ESCROW AGREEMENT
EXHIBIT
2.8
This
Escrow Agreement (this “Agreement”) is
made as of August 16, 2006, by and among Cyber Merchants Exchange, Inc., a
California corporation ("Cyber"),
KI
Equity Partners II, LLC, a Delaware limited liability company (“KI
Equity”),
which
owns the majority of the outstanding shares of common stock of Cyber prior
to
Closing, Infosmart Group, Limited, a corporation organized in the British Virgin
Islands ("Company"),
the
persons listed on the signature pages hereto as the holders of the shares of
Series A Preferred Stock issued in connection with the Exchange Agreement (the
“Shareholders”),
and
Xxxxxxxxxx Xxxxx LLP (the “Escrow
Agent”).
All
of the aforementioned are also referred to individually herein as a
“Party”
and
collectively herein as the “Parties.”
PRELIMINARY
STATEMENTS
A. Each
of
the Parties, other than the Escrow Agent, have entered into that certain
Exchange Agreement dated as of July 7, 2006, and amended as of August 14, 2006
(the “Exchange
Agreement”),
a
copy of which has been delivered to the Escrow Agent, pursuant to which the
Shareholders shall contribute, transfer, assign and deliver to Cyber, and Cyber
shall acquire from the Shareholders, the outstanding shares of capital stock
of
the Company owned by the Shareholders (“Shares”)
and
Cyber shall issue to the Shareholders 1,000,000 shares of Series A Convertible
Preferred Stock, no par value per share, of Cyber (the "Preferred
Shares"),
which
shall be convertible into 116,721,360 shares of Cyber Common Stock (the
“Conversion
Shares”).
Capitalized terms used in this Agreement and not otherwise defined shall have
the meanings set forth in the Exchange Agreement.
B. As
set
forth in the Exchange Agreement, the parties desire that the Shares, the
Preferred Shares, and the signed resignations of all of the then current
officers and directors of Cyber (after the Transaction) (“Resignations”)
together with a written consent action of all of the then current directors
appointing Xxxxx X. Xxxxxxx as the sole director of Cyber (“Consent”)
be
placed in escrow with the Escrow Agent and the parties desire to enter into
this
Escrow Agreement to set forth the terms of the escrow arrangement.
C. Unless
otherwise defined herein, capitalized terms used herein shall have the meaning
set forth in the Exchange Agreement.
NOW,
THEREFORE,
in
consideration of the foregoing, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
AGREEMENT
1. The
Escrow.
1.1 Escrow
Documents.
At the
Closing, the certificates representing the Preferred Shares shall be delivered
by Cyber to the Escrow Agent and the certificates representing the Shares shall
be delivered by the Shareholders and the Company to the Escrow Agent, and
immediately following the Closing, the newly appointed directors and officers
of
Cyber shall deliver to the Escrow Agent the Resignations and the Consent (all
of
the foregoing documents, the “Escrow
Documents”).
1.2 Escrow
Period.
Subject
to the following requirements, the Escrow Documents shall be retained by the
Escrow Agent for the period (the
"Escrow
Period")
beginning
at the Closing until the earlier of (a) the receipt by the Escrow Agent of
written notice from Cyber and KI
Equity
of the closing of the Financing, or (b) midnight on the date that is the third
business days following the Closing (or such later time as mutually agreed
to by
the Company, Cyber and KI Equity, but not more than ten (10) business days
following the Closing).
1.3 Distribution
of Escrow Documents Upon Closing of the Financing.
Upon
receiving notice of the closing of the Financing as provided in Section 1.2(a),
the Escrow Agent shall promptly (a) deliver the certificates representing the
Shares to Cyber, (b) deliver to the Shareholders the certificates representing
the Preferred Shares to be received by them in the Transaction, and (c) destroy
the Resignations and the Consent.
1.4 Distribution
of Escrow Documents Upon Rescission.
Upon the
occurrence of a Rescission, the Escrow Agent shall promptly (a) deliver to
the
Company and the Shareholders the certificates representing the Shares, (b)
deliver to Cyber the certificates representing the Preferred Shares, and (c)
deliver to Cyber the Resignations and the Consent. For purposes of this Escrow
Agreement, the Escrow Agent may deem a Rescission to have occurred at the
conclusion of the third business day following the Closing if it has not
received either (a) the notice of closing of the Financing as provided in
Section 1.2(a), or (b) agreement in writing from each of the Company, Cyber
and
KI Equity that the Escrow Period has been extended to a period ending no later
than ten (10) business days following the Closing.
