MAKE GOOD ESCROW AGREEMENT
This
Make
Good Escrow Agreement (this “Agreement”), dated as of September 7, 2007, is
entered into by and among Sino Gas International Holdings, Inc., a Utah
corporation (the “Company”), each of the parties listed below who are Investors
in the private offering of securities of the Company under the SPA (as
hereinafter defined), and Manufacturers and Traders Trust Company (the “Escrow
Agent”).
WHEREAS,
each of the Investors are simultaneously entering into a Securities Purchase
Agreement, dated as of the date hereof (the “SPA”), evidencing their
participation in the Company’s private offering of securities contemplated under
the SPA (the “Offering”);
WHEREAS,
as an inducement to the Investors to participate in the Offering and as set
forth in the SPA, the Company has agreed to place the “Escrow Shares” (as
hereinafter defined) into escrow for the benefit of the Investors in the event
the Company fails to satisfy the conditions set forth in Section 4.12 of the
SPA;
WHEREAS,
pursuant to the requirements of the SPA, the Company and the Investors have
agreed to establish an escrow on the terms and conditions set forth in this
Agreement;
WHEREAS,
the Escrow Agent has agreed to act as escrow agent pursuant to the terms and
conditions of this Agreement; and
WHEREAS,
all capitalized terms used but not defined herein shall have the respective
meanings assigned them in the SPA.
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
Investors and the Company hereby appoint Manufacturers
and Traders Trust Company as
Escrow
Agent to act in accordance with the terms and conditions set forth in this
Agreement, and Escrow Agent hereby accepts such appointment and agrees to act
in
accordance with such terms and conditions.
2. Establishment
of Escrow.
Upon the
execution of this Agreement, the Company shall deliver to the Escrow Agent
stock
certificates evidencing in the aggregate 1,500,000 shares (the “Escrow Shares”)
of the Company’s Common Stock registered in the names of the Investors as set
forth on Exhibit
B
attached
hereto.
3. Representations
of the Company.
The
Company hereby represents and warrants to the Investors as follows:
(i) The
Escrow Shares are duly authorized and validly issued, and if and when
distributed to the Investors hereunder, will be fully paid and nonassessable
shares of the Company, and free and clear of all Liens, other than those
existing pursuant to federal securities laws.
(ii) Except
as
set forth in Schedule 3.1 to the Purchase Agreement, the execution, delivery
and
performance of this Agreement and other instruments contemplated herein will
not
(1) conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (2) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, result
in the creation of any Lien upon any of the properties or assets of the Company
or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company
or
any Subsidiary is a party or by which any property or asset of the Company
or
any Subsidiary is bound or affected, or (3) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction
of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations and the
rules and regulations of any self regulatory organization (including any Trading
Market) to which the Company or its securities is subject), or by which any
property or asset of the Company or a Subsidiary is bound or affected and which
the Escrow Shares may be bound except in the case of each of clauses (1), (2)
and (3), such as could not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect.
(iii) This
Agreement constitutes the legal obligation of the Company, enforceable against
it in accordance with its terms, except as such enforceability may be limited
by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general
application.
4. Disbursement
of Escrow Shares. (a)
Not
later than five business days after the filing of the Company’s Annual Report on
Form 10-K or Form 10-KSB, as the case may be, for the fiscal year ended December
31, 2008, the Company shall deliver to the Escrow Agent and all of the Investors
written notice (the “ATNI Company Notice”) which notice shall (1) set forth the
2008 Guaranteed ATNI amount and a statement indicating whether the Company
believes it met or achieved the 2008 Guaranteed ATNI amount, (2) include a
statement (the “ATNI Statement”) indicating how such amount was calculated and
(3) include a copy of the report of the Company’s independent registered public
accounting firm which report shall include an evaluation of the Company’s
internal control over financial report for the fiscal year ended December 31,
2008.
(b) Within
20
business days of receipt of the ATNI Company Notice, X. Xxxx Price, on behalf
of
the Investors, shall submit a written notice (the “Investors’ Notice”) to the
Escrow Agent and the other Investors indicating whether the Escrow Shares shall
be either (1) released and returned to the Company or (2) distributed in
accordance with Exhibit
B
attached
hereto. The Escrow Agent shall immediately forward a copy of such notice to
the
Company. If, within 10 business days after receipt of the Investors’ Notice, no
notice of objection to such Investors’ Notice has been filed by the Company in
accordance with the provisions of Section 4(c), Escrow Agent shall promptly
disburse the Escrow Shares in accordance with the instructions contained in
the
Investors’ Notice.
