ESCROW AGREEMENT
Exhibit 10.1 Escrow Agreement, dated as of December 23, 2007.
THIS
ESCROW AGREEMENT (the “Escrow Agreement”) is made as of December 23, 2007, by
and between Kinglake Resources, Inc. (the "KGLK" or "Party A"), a Nevada
corporation; Orient Come Holdings Limited, a British Virgin Islands company
("Party A Subsidiary" or "Orient"); and the Beijing K's Media Advertising
Ltd.
Co., a limited liability company organized under the laws of the PRC ("Chinese
Advertisement Company" or "Party B"); the persons listed on Schedule A hereto
("Party B Shareholders"); and Xxxxxxxx & Xxxx LLP, a law firm ("Escrow
Agent) (each of the parties hereto is a "Party" and, collectively, they are
the
"Parties").
WITNESSETH
WHEREAS,
on or about December 23, 2007, Party A Subsidiary and KGLK entered into an
Acquisition Agreement (the "Acquisition Agreement");
WHEREAS,
on or about December 23, 2007, Party A Subsidiary, KGLK and Party B and the
Party B Shareholders entered into a Share Exchange Agreement (the "Share
Exchange Agreement);
WHEREAS,
on or about December 23, 2007, Party A Subsidiary and Party B entered into
a
Business Cooperation Agreement (the "Business Cooperation"); and
WHEREAS,
as contemplated in the Share Exchange Agreement and Business Cooperation
Agreement, Party A Subsidiary, KGLK, Party B and the Party B Shareholders
intend
that this Escrow Agreement shall delineate the escrow arrangements between
Party
A and the Party B Shareholders.
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and
other
good and valuable consideration, the receipt and sufficiency of which is
hereby
acknowledged, Party A and Party B hereby agree as follows:
1. Pursuant
to the provisions
of the Share Exchange Agreement, the 10,500,000 new issued, but not outstanding
restricted common shares of KGLK (the "Escrowed Shares") will be deposited
or
held in an escrow account with the Escrow Agent.
2. The
10,500,000 new
restricted common shares of KGLK will be distributed to Party B Shareholders
according to the following terms and conditions:
(a) Not
later than 90 days
after the end of the first anniversary of this Agreement, Party A will prepare
and deliver to Party B and Escrow Agent with calculations setting forth in
sufficient detail Party B's "RMB Before Tax Profit" for such one year period
(the "One Year Tax Profit Report"). Such Report shall be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis. Party B shall have 15 days after receipt of such Report (the
"Pretax Profit Objection Statement"), to provide Party A and Escrow Agent,
in
writing, with any objections Party A shall have to the calculations set forth
in
the One Year Tax Profit Report (the "Objections"). In the event that
Party A and Escrow Agent have not received any such Objections within the
objection period, the One Year Tax Profit Report shall be considered final
and
conclusive. The number of shares to be released shall be determined
in accordance with Appendix I.
In
the
event the Escrow Agent and Party A receive one or more Objections within
the
applicable time period and are unable to resolve such Objections within twenty
(20) days from the receipt of such notice, Party A and Party B hereto shall
collectively agree upon an outside independent accounting firm which shall
then
be engaged to compile the information required to be included in the One
Year
Tax Profit Report. Once complied, such Report shall be conclusive,
and any Escrowed Shares due thereunder shall be paid by Escrow Agent to Party
B
on account of the Party B Shareholders with 15 days of the day
hereof. Any costs associated with the engagement of an outside
accounting firm shall be shared equally by Party A and Party B
Shareholders.
(b) Not
later than 90 days
after the end of the second anniversary of this Agreement, Party A will prepare
and deliver to Party B and Escrow Agent with calculations setting forth in
sufficient detail Party B's "RMB Before Tax Profit" for such two year period
(the "Two Year Tax Profit Report"). Such Report shall be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis. Party B shall have 15 days after receipt of such Report (the
"Pretax Profit Objection Statement"), to provide Party A and Escrow Agent,
in
writing, with any objections Party A shall have to the calculations set forth
in
the Two Year Tax Profit Report (the "Objections"). In the event that
Party A and Escrow Agent have not received any such Objections within the
objection period, the Two Year Tax Profit Report shall be considered final
and
conclusive. The number of shares to be released shall be determined
in accordance with Appendix I.
