SECURITIES ESCROW AGREEMENT
THIS
SECURITIES ESCROW AGREEMENT (the “Agreement”),
dated
as of August 20, 2008, is entered into by and among China New Energy Group
Company, a Delaware corporation (the “Company”),
China
Hand Fund I, LLC, a Delaware limited liability company, for itself and as
representative (the “Purchaser
Representative”)
of any
additional investors which may become parties to this Agreement (together with
their respective successors and assigns, each, a “Purchaser”
and
collectively, the “Purchasers”),
and
Escrow, LLC, with an address at 000 Xxxx Xxxxxx, X.X. Xxx 000, Xxxxxxxxxx,
Xxxxxxxx 00000 (the “Escrow
Agent”).
Capitalized terms used, but not defined herein shall have the meanings set
forth
in the Purchase Agreement (as defined below).
WITNESSETH:
WHEREAS,
the Purchaser Representative will be purchasing on the date hereof (the
“First
Closing Date”)
from
the Company, shares of the Company’s Series A Convertible Preferred Stock, par
value $0.001 per share (the “Series
A Preferred”),
convertible into shares of the Company’s common stock, par value $0.001 per
share (the “Common
Stock”),
and
certain common stock purchase warrants (the “Warrants”)
pursuant to a Series A Convertible Preferred Stock Purchase Agreement dated
as
of the First Closing Date by and among the Company and the Purchaser
Representative (the “Purchase
Agreement”),
and
it is contemplated that each of the Purchase Agreement and this Agreement may
hereafter be amended to provide for the purchase of additional shares of Series
A Preferred and Warrants (collectively, the “Securities”)
by
additional Purchasers at one or more additional closings after the First Closing
Date (each, a “Subsequent
Closing”
and
collectively, the “Subsequent
Closings”)
and
the deposit of additional shares of Series A Preferred in escrow by the Company
and the additional Purchasers;
WHEREAS,
as an inducement to the Purchaser Representative to enter into the Purchase
Agreement, and for additional Purchasers to purchase Securities at one or more
Subsequent Closings, the Company has agreed (i) immediately prior to the First
Closing Date and the date of each Subsequent Closing to issue and deposit the
number of shares of Series A Preferred Stock equal to 30% of the number of
shares of Series A Preferred Stock issued under the Purchase Agreement and
in
each Subsequent Closing to be held by the Escrow Agent for the benefit of the
Purchasers in the event the Company fails to achieve any of the following
financial performance thresholds for the 12-month periods ending December 31,
2008 (“2008”)
and
December 31, 2009 (“2009”),
and
(ii) upon distribution to Purchasers of any Make Good Escrow Shares for
2008,
if any,
the Company shall replenish the Make Good Escrow Shares by issuing and
delivering the number of shares of Series A Preferred Stock equal to the number
of Series A Preferred Stock so distributed to be held in escrow for 2009
distributions:
(a) In
2008,
(i) audited and consolidated After-Tax Net Income of at least $4.3
million1,
or (ii)
Earnings Per Share on a Fully-Diluted Basis of at least $[$0.0261] (each of
the
performance thresholds set forth in (i) and (ii) above shall be individually
referred to herein as a “2008
Target Number”
and
they are collectively referred to herein as the “2008
Performance Threshold”);
1
Drafting
Note:
Company
to confirm ATNI and EPS numbers and all other financial metrics throughout
agreement.
