MAKE GOOD ESCROW AGREEMENT
THIS
MAKE GOOD ESCROW AGREEMENT (the
“Agreement”),
dated
January 31, 2008, by and among Xxxx Asset Management, LLC, a
Tennessee Registered Investment Advisor,
as the
authorized agent of the Investors (as defined below) (the “Investor
Agent”),
China
Sky One Medical, Inc., a Nevada corporation, and its current and future
subsidiaries (collectively, the “Company”
and,
together with the Investor Agent, the “Third
Parties”),
Xxx
Xxx-Xxxx, an individual residing in the People’s Republic of China (the
“CSKI
Shareholder”)
and
Interwest Transfer Company, Inc., the transfer agent for the Company (the
“Escrow
Agent”).
WHEREAS:
A. The
Company has offered for sale (the “Offering”)
certain shares of the Company’s common stock, $.001 par value per share
(“Common
Stock”)
and
attached warrants to purchase shares of Common Stock in accordance with that
certain Securities Purchase Agreement, dated as of the date hereof (the
“Securities
Purchase Agreement”),
by
and among the Company and certain investors signatory thereto (the “Investors”),
and
certain other papers, agreements, documents, instruments and certificates
necessary to carry out the purposes thereof (collectively, the “Transaction
Documents”).
B. As
an
inducement to the Investors to enter into the Securities Purchase Agreement,
the
CSKI Shareholder desires to place the Escrow Shares (as hereinafter defined)
into an escrow for the benefit of the Investors in the event that the Company
fails to satisfy certain performance thresholds in accordance with that certain
Make Good Agreement, dated as of even date herewith (the “Make
Good Agreement”),
by
and among the Company, the CSKI Shareholder and the Investor Agent.
C. Pursuant
to the requirements of the Securities Purchase Agreement and the Make Good
Agreement, the Company, the CSKI Shareholder and the Investor Agent have agreed
to establish an escrow (the “Escrow”)
on the
terms and conditions set forth in this Agreement and the Escrow Agent has agreed
to act as escrow agent pursuant to the terms and conditions of this
Agreement.
NOW,
THEREFORE,
the
CSKI Shareholder, the Third Parties and the Escrow Agent, hereby agree that,
in
consideration of the mutual promises and covenants contained herein, the Escrow
Agent shall hold in escrow and shall distribute Escrow Shares in accordance
with, and subject to, the provisions of this Agreement:
1. Appointment.
The
CSKI Shareholder and Third Parties hereby appoint the Escrow Agent as each
party’s respective escrow agent for the purposes set forth herein, and the
Escrow Agent hereby accepts such appointment.
2. Escrow
Fund.
Concurrently with the closing of the Offering, the CSKI Shareholder shall
deliver to the Escrow Agent a stock certificate evidencing 3,000,000 shares
of
Common Stock (as adjusted for stock splits, stock dividends, and similar
adjustments) (“Escrow
Shares”),
with
the stock powers executed in blank, medallion signature guaranteed, or in other
form and substance acceptable for transfer. The Escrow Agent shall not be under
any duty or obligation to solicit the deposit of the Escrow Shares to the
Escrow. The foregoing property plus all dividends and other distributions and
payments thereon, if any (collectively the “Distributions”)
received by the Escrow Agent, less any property distributed or paid in
accordance with this Agreement, are collectively referred to herein as the
“Escrow
Property.”
1
3. Investment
of Escrow Property.
During
the term of this Agreement, the Escrow Agent shall not invest or liquidate
the
Escrow Property and any distribution of all or part of the Escrow Property
shall
be conducted in accordance with Section 4
below.
4. Distribution
of Escrow Property.
The
Escrow Agent shall disburse the Escrow Property as follows: (i) upon
receipt of a joint written instruction letter to the Escrow Agent from the
Investor Agent and the Company, the Escrow Agent shall promptly disburse the
Escrow Property in accordance with the instructions set forth in such letter,
or
(ii) upon receipt of evidence of the entry of a nonappealable order of a
court of competent jurisdiction requiring the Escrow Agent to release such
Escrow Property from the Escrow Account, the Escrow Agent shall release such
Escrow Property in accordance with such order.