In
the
event the Escrow Agent and Party A receive one or more Objections within
the
applicable time period and are unable to resolve such Objections within twenty
(20) days from the receipt of such notice, Party A and Party B hereto shall
collectively agree upon an outside independent accounting firm which shall
then
be engaged to compile the information required to be included in the Two
Year
Tax Profit Report. Once complied, such Report shall be conclusive,
and any Escrowed Shares due thereunder shall be paid by Escrow Agent to Party
B
on account of the Party B Shareholders with 15 days of the day
hereof. Any costs associated with the engagement of an outside
accounting firm shall be shared equally by Party A and Party B
Shareholders.
(c) Not
later than 90 days
after the end of the third anniversary of this Agreement, Party A will prepare
and deliver to Party B and Escrow Agent with calculations setting forth in
sufficient detail Party B's "RMB Before Tax Profit" for such three year period
(the "Three Year Tax Profit Report"). Such Report shall be prepared
in accordance with generally accepted accounting principles applied on a
consistent basis. Party B shall have 15 days after receipt of such
Report (the "Pretax Profit Objection Statement"), to provide Party A and
Escrow
Agent, in writing, with any objections Party A shall have to the calculations
set forth in the Three Year Tax Profit Report (the "Objections"). In
the event that Party A and Escrow Agent have not received any such Objections
within the objection period, the Three Year Tax Profit Report shall be
considered final and conclusive. The number of shares to be released
shall be determined in accordance with Appendix I.
In
the
event the Escrow Agent and Party A receive one or more Objections within
the
applicable time period and are unable to resolve such Objections within twenty
(20) days from the receipt of such notice, Party A and Party B hereto shall
collectively agree upon an outside independent accounting firm which shall
then
be engaged to compile the information required to be included in the Three
Year
Tax Profit Report. Once complied, such Report shall be conclusive,
and any Escrowed Shares due thereunder shall be paid by Escrow Agent to Party
B
on account of the Party B Shareholders with 15 days of the day
hereof. Any costs associated with the engagement of an outside
accounting firm shall be shared equally by Party A and Party B
Shareholders.
3. Each
Party shall use their
best efforts to make available to the other Party all work papers, and other
financial materials used in preparing the appropriate reports, and make such
information available to such Parties' accountants or representatives at
such
reasonable times and upon reasonable notice at any time during the preparation
(a) by Party A of the applicable report, (b) the review by Party B of the
applicable report, and (c) the resolution by the Parties of any objections
thereto.
4. Appointment
of Escrow
Agent. Parties hereby appoint the Escrow Agent as escrow agent
upon the terms and conditions set forth herein, and the Escrow Agent hereby
accepts such appointment. This Escrow Agreement and the Escrow
Agent’s obligations hereunder shall commence on the date first written
above.
5. Disbursement
Into
Court. At any time, the Escrow Agent, in its sole discretion,
may commence an action in the nature of interpleader in any court it deems
appropriate, to determine ownership or disposition of the Escrowed Shares
or it
may deposit the Escrowed Shares with the clerk of any appropriate court or
it
may retain the Escrowed Shares pending receipt of a final, non-appealable
order
of a court having jurisdiction over all of the parties hereto directing to
whom
and under what circumstances the Escrowed Shares are to be disbursed and
delivered. During the pendency of any such action, the Escrow Agent
may suspend the performance of any of its obligations under this Escrow
Agreement until such dispute or uncertainty shall be resolved to the sole
satisfaction of Escrow Agent or until a successor Escrow Agent shall have
been
appointed (as the case may be). The Escrow Agent shall have no
liability to all Parties or any other person with respect to any such suspension
of performance or disbursement into court, specifically including any liability
or claimed liability that may arise, or be alleged to have arisen, out of
or as
a result of any delay in the disbursement of the Escrowed Shares or any delay
in
or with respect to any other action required or requested of Escrow
Agent.
6. Limitation
of Responsibility
and Liability and Duties of the Escrow Agent. The acceptance
by the Escrow Agent of its duties as such under this Escrow Agreement is
subject
to the following terms and conditions, which all parties to this Escrow
Agreement hereby agree shall govern and control with respect to the rights,
duties, and liabilities of the Escrow Agent:
(a) The
Escrow Agent shall not
be liable for any error in judgment or mistake of law or fact, or for any
action
taken or omitted to be taken by it, or any action suffered by it to be taken
or
omitted by it, in good faith and in the exercise of its own best
judgment. The Escrow Agent shall not be liable for any delay in
delivering the Escrowed Shares to any party to this Escrow Agreement, absent
its
own gross negligence or willful misconduct.