(b) In
2009,
(i) After-Tax Net Income of at least (w) $6.0 million, if the Company receives
at least $5.4 million in additional gross proceeds from the sale of Securities
at Subsequent Closings held not later than 30 days after the filing of the
Company’s Annual Report on Form 10-K for the fiscal year ending December 31,
2008 (the “10-K
Filing Date”)
or (x)
$4.5 million, if the Company does not receive at least $5.4 million in
additional gross proceeds from the sale of Securities at Subsequent Closings
held on or prior to the 10-K Filing Date or (ii) Earnings Per Share on a
Fully-Diluted Basis of at least (y) $[0.0294], if the Company receives at least
$5.4 million in additional gross proceeds from the sale of Securities at
Subsequent Closings held on or prior to the 10-K Filing Date or (z) $[0.0273],
if the Company does not receive at least $5.4 million in additional gross
proceeds from the sale of Securities at Subsequent Closings held on or prior
to
the 10-K Filing Date (the performance thresholds set forth in (i) and (ii)
above
shall be individually referred to herein as a “2009
Target Number”
and
they are collectively referred to herein as the “2009
Performance Threshold”
and
together with the 2008 Performance Threshold, the “Performance
Thresholds”
and
each of the 2008 Target Number and 2009 Target Number is individually referred
to herein as a “Target
Number”
and
collectively referred to herein as the “Target
Numbers”);
WHEREAS,
as a further inducement to the Purchaser Representative to enter into the
Purchase Agreement, and for additional Purchasers to purchase Securities at
one
or more Subsequent Closings, the Company has agreed immediately prior to the
First Closing Date and the date of each Subsequent Closing to place the Listing
Escrow Shares (as hereinafter defined) into escrow for the benefit of the
Purchasers in the event that shares of Common Stock are not listed and trading
on a National Stock Exchange by January 31, 2010;
WHEREAS,
as an incentive to the members of management of the Company set forth on Exhibit
A attached hereto (“Management”)
to
cause the Company to meets its financial projections, the Purchaser
Representative has agreed to place Purchaser Deposited Escrow Shares (as
hereinafter defined) into escrow for the benefit of the Purchasers and each
additional Purchaser which becomes a party to this Agreement will deposit
additional Purchaser Deposited Escrow Shares into escrow to transfer to
Management in the event the Company achieves all of the 2008 Performance
Threshold and the 2009 Performance Threshold; and
WHEREAS,
the Company and the Purchaser Representative have requested, and the Additional
Purchasers, by becoming parties to this Agreement will request, that the Escrow
Agent hold the Company Deposited Escrow Shares (as herein after defined) and
the
Purchaser Deposited Escrow Shares (as hereinafter defined) 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, in consideration of the covenants and mutual promises contained
herein and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE
I
TERMS
OF
THE ESCROW
1.1. The
parties hereby agree to establish an escrow account with the Escrow Agent
whereby the Escrow Agent shall hold the Company Deposited Escrow Shares and
the
Purchaser Deposited Escrow Shares as contemplated by this
Agreement.
1.2. Upon
the
execution of this Agreement, the Company shall issue and deliver to the Escrow
Agent a stock certificate or stock certificates evidencing an aggregate of
557,212 shares of Series A Preferred (which number of shares of Series A
Preferred is equivalent to 30% of the number of shares of Series A Preferred
to
be issued and sold to the Purchaser Representative on the First Closing Date
and
which shares of Series A Preferred may be converted into 19,502,412 shares
of
Common Stock). Immediately prior to each Subsequent Closing, the Company shall
issue and deliver to the Escrow Agent a stock certificate or stock certificates
evidencing an aggregate number of shares of Series A Preferred equal to 30%
of
the number of shares of Series A Preferred to be issued and sold to the
Additional Purchasers on the closing date of the Subsequent Closing). In
addition, the Company will issue a stock certificate or stock certificates
evidencing such additional number of shares of Series A Preferred or Common
Stock as may be required to be deposited pursuant to Section 1.3(iv) hereof.
All
of the shares of Series A Preferred described in this Section 1.2 shall be
collectively referred to in this Agreement as the “Company
Deposited Escrow Shares”).
All
Company Deposited Escrow Shares shall be accompanied by stock powers executed
in
blank with signature medallion guaranteed.
