ESCROW AGREEMENT
This Agreement is dated as of
the ___ day of May, 2010 among China Yongxin Pharmaceuticals Inc., a Delaware corporation (the "Company"),
the subscribers listed on Schedule
I hereto (“Subscribers”), and Grushko & Xxxxxxx,
P.C. (the "Escrow Agent"):
WITNESSETH:
WHEREAS, the Company and Subscribers have entered into a Subscription
Agreement calling for the sale by the Company to the Subscribers of secured convertible Notes for an aggregate purchase price
of up to $250,000, in a third closing (“Third Closing”) of the Company’s note and warrant financing; and
WHEREAS, the parties hereto require the
Company to deliver the Notes against payment therefor, with such
Notes and the Escrowed Funds to be delivered to
the Escrow Agent, along with the other documents, instruments
and payments hereinafter described, to be held in escrow and released by the
Escrow Agent in accordance with the terms and conditions of this Agreement;
and
WHEREAS, the Escrow Agent is willing to
serve as escrow agent
pursuant to the terms and conditions of this Agreement;
NOW THEREFORE, the parties agree as
follows:
ARTICLE I
INTERPRETATION
1.1. Definitions. Capitalized terms used and
not otherwise defined herein that are defined in the Subscription Agreement
shall have the meanings
given to such terms in the Subscription Agreement. Whenever used in
this Agreement, the following terms shall have the following respective
meanings:
§ "Agreement" means this Agreement and all
amendments made hereto and thereto by written agreement between the
parties;
§ “Amended and Restated Subsidiary
Guaranty” shall have the
meaning set forth in Section 3 of the Modification and Consent
Agreement;
§ “Broker” shall mean StreetCapital
Corp.;
§ “Broker’s Fee” shall have the meaning set forth
in Section 8(a) and on
Schedule 8(a) of the Subscription Agreement;
§ “Closing Date” shall have the meaning set forth in
Section 1 of the
Subscription Agreement;
§ "Escrowed Payment" means an aggregate
cash payment of up to
$250,000;
§ “Legal Opinion” means the original signed legal opinion referred to
in Section 6 of the Subscription Agreement;
§ “Modification and Consent
Agreement” shall mean the
Modification and Consent Agreement among the Subscribers and the Copmany dated
of even date with this Escrow Agreement.
§ “Note” shall have the meaning set forth in
the second recital to
the Subscription
Agreement for the Third
Closing;
§ “Principal Amount” shall mean an aggregate of up to $250,000;
§ “Subscriber Legal Fees” shall have the meaning set forth in
Section 14 of the Modification and Consent Agreement;
§ "Subscription Agreement" means the
Subscription Agreement (and the exhibits and schedules thereto including fully executed Amended and Restated Lockup Agreements referred to in
Section 3 of the
Modification and Consent Agreement and Section 9(u) of the Subscription
Agreement) entered into or
to be entered into by the Company and Subscribers in reference to the sale and purchase
of the Notes in the Third Closing;
§ “Warrants” shall have the meaning set forth in
Section 2(b) of the
Subscription Agreement for
the Third Closing;
§ Collectively, the Legal Opinion, Notes, Amended and Restated Subsidiary Guaranty, Amended and Restated Lockup
Agreements, Warrants, the executed Subscription
Agreement, the executed Modification and Consent Agreement, Broker’s Fee and Subscriber Legal Fees are referred to as “Company Documents”; and
§ Collectively, the Escrowed Payment and
the Subscribers’ executed Subscription
Agreements for the Third
Closing, and the executed Modification and Consent
Agreement are referred to as “Subscriber Documents”.
1.2. Entire
Agreement. This
Agreement along with the Company Documents and the Subscriber Documents
to which the Subscriber and
the Company or
Subsidiary are a party
constitute the entire
agreement between the
parties hereto pertaining to the Company Documents and Subscriber Documents and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. There are no warranties,
representations and other agreements made by the parties in
connection with the subject matter hereof, except as specifically set forth in
this Agreement, the Company Documents and the Subscriber
Documents.
1.3. Extended
Meanings. In
this Agreement words importing the singular number include the plural and vice
versa; words importing the masculine gender include the feminine and neuter
genders. The word "person" includes an individual, body corporate,
partnership, trustee or trust or unincorporated association, executor,
administrator or legal
representative.
1.4. Waivers and
Amendments. This
Agreement may be amended, modified, superseded, cancelled, renewed or extended,
and the terms and conditions hereof may be waived, only by a written instrument
signed by all parties, or, in the case of a waiver, by the party
waiving compliance. Except as expressly stated herein, no delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of
any party of any right, power or privilege
hereunder preclude any other or future exercise of any other right, power or
privilege hereunder.
