ESCROW AGREEMENT
EXECUTION
VERSION
THIS
ESCROW AGREEMENT
(this
“Agreement”)
is
entered into this 15th day of February, 2008, by and among Xxxxxx Brothers
Commercial Corporation Asia Limited, a Hong Kong company (“LBCCA”),
YA
Global Investments, L.P., a Cayman Islands limited partnership (“YAGI”
and,
together with LBCCA, the “Purchasers”),
China
Automotive Systems, Inc., a Delaware corporation (the “Company”),
and
U.S. Bank National Association, a national banking association, as escrow agent
hereunder (the “Escrow
Agent”).
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Purchase Agreement (as defined
below).
RECITALS
WHEREAS,
the
Purchasers and the Company have entered into that certain Securities Purchase
Agreement, dated as of February 1, 2008 (the “Purchase
Agreement”),
pursuant to which the Purchasers agreed to purchase certain securities of the
Company; and
WHEREAS,
pursuant
to the terms of the Purchase Agreement, an amount equal to $17,500,000 (the
“Deposit
Amount”)
that
would have otherwise been paid by the Purchasers to the Company in connection
with the transactions contemplated by the Purchase Agreement is to be paid
by
the Purchasers to the Escrow Agent and held in escrow (the “Escrow
Account”),
pursuant to the Purchase Agreement.
AGREEMENT
NOW,
THEREFORE, in
consideration of the mutual agreements and covenants contained herein and other
good and valuable consideration, the sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Receipt
of Escrow.
By its
signature below, the Escrow Agent acknowledges receipt of funds from the
Purchasers in an amount equal to the Deposit Amount (together with the
investment return thereon, the “Escrow Amount”).
2. Investment
of Escrow.
(a) The
Escrow Amount shall be invested by the Escrow Agent in First American Prime
Obligation Fund - Class Y, or as otherwise directed by LBCCA and the
Company.
(b) All
assets held in the Escrow Account shall be registered in the name of any
nominees selected by the Escrow Agent under this Agreement. With respect to
any
funds received by the Escrow Agent for deposit into the Escrow Account or any
direction received by the Escrow Agent with respect to investment of any funds
in the Escrow Account after 10:00 a.m., Eastern Time, the Escrow Agent shall
not
be required to invest such funds or to effect such investment instruction until
the next day upon which banks in New York City are open for business. The Escrow
Agent shall be entitled to sell or redeem any such investment as necessary
to
make any distributions required under this Agreement and shall not be liable
or
responsible for any loss resulting from any such sale or
redemption.
3. Release
of Escrow.
(a) On
or
prior to April 30, 2008, the Purchasers and the Company shall deliver to the
Escrow Agent, joint written instructions (“Joint
Written Instructions”)
setting forth instructions for the Escrow Agent to release all or a portion
of
the Escrow Amount in an amount set forth therein to the Purchasers (pro
rata
in
accordance with their respective Applicable Percentages (as defined below))
or
to the Company, as the case may be, as specified in such Joint Written
Instructions. The “Applicable
Percentage”
of
each
Purchaser is set forth opposite such Purchaser’s name on Annex A
attached
hereto.
(b) The
Escrow Agent shall release all or portion of the Escrow Amount as expressly
directed by the Joint Written Instructions.
(c) The
Purchasers and the Company agree that they will act in good faith to execute
the
Joint Written Instructions in accordance with the terms of this Agreement and
the Purchase Agreement.
(d) Notwithstanding
the foregoing, the Escrow Agent shall disburse the Escrow Amount (or any portion
thereof) in accordance with a notice from either the Purchasers or the Company
of a final, non-appealable order from a court of competent jurisdiction in
the
United States, along with a copy of such order, pursuant to which such court
has
determined whether and to what extent the Purchasers or the Company, as
applicable, are entitled to the Escrow Amount (or any portion
thereof).
4. Duties
of the Escrow Agent.
(a) Duties
in General.
(i) The
Escrow Agent undertakes to perform only such duties as are expressly set forth
herein (and required by applicable law), which the parties agree are ministerial
in nature, and no duties shall be implied. If in doubt as to its duties and
responsibilities hereunder, the Escrow Agent may consult with counsel of its
choice and shall be protected in any action taken or omitted in connection
with
the advice or opinion of such counsel.
(ii) If
the
Escrow Agent becomes involved in litigation with respect to this Agreement
for
any reason, it is hereby authorized to deposit the Escrow Amount with the clerk
of such court in which such litigation is pending, or to interplead all
interested parties in any court of competent jurisdiction and to deposit with
the clerk of such court the Escrow Amount. Upon the happening of either of
the
above, the Escrow Agent shall be fully relieved and discharged of any further
duties hereunder.