1.3. The
parties hereby agree that the Company Deposited Escrow Shares shall be delivered
based on the achievement of the Performance Thresholds as set forth
below:
(i) If
either
or both of the After-Tax Net Income or Earnings Per Share on a Fully-Diluted
Basis for 2008 or 2009 is less than the applicable Target Number for such year,
then if the Percentage Shortfall (as hereinafter defined) for such year, is
less
than
fifty percent (50%), but equal or greater than fifteen percent (15%), then
an
Adjustment Percentage for such year shall be determined. For purposes of this
Section, the “Percentage
Shortfall”
shall
mean the greater of (A) the percentage obtained by dividing
(w) the
amount of the shortfall of the After-Tax Net Income from the applicable Target
Number by
(x) the
applicable Target Number for such year or (B) the percentage obtained by
dividing
(y) the
amount of the shortfall of the Earnings
Per Share on a Fully-Diluted Basis for such year from
the
applicable Target Number for such year by
(z) the
applicable Target Number for such year. For purposes of this Section, the
“Adjustment
Percentage”
for
2008 or 2009 shall mean the percentage that the Percentage Shortfall for such
year bears to fifty percent (50%). Within five days after the determination
of
the Percentage Shortfall for 2008 and/or 2009 the Purchaser Representative
and
the Company shall give joint written instructions to the Escrow Agent to, and
upon receipt of such written instructions, the Escrow Agent shall, within five
days after receipt of such instructions deliver to the Purchasers on a pro
rata
basis such number of shares of Series A Preferred as is determined by
multiplying the Adjustment Percentage for such year by the total number of
Company Deposited Escrow Shares then required to be in escrow. In the case
of a
delivery of less than all of the shares of the Company Deposited Escrow Shares
in respect of the computation of the Adjustment Percentage for 2008, the Escrow
Agent shall retain in escrow the balance of the Company Deposited Escrow Shares
which are not required to be delivered to the Purchasers. For example, if the
Percentage Shortfall for 2008 is 20%, the Adjustment Percentage would be 40%,
and 40% of the total number of Company Deposited Escrow Shares then required
to
be in escrow would be delivered to the Purchasers on a pro rata basis, with
the
balance being retained by the Escrow Agent pursuant to this
Agreement.
(ii) If
the
Percentage Shortfall for 2008 or 2009, as applicable, is equal to or greater
than fifty percent (50%), then within five days after the determination of
the
Percentage Shortfall for 2008 and/or 2009 the Purchaser Representative and
the
Company shall give joint written instructions to the Escrow Agent, and upon
receipt of such written instructions, the Escrow Agent shall within five days
after receipt of such instructions, deliver all of the remaining Company
Deposited Escrow Shares then held by the Escrow Agent to Purchasers on a pro
rata basis.
(iii) If
the
Percentage Shortfall for 2008 is less than fifteen percent (15%), then all
of
the Company Deposited Escrow Shares shall remain in escrow for 2009 to be
distributed in accordance with paragraphs (i) and (ii) of this Section 1.3.
If
the Percentage Shortfall for 2009 is less than fifteen percent (15%), then
the
Purchaser Representative and the Company shall give joint written instructions
to the Escrow Agent to, and upon receipt of such written instructions, the
Escrow Agent shall within five days after receipt of such instructions, return
to the Company for cancellation all of the Company Deposited Escrow Shares
which
remain in escrow.
(iv) Upon
distribution to the Purchasers of Company Deposited Escrow Shares for 2008
pursuant to Section 1.3(i) or 1.3(ii), the Company shall within 10 days
replenish the Company Deposited Escrow Shares by issuing and delivering the
number of shares of Series A Preferred equal to the number of shares of Series
A
Preferred so distributed for 2008.
(v) The
determination regarding the number and the distribution, if any, of Company
Deposited Escrow Shares to be distributed to the Purchasers pursuant to this
Section 1.3 shall be made within five (5) Trading Days after the date the
Company is required to file its Annual Report on Form 10-K for the applicable
fiscal year with the Commission (after giving effect to any extension pursuant
to Rule 12b-25 of the Exchange Act). In the event that the Company does not
file
its Annual Report on Form 10-K for the year ended December 31, 2008 or 2009,
as
applicable, with the Commission within thirty (30) days after the date such
filing was required, after giving effect to any extension pursuant to Rule
12b-25 of the Exchange Act, all of the Company Deposited Escrow Shares shall
be
delivered to the Purchasers on a pro rata basis within five (5) Trading Days
following the expiration of such thirty (30) day period.
