ESCROW AGREEMENT
Exhibit
10.3
This
Agreement, dated as of October 31, 2008 (this “Agreement”),
is
entered into by and among Lihua International, Inc., a Delaware corporation,
(the “Company”),
Xxxxxx & Xxxxxx, LLP (the “Escrow
Agent”),
Vision Opportunity China LP, a closed-ended investment company incorporated
in
Guernsey (“Vision”),
and
each of the purchasers as set forth on Exhibit
A attached
hereto (together with Vision, each, a “Purchaser”
and
collectively, the “Purchasers”).
The
principal address of each party is set forth on Exhibit
A.
WITNESSETH:
WHEREAS,
Magnify Wealth Enterprise Limited, a British Virgin Island company
(“Magnify”),
entered into a share exchange agreement with the Company pursuant to which
Magnify transferred all of its ownership interest in Ally Profit Investments
Limited, a limited liability company organized under the laws of the British
Virgin Islands (“Ally
Profit”),
in
exchange for the issuance of shares of common stock, par value $0.0001 per
share
(the “Common
Stock”)
of the
Company (the “Share
Exchange Transaction”),
and
as a result of the Share Exchange Transaction, Ally Profit became a wholly-owned
subsidiary of the Company; and
WHEREAS,
immediately following the consummation of the Share Exchange Transaction, the
Company made a private offering to the Purchasers (the “Offering”)
for
the sale of units, 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 (the “Offering
Securities”)
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 certain other agreements,
documents, instruments and certificates necessary to carry out the purposes
thereof (collectively, the “Transaction
Documents”).
WHEREAS,
the Company and the Purchasers desire to deposit all proceeds received by the
Company from the Purchasers for the Offering Securities (the “Escrowed
Funds”)
with
the Escrow Agent, to be held and disbursed by the Escrow Agent pursuant to
this
Agreement; and
WHEREAS,
the Escrow Agent is willing to hold the Escrowed Funds in escrow in accordance
with, 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 each Purchaser hereby appoint Xxxxxx & Jaclin 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 will direct each Purchaser to deliver their respective share of the
Escrowed Funds to the Escrow Agent as follows:
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Wachovia
Bank NA
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000
Xxxx Xxxx Xxxxxx
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Xxxxxxxx,
Xxx Xxxxxx 00000
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ABA
No.:
000000000
SWIFT:
Account:
Xxxxxx & Xxxxxx LLP Escrow Account
Account
No.: 2000013292968
Attn:
Xxxxxx X Xxxxxxx, Esq.
Reference:
Vision-Lihua Financing
(b) The
Escrowed Funds shall be forwarded to the Escrow Agent by wire transfer, together
with the executed Transaction Documents. The Escrowed Funds to be wired shall
be
wired to the account set forth in Section 2(a) above and the executed
Transaction Documents shall be faxed or emailed to the Escrow Agent in
accordance with the information provided on Exhibit
A
with
respect to the Escrow Agent.
(c) Simultaneously
with the deposit of each Purchaser’s share of the Escrowed Funds, each Purchaser
shall provide the Escrow Agent with the Transaction Documents, accompanied
by a
cover sheet setting forth the name, address and taxpayer identification number
of such Purchaser, wire transfer instructions and the aggregate principal amount
of Offering Securities purchased by such Purchaser.
(d) In
the
event a wire transfer is received by the Escrow Agent and the Escrow Agent
has
not received the executed Transaction Documents, the Escrow Agent shall notify
such Purchaser. If the Escrow Agent does not receive the Transaction Documents
from such Purchaser prior to the close of business on the day which is the
fifth
(5th)
business day (a day other than a Saturday or Sunday or other day on which the
Escrow Agent is not open for business in the State of New York) after the day
on
which the Escrow Agent notified the Purchaser that it has not received such
Purchaser’s executed Transaction Documents, the Escrow Agent shall return,
within five (5) business days after such date, the funds wired by such Purchaser
to the Purchaser by wire transfer in immediately available funds.
3. Escrow
Agent to Hold and Disburse Escrowed Funds.
The
Escrow Agent will hold and disburse the Escrowed Funds received by it pursuant
to the terms of this Agreement, as follows:
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(a) Simultaneous
with the disbursement of the Escrowed Funds to the Company, the Escrow Agent
shall allocate a portion of the Escrowed Funds in the aggregate amount of Seven
Hundred Fifty Thousand Dollars ($750,000) (the “Public
Relations Escrowed Funds”)
to be
delivered via wire transfer to Loeb
& Loeb, LLP, as escrow
agent for the Public Relations Escrowed Funds pursuant to the terms and
conditions of the Investor and Public Relations Escrow Agreement dated as of
even date herewith. Unless otherwise specified herein, the term “Escrowed Funds”
shall include the aggregate amount of the Public Relations Escrowed
Funds.
(b) At
such
time that the Offering Amount is deposited all executed Transaction Documents
have been received and upon receipt of joint instructions from the Company
and
Vision, in substantially the form of Exhibit
B
hereto,
the Escrow Agent shall release the Escrowed Funds, in accordance with such
disbursement instructions, provided,
however,
that
One Million Dollars ($1,000,000) of the Escrowed Funds shall not be released
from escrow in accordance with Exhibit B (the “Held
Back Escrow Funds”).
