offering or (b) if the
allocation provided by clause (a) is not permitted by applicable law, in
such
proportion as is appropriate to reflect the relative fault of the Indemnitors,
on the one hand, and the Indemnitee or Indemnitees, on the other, in connection
with the action, claim or proceeding that resulted in such Losses. The aggregate
amount which the Indemnitees shall be required to contribute in respect of
all
such Losses shall not exceed the Escrow Agent Fees actually received by the
Escrow Agent pursuant to this Agreement.
9.3
The
provisions of this Article 9 shall survive any termination of this Agreement,
whether by disbursement of the Fund, resignation of the Escrow Agent or
otherwise.
10. Termination
of Agreement. This Agreement shall terminate on the final disposition of
the
Fund pursuant to Section 4, provided that the rights of the Escrow Agent
and the
obligations of the other parties hereto under Section 9 shall survive the
termination hereof and the resignation or removal of the Escrow
Agent.
11.
Governing
Law and Assignment. This Agreement shall be construed in accordance with
and
governed by the laws of the State of Colorado, without regard to the conflicts
of laws principles thereof, and shall be binding, upon the parties hereto
and
their respective successors and assigns; provided, however, that any assignment
or transfer by any party of its rights under this Agreement or with respect
to
the Escrow Amounts or the Fund shall be void as against the Escrow Agent
unless
(a) written notice thereof shall be given to the Escrow Agent; and (b) the
Escrow Agent shall have consented in writing to such assignment or transfer.
The
parties consent to the jurisdiction and venue of the foregoing courts and
consent that any process or notice of motion or other application to any
of said
courts or a judge thereof may be served inside or outside the State of Colorado
by registered mail, return receipt requested, directed to the party being
served
at its address set forth on the signature ages to this Agreement (and service
so
made shall be deemed complete three (3) days after the same has been posted
as
aforesaid) or by personal service or in such other manner as may be permissible
under the rules of said courts. Each of the parties hereto irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action, or
proceeding brought in such a court and any claim that suit, action, or
proceeding has been brought in an inconvenient forum. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,
A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
12.
Notices.
All notices required to be given in connection with this Agreement shall
be sent
by registered or certified mail, return receipt requested, or by hand delivery
with receipt acknowledged, or by the Express Mail service offered by the
United
States Postal Service, and addressed, if to Ever Leader, the Company or the
Investor Agent, at their respective addresses set forth on the Information
Sheet, and if to the Escrow Agent, at its address set forth above, to the
attention of the Downtown Banking Center - Escrow Department.
8
13.
Assignment.
The covenants and provisions of this Agreement by or for the benefit of the
Company, Ever Leader, the Investor Agent and the Escrow Agent shall bind
and
inure to the benefit of
their
respective successors and permitted
assigns hereunder. Any
assignment or transfer by any party of its rights under this Agreement or
with
respect to the Escrow Amounts or the Fund shall be void as against the Escrow
Agent unless (a) written notice thereof shall be given to the Escrow Agent;
and
(b) the Escrow Agent shall have consented in writing to such assignment or
transfer.
14.
Severability.
If any provision of this Agreement or the application thereof to any person
or
circumstance shall be determined to be invalid or unenforceable, the remaining
provisions of this Agreement or the application of such provision to persons
or
circumstances other than those to which it is held invalid or unenforceable
shall not be affected thereby and shall be valid and enforceable to the fullest
extent permitted by law.
15.
Execution
in Several Counterparts. This Agreement may be executed in several counterparts
or by separate instruments and by facsimile transmission, and all of such
counterparts and instruments shall constitute one agreement, binding on all
of
the parties hereto.
16.
Entire
Agreement. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings (written or oral) of the parties in connection
therewith.
17. Third
Party Beneficiaries. The Investors shall be intended third party beneficiaries
of this Agreement to the same extent as if they were parties hereto, and
shall
be entitled to enforce the provisions hereof.
[Signature
Page Follows]
9
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and
year first above written.
| XXXXXX STREET STATE BANK | ||
| |
|
|
| By: | /s/ Xxxxx Xxxxxxxxx | |
|
Name: Xxxxx Xxxxxxxxx |
||
| Title: President, Denver office | ||
| APPLIED SPECTRUM TECHNOLOGIES, INC. | ||
| |
|
|
| By: | /s/ Xxxxx X. Xxxxxxx | |
|
Name: Xxxxx X. Xxxxxxx |
||
| Title: President | ||
| EVER LEADER HOLDINGS LIMITED | ||
| |
|
|
| By: | /s/ Xxxxxx Xxx | |
|
Name: Xxxxxx Xxx |
||
| Title: Director | ||
| XXXXXXX SECURITIES, LLC | ||
| |
|
|
| By: | /s/ Xxxx X. Xxxxxx | |
|
Name: Xxxx X. Xxxxxx |
||
| Title: Partner | ||
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