(iii) If,
at
any time, (i) there shall exist any dispute among the parties hereto with
respect to the holding or disposition of any portion of the Escrow Amount or
any
other obligations of the Escrow Agent hereunder, (ii) the Escrow Agent is unable
to determine, to the Escrow Agent’s sole satisfaction, the proper disposition of
any portion of the Escrow Amount or the Escrow Agent’s proper actions with
respect to its obligations hereunder, or (iii) the Purchasers and the Company
have not within fifteen (15) business days of the furnishing by the Escrow
Agent
of a notice of resignation pursuant to Section 6, appointed a successor Escrow
Agent to act hereunder, then the Escrow Agent may, in its sole discretion,
take
either or both of the following actions:
(A) suspend
the performance of any of its obligations under this Agreement until such
dispute or uncertainty shall be resolved to the sole satisfaction of the Escrow
Agent or until a successor Escrow Agent shall have been appointed (as the case
may be); or
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(B) petition
(by means of an interpleader action or any other appropriate method) any court
of competent jurisdiction in any state or federal court located in the State
of
New York, for instructions with respect to such dispute or uncertainty, and
to
the extent required or permitted by law, pay into such court, for holding and
disposition in accordance with the instructions of such court, the Escrow
Amount, after deduction and payment to the Escrow Agent of all fees and expenses
(including court costs and reasonable attorneys’ fees) payable to, actually
incurred by, or reasonably expected to be incurred by the Escrow Agent in
connection with the performance of its duties and the exercise of its rights
hereunder.
The
Escrow Agent shall have no liability to the Purchasers, the Company, their
respective shareholders or members or any other person with respect to any
such
suspension of performance or disbursement into such court, including, without
limitation, any liability that may arise, or be alleged to have arisen, out
of
or as a result of any delay in the disbursement of funds held in the Escrow
Account or any delay in or with respect to any other action required or
requested of the Escrow Agent.
(b) Exculpation.
(i) The
Escrow Agent shall have no liability under and no duty to inquire as to the
provisions of any agreement other than this Agreement (except as to the
capitalized terms used herein and defined in the Purchase Agreement). 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 Purchasers or the Company. The Escrow Agent’s sole
responsibility shall be for the safekeeping and disbursement of the Escrow
Amount in accordance with the terms of this Agreement. The Escrow Agent may
rely
upon any notice, instruction, request or other instrument, not only as to its
due execution, validity and effectiveness, but also as to the truth and accuracy
of any information contained therein, which the Escrow Agent shall believe
to be
genuine and to have been signed or presented by the person or parties purporting
to sign the same. In no event shall the Escrow Agent be liable for incidental,
indirect, special, and consequential or punitive damages (including, without
limitation, lost profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action. The
Escrow Agent shall not be obligated to take any legal action or commence any
proceeding in connection with the Escrow Account, any account in which the
Escrow Amount is deposited, this Agreement or the Purchase Agreement, or to
appear in, prosecute or defend any such legal action or proceeding. The Escrow
Agent may consult legal counsel selected by it in the event of any dispute
or
question as to the construction of any of the provisions hereof or of any other
agreement or of its duties hereunder, or relating to any dispute involving
any
party hereto, and shall incur no liability and shall be fully protected from
any
liability whatsoever in acting in accordance with a written opinion of such
counsel. Each of the Purchasers (in accordance with their Applicable
Percentages), on the one hand, and the Company, on the other hand, severally
and
not jointly, shall promptly pay, upon demand, one-half of the reasonable fees
and expenses of any such legal counsel.
-3-
(ii) The
Escrow Agent is authorized, in its sole discretion, to comply with orders issued
or process entered by any court of competent jurisdiction with respect to the
Escrow Account. If any portion of the Escrow Amount is at any time attached,
garnished or levied upon under any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by any court of competent jurisdiction affecting such
property or any part thereof, then and in any such event, the Escrow Agent
is
authorized, in its sole discretion, to rely upon and comply with any such order,
writ, judgment or decree; and if the Escrow Agent complies with any such order,
writ, judgment or decree, it shall not be liable to any of the parties hereto
or
to any other person or entity by reason of such compliance even though such
order, writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
(c) No
Additional Duties.
The
Escrow Agent shall have no duties except those that are expressly set forth
herein, and it shall not be bound by any notice of a claim or demand hereunder,
or any waiver, modification, amendment, termination or rescission of this
Agreement, unless received by it in writing.