The
Held
Back Escrow Funds shall remain in the escrow account until the Escrow Agent
receives joint written notice from Vision and the Company notifying the Escrow
Agent that the Company has complied with the covenants in Section 3.23
(Registered Capital of Lihua Copper), Section 3.35 (Environmental Authority
Approval for Jiangsu Lihua Copper Industry Co., Ltd.), Section 3.37 (Comply
with
Relevant Employment Laws in PRC), Section 3.38 (Construction Works Planning
Permit and Construction Works Execution Permit for Lihua Copper), Section 3.43
(Intellectual Property and Commercial and Trade Secrets), Section 3.44 (Payment
of Stamp Tax), Section 3.45 (Filing of PRC Certificates) and Section 3.46 (Lihua
Copper Pay-Off Loan from Lihua Electron) of the Securities Purchase Agreement
(the “Held
Back Release Conditions”)
and
such joint written notice authorizes and provides instructions for the release
of the Held Back Escrow Funds, provided,
that,
such Held Back Release Conditions are satisfactorily completed prior to ninety
(90) days from the date hereof. In the event that all of the Held Back Release
Conditions are not satisfactorily completed by the date which is ninety (90)
days following the date hereof, Vision shall provide the Escrow Agent with
sole
written notice authorizing the release of the Held Back Escrow Funds to be
disbursed pro-rata to the Purchasers, as liquidated damages.
(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 to 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
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 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 the 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 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.
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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 Purchasers relating to the
Escrowed Funds, the Escrow Agent shall not be obligated to recognize any
agreement between or among any of the Purchasers, 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 liable for any action taken or omitted by him in good faith and in no
event shall the Escrow Agent be liable or responsible except for the Escrow
Agent’s own gross negligence or willful misconduct. 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.
(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.
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(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
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 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 it 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 claim,
demand, 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
reasonably deem sufficient to indemnify itself for any such loss or
expense.
(g) For
purposes hereof, the terms “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.
5. Termination
of Agreement and Resignation of Escrow Agent.
(a) This
Agreement shall terminate upon disbursement of all of the 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.
Notwithstanding the foregoing, in the event that the Escrow Agent does not
receive any instructions with respect to the disbursement of any Escrowed Funds
by November 7, 2008, this Agreement shall terminate as of such date and all
Escrowed Funds shall be returned to the parties from which they were received
without interest thereon or deduction therefrom within five (5) business
days.
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(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
prior 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 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 (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).
6. Form
of Payments by Escrow Agent.
(a) Any
payments of the Escrowed Funds or 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 Purchasers.
(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 be entitled to the following compensation from the
Company:
(a) Documentation
Fee:
The
Company shall pay a documentation fee to the Escrow Agent of $2,000 which shall
be payable upon release of the Escrowed Funds or termination of this Agreement
as provided in Section 5 hereof.
(b) Fees:
The
Company shall pay a fee of $500 to the Escrow Agent upon the deposit of the
Escrowed Funds.
(c) Interest:
The
Escrowed Funds shall be held in separate non-interest bearing escrow
accounts.
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 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 this 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 the 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.
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(c) The
Escrow Agent shall be entitled to employ such legal counsel and other experts
as
the Escrow Agent may deem necessary properly to advise the Escrow Agent in
connection with the Escrow Agent’s duties hereunder. The Escrow Agent may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor which shall be paid by the Escrow Agent. The
Escrow Agent has acted as legal counsel for one of the Purchasers and may
continue to act as legal counsel for such Purchaser from time to time,
notwithstanding its duties as the Escrow Agent hereunder. The Company and the
Purchasers consent to the Escrow Agent acting in such capacity as legal counsel
for one of the Purchasers and waive any claim that such representation
represents a conflict of interest on the part of the Escrow Agent. The Company
and the Purchasers understand that the Escrow Agent is relying explicitly on
the
foregoing provision in entering into this Escrow
Agreement.
(d) 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.
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.
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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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XXXXXX
& XXXXXX LLP
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By:
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/s/
Xxxxx X. Xxxxxx
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Name:
Xxxxx X. Xxxxxx, 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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EXHIBIT
A TO THE
SECURITIES
PURCHASE AGREEMENT
LIST
OF PURCHASERS
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EXHIBIT
B
DISBURSEMENT
REQUEST
Reference
is made to that certain Escrow Agreement, dated as of October 31, 2008, by
and
among Lihua International, Inc., a Delaware corporation (the “Company”),
Xxxxxx & Xxxxxx, LLP (the “Escrow
Agent”),
Vision Opportunity China LP, a closed-ended investment company incorporated
in
Guernsey (“Vision”),
and
each of the purchasers as set forth on Exhibit
A attached
thereto. Pursuant to the terms of the Escrow Agreement, the Company and Vision
hereby request that the Escrow Agent disburse from the escrow account the
Escrowed Funds in the amount and manner described in the attached Flow of Funds
Memorandum.
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LIHUA
INTERNATIONAL, INC.
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Date:
October ___, 2008
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By:
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Name:
Xxxxxxx Xxx
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Title:
Chief Executive Officer and President
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VISION
OPPORTUNITY CHINA LP
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Date:
October ___, 2008_
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By:
______________________________
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Name:
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Title:
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