2. Appointment
of Escrow Agent
2.1 Appointment
of Escrow Agent.
The
Escrow Agent is hereby appointed as escrow agent under this Escrow Agreement.
The Escrow Agent agrees to accept delivery of the Escrow Documents, to hold
such
Escrow Documents in accordance with this Escrow Agreement and to release the
Escrow Documents as provided in this Escrow Agreement.
3. Terms
of Escrow.
3.1 Other
Releases from Escrow.
Prior
to the termination of the Escrow Period, the Escrow Agent shall hold the Escrow
Documents in trust and undelivered until the Escrow Agent is required to effect
the release of the Escrow Documents pursuant to Section 1.3 or 1.4 above, as
the
case may be, or until the Escrow Agent receives:
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3.1.1 a
written
direction signed by each of Company, Cyber and KI Equity to release the Escrow
Documents or part thereof as set forth in such written notice; or
3.1.2 a
copy of
an order of a court of competent jurisdiction in a final determination
instructing the Escrow Agent to act in a certain manner, which order has been
certified by the United States District Court for the Southern District Court
of
California or, if such court does not have jurisdiction or will not accept
jurisdiction, in any court of general jurisdiction in the County of Los Angeles,
California as having been filed with such court (a “Court
Order”),
and
upon receipt of the Court Order, the Escrow Agent shall release part or all
of
the applicable Escrow Documents in accordance with and to the party or parties
named in the Court Order. For purposes of this subparagraph, the phrase “a final
determination” means the final decision after all appeals have been exhausted,
or the time to file an appeal has expired without a notice of appeal having
been
filed, as the case may be.
3.2 Dispute
Procedure.
If the
Escrow Agent receives a notice from any party disputing the release or proposed
release of any Escrow Documents then the Escrow Agent shall continue to hold
the
applicable Escrow Documents or part thereof which is the subject of the dispute
in escrow and shall not release it from escrow until the Escrow Agent has
received:
3.2.1 a
written
notice signed by KI Equity, Cyber and the Company stating that the dispute
has
been settled and directing the Escrow Agent to deliver the Escrow Documents
or
part thereof to the party set out in the notice; or
3.2.2 a
Court
Order ordering it to deliver such Escrow Documents or part thereof applicable
to
the party set out in the Court Order;
whereupon
the Escrow Agent shall deliver such Escrow Documents as so directed or ordered,
as the case may be.
3.3 Escrow
Agent’s Duties.
3.3.1 The
Escrow Agent shall be obligated only for the performance of such duties as
are
specifically set forth herein and may rely and shall be protected in relying
or
refraining from acting on any instrument reasonably believed by the Escrow
Agent
to be genuine and to have been signed and presented in accordance with the
terms
of this Escrow Agreement by the proper party or parties. The Escrow Agent shall
not be liable for any act done or omitted hereunder as Escrow Agent while acting
in good faith and in the exercise of reasonable judgment.
3.3.2 The
Escrow Agent is hereby expressly authorized to comply with and obey orders,
judgments or decrees of any court of law, notwithstanding any notices, warnings
or other communications from any party or any other person to the contrary.
In
case the Escrow Agent obeys or complies with any such order, judgment or decree
of any court, the Escrow Agent shall not be liable to any of the parties hereto
or to any other person by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled,
set
aside, vacated or found to have been entered without jurisdiction.
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3.3.3 The
Escrow Agent shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver this Escrow Agreement or any documents or papers deposited
or
called for hereunder.
3.3.4 The
Escrow Agent shall not be liable for the expiration of any rights under any
statute of limitations with respect to this Escrow Agreement or any property
deposited with the Escrow Agent.
3.3.5 In
performing any duties under the Escrow Agreement, the Escrow Agent shall not
be
liable to any party for damages, losses, or expenses, except for gross
negligence, fraud, willful misconduct or breach of this Escrow Agreement on
the
part of the Escrow Agent. The Escrow Agent shall not incur any such liability
for (A) any act or failure to act made or omitted in good faith, or
(B) any action taken or omitted in reliance upon any instrument, including
any written statement or affidavit provided for in this Escrow Agreement that
the Escrow Agent shall in good faith believe to be genuine, nor will the Escrow
Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any signatory’s authority. In addition, the Escrow
Agent may consult with legal counsel in connection with the Escrow Agent’s
duties under this Escrow Agreement and shall be fully protected in any act
taken, suffered, or permitted by him/her in good faith in accordance with the
advice of counsel. The Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting to act on behalf
of
any party to this Escrow Agreement. Without limiting the foregoing, in no event
will Escrow Agent be responsible for any damages in excess of the reasonable
costs of replacing or providing alternative documentation to the Escrow
Documents.
