ESCROW AGREEMENT
Exhibit
10.3
This
Agreement is made as of the 1st day of
August,
2007, by and among Xxxxx Xxxxxx, Xxxxx Xxxxxx and Xxxx Xxxx, each a shareholder
(the “Shareholders”) of Major Electric, Inc., a corporation organized and
existing under the laws of the State of Washington, with its principal offices
located at 00000 000xx Xxxxxx
XX,
Xxxxxxxxxxx, Xxxxxxxxxx 00000 ("MEI"), WPCS International Incorporated, a
corporation organized and existing under the laws of the State of Delaware,
with
its principal offices at Xxx Xxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxxxxxxx
00000 ("WPCS"), and Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP, a New York
limited liability partnership having offices at 00 Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx
00000 (the "Escrow Agent").
RECITALS
The
Shareholders, MEI and WPCS are
parties to that certain Stock Purchase Agreement, dated as of August 1, 2007
(the "Purchase Agreement"). WPCS and the Shareholders wish to provide
for the escrow of certain monies pursuant to the Purchase Agreement, and desire
that the Escrow Agent hold such monies in connection therewith pursuant to
the
provisions of this Agreement, and the Escrow Agent is willing to hold such
cash
pursuant to the provisions of this Agreement. All capitalized terms
contained herein and not otherwise defined shall have the meaning ascribed
to
them in the Purchase Agreement. In consideration of the premises and
mutual covenants, agreements, representations and warranties contained herein,
the parties hereby agree as follows:
1. WPCS
and Shareholders hereby appoint the Escrow Agent to hold $300,000 in cash (the
"Escrowed Funds"), in a trust account, and the Escrow Agent accepts such
appointment, subject to the terms and conditions hereof. WPCS has,
prior to the execution of this Escrow Agreement, delivered by way of wire
transfer to the Escrow Agent the Escrowed Funds and hereby irrevocably instructs
the Escrow Agent to deal with the Escrowed Funds on and subject to the terms
hereof. In executing this Escrow Agreement the Escrow Agent
acknowledges receipt of the Escrowed Funds and the instructions contained
herein.
2. (a) The
Escrow Agent shall retain the Escrowed Funds until the NTAV of the Company
as of
the Closing Date shall be determined.
(b) In
the event the NTAV as of the Closing Date shall be less than $1,900,000, the
Cash Purchase Price shall be reduced by the amount of the shortfall and such
amount shall be delivered to WPCS by the Escrow Agent from the Escrowed
Funds. In the event the NTAV as of the Closing Date shall be greater
than $1,900,000, the Closing Payment shall be increased by the amount of the
excess and such amount shall be delivered by WPCS to the Shareholders, pro
rata,
based upon their ownership of Shares. The NTAV shall be determined in
accordance with the terms and conditions of Section 2.3(a) of the Purchase
Agreement. The Escrow Agent shall only deliver the Escrowed Funds
upon (i) written notification signed by each of the Shareholders and WPCS of
final determination of the NTAV or (ii) delivery to the Escrow Agent of a final
written determination of NTAV by the Independent Accounting Firm.
(c) The
balance of any amount remaining after the delivery of payments required pursuant
to section 2(b) above (the “Escrow Payment”) shall be delivered to the
Shareholders, pro rata, based upon their ownership of Shares, within three
(3)
business days of the date of the escrow payments required by section 2(b)
above.
3. The
Escrow Agent shall, from time to time, deliver all or some of the Escrowed
Funds
to WPCS or the Shareholders in accordance with such written instructions,
jointly executed by WPCS and the Shareholders, as the Escrow Agent may
receive.
4. The
Escrow Agent shall not be under any duty to give the Escrowed Funds any greater
degree of care than it gives its own similar property, and it shall have no
liability hereunder, except for the willful breach or gross negligence of its
duties hereunder.
5. The
Escrow Agent shall have no duties or responsibilities except those expressly
set
forth herein, and no implied duties or obligations should be read into this
Escrow Agreement against the Escrow Agent. The Escrow Agent need not
refer to, and will not be bound by, the provisions of any other agreement,
except for definitions of terms contained in the Purchase
Agreement.
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6. The
Escrow Agent may consult with counsel and shall be fully protected with respect
to any action taken or omitted by it in good faith on advice of
counsel.
7. The
Escrow Agent makes no representation as to the validity, value, genuineness
or
the collectibility of any security or other document or instrument held by
or
delivered to it.
8. The
Escrow Agent will receive no compensation for its services
hereunder.
9. In
the event that the Escrow Agent shall be uncertain as to its duties or rights
hereunder, or shall receive instructions from WPCS and the Shareholders or
both
of them, with respect to the Escrowed Funds, which, in its opinion, are in
conflict with any of the provisions hereof (i) it shall be entitled to refrain
from taking any action, and in doing so shall not become liable in any way
or to
any person for its failure or refusal to comply with such conflicting demands,
and it shall be entitled to continue so to refrain from acting and so refuse
to
act until it shall be directed otherwise, in writing, jointly by WPCS and the
Shareholders or until it shall receive a final determination of a court of
law,
arbitration panel, or similar adjudicative body, or (ii) it may commence an
interpleader action in any court of competent jurisdiction to seek an
adjudication of the rights of WPCS and the Shareholders.