5. Disagreement
of Parties.
In the
event of a dispute between or conflicting claims by or among the parties or
any
other person or entity with respect to all or a portion of the Escrow Property
or the terms of this Agreement, the Escrow Agent shall be entitled in its sole
discretion to refuse to comply with claims, demands or instructions with respect
to the Escrow Property so long as such dispute or conflict shall continue and
the Escrow Agent shall not be or become liable in any way to the parties for
such refusal or failure to comply. The Escrow Agent shall not be required to
act
until, in its sole discretion such conflicting or adverse claims or demands
either (a) shall have been determined by a final order, judgment or decree
of a court of competent jurisdiction which order, judgment or decree is not
subject to appeal, or (b) settled by agreement between the conflicting
parties as evidenced in a writing satisfactory to the Escrow Agent.
6. Termination.
Unless
the Escrow Agent earlier resigns, this Agreement shall terminate, subject to
the
provisions of Section 8
hereof, upon
final distribution of all property in the Escrow Property by the Escrow
Agent.
7. Escrow
Agent.
(a) The
Escrow Agent undertakes to perform only those duties expressly set forth herein
and no duties shall be implied.
(b) The
Escrow Agent shall have no liability under and no duty to inquire as to the
provisions of any agreement of the CSKI Shareholder and/or the Third Parties
other than this Agreement.
(c) The
Escrow Agent may rely upon and shall not be liable for acting or refraining
from
acting upon any written notice, instruction or request furnished to it hereunder
and believed by it to be genuine and to have been signed or presented by the
proper party or parties.
2
(d) The
Escrow Agent shall be under no duty to inquire into or investigate the validity,
accuracy or content of any document.
(e) The
Escrow Agent shall not be liable for any action taken or omitted by it in good
faith except to the extent that a court of competent jurisdiction determines
that the Escrow Agent’s gross negligence or willful misconduct was the primary
cause of any loss to the Third Parties or the CSKI Shareholder.
(f) The
Escrow Agent may consult with legal counsel of its choosing as to any matter
relating to this Agreement and the Escrow Agent shall not incur any liability
in
acting in good faith in accordance with advice from such counsel.
(g) Anything
in this Agreement to the contrary notwithstanding, in no event shall the Escrow
Agent be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits and/or savings),
even
if the Escrow Agent has been advised of the likelihood of such loss or damage
and regardless of the form of action.
(h) The
Escrow Agent may resign at any time by giving the CSKI Shareholder and the
Third
Parties thirty (30) calendar days’ prior written notice thereof.
(i) In
the
event Escrow Agent shall be uncertain as to its duties or rights hereunder
or
receive instructions, claims or demands which, in its opinion, are in conflict
with any of the provisions of this Agreement, it shall be entitled to refrain
from taking any action, other than keep safely the Escrow Shares, until it
shall
be jointly directed otherwise by the parties hereto or by a determination by
a
court of competent jurisdiction which order or decree is not subject to
appeal.
(j)
The
Escrow Agent shall not be obligated to institute legal proceedings of any kind
and shall not be required to defend any legal proceeding instituted against
it
or in respect to the Escrow Shares.
8. Fees.
The
Company agrees to (i) pay the Escrow Agent reasonable compensation for the
services to be rendered hereunder, which shall be as described in Schedule
I
attached
hereto, and (ii) pay or reimburse the Escrow Agent upon request for all
reasonable expenses, disbursements and advances, including reasonable attorneys’
fees and expenses, incurred or made by it in connection with the preparation
execution, delivery, performance, modification and/or termination of this
Agreement. This Section 8
shall
survive the termination of this Agreement and the resignation of the Escrow
Agent.