3.3.6 If
any
controversy arises between the parties to this Escrow Agreement, or with any
other party, concerning the subject matter of this Escrow Agreement, its terms
or conditions, the Escrow Agent will not be required to determine the
controversy or to take any action regarding it. The Escrow Agent may hold the
Escrow Documents and may wait for settlement of any such controversy by final
appropriate legal proceedings or other means as, in the Escrow Agent’s
discretion, the Escrow Agent may require, despite what may be set forth
elsewhere in this Escrow Agreement. In such event, the Escrow Agent will not
be
liable for interest or damage. Furthermore, the Escrow Agent may at its option,
file an action of interpleader requiring the parties to answer and litigate
any
claims and rights among themselves. The Escrow Agent is authorized to deposit
with the clerk of the court the Escrow Documents held in escrow, except all
cost, expenses, charges and reasonable attorney fees incurred by the Escrow
Agent due to the interpleader action and which the parties jointly and severally
agree to pay. Upon initiating such action, the Escrow Agent shall be fully
released and discharged of and from all obligations and liability imposed by
the
terms of this Escrow Agreement.
3.3.7 Except
as
otherwise provided herein, the Company, Cyber and KI Equity (and their
respective successors and assigns) jointly and severally agree to indemnify
and
hold Escrow Agent harmless against any and all losses, claims, damages,
liabilities, and expenses, including reasonable costs of investigation, counsel
fees, and disbursements that may be imposed on Escrow Agent or incurred by
Escrow Agent in connection with the performance of his/her duties under this
Escrow Agreement in accordance with the terms hereof, including but not limited
to any litigation arising from this Escrow Agreement or involving its subject
matter.
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3.3.8 The
Escrow Agent may resign at any time upon giving at least five (5) days written
notice to Cyber, KI Equity and the Company; provided,
however,
that no
such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: Cyber and the Company
shall
use their best efforts to mutually agree on a successor escrow agent as soon
as
reasonably practicable after receiving such notice. If Cyber and the Company
fail to agree upon a successor escrow agent within five (5) days of receiving
notice of the resignation of the Escrow Agent, the Escrow Agent shall have
the
right to appoint a successor escrow agent authorized to do business in the
State
of California, but may not appoint any respective escrow agents that Cyber
or
the Company suggested to the other, but were declined by the other party. The
successor escrow agent shall execute and deliver an instrument accepting such
appointment and it shall, without further acts, be vested with all the estates,
properties, rights, powers, and duties of the predecessor escrow agent as if
originally named as escrow agent. The Escrow Agent shall be discharged from
any
further duties and liability under this Escrow Agreement; provided,
however,
that in
the event of the resignation or replacement of the Escrow Agent pursuant to
this
Section 3.3.8, Escrow Agent shall deliver the Escrow Documents to the successor
escrow agent, in trust, and all records related to the Escrow Documents that
the
successor escrow agent will require to properly perform its duties under this
Escrow Agreement.
3.3.9 Escrow
Agent is not responsible for compliance by the Company, Cyber or KI Equity
with
the terms of this Agreement, the Merger Agreement or any other agreement entered
into in connection with the Merger or the Equity Financing or related
transactions.
3.4 Fees.
There
shall be no separate fees for this escrow. Rather, the Escrow Agent’s fees shall
be as borne and paid entirely by the Company and will be billed to the Company
based on the Escrow Agent’s standard hourly rates for time spent working on the
Escrow Agreement and the actions contemplated therein as described in the
engagement agreement between the Company and the Escrow Agent. In the event
that
the conditions of this Escrow Agreement are not promptly fulfilled, or if the
Escrow Agent renders any service not provided for in this Escrow Agreement,
or
if the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes
in,
any litigation pertaining to this escrow or its subject matter, the Escrow
Agent
shall be reasonably compensated by the Company for such extraordinary services
and reimbursed for all costs, attorney’s fees, and expenses occasioned by such
default, delay, controversy or litigation. Notwithstanding anything in this
Agreement to the contrary, the obligations of the Company to pay the Escrow
Agent fees as provided herein shall be assumed and paid by Cyber following
the
Transaction.
3.5 Conflict.
Each of
Cyber and KI Equity understands and acknowledges that the Escrow Agent is
general outside counsel to the Company and owes the Company duties commensurate
with such legal representation.
4. Miscellaneous.
4.1 Successors
and Assigns.
