MAKE GOOD ESCROW AGREEMENT
Exhibit
10.3
This Make Good Escrow Agreement (the
"Make Good Agreement"),
dated effective as of August 26, 2008, is entered into by and among China Valves
Technology, Inc. (f/k/a Intercontinental Resources, Inc.), a Nevada corporation
(the "Company"), the
Investors (as defined below), Xxx Xx (the "Make Good Pledgor"), Xxxxx
Xxxxxx Carret & Co., LLC as Investor agent (“Investor Agent”) and Escrow,
LLC, as escrow agent ("Escrow
Agent").
WHEREAS, each of the investors in the
private offering of securities of the Company (the "Investors") has entered into
a Securities Purchase Agreement, dated the date of this Agreement (the "Securities Purchase
Agreement"), evidencing their participation in the Company's private
offering (the "Offering") of
securities. As an inducement to the Investors to participate in the
Offering and as set forth in the Securities Purchase Agreement, the Make Good
Pledgor has agreed to place certain shares of the Company’s common stock, par
value $0.001 per share (the “Common Stock”) owned by them
into escrow for the benefit of the Investors in the event the Company fails to
satisfy certain financial thresholds.
WHEREAS, pursuant to the requirements
of the Securities Purchase Agreement, the Company and Make Good Pledgor have
agreed to establish an escrow on the terms and conditions set forth in this Make
Good Agreement;
WHEREAS, the Escrow Agent has agreed to
act as escrow agent pursuant to the terms and conditions of this Make Good
Agreement; and
WHEREAS, all capitalized terms used but
not defined herein which are defined in the Securities Purchase Agreement shall
have the respective meanings given to such terms in the Securities Purchase
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 Make Good Pledgor and the Company hereby appoint Escrow Agent
to act as Escrow Agent in accordance with the terms and conditions set forth in
this Make Good Agreement, and Escrow Agent hereby accepts such appointment and
agrees to act as Escrow Agent in accordance with such terms and
conditions.
2. Establishment of
Escrow. Within three Trading Days following the Closing, the
Make Good Pledgor shall deliver, or cause to be delivered, to the Escrow Agent
certificates evidencing an aggregate of 25,166,064 shares of the Company’s
Common Stock, as equitably adjusted for any stock splits, stock combinations,
stock dividends or similar transactions (the "Escrow Shares"), along with
stock powers executed in blank (or such other signed instrument of transfer
acceptable to the Company’s Transfer Agent).
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As used
in this Make Good Agreement, “Transfer Agent” means PacWest
Transfer LLC, or such other entity hereafter retained by the Company as its
stock transfer agent as specified in a writing from the Company to the Escrow
Agent. The Make Good Pledgors understand and agree that the
Investors’ right to receive 2008 Make Good Shares, 2009 Make Good Shares and
2010 Make Good Shares (each as defined below) pursuant to this Make Good
Agreement shall continue to run to the benefit of each Investor even if such
Investor shall have transferred or sold all or any portion of the Shares it
acquired under the Securities Purchase Agreement, and that each Investor shall
have the right to assign its rights to receive all or any such 2008 Make Good
Shares, 2009 Make Good Shares and 2010 Make Good Shares to other Persons in
conjunction with negotiated sales or transfers of any of its
Shares. The Make Good Pledgor hereby irrevocably agrees that, other
than in accordance with this Make Good Agreement, the Make Good Pledgor will not
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, or
announce the offering of any of the Escrow Shares (including any securities
convertible into, or exchangeable for, or representing the rights to receive
Escrow Shares). In furtherance thereof, the Company will (x) place a
stop order on all Escrow Shares which shall expire on the date the Escrow Shares
are delivered to the Investors or returned to the Make Good Pledgor, (y) notify
the Transfer Agent in writing of the stop order and the restrictions on such
Escrow Shares under this Make Good Agreement and direct the Transfer Agent not
to process any attempts by any Make Good Pledgor to resell or transfer any
Escrow Shares before the date the Escrow Shares that should be delivered to the
Investors are delivered to the Investors or returned to the Make Good Pledgor,
or otherwise in violation of this Make Good Agreement. The Company
shall notify the Investors as soon as the 2008 Make Good Shares, 2009 Make Good
Shares and 2010 Make Good Shares have been deposited with the Escrow
Agent.