9. Indemnity.
The
Company shall indemnify, defend and save harmless the Escrow Agent and its
directors, officers, agents and employees (the “indemnitees”)
from
and against all demands, claims, liabilities, losses, damages, settlements,
awards, judgments, fines, penalties, costs or expenses (including, without
limitation, reasonable attorneys’ fees) (collectively, “Losses”)
incurred by Escrow Agent as a result (directly or indirectly) of or relating
to
Escrow Agent’s acceptance of this Agreement or provision of services under this
Agreement; provided,
however,
that no
indemnitee shall have the right to be indemnified hereunder for any liability
to
the extent finally determined by a court of competent jurisdiction that such
Losses have resulted directly from the gross negligence or willful misconduct
of
such indemnitee. The parties hereto acknowledge that the foregoing indemnities
shall survive the resignation or removal of the Escrow Agent or the termination
of this Agreement and that costs of enforcement of this provision is the
obligation of the Company.
3
10 Taxes.
It is
understood that the Escrow Agent shall be responsible for income reporting
only
with respect to income earned on the Escrow Property and will not be responsible
for any other reporting.
11. Notices.
Any
communication, notice or document required or permitted to be given under this
Agreement shall be given in writing and shall be deemed received (i) when
personally delivered to the relevant party at such party’s address as set forth
below, (ii) if sent by mail (which must be certified or registered mail,
postage prepaid) or overnight courier, when received or rejected by the relevant
party at such party’s address indicated below, or (iii) if sent by
facsimile, when confirmation of delivery is received by the sending
party:
If
to the
Investor Agent, to:
Xxxx
Asset Management, LLC
0000
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attn.:
Xxxx Xxxxx, President
tel.:
(000) 000-0000
fax.:
(000) 000-0000
e-mail:
xxxxxxxxx@xxxxxxxxx.xxx
with
a
copy to (for informational purposes only):
Wells,
Moore, Xxxxxxx & Xxxxxxx, PLLC
0000
Xxx
Xxxxxx Xxxx, Xxxxx 000
P.O.
Box
1970
Xxxxxxx,
XX 00000
Attn.:
Xxxx Xxxxxxx, Esq.
tel.:
(000) 000-0000
fax:
(000) 000-0000
e-mail:
xxxxxxx@xxxxxxxxxx.xxx
If
to the
Company, to:
Xxxx
0000, Xx. 00 Xx Xxxx Building, Gan Shui Road,
Nandang
District, Harbin, People’s Republic of China 150001
Attn.:
Xxx Xxx-Xxxx, Chairman
tel.:
+
00-000-00000000
fax.:
+
00-000-0000-0000
e-mail:
xxxxxxxxxxx@xxxxx.xxx.xx
4
or
such
other address as indicated by the Company as its primary business address in
its
SEC filings.
with
a
copy to:
Xxxxxxx
Xxxx, LLP
0000
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attn.:
Xxxxxxx X. Xxxxx, Esq.
tel.:
(000) 000-0000
fax.:
(000) 000-0000
e-mail:
xxxxxx@xxxxxxxxxxx.xxx
If
to the
CSKI Shareholder, to:
Xxx
Xxx-Xxxx
Xxxx
0000, Xx. 00 Xx Xxxx Building, Gan Shui Road,
Nandang
District, Harbin, People’s Republic of China 150001
tel.:
+
00-000-00000000
fax.:
+
00-000-0000-0000
e-mail:
xxxxxxxxxxx@xxxxx.xxx.xx
If
to the
Escrow Agent:
Interwest
Transfer Company, Inc.
0000
Xxxx
Xxxxxx Xxxxxxxx Xxxx, Xxxxx 000
X.X.
Xxx
00000
Xxxx
Xxxx
Xxxx, XX 00000
Attn.:
Xxxx Xxxxxx, Vice President
tel.:
(000) 000-0000
fax.:
(000) 000-0000
e-mail:
xx@xxxxxxxxxxx.xxx
12. Miscellaneous
.
(a) The
provisions of this Agreement may be waived, altered, amended or supplemented,
in
whole or in part, only by a writing signed by all of the parties hereto. This
Agreement and the rights and obligations hereunder of the parties may not be
assigned except with the prior written consent of the other parties
hereto.