10. The
Escrow Agent may act in reliance upon any notice, instruction, certificate,
statement, request, consent, confirmation, agreement or other instrument which
it believes to be genuine and to have been signed by a proper person or persons,
and may assume that any of the officers of WPCS or the Shareholders purporting
to act on behalf of WPCS or the Shareholders in giving any such notice or other
instrument in connection with the provisions hereof has been duly authorized
to
do so.
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11.1 In
the event that the Escrow Agent retains counsel or otherwise incurs any legal
fees by virtue of any provision of this Escrow Agreement, the reasonable fees
and disbursements of such counsel and any other liability, loss or expense
which
the Escrow Agent may thereafter suffer or incur in connection with this Escrow
Agreement or the performance or attempted performance in good faith of its
duties hereunder shall be paid (or reimbursed to it) by WPCS. In the
event that the Escrow Agent shall become a party to any litigation in connection
with its functions as Escrow Agent pursuant to this Escrow Agreement, whether
such litigation shall be brought by or against it, the reasonable fees and
disbursements of counsel to the Escrow Agent including the amounts attributable
to services rendered by members or associates of Escrow Agent at the then
prevailing hourly rate charged by them and disbursements incurred by them,
together with any other liability, loss or expense which it may suffer or incur
in connection therewith, shall be paid (or reimbursed to it) by WPCS, unless
such loss, liability or expense is due to the willful breach or gross negligence
by the Escrow Agent of its duties hereunder.
11.2 WPCS
hereby
unconditionally agrees to indemnify the Escrow Agent and hold it harmless from
and against any and all taxes (including federal, state and local taxes of
any
kind and other governmental charges), expenses, damages, actions, suits or
other
charges incurred by or brought or assessed against it for (i) anything done
or
omitted by it in the performance of its duties hereunder, or (ii) on account
of
acting in its capacity as an Escrow Agent or stakeholder hereunder, except
as a
result of its willful breach or gross negligence of its duties under this Escrow
Agreement.
11.3
All expenses incurred by the Escrow Agent in connection with the performance
of
its duties hereunder shall be paid (or reimbursed to it) by WPCS.
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11.4
The agreements contained in this
section 11 shall survive any termination of the duties of the Escrow Agent
hereunder.
12. The
terms and provisions of this Escrow Agreement may not be waived, discharged
or
terminated orally, but only by an instrument in writing signed by the person
or
persons against whom enforcement of the discharge, waiver or termination is
sought.
13. The
Escrow Agent shall not be bound by any modification of the provisions of this
Escrow Agreement, unless such modification is in writing and signed by WPCS
and
the Shareholders, and, with respect to any modification in Escrow Agent's duties
or its rights of indemnification hereunder, it shall have given their prior
written consent thereto.
14. WPCS
and the Shareholders shall, from time to time, execute such documents and
perform such acts as the Escrow Agent may reasonably request and as may be
necessary to enable the Escrow Agent to perform its duties hereunder or
effectuate the transactions contemplated by this Escrow Agreement.
15. WPCS
and the Shareholders hereby acknowledge that the acts of the Escrow Agent are
purely ministerial and do not represent a conflict of interest for the Escrow
Agent to act, or continue to act, as counsel for any party to this Agreement
with respect to any litigation or other matters arising out of this Agreement
or
otherwise.
16. The
Escrow Agent may resign at any time upon ten (10) days' written notice to WPCS
and the Shareholders. In the event of the Escrow Agent's resignation,
its only duty thereafter shall be to hold and dispose of the Escrowed Funds
in
accordance with the provisions of this Agreement until a successor Escrow Agent
shall be appointed and written notice of the name and address of such successor
Escrow Agent shall be given to the resigning Escrow Agent by the other parties
hereto, whereupon the resigning Escrow Agent's only duty shall be to deliver
the
Escrowed Funds to the successor Escrow Agent.
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17. The
rights created by this Agreement shall inure to the benefit of, and the
obligations created hereby shall be binding upon, the heirs, successors, assigns
and personal representatives of the Escrow Agent, WPCS and the
Shareholders.
18.
Each notice, demand, request, approval or communication ("Notice") which is
or
may be required to be given by any party to any other party in connection with
this Agreement and the transactions contemplated hereby, shall be in writing,
and given by personal delivery, certified mail, return receipt requested,
prepaid, or by overnight express mail delivery and properly addressed to the
party to be served at such address as set forth above.
Notices
shall be effective on the
date delivered personally, the next day if delivered by overnight express mail
or three days after the date mailed by certified mail.
19. This
Escrow Agreement shall be governed by, and its provisions construed in
accordance with the laws of the State of New York.
[Intentionally
blank]
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IN
WITNESS WHEREOF,
the parties hereto have caused this Escrow Agreement to be duly executed as
of
the day and year first above written.
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WPCS
INTERNATIONAL INCORPORATED
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By:
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/s/ XXXXXX XXXXXXX | ||
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Xxxxxx Xxxxxxx
Chief
Executive Officer
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| MAJOR ELECTRIC, INC. | |||
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/s/ XXXXX XXXXXX | |
| Xxxxx Xxxxxx, | |||
| President | |||
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| SHAREHOLDERS | |||
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|
/s/ XXXXX XXXXXX | |
| Xxxxx Xxxxxx | |||
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|
/s/ XXXXX XXXXXX | |
| Xxxxx Xxxxxx | |||
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/s/ XXXX XXXX | ||
| Xxxx Xxxx | |||
ESCROW
AGENT:
SICHENZIA
XXXX XXXXXXXX XXXXXXX LLP
/s/
XXXXXX X. XXXX
Xxxxxx
X.
Xxxx,
Partner