3. Representations of Make Good
Pledgor. The Make Good Pledgor (as to itself and its Escrowed
Shares) hereby represents and warrants to the Investors as follows:
(i) All
of the Escrow Shares are validly issued, fully paid and nonassessable shares of
the Company, and free and clear of all Liens. Upon any transfer of
Escrow Shares to Investors hereunder, Investors will receive full right, title
and authority to such shares as holders of Common Stock of the Company free and
clear of all liens other than those imposed by US Federal Securities
laws.
(ii) Performance of this Make
Good 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 upon any of the
properties or assets of Make Good Pledgor pursuant to the terms of any
indenture, mortgage, deed of trust or other agreement or instrument binding upon
Make Good Pledgor or such properties or assets, other than such breaches,
defaults or Liens which would not have a material adverse effect taken as a
whole.
(iii) The
Make Good Pledgor has carefully considered and understands its obligations and
rights under this Make Good Agreement, and in furtherance thereof (x) has
consulted with its legal and other advisors with respect thereto and (y) hereby
forever waives and agrees that it may not assert any equitable defenses in any
Proceeding involving the Escrow Shares.
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4.
Disbursement of Escrow Shares.
a. In
the event that the After Tax Net Income (as defined below) reported in the
Annual Report of the Company for the fiscal year ending December 31, 2008, as
filed with the Commission on Form 10-K (or such other form appropriate for such
purpose as promulgated by the Commission) (the “2008 Annual Report”) is less
than $10,500,000 (the “2008
Guaranteed ATNI”), the Escrow Agent (on behalf of the Make Good Pledgor)
will transfer the 2008 Make Good Shares to the Investors on a pro rata basis
(determined by dividing each Investor’s Investment Amount by the aggregate of
all Investment Amounts delivered to the Company by the Investors under the
Securities Purchase Agreement) as specified in Exhibit A to this
Agreement for no consideration other than payment of their respective Investment
Amount paid to the Company at Closing and without any need for action or notice
by or on behalf of any Investor. The “2008 Make Good Shares” means
8,388,688 shares of Common Stock, as equitably adjusted for any stock splits,
stock combinations, stock dividends or similar transactions.
In the
event that either (i) the Earnings Per Share (as defined below) reported in the
Annual Report of the Company for the fiscal year ending December 31, 2009, as
filed with the Commission on Form 10-K (or such other form appropriate for such
purpose as promulgated by the Commission) (the “2009 Annual Report”) is less
than $0.369 per share on a fully diluted basis (as equitably adjusted for any
stock splits, stock combinations, stock dividends or similar transactions) (the
“2009 Guaranteed EPS”)
or (ii) the After Tax Net Income reported in the 2009 Annual Report is less than
$23,000,000 (the “2009
Guaranteed ATNI”), the Escrow Agent (on behalf of the Make Good Pledgor)
will transfer the 2009 Make Good Shares to the Investors on a pro rata basis
(determined by dividing each Investor’s Investment Amount by the aggregate of
all Investment Amounts delivered to the Company by the Investors under the
Securities Purchase Agreement) as specified in Exhibit A to this
Agreement for no consideration other than payment of their respective Investment
Amount paid to the Company at Closing and without any need for action or notice
by or on behalf of any Investor. The “2009 Make Good Shares” means
8,388,688 shares of Common Stock, as equitably adjusted for any stock splits,
stock combinations, stock dividends or similar
transactions.
In the
event that either (i) the Earnings Per Share reported in the Annual Report of
the Company for the fiscal year ending December 31, 2010, as filed with the
Commission on Form 10-K (or such other form appropriate for such purpose as
promulgated by the Commission) (the “2010 Annual Report”) is less
than $0.497 per share on a fully diluted basis (as equitably adjusted for any
stock splits, stock combinations, stock dividends or similar transactions) (the
“2010 Guaranteed EPS”)
or (ii) the After Tax Net Income reported in the 2010 Annual Report is less than
$31,000,000 (the “2010
Guaranteed ATNI”), the Escrow Agent (on behalf of the Make Good Pledgor)
will transfer the 2010 Make Good Shares to the Investors on a pro rata basis
(determined by dividing each Investor’s Investment Amount by the aggregate of
all Investment Amounts delivered to the Company by the Investors under the
Securities Purchase Agreement) as specified in Exhibit A to this
Agreement for no consideration other than payment of their respective Investment
Amount paid to the Company at Closing and without any need for action or notice
by or on behalf of any Investor. The “2010 Make Good Shares” means
8,388,688 shares of Common Stock, as equitably adjusted for any stock splits,
stock combinations, stock dividends or similar
transactions.