(d) Miscellaneous.
The
Escrow Agent may execute any of its powers or responsibilities hereunder and
exercise any rights hereunder either directly or by or through its agents or
attorneys. The Escrow Agent shall not be responsible for and shall not be under
a duty to examine or pass upon the validity, binding effect, execution or
sufficiency of this Agreement or of any agreement amendatory or supplemental
hereto.
5. Indemnification
of the Escrow Agent.
(a) From
and
at all times after the date of this Agreement, each of the Purchasers (in
accordance with their Applicable Percentages), on the one hand, and the Company,
on the other hand, severally and not jointly, shall, to the fullest extent
permitted by law, defend, indemnify and hold harmless the Escrow Agent and
each
director, officer, employee, attorney, agent and affiliate of the Escrow Agent
(collectively, the “Indemnified
Parties”)
against one-half of any and all actions, claims (whether or not valid), losses,
damages, liabilities, costs and expenses of any kind or nature whatsoever
(including, without limitation, reasonable attorneys’ fees, costs and expenses)
incurred by or asserted against any of the Indemnified Parties from and after
the date hereof, whether direct, indirect or consequential, as a result of
or
arising from or in any way relating to any claim, demand, suit, action or
proceeding (including any inquiry or investigation) by any person, including,
without limitation, the Purchasers or the Company, whether threatened or
initiated, asserting a claim for any legal or equitable remedy against any
person under any statute or regulation, including, without limitation, any
federal or state securities laws, or under any common law or equitable cause
or
otherwise, arising from or in connection with the negotiation, preparation,
execution, performance or failure of performance of this Agreement or any
transactions contemplated herein, whether or not any such Indemnified Party
is a
party to any such action, proceeding, suit or the target of any such inquiry
or
investigation; provided,
however,
that no
Indemnified Party shall have the right to be indemnified hereunder for any
liability finally determined by a court of competent jurisdiction, subject
to no
further appeal, to have resulted primarily from the gross negligence or willful
misconduct of such Indemnified Party. The Indemnified Parties (as a group)
shall
have the right to select and employ a single firm of counsel with respect to
any
action or claim brought or asserted against them, provided that such counsel
is
reasonably acceptable to the Purchasers and the Company, and one-half of the
reasonable fees of such counsel shall be paid upon demand by each of the
Purchasers (in accordance with their Applicable Percentages), on the one hand,
and the Company, on the other hand, severally and not jointly. The obligations
of the Purchasers and the Company under this Section 5 shall survive any
termination of this Agreement and the resignation or removal of the Escrow
Agent.
-4-
(b) The
parties agree that neither the payment by the Purchasers or the Company of
any
claim by the Escrow Agent for indemnification hereunder nor the disbursement
of
any amounts to the Escrow Agent from the Escrow in respect of a claim by the
Escrow Agent for indemnification shall impair, limit, modify, or affect, as
between the Purchasers or the Company, the respective rights and obligations
of
the Purchasers, on the one hand, and the Company, on the other hand, under
the
Purchase Agreement.
6. Resignation
of the Escrow Agent.
The
Escrow Agent, and any successor Escrow Agent, may resign at any time as Escrow
Agent hereunder by giving at least fifteen (15) business days written notice
to
the parties. Upon such resignation and the appointment of a successor Escrow
Agent, the resigning Escrow Agent shall be absolved from any duties as Escrow
Agent hereunder. Upon their receipt of notice of resignation from the Escrow
Agent, the Purchasers and the Company shall use their reasonable best efforts
jointly to designate a successor Escrow Agent. If the parties do not agree
upon
a successor Escrow Agent within fifteen (15) business days after the receipt
by
the parties of the Escrow Agent’s resignation notice, the Escrow Agent may
petition any court of competent jurisdiction for the appointment of a successor
Escrow Agent or other appropriate relief (including, without limitation, an
interpleader action) and any such resulting appointment shall be binding upon
all parties hereto. By mutual agreement, the Purchasers and the Company, acting
together, shall have the right at any time upon not less than ten (10) business
days written notice to terminate their appointment of the Escrow Agent, or
any
successor Escrow Agent, as Escrow Agent hereunder. Notwithstanding anything
to
the contrary in the foregoing, the Escrow Agent or any successor Escrow Agent
shall continue to act as the Escrow Agent until a successor is appointed and
qualified to act as the Escrow Agent. The resigning Escrow Agent shall transmit
all records pertaining to the Escrow Account and shall pay the Escrow Amount
to
the successor Escrow Agent, after making copies of such records as the resigning
Escrow Agent deems advisable and after deduction and payment to the resigning
Escrow Agent of all fees and expenses (including court costs and reasonable
attorneys’ fees) payable to, actually incurred by, or reasonably expected to be
incurred by the retiring Escrow Agent in connection with the performance of
its
duties and the exercise of its rights hereunder. After any resigning Escrow
Agent’s resignation or removal, the provisions of this Agreement shall inure to
its benefit and survive with respect to any actions taken or omitted to be
taken
by such resigning Escrow Agent while it was the Escrow Agent under this
Agreement. Any corporation or association into which the Escrow Agent may be
merged or converted or with which it may be consolidated, or any corporation
or
association to which all or substantially all of the escrow business of the
Escrow Agent’s corporate trust line of business may be transferred, shall be the
Escrow Agent under this Agreement without further act.
