EXHIBIT 10.2
ESCROW AGREEMENT
This Escrow Agreement (the "Agreement"), dated effective as of the last
date set forth opposite the respective signatories hereto, is entered into by
and among Xxxxxx Coffee, Inc., a Nevada corporation (the "Company"), each of the
parties listed below who were subscribers to the private offering of securities
of BAK International, Ltd. ("BAK"), the Company's wholly-owned subsidiary,
(collectively, the "Subscribers"), Xxxxxxxxx Xx, in his individual capacity
("Li"), and Securities Transfer Corporation (hereinafter referred to as "Escrow
Agent").
WHEREAS, each of the Subscribers has entered into a Subscription
Agreement (the "Subscription Agreement") evidencing their participation in BAK's
private offering (the "Offering") of securities. As an inducement to the
Subscribers to participate in the Offering and as set forth in the Subscription
Agreement, Li agreed to place the "Escrow Shares" (as hereinafter defined) into
escrow for the benefit of the Subscribers in the event the Company failed to
satisfy the "Performance Thresholds" (as hereinafter defined). As a result of
their participation in the Offering, the Subscribers also participated in that
certain stock exchange transaction (the "Exchange") with the Company pursuant to
which they and all other holders of BAK capital stock, including Li, received
shares of common stock of the Company in exchange for all of their holding in
BAK. As a result of the Exchange, the Escrow Shares shall be shares of the
common capital stock of the Company currently held by Li;
WHEREAS, pursuant to the requirements of the Subscription Agreement,
the Company, Li and the Subscribers have agreed to establish an escrow on the
terms and conditions set forth in this Agreement;
WHEREAS, the Escrow Agent has agreed to act as escrow agent pursuant to
the terms and conditions of this Agreement; and
WHEREAS, all capitalized terms used but not defined herein shall have
the meanings assigned them in the Subscription Agreement;
NOW, THEREFORE, in consideration of the mutual promises of the parties
and the terms and conditions hereof, the parties hereby agree as follows:
1. Appointment of Escrow Agent. The Subscribers, Li and the Company
hereby appoint Securities Transfer Corporation as Escrow Agent to act in
accordance with 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. Upon the execution of this Agreement, Li
shall deliver to the Escrow Agent a stock certificate evidencing 2,179,550
shares (the `Escrow Shares") of the Company's common capital stock along with a
stock power executed in blank.
3. Representations of Li. Li hereby represents and warrants to the
Subscribers as follows:
(i) The Escrow Shares are validly issued, fully paid and
nonassessable shares of the Company, and free and clear of all pledges, liens
and encumbrances.
(ii) Performance of this Agreement and compliance with the
provisions hereof will not violate any provision of any applicable law 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 Li pursuant to the terms of any indenture, mortgage, deed of trust or
other agreement or instrument binding upon Li, other than such breaches,
defaults or liens which would not have a material adverse effect taken as a
whole.
4. Disbursement of Escrow Shares. BAK advised the Subscribers that the
Company, on a consolidated basis, would attain the following financial
performance thresholds (the "Performance Thresholds"): $12 million of Net Income
("NI") for the fiscal year ending September 30, 2005 (the "2005 Threshold") and
$27 million NI for the fiscal year ending September 30, 2006 (the "2006
Threshold"), respectively. In the event that the 2005 Threshold is not achieved
based on the Company's audited financial statements for the period as filed with
the U.S. Securities and Exchange Commission ("SEC"), the Subscriber's
attorney-in-fact, Halter Financial Group, Inc. ("HFG"), shall provide written
instruction to the Escrow Agent instructing the Escrow Agent to issue and
deliver certificates evidencing, in the aggregate, 50% of the Escrow Shares to
the Subscribers, on a pro rata basis, within ten (10) business days of the date
the audit report for the period is filed with the SEC. The Escrow Agent need
only rely on the letter of instruction from HFG in this regard. If the 2005
Threshold is achieved, Li shall provide written instruction to the Escrow Agent,
which letter of instruction shall be acknowledged in writing by HFG, for the
release of 50% of the Escrow Shares to Li. In the event that the 2006 Threshold
is not achieved based on the Company's audited financial statements for the
period as filed with the SEC, HFG shall provide written instruction to the
Escrow Agent instructing the Escrow Agent to issue and deliver certificates
evidencing, in the aggregate, the remaining 50% of the Escrow Shares to the
Subscribers, on a pro rata basis, within ten (10) business days of the date the
audit report for the period is filed with the SEC. The Escrow Agent need only
rely on the letter of instruction from HFG in this regard. If the 2006 Threshold
is achieved, Li shall provide written instruction to the Escrow Agent, which
letter of instruction shall be acknowledged in writing by HFG, for the release
of the remaining 50% of the Escrow Shares to Li.
5. Duration. This Agreement shall terminate on the sooner of the
distribution of all the Escrow Shares or the 10th business day following the
filing of the Company's audited financial statements for fiscal 2006 with the
SEC.
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 Shares, Escrow Agent shall have the right to consult counsel and/or to
institute an appropriate interpleader action to determine the rights of the
parties. Escrow Agent is also 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 Dallas County, Texas, and the Escrow Shares 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 the Escrow Shares.
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. 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.
(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 Texas upon fiduciaries.
(c) Escrow Agent will be indemnified and held harmless,
jointly and severally, by the Company, Li and the Subscribers 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. 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.
8. Compensation of Escrow Agent. The Company will pay Escrow Agent an
amount equal to Escrow Agent's standard fee schedule rate for all services
rendered by Escrow Agent hereunder.
9. 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 the Escrow Shares 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 Shares into the
registry of any court having jurisdiction.
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: Securities Transfer Corporation
0000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxx
If to the Company or Li: BAK Industrial Zone
Atou Village
Xxx Xxxxx Town
Lunggang District
Shenzhen, China 518119
Attention: Xx Xxxxx Qian, President
If to the Subscribers: c/o Halter Financial Group, Inc.
00000 Xxxxxxx Xxxx
Xxxxxx, Xxxxx 00000
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. 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.
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 Shares 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 TEXAS APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED THEREIN, EXCEPT THAT THE PORTIONS OF THE TEXAS TRUST CODE,
SECTION 111.001, ET SEQ. OF THE TEXAS PROPERTY CODE, CONCERNING FIDUCIARY DUTIES
AND LIABILITIES OF TRUSTEES SHALL NOT APPLY TO THIS AGREEMENT. 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 DALLAS COUNTY, TEXAS, 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.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date set forth opposite their respective names.
Xxxxxx Coffee, Inc.
By: /s/
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Its:
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Dated: January 20, 2005
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/s/ Xxxxxxxxx Xx
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Xxxxxxxxx Xx
Dated: January 20, 2005
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SECURITIES TRANSFER CORPORATION
By: /s/
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Its:
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Dated: January 20, 2005
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SUBSCRIBERS
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, President
Halter Financial Group, Inc., as attorney-
in-fact or each of the Subscribers