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For
purposes hereof, “After Tax Net
Income” shall mean the Company’s operating income after taxes for the
fiscal year ending December 31, 2008, December 31, 2009, or December 31, 2010
(as applicable) in each case determined in accordance with GAAP as reported in
the 2008 Annual Report, 2009 Annual Report, or 2010 Annual Report (as
applicable). Notwithstanding the foregoing or anything else to the
contrary herein, for purposes of determining whether or not the 2008 Guaranteed
ATNI, 2009 Guaranteed ATNI, 2009 Guaranteed EPS, 2010 Guaranteed ATNI and 2010
Guaranteed EPS have been met, the release of any of (i) the 2008 Make Good
Shares, 2009 Make Good Shares and/or 2010 Make Good Shares to the Make Good
Pledgor as a result of the operation of this Section 4 (ii) and any expense
recorded under GAAP as the result of that certain Earn-In Agreement, dated April
10, 2008, between Mr. Siping Fang and Mr. Xxx Xx, shall not be deemed
to be an expense, charge, or any other deduction from revenues even though GAAP
may require contrary treatment or the Annual Report for the respective fiscal
years filed with the Commission by the Company may report
otherwise. Other than as set forth in this Section 4, no other
expenses of the Company shall be excluded in determining whether any of the 2008
Guaranteed ATNI, 2009 Guaranteed ATNI, 2009 Guaranteed EPS, 2010 Guaranteed ATNI
and 2010 Guaranteed EPS have been achieved. Further, any
non-operating income of the Company, including, but not limited to, income from
asset sales, tax credits, and rebates shall not be included in determining
whether any of the 2008 Guaranteed ATNI, 2009 Guaranteed ATNI, 2009 Guaranteed
EPS, 2010 Guaranteed ATNI and 2010 Guaranteed EPS have been
achieved. For purposes hereof, “Earnings Per Share” shall mean
the Company’s After Tax Net Income (for the relevant fiscal year) divided by the
weighted average number of shares of Common Stock of the Company outstanding
during the calculation period, calculated on a fully diluted basis.
If prior
to the second anniversary of the filing of either of the 2008 Annual Report,
2009 Annual Report, or the 2010 Annual Report (as applicable), the Company or
their auditors report or recognize that the financial statements contained in
such report are subject to amendment or restatement such that the Company would
recognize or report adjusted After Tax Net Income of less than either of the
2009 Guarantee ATNI or the 2010 Guaranteed ATNI (as applicable) or Earnings Per
Share of less than either the 2009 Guaranteed EPS or 2010 Guaranteed EPS, then
notwithstanding any prior return of 2008 Make Good Shares, 2009 Make Good
Shares, or 2010 Make Good Shares to the Make Good Pledgor, the Make Good Pledgor
will, within 10 Business Days following the earlier of the filing of such
amendment or restatement or recognition, deliver the relevant 2008 Make Good
Shares, 2009 Make Good Shares, or 2010 Make Good Shares to the Investors without
any further action on the part of the Investors.
In the
event that the After Tax Net Income reported in the 2008 Annual Report is equal
to or greater than the 2008 Guaranteed ATNI, no transfer of the 2008 Make Good
Shares shall be required by the Make Good Pledgor to the Investors under this
Section and such 2008 Make Good Shares shall be returned to the Make Good
Pledgor in accordance with this Make Good Agreement.