-5-
7. Taxes.
(a) For
U.S.
federal (and all relevant state and local) income tax purposes, each party
hereto agrees to treat the party receiving the Escrow Amount as set forth in
the
Joint Written Instructions as the owner of the funds in the Escrow Account
(including any portion thereof that is invested or reinvested under the terms
of
this Agreement) and any interest or other earnings on such funds, which shall
be
allocated to such party and so reported, to the extent necessary, to the
Internal Revenue Service and any other taxing authority.
(b) The
correct Taxpayer Identification Number (“TIN”)
assigned by the Internal Revenue Service for each Purchaser and the Company
is
set forth in Annex
A.
Promptly following the execution of this Agreement, each Purchaser and the
Company shall, to the extent applicable, provide the Escrow Agent with a fully
executed W-8 or W-9 Internal Revenue Service form.
8. Notices.
All
notices and other communications required or permitted pursuant to this
Agreement shall be in writing and be deemed to have been duly given and
delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,
when
sent by facsimile (provided confirmation of transmission is mechanically or
electronically generated and kept on file by the sending party); or (iii) one
(1) business day after deposit with an internationally recognized courier
service, in each case properly addressed to the party to receive the same.
The
addresses and facsimile numbers for such communications shall be:
If
to the
Purchasers:
Xxxxxx
Brothers Commercial Corporation Asia Limited
24F,
Two
International Finance Xxxxxx
0,
Xxxxxxx Xxxxxx
Xxxxxxx,
Xxxx Xxxx
Xxxxxxxxx:
Xxxxxx Xxxx
Facsimile:
(000) 0000-0000
and
YA
Global
Investments, L.P.
c/o
Yorkville Advisors, LLC
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx
Xxxx, XX 00000
Attention:
Xxxxx Xxxxxxxx
Facsimile:
(000) 000-0000
-6-
With
a
copy to:
Xxxxxxx
Procter LLP
000
Xxx
Xxxx Xxxxxx, X.X.
Xxxxxxxxxx,
XX 00000
Attention:
Xxxxx X. Xxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
If
to the
Company:
China
Automotive Systems, Inc.
Xx.
0
Xxxxxxxx Xxxx
Xx
Xxxx
Development Zone
Shashi
District, Xxxx Xxxx City
Hubei
Province, People’s Republic of China
Attention:
Xxxxxx Xxxx
Facsimile:
(00) 00-0000-0000
With
a
copy to:
Xxxxxx
Xxxxxx LLP
0000
Xx
Xxxxx Xxxxxxx Xxxxx, 0xx
Xxxxx
Xxx
Xxxxx, XX 00000
Attention:
Xxxxxx X. Xxxxxxx, Esq.
Facsimile:
(000) 000-0000
If
to the
Escrow Agent:
U.S.
Bank
Corporate Trust Services
0000
X.
Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx,
XX 00000
Attention:
Xxxxxxxxx X. Xxxxxxx
Facsimile:
(000) 000-0000
or
to
such other address as such party shall specify by written notice to the other
parties hereto. Any notice sent to the Escrow Agent shall also be sent to the
other parties to this Agreement.
9. Fees
and Expenses.
All
fees
and expenses of, and incurred by, the Escrow Agent in connection with the
performance of its obligations hereunder shall be paid one-half by the Company
and one-half by the Purchasers (in accordance with their respective Applicable
Percentages) in accordance with Annex B. In addition, the Escrow Agent shall
be
reimbursed for all its reasonable out-of-pocket expenses, including attorney’s
fees, travel expenses, telephone and facsimile transmission costs, postage
(including express mail and overnight delivery charges), copying charges and
the
like. All of the compensation and reimbursement obligations set forth in this
Section 9 shall be payable upon demand by the Escrow Agent, after presentation
of a statement in reasonable detail by the Escrow Agent.