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1.5. Headings. The division of this
Agreement into articles, sections, subsections and paragraphs and the insertion
of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.6. Law
Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of
New York without regard to
conflicts of
laws principles that would
result in the application of the substantive laws of another
jurisdiction. Any action brought by
either party against the other concerning the transactions contemplated by this
Agreement shall be brought
only in the state courts of New York or in the federal courts located in the
state of New York. Both parties and the individuals executing this
Agreement and other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by
jury. The prevailing party (which shall be the party which receives
an award most closely resembling the remedy or action sought) shall be entitled
to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any
agreement.
1.7. Specific
Enforcement, Consent to Jurisdiction. The Company and
Subscribers acknowledge and agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof,
this being in addition to any other remedy
to which any of them may be entitled by law or equity. Subject to
Section
1.6 hereof, each of the
Company and Subscribers hereby waives, and agrees not to assert
in any such suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Nothing in this Section shall affect or limit any
right to serve process in any other
manner permitted by law.
ARTICLE II
DELIVERIES TO THE ESCROW
AGENT
2.1. Company
Deliveries. On
or before the Closing Date, the Company shall execute and deliver the Company Documents to the
Escrow Agent.
2.2. Subscriber
Deliveries. On
or before the Closing Date, Subscribers shall execute and deliver the Subscriber Documents, and shall deliver the Escrowed Payment
in cash, to the Escrow Agent. The Escrowed Payment will
be delivered pursuant to the following wire transfer instructions:
Citibank, N.A.
0000 0xx Xxxxxx
Xxx Xxxx, XX 00000
ABA Number:
0210-00089
For Credit to: Grushko & Xxxxxxx,
XXXX Trust Account
Account Number:
00000000
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2.3. Intention to
Create Escrow Over Company Documents and Subscriber Documents. The Subscribers and Company intend that the Company
Documents and Subscriber Documents shall be held in escrow by the Escrow Agent
pursuant to this Agreement for their benefit as set forth
herein.
2.4. Escrow Agent
to Deliver Company Documents and Subscriber Documents. The Escrow Agent shall hold
and release the Company Documents and Subscriber Documents only in accordance
with the terms and conditions of this Agreement.
ARTICLE III
RELEASE OF COMPANY DOCUMENTS AND
SUBSCRIBER DOCUMENTS
3.1. Release of
Escrow. Subject to the provisions of
Section 4.2, the Escrow Agent shall release the Company Documents and Subscriber
Documents as follows:
(a) On
the Closing Date, the Escrow Agent will simultaneously release the Company
Documents to the Subscribers and release the Subscriber Documents to the
Company, except that: (i) the Broker’s Fee will be released to the Broker; and
(ii) Subscriber Legal Fees will be released directly to the Subscriber’s
attorneys,
(b) Notwithstanding the above, upon receipt
by the Escrow Agent of
joint written instructions ("Joint Instructions") signed by the Company and the
Subscribers, it shall deliver the Company Documents
and Subscriber Documents in accordance with the terms of the Joint
Instructions.
(c) Anything herein to the contrary notwithstanding, upon receipt by the Escrow Agent of a
final and non-appealable judgment, order, decree or award of a court of
competent jurisdiction (a "Court Order"), the Escrow Agent shall deliver the
Company Documents and Subscriber Documents in accordance with the Court
Order. Any Court Order shall be accompanied by an opinion of counsel
for the party presenting the Court Order to the Escrow Agent (which opinion
shall be satisfactory to the Escrow Agent) to the effect that the court issuing
the Court Order has competent jurisdiction
and that the Court Order is final and non-appealable.
3.2. If a Closing does not take
place on or before
May 15, 2010, the Escrow Agent will promptly return
the applicable Company Documents to the Company and
return the Subscriber
Documents to the Subscriber.
3.3. Acknowledgement of Company
and Subscriber; Disputes. The Company and the Subscribers
acknowledge that the only terms and conditions upon which the Company Documents
and Subscriber Documents are to be released are set forth in Sections 3 and 4 of
this Agreement. The Company and the Subscribers reaffirm their
agreement to abide by the terms and conditions of this Agreement with respect to
the release of the Company Documents and Subscriber Documents. Any
dispute with respect to the release of the Company Documents and Subscriber
Documents shall be resolved pursuant to Section 4.2 or by agreement between the
Company and Subscribers.