(b) The
Escrow Agent shall not
be bound by any notice or demand, or any waiver, modification, termination
or
rescission of this Escrow Agreement unless evidenced by a writing delivered
to
the Escrow Agent signed by all Parties and, if the duties or rights of the
Escrow Agent are affected by any such modification of or waiver under this
Escrow Agreement unless the Escrow Agent shall have given its prior written
consent thereto.
(c) The
Escrow Agent shall be
indemnified and held harmless by all Parties, upon demand by the Escrow Agent,
from and against any claims, demands, losses, damages, liabilities, costs
and
expenses, including counsel fees and disbursements, (collectively, “Damages”)
suffered by the Escrow Agent in connection with any action, suit or other
proceeding involving any claim, or in connection with any claim or demand,
which
in any way directly or indirectly arises out of or relates to this Escrow
Agreement, the services of the Escrow Agent hereunder, the monies or other
property held by it hereunder or any such Damages. Promptly after the
receipt by the Escrow Agent of notice of any demand or claim or the commencement
of any action, suit or proceeding, the Escrow Agent shall, if a claim in
respect
thereof shall be made against the other parties hereto, notify such parties
thereof in writing; but the failure by the Escrow Agent to give such notice
shall not relieve any party from any liability which such party may have
to the
Escrow Agent hereunder, except to the extent of actual prejudice demonstrated
by
such party. The obligations of all Parties under this subsection
shall survive any termination of this Escrow Agreement and the resignation
or
removal of the Escrow Agent.
(d) The
Escrow Agent may resign
at any time and be discharged from its duties as Escrow Agent hereunder by
its
giving the other parties hereto prior written notice of at least seven (7)
business days. As soon as practicable after its resignation, the
Escrow Agent shall turn over to a successor escrow agent appointed by the
other
parties hereto, jointly, all of the Escrowed Shares held hereunder upon
presentation of the document appointing the new escrow agent and its acceptance
thereof. If no new escrow agent is so appointed within the twenty
(20) day period following the giving of such notice of resignation, the Escrow
Agent may deposit the Escrowed Shares with any court it deems
appropriate.
(e) The
Escrow Agent is
authorized, in its sole discretion, to comply with orders issued or process
entered by any court with respect to the Escrowed Shares, without determination
by the Escrow Agent of such court’s jurisdiction in the matter. If
any portion of the Escrowed Shares 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 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 which it is advised by legal
counsel selected by it is binding upon it without the need for appeal or
other
action; 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.
7. Governing
Law; Jurisdiction,
Venue. This Escrow Agreement, and all proceedings hereunder,
shall be governed by and construed in accordance with the domestic laws of
the
State of Florida without giving effect to any choice or conflict of law
provision or rule (either of the State of Florida or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than
the
State of Florida. Each party to this Escrow Agreement hereby submits
to exclusive jurisdiction of any state or federal court within Broward County,
Florida for purposes of all legal proceedings arising out of or relating
to this
Escrow Agreement or the transactions contemplated hereby. Each party
to this Escrow Agreement hereby irrevocably waives, to the fullest extent
permitted by law, any objections which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any
claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum.