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In the
event that the After Tax Net Income reported in the 2009 Annual Report is equal
to or greater than the 2009 Guaranteed ATNI and Earnings Per Share reported in
the 2009 Annual Report is equal to or greater than the 2009 Guaranteed EPS, no
transfer of the 2009 Make Good Shares shall be required by the Make Good Pledgor
to the Investors under this Section and such 2009 Make Good Shares shall be
returned to the Make Good Pledgor in accordance with this Make Good
Agreement. In the event that the After Tax Net Income reported in the
2010 Annual Report is equal to or greater than the 2010 Guaranteed ATNI and
Earnings Per Share reported in the 2010 Annual Report is equal to or greater
than the 2010 Guaranteed EPS, no transfer of the 2010 Make Good Shares shall be
required by the Make Good Pledgor to the Investors under this Section and such
2010 Make Good Shares shall be returned to the Make Good Pledgor in accordance
with this Make Good Agreement, subject to return as provided in the immediately
preceding sentence.
Any
transfer of the 2008 Make Good Shares, 2009 Make Good Shares and the 2010 Make
Good Shares under this Section shall be made to the Investors or the Make Good
Pledgor, as applicable, within 10 Business Days after the date which the 2008
Annual report, 2009 Annual Report, or 2010 Annual Report, as applicable, is
filed with the Commission and otherwise in accordance with this Make Good
Agreement subject to return as provided in the immediately preceding paragraph
and, in the event that any of the 2008 Make Good Shares, 2009 Make Good Shares,
or 2010 Make Good Shares are required to be distributed to the Investors in
accordance with the terms of this Agreement, the Escrow Agent will deliver such
shares to the Investors in accordance with Exhibit
A. The Investor Agent will deliver to the Escrow Agent (with a
copy to the Company) a copy of the 2008 Annual Report, 2009 Annual Report and
2010 Annual Report, together with the calculation of whether the 2008 Guaranteed
ATNI, 2009 Guaranteed EPS, 2009 Guaranteed ATNI, 2010 Guaranteed EPS, or 2010
Guaranteed ATNI (as applicable) has been achieved. Escrow Agent need
only rely on such letters from Investor Agent and will disregard any contrary or
further calculations or instructions in such regard delivered by or on behalf of
the Company.
b. Pursuant
to Section 4(a), if the Investor Agent delivers a notice to the Escrow Agent
that the Escrow Shares are to be transferred to the Investors, then the Escrow
Agent shall immediately forward either the 2008 Make Good Shares, 2009 Make Good
Shares, or 2010 Make Good Shares, as the case may be, to the Company’s Transfer
Agent for reissuance to the Investors in an amount to each Investor as set forth
on Exhibit A
attached hereto and otherwise in accordance with this Make Good Agreement. The
Company covenants and agrees that upon any transfer of 2008 Make Good Shares,
2009 Make Good Shares, or 2010 Make Good Shares to the Investors in accordance
with this Make Good Agreement, the Company shall promptly instruct its Transfer
Agent to reissue such 2008 Make Good Shares, 2009 Make Good Shares, or 2010 Make
Good Shares in the applicable Investor’s name and deliver the same, or cause the
same to be delivered as directed by such Investor in an amount to each Investor
as set forth on Exhibit A attached
hereto. If the Company does not promptly provide such instructions to
the Transfer Agent of the Company, then the Investor Agent is hereby irrevocably
authorized and directed by the Company to give such re-issuance instruction to
the Transfer Agent of the Company. If a notice from the Investor
Agent pursuant to Section 4(a) indicates that the Escrow Shares are to be
returned to the Make Good Pledgor, then the Escrow Agent will promptly deliver
either the 2008 Make Good Shares, 2009 Make Good Shares, or 2010 Make Good
Shares, as the case may be, to the Make Good Pledgor in accordance with
instructions provided by the Make Good Pledgor at such time.
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c. The
Company and Make Good Pledgor covenant and agree to provide the Escrow Agent
with certified tax identification numbers by furnishing appropriate forms W-9 or
W-8 and such other forms and documents that the Escrow Agent may request,
including appropriate W-9 or W-8 forms for each Investor. The
Company, Make Good Pledgor and the Investors understand that if such tax
reporting documentation is not provided and certified to the Escrow Agent, the
Escrow Agent may be required by the Internal Revenue Code of 1986, as amended,
and the Regulations promulgated thereunder, to withhold a portion of any
interest or other income earned on the investment of the Escrow
Property.