(vi) Notwithstanding
anything to the contrary set forth herein, only those Purchasers who own shares
of Series A Preferred issued under the Purchase Agreement and remain
shareholders of the Company at the time that any Company Deposited Escrow Shares
become deliverable hereunder shall be entitled to their pro rata portion of
such
Company Deposited Escrow Shares calculated based on their ownership interest
at
the time when the Company Deposited Escrow Shares become deliverable hereunder.
Any Company Deposited Escrow Shares not delivered to Purchasers because the
Purchasers no longer hold shares of Series A Preferred acquired under the
Purchase Agreement shall remain in escrow with the Escrow Agent until
transferred either to the Purchasers or returned to the Company pursuant to
Section 1.3(ii) or 1.3(iii), as applicable.
(vii) Notwithstanding
anything to the contrary contained in this Section 1.3 or in the Purchase
Agreement, the Parties agree that for purposes of determining whether or not
the
Target Numbers have been achieved,
(A) the
release of any or all of the Company Deposited Escrow Shares shall not be
counted as an expense, charge, or other deduction from revenues in calculating
net income even though GAAP may require contrary treatment,
(B) any
registration delay payments arising under the Registration Rights Agreement
that
are accrued or paid by the Company to any Series A Purchaser will be excluded
from the calculation of net income, and
(C) any
increase in taxes payable by the Company or any Subsidiary as a result of
recently adopted PRC tax laws or any related implementing regulations
promulgated for the purpose of making more equal the tax treatment of foreign
invested entities and domestic entities shall not be included as an expense
in
calculating net income.
(viii) So
long
as the Company Deposited Escrow Shares remain in escrow, such shares shall
not
be counted in calculating a quorum for stockholder voting purposes nor shall
such shares be voted at any meeting of stockholders or included in a written
consent.
1.4. (i)
Upon
the execution of this Agreement, the Purchaser Representative shall deliver
to
the Escrow Agent a stock certificate or stock certificates evidencing an
aggregate of 37,148 shares of Series A Preferred (which number of shares of
Series A Preferred is equivalent to 2.0% of the number of shares of Series
A
Preferred issued and sold to the Purchaser Representative on the First Closing
Date and which shares of Series A Preferred may be converted into 1,300,161
shares of Common Stock). At each Subsequent Closing, each additional Purchaser
shall deliver to the Escrow Agent a stock certificate or stock certificates
evidencing a number of shares of Series A Preferred equivalent to 2.0% of the
number of shares of Series A Preferred issued and sold to such additional
Purchaser on the closing date of the Subsequent Closing. Such shares shall
be
collectively referred to in this Agreement as the “Purchaser
Deposited Escrow Shares”).
All
Purchaser Deposited Escrow Shares shall be accompanied by stock powers executed
in blank with signature medallion guaranteed.
(ii)
If
the Company achieves both the 2008 Performance Threshold and the 2009
Performance Threshold, then within five Trading Days after the filing of the
Company’s Annual Report on Form 10-K for the fiscal year ending December 31,
2009 the Company and the Purchaser Representative shall give joint written
instructions to the Escrow Agent to, and upon receipt of such instructions,
the
Escrow Agent shall within five days after receipt of such instructions, transfer
all of the Purchaser Deposited Escrow Shares to Management, pro rata in
accordance with the percentages set forth in Exhibit A. In such instance, the
Purchaser Deposited Escrow Shares shall be converted to common stock in
accordance with their terms prior to distribution to
Management.
(iii)
If
the Company fails to achieve the 2008 Performance Threshold, then within five
Trading Days after the filing of the Company’s Annual Report on Form 10-K for
the fiscal year ending December 31, 2008 the Company and the Purchaser
Representative shall give joint written instructions to the Escrow Agent to,
and
upon receipt of such instructions, the Escrow Agent shall within five days
after
receipt of such instructions, transfer all of the Purchaser Deposited Escrow
Shares to the Purchasers who deposited such shares.