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ARTICLE
IV
CONCERNING
THE ESCROW AGENT
4.1. Duties and Responsibilities
of the Escrow Agent. The Escrow Agent's duties and
responsibilities shall be subject to the following terms and
conditions:
(a) The Subscribers and Company acknowledge and agree that
the Escrow Agent (i) shall not be responsible for or bound by, and
shall not be required to
inquire into whether either the Subscribers or Company is entitled to receipt of
the Company Documents and Subscriber Documents pursuant to any other agreement or otherwise; (ii)
shall be obligated only for the performance of such duties as are specifically assumed by the
Escrow Agent pursuant to this Agreement; (iii) may rely on and shall be
protected in acting or refraining from acting upon any written notice,
instruction, instrument, statement, request or document furnished to it
hereunder and believed by the Escrow Agent
in good faith to be genuine and to have been signed or presented by the proper
person or party, without being required to determine the authenticity or
correctness of any fact stated therein or the propriety or validity or the service thereof; (iv) may
assume that any person believed by the Escrow Agent in good faith to be
authorized to give notice or make any statement or execute any document in
connection with the provisions hereof is so authorized; (v) shall not
be under any duty to give the property held
by Escrow Agent hereunder any greater degree of care than Escrow Agent gives its
own similar property; and (vi) may consult counsel satisfactory to Escrow Agent,
the opinion of such counsel to be full and complete authorization and protection in respect
of any action taken, suffered or omitted by Escrow Agent hereunder in good faith
and in accordance with the opinion of such counsel.
(b) The Subscribers and Company acknowledge that the Escrow
Agent is acting solely as a
stakeholder at their request and that the Escrow Agent shall not be liable for
any action taken by Escrow Agent in good faith and believed by Escrow Agent to
be authorized or within the rights or powers conferred upon Escrow Agent by this
Agreement. The Subscribers and Company, jointly and severally,
agree to indemnify and hold harmless the Escrow Agent and any of Escrow Agent's
partners, employees, agents and representatives for any action taken or omitted
to be taken by Escrow Agent or any of them hereunder, including the fees of outside
counsel and other costs and expenses of defending itself against any claim or
liability under this Agreement, except in the case of gross negligence or
willful misconduct on Escrow Agent's part committed in its capacity as Escrow Agent under this
Agreement. The Escrow Agent shall owe a duty only to the
Subscribers and Company under this Agreement and to
no other person.
(c) The Subscribers and Company jointly and severally agree
to reimburse the Escrow Agent for outside counsel fees, to the extent
authorized hereunder and incurred in connection with the performance of its
duties and responsibilities hereunder.
(d) The Escrow Agent may at any time resign
as Escrow Agent hereunder by giving five (5) days prior written notice of resignation to the
Subscribers and the Company. Prior to
the effective date of the resignation as specified in such notice, the
Subscribers and Company will issue to the Escrow
Agent a Joint Instruction authorizing delivery of the Company Documents and Subscriber Documents to a
substitute Escrow Agent selected by the Subscribers and Company. If no successor
Escrow Agent is named by the Subscribers and Company, the Escrow Agent may apply
to a court of competent jurisdiction in the State of New York for appointment of a successor
Escrow Agent, and to deposit the Company Documents and Subscriber Documents with
the clerk of any such court.
(e) Other than in connection with the Subscriber Legal
Fees, the Escrow Agent does not have and will
not have any interest in
the Company Documents and Subscriber Documents, but is serving only as escrow
agent, having only possession thereof. The Escrow Agent shall not be
liable for any loss resulting from the making or retention of any investment in
accordance with this Escrow
Agreement.
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(f) This Agreement sets forth exclusively
the duties of the Escrow Agent with respect to any and all matters pertinent
thereto and no implied duties or obligations shall be read into this
Agreement.
(g) The Escrow Agent shall be permitted to act as counsel for
the Subscribers in any dispute as to the disposition of
the Company Documents and Subscriber Documents, in any other dispute between the
Subscribers and Company, whether or not the Escrow
Agent is then holding the Company Documents and Subscriber Documents
and continues to act as the Escrow Agent hereunder.
(h) The provisions of this Section
4.1 shall survive the
resignation of the Escrow Agent or the termination of this
Agreement.