5. Notice of
Filings. The Company agrees to promptly provide the Investors
with written notice of the filing with the Commission of any financial
statements or reports referenced herein.
6. Escrow
Shares. If any Escrow Shares are deliverable to the Investors
in accordance with this Make Good Agreement, (i) Make Good Pledgor covenants and
agrees to execute all such instruments of transfer (including stock powers and
assignment documents) as are customarily executed to evidence and consummate the
transfer of the Escrow Shares from Make Good Pledgor to the Investors, to the
extent not done so in accordance with Section 2, and (ii) following its receipt
of the documents referenced in Section 6(i), the Company and Escrow Agent
covenant and agree to cooperate with the Transfer Agent so that the Transfer
Agent may promptly reissue such Escrow Shares in the applicable Investor’s name
and delivers the same as provided herein or otherwise directed in writing by the
applicable Investors. Until such time as (if at all) the Escrow
Shares are required to be delivered pursuant to the Securities Purchase
Agreement and in accordance with this Make Good Agreement, (i) any dividends
payable in respect of the Escrow Shares and all voting rights applicable to the
Escrow Shares shall be retained by Make Good Pledgor and (ii) should the Escrow
Agent receive dividends or voting materials, such items shall not be held by the
Escrow Agent, but shall be passed immediately on to the Make Good Pledgor and
shall not be invested or held for any time longer than is needed to effectively
re-route such items to the Make Good Pledgor. In the event that
the Escrow Agent receives a communication requiring the conversion
of the Escrow Shares to cash or the exchange of the Escrow Shares for that
of an acquiring company, the Escrow Agent shall solicit and follow the
written instructions of the Make Good Pledgor; provided, that the
cash or exchanged shares are instructed to be redeposited into the Escrow
Account. Make Good Pledgor shall be responsible for all taxes
resulting from any such conversion or exchange.
Assuming
the Make Good Pledgor provides good and valid title to the Escrow Shares to be
transferred and delivered on behalf of the Make Good Pledgor to the Investors
hereunder, free and clear of all liens, encumbrances, equities or claims, the
Escrow Agent will ensure that upon delivery of the Escrow Shares, good and valid
title to the Escrow Shares, free and clear of all liens, encumbrances, equities
or claims will pass to the Investors. The Escrow Agent shall
not take any action which could impair Investors’ rights in the Escrow
Shares. The Escrow Agent shall not sell, transfer, assign or
otherwise dispose of (by operation of law or otherwise) or grant any option with
respect to any Escrow Shares prior to the termination of this
Agreement.
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7.
Interpleader. Should any controversy arise among the parties
hereto with respect to this Make Good Agreement or with respect to the right to
receive the Escrow Shares, Escrow Agent and/or the Investor Agent shall have the
right to consult and hire counsel and/or to institute an appropriate
interpleader action to determine the rights of the parties. Escrow Agent and/or
the Investor Agent are also each hereby authorized to institute an appropriate
interpleader action upon receipt of a written letter of direction executed by
the parties so directing either Escrow Agent or the Investor Agent. If Escrow
Agent or the Investor 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 7
shall be filed in any court of competent jurisdiction in the State of New York,
and the Escrow Shares in dispute shall be deposited with the court and in such
event Escrow Agent and the Investor Agent shall be relieved of and discharged
from any and all obligations and liabilities under and pursuant to this Make
Good Agreement with respect to the Escrow Shares and any other obligations
hereunder.
8. Exculpation and Indemnification of
Escrow Agent and the Investor 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 Make Good 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 Make Good Agreement and instructions to Escrow Agent pursuant to the terms
of this Make Good 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. The Investor Agent’s
sole obligation under this Make Good Agreement is to provide written instruction
to Escrow Agent (following such time as the Company files certain periodic
financial reports as specified in Section 4 hereof) directing the distribution
of the Escrow Shares. The Investor Agent will provide such written
instructions upon review of the relevant After Tax Net Income and Earnings Per
Share amount reported in such periodic financial reports as specified in Section
4 hereof. The Investor Agent is not charged with any obligation to
conduct any investigation into the financial reports or make any other
investigation related thereto. In the event of any actual or alleged
mistake or fraud of the Company, its auditors or any other person in connection
with such financial reports of the Company, the Investor Agent shall have no
obligation or liability to any party hereunder.