8. Notices. All
notices and communications shall be deemed to have been duly given: at the
time
(a) when received, if deposited in the mail, postage prepaid, addressed as
provided below; (b) when transmission is verified, if telecopied; and (c)
on the
next business day, if timely delivered to a courier service guaranteeing
overnight delivery; provided that the Escrow Agent shall have no obligation
hereunder unless notice is actually received by it;
| If to Party A: | Kinglake Resources, Inc. |
| Xxxxx 000-000 | |
| Xxxxxxx Xxxxxx, Xxxxxxxxx, XX | |
| X0X 0X0, Xxxxxx | |
| Attention: Xxxx Xxx |
| With a copy to: | Xxxxxxxx & Xxxx LLP |
| 000 Xxxx Xxx Xxxx Xxxxxxxxx | |
| Xxxxx 0000 | |
| Xxxx Xxxxxxxxxx, XX 00000 | |
| Attention: Xxxx X. Xxxxxxxxx, Esq. |
| If to Party A Subsidiary: | Orient Come Holdings Limited |
| Xxxx 000, Xxxxx X0 | |
| Xxxxxxxx Xxxxx, Xx. 0 Xxxxx An Street | |
| Beijing, China 100738 | |
| Attention: Xx Xxxx |
| If to Party B: | Beijing K's Media Advertising Ltd. Co. |
| Xxxx 000, Xx. 00 | |
| Xxx Xx Xxxxxx, Xxx Xi Economic Xxxx | |
| Xxxx Xxx Xxxxxxxx, Xxxxxxx, Xxxxx | |
| Attention: Xxx Xxx |
| If to the Escrow Agent: | Xxxxxxxx & Xxxx LLP |
| 000 Xxxx Xxx Xxxx Xxxxxxxxx | |
| Xxxxx 0000 | |
| Xxxx Xxxxxxxxxx, Xxxxxxx 00000 | |
| Attention: Xxxx X. Xxxxxxxxx, Esq. | |
| Facsimile No.: (000) 000-0000 |
| If to Party B Shareholders: | Beijing K's Media Advertising Ltd. Co. |
| Xxxx 000, Xx. 00 | |
| Xxx Xx Xxxxxx, Xxx Xi Economic Xxxx | |
| Xxxx Xxx Xxxxxxxx, Xxxxxxx, Xxxxx | |
| Attention: Xxx Xxxxxx |
Any
party
may change its address by providing written notice of such change to the
other
parties hereto. All notices and communications provided by Buyer
and/or Seller to the Escrow Agent shall be signed by duly authorized persons
of
each.
9. Termination
of Escrow
Agreement. The Escrow Agent’s responsibilities hereunder shall
terminate upon the earliest to occur of the termination of this Escrow Agreement
by mutual consent of Parties, the disbursement of the Escrowed Shares pursuant
to this Agreement hereof, the disbursement of the Escrowed Shares into court
pursuant to this Agreement hereof, and the resignation of the Escrow Agent
pursuant to this Agreement hereof.
10. Entire
Escrow
Agreement. This Escrow Agreement contains the entire
understanding by and among the parties hereto with respect to the subject
matter
hereof; there are no promises, agreements, understandings, representations
or
warranties, other than as herein set forth. No change or modification
of this Escrow Agreement shall be valid or effective unless the same is in
writing and is signed by all of the parties hereto.
11. Counterparts. This
Escrow Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the
same
agreement.
12. Waive
of
Conflicts. Parties hereby acknowledge that Escrow Agent has
represented Party A in connection with certain acquisitions, securities matters,
general corporate counseling, and various other matters, and hereby waive
any
and all conflicts of interest arising as a result of said
representation. Parties further acknowledge that Escrow Agent may
represent Party A in the future, and hereby consent to any such
representation.
13. Party
B Shareholders
appoint Xxx Xxxxxx (the “Designee”) to serve as their authorized representative
and give Designee the authority to act on their behalf under the terms of
this
Agreement.
IN
WITNESS WHEREOF, the parties hereto have caused their respective hands to
be set
hereto with the intention of being bound effective in all respects as of
the
date first written above.
|
Kinglake
Resources, Inc.
|
|||
|
|
By:
|
/s/ Xxxx Xxx | |
| Name Xxxx Xxx | |||
| Its President | |||
| Orient Come Holdings Limited | |||
|
|
By:
|
/s/ Xx Xxxx | |
| Name Xx Xxxx | |||
| Its President | |||
| Beijing K's Media Advertising Ltd. Co. | |||
|
|
By:
|
/s/ Kun (Xxxxx) Wei | |
| Name Kun (Xxxxx) Wei | |||
| Its President | |||
Party
B's
Shareholders
/s/
Xxx
Xxxxxx
Xxx
Xxxxxx
/s/
Xxxx
Xx
Xxxx
Xx
/s/
Xxx
Xxxxx
Xxx
Xxxxx
/s/
XxXxxx
Xx
XxXxxx
Xx
/s/
Qing Ya
Wang
QingYa
Wang
Xxxxxxxx
& Xxxx LLP
By:
/s/ Xxxx X.