-7-
10. Assignment.
The
Purchasers and the Company may assign rights under this Agreement to the same
extent they are permitted to assign their rights and obligations under the
Purchase Agreement.
11. Miscellaneous.
This
Agreement, and with respect to the Purchasers and the Company, the Purchase
Agreement, embody the entire agreement and understanding of the parties
concerning the Escrow Amount, and, in the event of any inconsistency between
this Agreement and the Purchase Agreement, the Purchase Agreement shall control.
This Agreement may be amended or waived only by a writing signed by the Company,
the Purchasers and the Escrow Agent. The headings in this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
This Agreement shall bind and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. This Agreement may be
executed in two or more identical counterparts, all of which shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party; provided that a
facsimile signature shall be considered due execution and shall be binding
upon
the signatory thereto with the same force and effect as if the signature were
an
original, not a facsimile signature.
[SIGNATURE
PAGE FOLLOWS]
-8-
To
evidence their agreement, the parties have caused this Escrow Agreement to
be
executed on the date first written above.
| PURCHASERS: | XXXXXX BROTHERS COMMERCIAL CORPORATION ASIA LIMITED | |
| |
|
|
| By: | /s/ Xxxxxx X. Xxxx | |
|
Name:
Xxxxxx X. Xxxx
Title:
Senior Vice President
|
||
| YA GLOBAL INVESTMENTS, L.P. | ||
| |
|
|
| By: | /s/ Yorkville Advisors, LLC, | |
| Investment Manager | ||
| By: | /s/ Xxxx Xxxxxx | |
|
Name:
Xxxx Xxxxxx
Title:
President and Portfolio Manager
|
||
| COMPANY: | CHINA AUTOMOTIVE SYSTEMS, INC. | |
| |
|
|
| By: | /s/ Xxxxxx Xxxx | |
|
Name:
Xxxxxx Xxxx
Title:
Chairman
|
||
[Escrow
Agreement Signature Page]
| ESCROW AGENT: | US BANK NATIONAL ASSOCIATION | |
| |
|
|
| By: | /s/ Xxxxxxxxx X. Xxxxxxx | |
|
Name:
Xxxxxxxxx X. Xxxxxxx
Title:
Vice President
|
||
ANNEX
A
|
Purchaser
|
TIN
|
Applicable
Percentage
|
|||||
|
Xxxxxx
Brothers Commercial Corporation Asia Limited
|
N/A
|
85.7142858
|
%
|
||||
|
YA
Global Investments, L.P.
|
00-0000000
|
14.2857142
|
%
|
||||
|
Total
|
100.0000000
|
%
|
|||||
ANNEX
B
Escrow
Agent Fees.
|
Acceptance
Fee:
|
$Waived | ||
|
Administration
Fee:
|
$1,250 | ||
|
Transactional
Costs:
|
$Waived | ||
|
Out
of Pocket Expenses:
|
$Waived |
The
Administration Fee is payable upon execution of the escrow documents. In the
event the escrow is not funded, the Administration Fee and all related expenses,
including attorneys’ fees, remain due and payable, and if paid, will not be
refunded.
The
fees
quoted in this schedule apply to services ordinarily rendered in the
administration of an Escrow Account and are subject to reasonable adjustment
based on final review of documents, or when the Escrow Agent is called upon
to
undertake unusual duties or responsibilities, or as changes in law, procedures,
or the cost of doing business demand. Services in addition to and not
contemplated in this Escrow Agreement, including, but not limited to, document
amendments and revisions, non-standard cash and/or investment transactions,
calculations, notices and reports, and legal fees, will be billed as
extraordinary expenses.
Unless
otherwise indicated, the above fees relate to the establishment of one escrow
account. Additional sub-accounts governed by the same Escrow Agreement may
incur
an additional charge. Transaction costs include charges for wire transfers,
checks, internal transfers and securities transactions.
To
help
the government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify and record
information that identifies each person who opens an account. For a
non-individual person such as a business entity, a charity, a Trust or other
legal entity Agent will ask for documentation to verify its formation and
existence as a legal entity. Agent may also ask to see financial statements,
licenses, identification, and authorization documents from individuals claiming
authority to represent the entity or other relevant documentation.
Acknowledgement:
| LBCCA | _________ [initials] | _________ [date] | |||
| YAGI | _________ [initials] | _________ [date] | |||
| Company | _________ [initials] | _________ [date] |