4.2. Dispute
Resolution: Judgments. Resolution of disputes
arising under this Agreement shall be subject to the following terms and
conditions:
(a) If any dispute shall arise with respect
to the delivery, ownership, right of possession or disposition of the Company
Documents and Subscriber
Documents, or if the Escrow Agent shall in good faith be uncertain as to its
duties or rights hereunder, the Escrow Agent shall be authorized, without
liability to anyone, to (i) refrain from taking any action other than to
continue to hold the Company Documents and Subscriber Documents
pending receipt of a Joint Instruction from the Subscribers and Company, or (ii) deposit the
Company Documents and Subscriber Documents with any court of competent
jurisdiction in the State of New York, in which event the Escrow Agent shall give written notice
thereof to the Subscribers and the Company and shall thereupon be
relieved and discharged from all further obligations pursuant to this
Agreement. The Escrow Agent may, but shall be under no duty to,
institute or defend any
legal proceedings which relate to the Company Documents and Subscriber
Documents. The Escrow Agent shall have the right to retain counsel if
it becomes involved in any disagreement, dispute or litigation on account of
this Agreement or otherwise determines that it is necessary to
consult counsel.
(b) The Escrow Agent is hereby expressly
authorized to comply with and obey any Court Order. In case the
Escrow Agent obeys or complies with a Court Order, the Escrow Agent shall not be
liable to the Subscribers and Company or to any other person,
firm, corporation or entity by reason of such compliance.
ARTICLE V
GENERAL MATTERS
5.1. Termination. This escrow shall terminate
upon the release of all of the Company Documents and Subscriber Documents or
at any time upon the
agreement in writing of the Subscribers and Company.
5.2. Notices. All notices, demands,
requests, consents, approvals, and other communications required or permitted
hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below
or to such other address as such party shall have specified most recently by
written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand
delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day following such delivery
(if delivered other than on a business day during normal business hours where
such notice is to be received) or (b) on the second business day following the
date of mailing by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
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(a) If to the Company,
to:
China Yongxin Pharmaceuticals,
Inc.
000 Xxxxxx Xxxxx
Xxxx xx Xxxxxxxx, XX
00000
Attn: Xxxxxxx Xxx, CEO
Fax: (000) 000-0000
With a copy by facsimile only
to:
Xxxxxxxxxx & Xxxxx,
LLP
00000 Xxxxxxxx Xxxx., Xxxxx
000
Xxx Xxxxxxx, XX 00000
Attn: Xxxx Xxxx, Esq.
Fax: (000) 000-0000
(b) If to the Subscribers: to the addresses
set forth on Schedule I
With a copy by facsimile only
to:
Grushko & Xxxxxxx,
P.C.
000 Xxxxx Xxxxxx, Xxxxx
0000
Xxx Xxxx, Xxx Xxxx
00000
Fax: 000-000-0000
(c) If
to the Broker, to:
StreetCapital Corp.
000
Xxxxxxxx Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attn:
Xxxxx Xxxxxx
Fax:
(000) 000-0000
(d) If to the Escrow Agent,
to:
Grushko & Xxxxxxx,
P.C.
000 Xxxxx Xxxxxx, Xxxxx
0000
Xxx Xxxx, Xxx Xxxx
00000
Fax: 000-000-0000
or to such other address as any of them
shall give to the others by notice made pursuant to this Section
5.2.
5.3. Interest. The Escrowed Payment
shall not be held in an interest bearing account nor will interest be payable in
connection therewith. In the event the Escrowed Payment is deposited
in an interest bearing account, the Subscribers shall be entitled to receive any
accrued interest thereon, but only if the Escrow Agent receives from the
Subscriber the Subscribers’ United States taxpayer identification number and
other requested information and forms.
5.4. Assignment; Binding
Agreement. Neither this Agreement nor
any right or obligation hereunder shall be assignable by any party without the
prior written consent of the other parties hereto. This Agreement
shall enure to the benefit of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.
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5.5. Invalidity. In the event that any one
or more of the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal, or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
5.6. Counterparts/Execution. This Agreement may be
executed in any number of counterparts and by different signatories hereto on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and the same
instrument. This Agreement may be executed by facsimile transmission
and delivered by facsimile transmission.
5.7. Agreement. Each of the undersigned states that he has read the
foregoing Escrow Agreement and understands and agrees to it.
[THE
BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS
WHEREOF, the udersigned
have executed and delivered this Escrow Agreement, as of the date first written
above.
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“COMPANY”
a
Delaware corporation
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By:
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| Xxxxxxx Xxx | |||
| Chief Executive Officer | |||
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ESCROW AGENT:
GRUSHKO
& XXXXXXX, P.C.
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By:
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| Name: | |||
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SUBSCRIBERS:
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Pring
Name of Subscriber
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| By: | |||
| Name: | |||
| Title: | |||
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