Except
as otherwise expressly provided herein, all covenants and agreements contained
in this Escrow Agreement by or on behalf of any of the
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parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
4.2 Severability.
Whenever
possible, each provision of this Escrow Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Escrow Agreement is held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of this Escrow
Agreement.
4.3 Counterparts.
This
Escrow Agreement may be executed simultaneously in two or more counterparts,
any
one of which need not contain the signatures of more than one party, but all
such counterparts taken together shall constitute one and the same
agreement.
Facsimile signatures on counterparts of this Escrow Agreement shall be deemed
original signatures.
4.4 Descriptive
Headings; Interpretation.
The
descriptive headings of this Escrow Agreement are inserted for convenience
only
and do not constitute a part of the body of this Escrow Agreement.
4.5 Governing
Laws.
This
Escrow Agreement shall be construed and enforced in accordance with, and all
questions concerning the construction, validity, interpretation and performance
of this Escrow Agreement shall be governed by, the laws of the State of
California without giving effect to provisions thereof regarding conflict of
laws.
Any
lawsuit brought by a party to this Escrow Agreement against any other party
hereto shall be filed in the state or federal courts in Sacramento County,
California.
4.6 Notices.
All
notices, demands, consents or other communications to be given or delivered
under or by reason of the provisions of this Escrow Agreement shall be in
writing and shall be deemed to be given if delivered personally or by commercial
delivery service or at the same time if sent via facsimile (with acknowledgment
of complete transmission provided that a copy of such notice, demand, consent
or
other communication is concurrently given or delivered by one of the other
permissible forms of notice hereunder) to Cyber, KI Equity, the Company, and
the
Escrow Agent at the respective addresses indicated below:
(a) if
to Cyber,
to:
Cyber
Merchants Excahnge, Inc.
Attn:
Xxxxx X. Xxxxxxx, President
000X
Xxxxxxxxx Xxxxxxxxx, Xxxxx 00
Xxxx
Xxxxx, XX XXX 00000
facsimile:
(000) 000-0000
(b) if
to the
Company, to:
Infosmart
Group, Limited
A2,
18F
Fortune Factory Building
00
Xxx
Xxxxx Xxxxxx
-0-
Xxxx
Xxx,
Xxxx Xxxx
Attn:
Xxxx Xxxx
(000)
0000-0000 telephone
(000)
0000-0000 telecopy
with
a
copy to:
Xxxxxxxxxx
& Xxxxx LLP
00000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn:
Xxxxx X. Xxxxx, Esq.
(000)
000-0000 telephone
(000)
000-0000 telecopy
(c) if
to KI
Equity, to:
Xx.
Xxxxxxx X. Xxxxxxx, Manager
KI
Equity
Partners II, LLC
0000
XXX
Xxxxxxx, Xxxxx 0000
Xxxxxxxxx
Xxxxxxx, Xxxxxxxx XXX 00000-0000
facsimile:
(000) 000-0000
(d) if
to the
Escrow Agent, to:
Xxxxxxxxxx
& Xxxxx LLP
00000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn:
Xxxxx X. Xxxxx, Esq.
(000)
000-0000 telephone
(000)
000-0000 telecopy
or
to
such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.
4.7 Mutual
Drafting.
This
Escrow Agreement is the joint product of the parties hereto and their respective
counsel, and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of such parties and counsel, and shall not be
construed for or against any party hereto on the basis of authorship
thereof.
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IN
WITNESS WHEREOF, the parties hereby have executed this Escrow Agreement on
the
date first written above.
CYBER
MERCHANTS EXCHANGE, INC.
By:
/s/ Xxxxx X. Xxxxxxx
Xxxxx
X.
Xxxxxxx, President
KI
EQUITY
PARTNERS II, LLC
By:
/s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx
X. Xxxxxxx, Manager
INFOSMART
GROUP LIMITED (“INFOSMART”)
By:
/s/ Xxxx Xxx Xxxx
Xxxx
Xxx
Xxxx, Director
SHAREHOLDERS:
PRIME
CORPORATE DEVELOPMENTS LIMITED
By:
/s/ Sze Po Nei
Sze
Po
Nei, Director
/s/
Xxxx Xxxxx
Xxxx
Xxxxx, Individually
/s/
Xxx
Xxx Xxx
Xxx
Xxx
Xxx, Individually
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HAMPTONS
INVESTMENT GROUP LIMITED
By:
/s/ Xxx Xxx Sui
Xxx
Xxx
Sui, William, Director
ESCROW
AGENT:
XXXXXXXXXX
XXXXX LLP
By:
/s/ Xxxxx X. Xxxxx
Name:
Xxxxx X. Xxxxx
Title:
Partner
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