ESCROW AGREEMENT
Exhibit
10.4
This
Escrow Agreement (the “Agreement”),
entered into as of this 6th day of July, 2006, is by and among CHINA SECURITY
& SURVEILLANCE TECHNOLOGY, INC., a British Virgin Islands corporation (the
“Company”),
each
of the Investors of ordinary shares of the Company (the “Shares”)
identified below (collectively, the “Investors”)
and
XXXXXX XXXX & PRIEST LLP (hereinafter referred to as “Escrow
Agent”).
All
capitalized terms used but not defined herein shall have the meanings assigned
them in the Securities Purchase Agreement (as hereinafter defined).
BACKGROUND
The
Company and the Investors are entering into concurrently herewith a Securities
Purchase Agreement (the “Securities
Purchase Agreement”)
pursuant to which each Investor has agreed to purchase from the Company, and
the
Company has agreed to sell to each Investor, the number of Shares identified
therein. Pursuant to the Securities Purchase Agreement, the Company and the
Investors have agreed to establish an escrow on the terms and conditions set
forth in this Agreement. The Escrow Agent has agreed to act as escrow agent
pursuant to the terms and conditions of this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the promises of the parties and the terms and
conditions hereof, the parties hereby agree as follows:
1. Appointment
of Escrow Agent.
Each
Investor and the Company hereby appoint Xxxxxx Xxxx & Priest LLP as Escrow
Agent to act in accordance with the Securities Purchase Agreement and the terms
and conditions set forth in this Agreement, and Escrow Agent hereby accepts
such
appointment and agrees to act in accordance with such terms and
conditions.
2. Establishment
of Escrow.
All
amounts provided by the Investors in connection with their acquisition of the
Shares as set forth in the Securities Purchase Agreement shall be deposited
with
the Escrow Agent in immediately available funds by federal wire transfer, such
funds being referred to herein as the “Escrow
Funds”.
In
addition, certificates representing the Shares (the “Escrowed
Certificates”)
shall
be deposited with the Escrow Agent.
3. Segregation
of Escrow Funds and Escrowed Certificates.
The
Escrow Funds and Escrowed Certificates shall be segregated from the assets
of
Escrow Agent and held in trust for the benefit of the Company and the Investors
in accordance herewith.
4. Receipt
and Investment of Funds.
(a) Escrow
Agent agrees to place the Escrow Funds in a non-interest bearing and federally
insured depository account. Subject to Section 7(c) hereof, Escrow Agent shall
have no liability for any loss resulting from the deposit of the Escrow
Funds.
(b) The
Escrow Agent shall cause to be prepared all income and other tax returns and
reports the Escrow Agent, in its sole discretion, deems necessary or advisable
in order to comply with all tax and other laws, rules and regulations applicable
to the Escrow Funds.
5. Disbursement
of the Escrow Funds.
(a) The
Escrow Agent shall continue to hold the Escrow Funds delivered for deposit
hereunder by an Investor until the earlier of: (1) receipt of such Investor’s
written notice evidencing termination under Section 6.5 of the Securities
Purchase Agreement, and (2) receipt of both (x) written notice from the Company
that the conditions
to closing under Section 5.1 of the Securities Purchase Agreement shall have
been satisfied and (y) joint written notice from the Company and Xxxx Capital
Partners, LLC to effect the Closing under the Securities Purchase
Agreement.
(b) If
the
Escrow Agent shall receive the termination election of an Investor as
contemplated by Section 5(a)(1) prior to its receipt of the notices contemplated
under Section 5(a)(2), then the Escrow Agent shall return the Escrow Funds
delivered by such Investor as directed by such Investor and shall return the
Escrowed Certificates in respect of such Investor to the Company. If the Escrow
Agent shall receive the notices contemplated under Section 5(a)(2) prior to
the
termination election of an Investor as contemplated by Section 5(a)(1), then
the
Escrow Agent shall disburse the portion of the Escrow Funds for which the
foregoing is the case in accordance with Annex
A
to this
Agreement and shall deliver the Escrowed Certificates as per the instructions
of
the non-terminated Investors.
6. Interpleader.
Should
any controversy arise among the parties hereto with respect to this Agreement
or
with respect to the right to receive the Escrow Funds or the Escrowed
Certificates, Escrow Agent shall have the right to consult counsel and/or to
institute an appropriate interpleader action to determine the rights of the
parties. The Escrow Agent shall not have any right to challenge any termination
of an Investor’s participation in the transactions contemplated by the
Securities Purchase Agreement. Escrow Agent is 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 6 shall be filed in any court of competent
jurisdiction in New York, New York, and the portion of the Escrow Funds 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 Agreement with respect to that portion of the Escrow
Funds.
7. 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
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 or depositing the Escrow
Funds. 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 Agreement and instructions to Escrow Agent pursuant to the terms of
this 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.
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(b) 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, in good faith and in the exercise of
its
own best judgment, and 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 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.
(c) Escrow
Agent will be indemnified and held harmless by the Company 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 Agreement
or the services of Escrow Agent hereunder; except, that if Escrow Agent is
guilty of willful misconduct, fraud or gross negligence under this Agreement,
then Escrow Agent will bear all losses, damages and expenses arising as a result
of such willful misconduct, fraud or gross negligence. For this purpose, the
term “attorneys’ fees” includes fees payable to any counsel retained by the
Escrow Agent in connection with its services under this agreement and, with
respect to any matter arising under this agreement as to which the Escrow Agent
performs legal services, its standard hourly rates and charges then in effect.