(iv)
If
the Company achieves the 2008 Performance Threshold, but fails to achieve the
2009 Performance Threshold, then within five Trading Days after the filing
of
the Company’s Annual Report on Form 10-K for the fiscal year ending December 31,
2009 the Company and the Purchaser Representative shall give joint written
instructions to the Escrow Agent to, and upon receipt of such instructions,
the
Escrow Agent shall within five days after receipt of such instructions, transfer
all of the Purchaser Deposited Escrow Shares to the Purchasers who deposited
such shares.
1.5. The
Company will provide the Purchaser Representative with (i) the Company’s audited
financial statements for 2008 and 2009, prepared in accordance with US GAAP,
on
or before March 31, 2009 (or such later date on which the Company has filed
its
annual report on Form 10-K for 2008 fiscal year) and March 31, 2010 (or such
later date on which the Company has filed its annual report on Form 10-K for
2009 fiscal year), respectively, so as to allow the Purchaser Representative
the
opportunity to evaluate whether the 2008 Performance Threshold and the 2009
Performance Threshold were attained.
1.6. The
parties hereby agree that the Listing Escrow Shares (as hereinafter defined)
shall be deposited in escrow and as set forth below:
(a) Upon
the
execution of this Agreement, the Company shall issue and deliver to the Escrow
Agent a stock certificate or stock certificates evidencing an aggregate of
__________ shares of Series A Preferred (which number of shares of Series A
Preferred is equivalent to 2.5% of the number of shares of Series A Preferred
to
be issued and sold to the Purchaser Representative on the First Closing Date
and
which shares of Series A Preferred may be converted into __________ shares
of
Common Stock). Immediately prior to each Subsequent Closing, the Company shall
issue and deliver to the Escrow Agent a stock certificate or stock certificates
evidencing an aggregate of shares of Series A Preferred equivalent to 2.5%
of
the number of shares of Series A Preferred to be issued and sold to the
additional Purchasers on the closing date of the Subsequent Closing). All of
the
shares of Series A Preferred described in this Section 1.6 shall be collectively
referred to in this Agreement as the “Listing
Escrow Shares”).
(b) In
the
event shares of Common Stock are not listed and trading on a National Stock
Exchange by January 31, 2010, the
Purchaser Representative and the Company shall within five days thereafter
give
joint written instructions to the Escrow Agent to, and upon receipt of such
written instructions, the Escrow Agent shall, within five days after receipt
of
such instructions deliver to the Purchasers on a pro rata basis all of the
Listing Escrow Shares. In
the
event shares of Common Stock are listed and trading on a National Stock Exchange
by January 31, 2010, the
Company and Purchaser Representative shall within five days after such listing
give joint written instructions to the Escrow Agent to, and upon receipt of
such
written instructions, the Escrow Agent shall, within five days after receipt
of
such instructions deliver to the Company all of the Listing Escrow Shares and
the Company shall cancel all of such Listing Escrow Shares.
ARTICLE
II
REPRESENTATIONS
OF THE COMPANY
2.1. The
Company hereby represents and warrants to the Purchasers and the Purchaser
Representative as follows:
(i) The
Company Deposited Escrow Shares and the Listing Escrow Shares being placed
into
escrow immediately prior to the First Closing Date and to be placed into escrow
prior to the closing date of each Subsequent Closing are or will be upon release
from escrow in accordance with this Agreement validly issued, fully paid and
nonassessable shares of the Company, free and clear of all pledges, liens,
claims and encumbrances, except encumbrances created by this Agreement. There
are no restrictions on the ability of the Company to issue and deposit in escrow
the Company Deposited Escrow Shares or Listing Escrow Shares or to enter into
this Agreement other than transfer restrictions under applicable federal and
state securities laws. Upon any delivery to the Purchasers of Company Deposited
Escrow Shares or Listing Escrow Shares placed into escrow pursuant to this
Agreement, the Purchasers will acquire good and valid title to such Company
Deposited Escrow Shares or Listing Escrow Shares, free and clear of any pledges,
liens, claims and encumbrances.