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b. Neither
the Escrow Agent nor Investor Agent will be liable for any action taken or
omitted by it, or any action suffered by it to be taken or omitted, absent gross
negligence or willful misconduct. The Escrow Agent and Investor Agent
may each 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 or Investor Agent, as applicable), 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 or Investor Agent, as applicable, to be genuine and to be signed
or presented by the proper person or persons. The duties and
responsibilities of the Escrow Agent and Investor Agent, as the case may be,
hereunder shall be determined solely by the express provisions of this Make Good
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 New York upon fiduciaries. NEITHER THE ESCROW AGENT NOR
INVESTOR AGENT SHALL BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (I) DAMAGES,
LOSSES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN
DAMAGES, LOSSES OR EXPENSES WHICH HAVE BEEN FINALLY ADJUDICATED TO HAVE DIRECTLY
RESULTED FROM THE ESCROW AGENT’S OR INVESTOR AGENT'S, AS THE CASE MAY BE, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, OR (II) SPECIAL, INDIRECT OR CONSEQUENTIAL
DAMAGES OR LOSSES OF ANY KIND WHATSOEVER (INCLUDING, WITHOUT LIMITATION, LOST
PROFITS), EVEN IF THE ESCROW AGENT OR INVESTOR AGENT, AS APPLICABLE, HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM
OF ACTION.
c. The
Company and each Make Good Pledgor each hereby, jointly and severally, indemnify
and hold harmless each of Escrow Agent, the Investor Agent and any of their
principals, partners, agents, employees and affiliates from and against any
expenses, including reasonable attorneys' fees and disbursements, damages or
losses suffered by Escrow Agent or the Investor Agent in connection with any
claim or demand, which, in any way, directly or indirectly, arises out of or
relates to this Make Good Agreement or the services of Escrow Agent or the
Investor Agent hereunder; except, that if Escrow Agent or the Investor Agent is
guilty of willful misconduct or gross negligence under this Make Good Agreement,
then Escrow Agent or the Investor Agent, as the case may be, will bear all
losses, damages and expenses arising as a result of its own willful misconduct
or gross negligence. Promptly after the receipt by Escrow Agent or
the Investor 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 or
the Investor Agent, as the case may be, 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 8 shall
survive the termination of this Make Good Agreement, and the resignation or
removal of the Escrow Agent.
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9. Compensation of Escrow
Agent. Escrow Agent shall be entitled to compensation for its
services as stated in the fee schedule attached hereto as Exhibit B, which
compensation shall be paid by the Company. The fee agreed upon for the services
rendered hereunder is intended as full compensation for Escrow Agent's services
as contemplated by this Make Good Agreement; provided, however, that in the
event that Escrow Agent renders any material service not contemplated in this
Make Good Agreement, or there is any assignment of interest in the subject
matter of this Make Good Agreement, or any material modification hereof, or if
any material controversy arises hereunder, or Escrow Agent is made a party to
any litigation pertaining to this Make Good Agreement, or the subject matter
hereof, then Escrow Agent shall be reasonably compensated by the Company for
such extraordinary services and reimbursed for all costs and expenses, including
reasonable attorney's fees, occasioned by any delay, controversy, litigation or
event, and the same shall be recoverable from the Company. Prior to
incurring any costs and/or expenses in connection with the foregoing sentence,
Escrow Agent shall be required to provide written notice to the Company of such
costs and/or expenses and the relevancy thereof and Escrow Agent shall not be
permitted to incur any such costs and/or expenses which are not related to
litigation prior to receiving written approval from the Company, which approval
shall not be unreasonably withheld.
10. Resignation of Escrow
Agent. At any time, upon ten (10) Business Days' written
notice to the Company and the Investors, 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-Business 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 shall deposit the
Escrow Shares as directed by the Investor Agent with the understanding that such
Escrow Shares will continue to be subject to the provisions of this Make Good
Agreement.