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 7 shall survive
the
termination of this Agreement.
(d) The
Investors acknowledge that they know that the Escrow Agent has represented
the
Company in connection with this Agreement and that it may continue to represent
the Company in that connection and in connection with the transactions
contemplated by this agreement and the Securities Purchase Agreement and other
transactions, including, but not limited to, in connection with any disputes
that may arise under any such agreements or transactions. The Escrow Agent
shall
not be precluded from or restricted in any way from representing the Company
or
any of its affiliates or otherwise acting as attorneys for the Company or any
of
its affiliates in any matter, except for any legal proceeding or other matter
related to this Agreement. The Escrow Agent shall be permitted to represent
the
Company in any and all legal matters pertaining to, the Securities Purchase
Agreement and the Company’s other transactions, whether or not there is a
dispute between the Investors and the Company with respect to any such matter.
The Investors irrevocably consent to any such representation and waive any
conflict or appearance of conflict with respect to any such
representation.
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8. Resignation
of Escrow Agent.
At any
time, upon ten (10) days’ written notice to the Company, Escrow Agent may resign
and be discharged from its duties as Escrow Agent hereunder. As soon as
practicable after its resignation, Escrow Agent will promptly turn over to
a
successor escrow agent appointed by the Company all monies and property held
hereunder upon presentation of a document appointing the new escrow agent and
evidencing its acceptance thereof. If, by the end of the 10-day period following
the giving of notice of resignation by Escrow Agent, the Company shall have
failed to appoint a successor escrow agent, Escrow Agent may interplead the
Escrow Funds into the registry of any court having jurisdiction.
9. Method
of Distribution by Escrow Agent.
All
disbursements by Escrow Agent to a party to this Agreement will be made by
wire
transfer of immediately available funds to an account designated in writing
by
the party to receive any such payment.
10. Records.
Escrow
Agent shall maintain accurate records of all transactions hereunder. Promptly
after the termination of this 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.
11. Notice.
All
notices, communications and instructions required or desired to be given under
this 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 following addresses:
If
to
Escrow Agent:
Xxxxxx
Xxxx & Priest LLP
000
Xxxxxx Xxxxxx, X.X.
Xxxxxxxxxx,
XX 00000
Attention:
Xxxxx X. Xxxxxxxxxx, Esq.
If
to the
Company: China
Security & Surveillance Technology, Inc.
0/X,
Xxxx
0/X, Xxxxx Science & Technology Park
Huaqiang,
Shenzhen, China 518028
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If
to the
Investors: To
their
addresses as specified in the Securities Purchase Agreement
or
to
such other address and to the attention of such other person as any of the
above
may have furnished to the other parties in writing and delivered in accordance
with the provisions set forth above.
12. Execution
in Counterparts; Facsimile Execution.
This
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. Facsimile execution and delivery of this Agreement is legal, valid
and binding for all purposes.
13. Assignment
and Modification.
This
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. Subject to the foregoing, this 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 Agreement. No portion of the Escrow Funds or Escrowed
Certificates 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 Agreement. This Agreement may be changed or modified only
in
writing signed by all of the parties hereto.
14. APPLICABLE
LAW.
THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE
STATE OF NEW YORK, USA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN.
THE PARTIES EXPRESSLY WAIVE SUCH DUTIES AND LIABILITIES, IT BEING THEIR INTENT
TO CREATE SOLELY AN AGENCY RELATIONSHIP AND HOLD THE ESCROW AGENT LIABLE ONLY
IN
THE EVENT OF ITS WILLFUL MISCONDUCT, FRAUD, OR GROSS NEGLIGENCE. ANY LITIGATION
CONCERNING THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE EXCLUSIVELY PROSECUTED
IN THE COURTS OF NEW YORK COUNTY, NEW YORK, USA, AND ALL PARTIES CONSENT TO
THE
EXCLUSIVE JURISDICTION AND VENUE OF THOSE COURTS.
15. Headings.
The
headings contained in this Agreement are for convenience of reference only
and
shall not affect the construction of this Agreement.
16. Attorneys’
Fees.
If any
action at law or in equity, including an action for declaratory relief, is
brought to enforce or interpret the provisions of this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys’ fees from the other
party (unless such other party is the Escrow Agent), which fees may be set
by
the court in the trial of such action or may be enforced in a separate action
brought for that purpose, and which fees shall be in addition to any other
relief that may be awarded.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
| The Company: | ||
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CHINA
SECURITY & SURVEILLANCE TECHNOLOGY,
INC.
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| By: | ||
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Name: Guoshen Tu |
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| Title: CEO and Chairman | ||
| Escrow Agent: | ||
| XXXXXX XXXX & PRIEST | ||
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| By: | ||
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Name: Xxx Xxxxx, Esq. |
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| Title: Partner | ||
[Investor
Signature Page Follows]
[Signature
Page to Escrow Agreement]
IN
WITNESS WHEREOF, the undersigned Investor hereby executes this Agreement as
of
the date first above written.
| For Individuals: | ||
|
Print Name Above |
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|
Sign Name Above |
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| For Entities: | ||
|
Print Name Above |
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| By: | ||
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| Title: | ||