(ii) The
performance of this Agreement and compliance with the provisions hereof will
not
violate any provision of any law applicable to the Company and will not conflict
with or result in any breach of any of the terms, conditions or provisions
of,
or constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon, any of the properties or assets of the Company
pursuant to the terms of the certificate of incorporation or by-laws of the
Company or any indenture, mortgage, deed of trust or other agreement or
instrument binding upon the Company or affecting the Company Deposited Escrow
Shares or Listing Escrow Shares. No notice to, filing with, or authorization,
registration, consent or approval of any governmental authority or other person
is necessary for the execution, delivery or performance of this Agreement or
the
consummation of the transactions contemplated hereby by the
Company.
ARTICLE
III
REPRESENTATIONS
OF THE PURCHASERS
3.1. Each
Purchaser hereby severally represents and warrants to the Company and the
Purchaser Representative as follows:
(i) The
Purchaser Deposited Escrow Shares being placed into escrow at the First Closing
Date and to be placed into escrow prior to the closing date of each Subsequent
Closing are or will be owned by the Purchaser free and clear of all pledges,
liens, claims and encumbrances, except encumbrances created by this Agreement.
There are no restrictions on the ability of the Purchaser to deposit in escrow
the Purchaser Deposited Escrow Shares or to enter into this Agreement other
than
transfer restrictions under applicable federal and state securities laws. Upon
any delivery to Management of Purchaser Deposited Escrow Shares placed into
escrow pursuant to this Agreement, Management will acquire good and valid title
to such Purchaser Deposited Escrow Shares, free and clear of any pledges, liens,
claims and encumbrances.
(ii) The
performance of this Agreement and compliance with the provisions hereof will
not
violate any provision of any law applicable to the Purchaser and will not
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon, any of the properties or
assets of the Purchaser pursuant to the terms of any indenture, mortgage, deed
of trust or other agreement or instrument binding upon the Purchaser or
affecting the Purchaser Deposited Escrow Shares. No notice to, filing with,
or
authorization, registration, consent or approval of any governmental authority
or other person is necessary for the execution, delivery or performance of
this
Agreement or the consummation of the transactions contemplated hereby by the
Purchaser.
ARTICLE
IV
ESCROW
AGENT
4.1
Interpleader.
In the
event this Agreement, the Company Deposited Escrow Shares, the Purchaser
Deposited Escrow Shares or the Escrow Agent becomes the subject of litigation,
or if the Escrow Agent shall desire to do so for any other reason, the Company
authorizes the Escrow Agent, at its option, to deposit the Company Deposited
Escrow Shares, the Listing Escrow Shares and/or the Purchaser Deposited Escrow
Shares with the clerk of the court in which the litigation is pending, or a
court of competent jurisdiction if no litigation is pending, and thereupon
the
Escrow Agent shall be fully relieved and discharged of any further
responsibility with regard thereto. The Company also authorizes the Escrow
Agent, if it receives conflicting claims to the Company Deposited Escrow Shares,
and/or the Purchaser Deposited Escrow Shares, is threatened with litigation
or
if the Escrow Agent shall desire to do so for any other reason, to interplead
all interested parties in any court of competent jurisdiction and to deposit
the
Company Deposited Escrow Shares, the Listing Escrow Shares and/or the Purchaser
Deposited Escrow Shares with the clerk of that court and thereupon the Escrow
Agent shall be fully relieved and discharged of any further responsibility
hereunder to the parties from which they were received.
4.2
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 Escrow Agreement referenced below, and except for written
instructions given to the Escrow Agent by the Company and the Purchaser
Representative relating to the Company Deposited Shares, the Listing Escrow
Shares and the Purchaser Deposited Escrow Shares, the Escrow Agent shall not
be
obligated to recognize any agreement between or among any of the other parties,
notwithstanding that references hereto may be made herein and whether or not
it
has knowledge thereof.