(b) The
covenants and provisions of this Agreement by or for the benefit of the CSKI
Shareholder, the Third Parties or the Escrow Agent shall bind and inure to
the
benefit of their respective successors and permitted assigns
hereunder.
5
(c) All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of Utah,
without giving effect to any choice of law or conflict of law provision or
rule
(whether of the State of Utah or any other jurisdictions) that would cause
the
application of the laws of any jurisdictions other than the State of Utah.
The
parties hereby agree that all actions or proceedings arising directly or
indirectly from or in connection with this Agreement shall be litigated only
in
the Supreme Court of the State of Utah or the United States District Court
for
the District of Utah located in Salt Lake County, Utah. 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 Utah or the District of
Utah by registered mail, return receipt requested, directed to the party being
served at its address set forth on the signature pages 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.
(d) No
party
to this Agreement is liable to any other party for losses due to, or if it
is
unable to perform its obligations under the terms of this Agreement because
of,
acts of God, fire, floods, strikes, equipment or transmission failure, or other
causes reasonably beyond its control. This Agreement may be executed in one
or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) This
Agreement may be executed by each of the parties hereto by facsimile signature
and in any number of counterparts, each of which counterpart, when so executed
and delivered, shall be deemed to be an original and all such counterparts
shall
together constitute one and the same agreement.
(f) The
headings contained in this Agreement are for convenience of reference only
and
shall have no effect on the interpretation or operation hereof.
(g) 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.
(h) If
any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of this Agreement is not affected
in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the
parties hereto shall negotiate in good faith to modify this Agreement so as
to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the terms of this Agreement remain as originally
contemplated to the fullest extent possible.
[The
remainder of the page is intentionally left blank]
6
IN
WITNESS WHEREOF,
each of
the parties hereto has executed this Agreement by the authorized officer named
below.
INVESTOR
AGENT:
XXXX
ASSET MANAGEMENT, LLC
By:
______________________________
Name:
____________________________
Its:
______________________________
Dated:
____________________________
SIGNATURE
PAGE FOR
7
IN
WITNESS WHEREOF,
each of
the parties hereto has executed this Agreement by the authorized officer named
below.
THE
COMPANY:
By:
______________________________
Name:
____________________________
Its:
______________________________
Dated:
____________________________
SIGNATURE
PAGE FOR
8
IN
WITNESS WHEREOF,
each of
the parties hereto has executed this Agreement by the authorized officer named
below.
CSKI
SHAREHOLDER:
_____________________________
Name:
____________________________
Dated:
____________________________
SIGNATURE
PAGE FOR
9
IN
WITNESS WHEREOF,
each of
the parties hereto has executed this Escrow Agreement by the authorized officer
named below.
INTERWEST
TRANSFER COMPANY, INC.
By:
______________________________
Name:
____________________________
Title:
_____________________________
Dated:
____________________________
SIGNATURE
PAGE FOR
10
SCHEDULE
I
Interwest
Transfer Company, Inc.
China
Sky One Medical, Inc. Escrow
Escrow
Agent Fee Schedule
|
Account
Acceptance Fee
|
$
|
—
|
||
|
Annual
Administrative Fee
|
$
|
—
|
||
|
Overnight
Delivery Charges
|
At
cost
|
|||
|
Out-of-Pocket
Expenses
|
At
cost
|
The
acceptance and first year’s annual fee are payable at closing. Annual
administrative fees are due in advance of the period for which service is to
be
rendered. Special or extraordinary events, such as amendments to the documents
or disputes are not included in the above fees, and we reserve the right to
charge an additional amount based on the time incurred in handling such events
should they occur. Late charges are one and one-half percent (1½%) per month on
outstanding balances owing forty-five (45) days from date of invoice.
Interwest reserves the right to earn investment fees on escrow funds payable
by
third-party investment providers and pursuant to contracts with
same.
11