11. Records. Escrow
Agent shall maintain accurate records of all transactions
hereunder. Promptly after the termination of this Make Good 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 and at the requesting party’s
expense.
12. Notice. All
notices, communications and instructions required or desired to be given under
this Make Good 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 addresses listed on the signature pages hereto.
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13. Execution in
Counterparts. This Make Good 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.
14. Assignment and
Modification. This Make Good Agreement and the rights and
obligations hereunder of the Company may be assigned by the Company only
following the prior written consent of Investors holding a majority of the
Shares issued at Closing under the Securities Purchase
Agreement. This Make Good Agreement and the rights and obligations
hereunder of the Escrow Agent may be assigned by the Escrow Agent only with the
prior consent of the Company and the Investor Agent. This Make Good
Agreement and the rights and obligations hereunder of the Make Good Pledgor may
not be assigned by any Make Good Pledgor. Subject to the requirements
under federal and state securities laws, an Investor may assign its rights under
this Make Good Agreement without any consent from any other party. This Make
Good Agreement may not be changed orally or modified, amended or supplemented
without an express written agreement executed by the Escrow Agent, the Company,
the Make Good Pledgor and the Investor Agent (upon consent of the Investors
holding a majority of the Shares issued at Closing under the Securities Purchase
Agreement. This Make Good Agreement is binding upon and intended to be for the
sole benefit of the parties hereto and their respective successors, heirs and
permitted assigns, and none of the provisions of this Make Good Agreement are
intended to be, nor shall they be construed to be, for the benefit of any third
person. 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 Make Good
Agreement.
15. Applicable
Law. This Make Good Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York. The
representations and warranties contained in this Make Good Agreement shall
survive the execution and delivery hereof and any investigations made by any
party. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Make Good Agreement shall be commenced exclusively in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the “New York
Courts”). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith, and hereby irrevocably waives, and
agrees not to assert in any such proceeding, any claim that it is not personally
subject to the jurisdiction of any such New York Court, or that such proceeding
has been commenced in an improper or inconvenient forum. Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Make Good Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by
law.
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16. Headings. The
headings contained in this Make Good Agreement are for convenience of reference
only and shall not affect the construction of this Make Good
Agreement.
17. 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 Make Good 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.
18. Merger or
Consolidation. Any corporation or association into which the
Escrow Agent may be converted or merged, or with which it may be consolidated,
or to which it may sell or transfer all or substantially all of its corporate
trust business and assets as a whole or substantially as a whole, or any
corporation or association resulting from any such conversion, sale, merger,
consolidation or transfer to which the Escrow Agent is a party, shall be and
become the successor escrow agent under this Make Good Agreement and shall have
and succeed to the rights, powers, duties, immunities and privileges as its
predecessor, without the execution or filing of any instrument or paper or the
performance of any further act.
[REMAINDER
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IN WITNESS WHEREOF, the parties have
duly executed this Make Good Agreement as of the date set forth opposite their
respective names.
COMPANY:
By:_______________________________
Name:
Siping Fang
Title: Chief
Executive Officer
Address:
Xx. 00 Xxxx Xxxxxxx Xxxx
Xxxxxxx, Xxxxx
Xxxxxxxx
China 475002
Facsimile: 00-000-0000000
Attn.: Siping
Fang
MAKE GOOD
PLEDGOR:
Xxx
Xx
___________________________________
Address:
0000 Xxxxxxxxxxx Xxx
Xxxxxx, XX
00000
Facsimile: (000)
000-0000
Attn.:
Xxx Xx
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK -
SIGNATURE
PAGE FOR OTHER PARTIES FOLLOWS]
[Signature
page to Make Good Escrow Agreement]
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ESCROW AGENT:
ESCROW, LLC, as
Escrow Agent
By:_______________________________
Name:
Title:
Address:
Facsimile: (000)
000-0000
Attn.:
INVESTOR
AGENT
XXXXX
XXXXXX CARRET & CO., LLC, as Investor Agent
By:_______________________________
Name:
Title:
Address:
Facsimile:
Attn.:
INVESTORS:
By:_______________________________
Name:
Title:
Address:
Facsimile:
Attn.:
[Signature
page to Make Good Escrow Agreement]
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