(b)
The
Escrow Agent shall not be liable to the Company, the Purchaser Representative,
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 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, the Purchaser Representative, 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 Escrow Agreement.
(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, the
Purchaser Representative, 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.
(e)
The
Escrow Agent shall be indemnified and held harmless against any liability for
taxes and for any penalties in respect of taxes, on any investment income or
payments with respect to the Company Deposited Escrow Shares and the Purchaser
Deposited Escrow Shares in the manner provided in Section 4.2 (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 proceedings
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 Escrow Agreement,
the services of the Escrow Agent hereunder, except for claims relating to gross
negligence by Escrow Agent or breach of this Escrow Agreement by the Escrow
Agent, or the monies or other property held by it hereunder or for willful
misconduct of the Escrow Agent. Promptly after the receipt of 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
against the Company, notify the Company thereof in writing, but the failure
by
the Escrow Agent to give such notice shall not relieve the Company from any
liability which the Company may have to the Escrow Agent hereunder.
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, including shares of the Company’s capital stock as it
shall, from time to time, in its sole discretion, seem sufficient to indemnify
itself for any such loss or expense and for any amounts due it under Section
7.
(g)
For
purposes hereof, the term “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.
ARTICLE
V
TERMINATION
OF AGREEMENT
5.1 This
Escrow Agreement shall terminate upon delivery by the Escrow Agent in accordance
with this Agreement of all of the Company Deposited Escrow Shares, the Listing
Escrow Shares and Purchaser Deposited Escrow Shares, provided that the rights
of
the Escrow Agent and the obligations of the Company under Article IV shall
survive the termination hereof.
5.2 The
Escrow Agent may resign at any time and be discharged from its duties as Escrow
Agent hereunder by giving the Company and the Purchaser Representative at least
five days written notice thereof (the “Notice
Period”).
As
soon as practicable after its resignation, the Escrow Agent shall, if it
receives notice from the Company within the Notice Period, turn over to a
successor escrow agent appointed by the Company all of the Company Deposited
Escrow Shares, the Listing Escrow Shares and Purchaser Deposited Escrow Shares
then held by the Escrow Agent 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 may deposit the Company Deposited
Escrow Shares and Purchaser Deposited Escrow Shares with the clerk of a court
of
competent jurisdiction in accordance with Section 4.1 of this Agreement.
ARTICLE
VI
COMPENSATION
OF ESCROW AGENT
The
Escrow Agent shall be entitled to the following compensation from the
Company:
6.1 Documentation
Fee: The
Company shall pay a documentation fee to the Escrow Agent of $____________,
on
the First Closing Date.
6.2 Delivery
Fee.
The
Company shall pay a fee of $_______ to the Escrow Agent each time during the
term of the Agreement in which the Escrow Agent delivers any of Company
Deposited Escrow Shares, the Listing Escrow Shares and Purchaser Deposited
Escrow Shares.
ARTICLE
VII
MISCELLANEOUS
7.1 No
waiver
or any breach of any covenant or provision herein contained shall be deemed
a
waiver of any preceding or succeeding breach thereof, or of any other covenant
or provision herein contained. No extension of time for performance of any
obligation or act shall be deemed an extension of the time for performance
of
any other obligation or act.
7.2 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:
Escrow,
LLC
000
Xxxx
Xxxxxx
X.X.
Xxx
000
Xxxxxxxxxx,
Xxxxxxxx 00000
Attt:
Xxxxxx Xxxxxxx
Tel
No.:
000-000-0000 or 000-000-0000
Fax
No.:
000-000-0000
Email:
If
to the
Company:
c/o
Tianjin Sing Ocean Public Utility Development Co., Ltd.