Maysohn
Xxxx
X. Xxxxxxxxx
SCHEDULE
A
List
of Shareholders
Xxx
Xxxxxx
Xxxx
Xx
Xxx
Xxxxx
XxXxxx
Xx
QingYa
Wang
APPENDIX
I
Release
Formula
|
KTV
Financial Projection
|
||||
|
In
US Dollar
|
Year
1
|
Year
2
|
Year
3
|
|
|
Cash
Inflow
|
||||
|
Signed
Sales
|
2,118,789
|
15,980,447
|
36,929,605
|
|
|
90%
of Signed Sales
|
1,906,911
|
14,382,403
|
33,236,645
|
|
|
50%
of Signed Sales
|
1,059,395
|
7,990,224
|
18,464,803
|
|
|
Release
Formula:
|
||||
|
Notes:
|
||||
|
1.
KTV Management Team refers to: Zhuang, Yan; Xx, Xxxx; Xxxxx, Xxx;
Xx,
XxXxxx (4 persons). Each of them will receive 25% of total released
shares.
|
||||
|
2.
KTV Management Team are entitled to have 75% of the Escrow Share,
that is
10,500,000 X 75% = 7,875,000. Each year, they can have up to 2,625,000
shares. Release Formula (1) apply to KTV Management Team Release
Formula
(1) applies to KTV Management Team
|
||||
|
3.
Wang, QingYa (1 person) is entitled to have 25% of the Escrow Share,
that
is 10,500,000 X 25% = 2,625,000. Each year, he can have up to
875,000.
Release
Formula (2) applies to him.
|
||||
|
Release
Formula (1):
|
||||
|
Year
1:
|
||||
|
If
K's Media achieved >=90% of Year 1 Signed Sales, that is
>=US$1,900,000, release 2,625,000 to KTV Management
Team
|
||||
|
If
K's Media achieved <50% of Year 1 Signed Sales, that is <
$1,059,000, none of the escrowed shares will be released. Rather
these
shares will be escrowed by the Escrow Agent instead of
cancellation.
|
||||
|
If
K's Media achieved in between, a proportionate number of shares
will be
released using the following equation: Actual Signed Sales /
$1,900,000 X 2,625,000
|
||||
|
Year
2:
|
||||
|
If
K's Media achieved >=90% of Year 2 Signed Sales, that is
>=US$14,380,000, release 2,625,000 to KTV Management
Team
|
||||
|
If
K's Media didn't achieve > 50% in Year 1, but achieved >=90% in Year
2, we will release Year 1's escrowed shares using the following
equation:
|
||||
|
Actual
Signed Sales in Year 1 / $1,900,000 X 2,625,000
|
||||
|
If
K's Media achieved <50% of Year 2 Signed Sales, that is <
$7,990,000, none of the escrowed shares will be released.
|
||||
|
If
K's Media achieved in between, a proportionate number of shares
will be
released using the following equation:
|
||||
|
Actual
Signed Sales/ $14,380,000 X 2,625,000
|
||||
|
Year
3:
|
||||
|
If
K's Media achieved >=90% of Year 3 Signed Sales, that is
>=US$33,230,000, release 2,625,000 to KTV Management
Team
|
||||
|
If
K's Media achieved <50% of Year 3 Signed Sales, that is <
$18,460,000, none of the escrowed shares will be released.
|
||||
|
If
K's Media achieved in between, a proportionate number of shares
will be
released using the following equation:
|
||||
|
Actual
Signed Sales / $33,230,000 X 2,625,000
|
||||
|
All
un-released shares will be cancelled then.
|
||||
|
Release
Formula (2):
|
||||
|
Release
date will be same as Release Formula (1)
|
||||
|
Release
standard as follows:
|
||||
|
eg:
Year 1, if Wang, QingYa signed up less than 300 KTV club for the
"KTV
Advertisement Placing Agreement" with K's Media ("AD Agreement"),
we will
cancel 60% of his entitled shares, which is 10,500,000 X 25%=2,625,000
X
60% = 1,575,000 shares.
|
||||
|
DATE
|
Condition
|
Total
# of Shares=2,625,000
|
||
|
Year
1
|
>600
|
release
60%
|
||
|
300-600
|
Pro
Rata
|
|||
|
<300
|
Cancel
60%
|
|||
|
Year
2
|
>600
|
Release
20%
|
||
|
300-600
|
Pro
Rata
|
|||
|
<300
|
Cancel
20%
|
|||
|
Year
3
|
>600
|
Release
20%
|
||
|
300-600
|
Pro
Rata
|
|||
|
<300
|
Cancel
20%
|
|||