00xx
Xxxxx, XxxxXx Xxxxxxxx, XxxXxx Xxxx
XxXxx
Xxxxxxxx, Xxxxxxx, Xxxxx
People’s
Republic of China
Attention:
Xxx Xx Shang
Tel:
(00 00) 0000 0000
Fax:
(00 00) 0000 0000
Email: xxxxxxxxx@xxxx.xxx
With
a
copy to:
Xxxxxx
Xxxx Xxxxx Raysman & Xxxxxxx LLP
000
0xx
Xxxxxx XX
Xxxxxxxxxx,
X.X. 00000
Attn.:
Xxxxx X. Xxxxxxxxxx, Esq.
Tel.
No.:
(000) 000-0000
Facsimile:
(000) 000-0000
Email:
xxxxxxxxxxx@xxxxxx.xxx
If
to the
Purchaser
Representative:
China
Hand Fund I, LLC
000
Xxxx
Xxxx Xxxx
Xxxxxxxxx,
XX 00000
Attn:
Xxxx Xxxxxxx
Tel.
No.:
000-000-0000
Fax
No.:
000-000-0000
Email:
xxxxxxxx@xxxxxxxxxxxxx.xxx
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.
7.3 This
Escrow Agreement shall be binding upon and shall inure to the benefit of the
permitted successors and permitted assigns of the parties hereto.
7.4 This
Escrow Agreement and the rights and obligations hereunder of the Company may
not
be assigned. This Escrow Agreement and the rights and obligations hereunder
of
the Escrow Agent may be assigned by the Escrow Agent. This Escrow 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 Escrow Agreement. This Escrow Agreement
may not be changed orally or modified, amended or supplemented without an
express written agreement executed by the Escrow Agent, the Company and the
Purchaser Representative. This Escrow Agreement is intended to be for the sole
benefit of the parties hereto and the Purchasers and their respective
successors, heirs and permitted assigns, and none of the provisions of this
Escrow Agreement are intended to be, nor shall they be construed to be, for
the
benefit of any third person.
7.5 This
Escrow 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 Escrow Agreement, refer to the Escrow Agreement in its entirety
and
not only to the particular portion of this Escrow 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 Escrow 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 Escrow Agreement shall not be admissible in
evidence to construe the provisions of any prior agreement.
7.6 The
parties hereto expressly agree that this Escrow Agreement shall be governed
by,
interpreted under and construed and enforced in accordance with the laws of
the
State of New York, without regard to conflicts of law principles that would
result in the application of the substantive laws of another jurisdiction.
Each
of the parties hereby irrevocably consents 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 Escrow 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 for notices set forth in Section 7.2.
7.7 The
Escrow Agent’s duties hereunder may be altered, amended, modified or revoked
only by a writing signed by the Company, the Purchaser Representative and the
Escrow Agent.
7.8 The
representations and warranties contained in this Escrow Agreement shall survive
the execution and delivery hereof and any investigations made by any party.
The
headings in this Escrow Agreement are for purposes of reference only and shall
not limit or otherwise affect any of the terms thereof.
7.9 This
Escrow Agreement may be executed in a number of counterparts, by facsimile,
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 Escrow Agreement shall become binding when one or more of the counterparts
hereof, individually or taken together, are signed by all the
parties.
7.10 If
the
Escrow Agent reasonably requires other or further instruments in connection
with
this Escrow Agreement or obligations in respect hereto, the necessary parties
hereto shall join in furnishing such instruments.
[Signature
Page Follows]
[SIGNATURE
PAGE TO SECURITIES ESCROW AGREEMENT]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
20th
day of
August, 2008.
|
By:
|
/s/
Jiaji Shang
|
|
Name:
Jiaji Shang
|
|
|
Title:
Chairman & CEO
|
|
|
PURCHASER
REPRESENTATIVE:
|
|
|
CHINA
HAND FUND I, LLC
|
|
|
By:
|
/s/
Xxxx X. Xxxxx
|
|
Name:
Xxxx X. Xxxxx
|
|
|
Title:
Member-Manager
|
|
|
ESCROW
AGENT:
|
|
|
ESCROW,
LLC
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
EXHIBIT
A
MANAGEMENT
|
Name
|
Percentage
of Purchaser Deposited Escrow
Shares
to Which Entitled if Performance
Thresholds
are Attained
|
|