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(c) If
the
Company objects to the Investors’ instructions contained in the Investors’
Notice, then within 10 business days after receipt of the Investors’ Notice, the
Company shall submit written notice of such objection to the Escrow Agent and
each of the Investors. In the event of a Company objection pursuant to this
Section 4(c), the Escrow Agent shall retain the Escrow Shares and not return
them to the Company or distribute them to the Investors. The Escrow Agent shall
retain the Escrow Shares until the question of whether the Escrow Shares shall
be returned to the Company or distributed to the Investors shall have been
determined (i) by an agreement in writing executed by the Company and each
of
the Investors or (ii) by a final, nonappealable order of a court of competent
jurisdiction. The Company and the Investors shall deliver to Escrow Agent an
executed copy of such agreement or a certified copy of such final judgment
directing the Escrow Agent to return the Escrow Shares to the Company or
distribute the Escrow Shares to the Investors as specified in such agreement
or
final decision, as the case may be, after which the Escrow Agent shall promptly
return or distribute the Escrow Shares accordingly.
5. Duration. This
Agreement shall terminate upon the distribution of all
the Escrow Shares in accordance with the provisions of Section 4.12 of the
SPA
and this Agreement.
6. Escrow
Shares. If
any
Escrow Shares are deliverable to the Investors pursuant to the SPA and in
accordance with this Agreement, the Company covenants and agrees to cooperate
with its transfer agent, and the Company agrees to use its best efforts, to
aid
the Escrow Agent in issuing the Escrow Shares pursuant hereto. Until such time
as the Escrow Shares are required to be delivered pursuant to the SPA and in
accordance with this Agreement, any dividends payable in respect of the Escrow
Shares and all voting rights applicable to the Escrow Shares shall be retained
by the Company. Should the Escrow Agent receive dividends or voting materials,
such items shall not be held by the Escrow Agent, but shall be promptly passed
on to the Company and shall not be invested or held for any time longer than
is
needed to deliver such items to the Company. 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 another entity,
the Escrow Agent shall solicit and follow the written instructions of the
Company; provided,
that
the cash or exchanged shares are instructed to be redeposited into the Escrow
Account. The Company shall be responsible for all taxes resulting from any
such
conversion or exchange.
7. Interpleader. Should
any controversy arise among the parties hereto with
respect to this Agreement or with respect to the right to receive the Escrow
Shares, Escrow Agent shall have the right to consult counsel and/or to institute
an appropriate interpleader action to determine the rights of the parties.
Escrow Agent is also hereby authorized to institute an appropriate interpleader
action upon receipt of a written letter of direction executed by the parties
so
directing Escrow Agent. If Escrow Agent is directed to institute an appropriate
interpleader action, it shall institute such action not prior to thirty (30)
days after receipt of such letter of direction and not later than sixty (60)
days after such date. Any interpleader action instituted in accordance with
this
Section 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 shall be relieved of and discharged from any and
all
obligations and liabilities under and pursuant to this Agreement with respect
to
the Escrow Shares.
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8. Exculpation
and Indemnification of Escrow Agent. (a)
Escrow
Agent is not a party to, and is not bound by or charged with notice of any
agreement out of which this escrow may arise. Escrow Agent acts under this
Agreement as a depositary only and is not responsible or liable in any manner
whatsoever for the sufficiency, correctness, genuineness or validity of the
subject matter of the escrow, or any part thereof, or for the form or execution
of any notice given by any other party hereunder, or for the identity or
authority of any person executing any such notice. Escrow Agent will have no
duties or responsibilities other than those expressly set forth herein. Escrow
Agent will be under no liability to anyone by reason of any failure on the
part
of any party hereto (other than Escrow Agent) or any maker, endorser or other
signatory of any document to perform such person’s or entity’s obligations
hereunder or under any such document. Except for this Agreement and instructions
to Escrow Agent pursuant to the terms of this Agreement, Escrow Agent will
not
be obligated to recognize any agreement between or among any or all of the
persons or entities referred to herein, notwithstanding its knowledge
thereof.
(b) Escrow
Agent will not be liable for any action taken or omitted by it, or any action
suffered by it to be taken or omitted, in good faith and in the exercise of
its
own best judgment, and may rely conclusively on, and will be protected in acting
upon, any order, notice, demand, certificate, or opinion or advice of counsel
(including counsel chosen by Escrow Agent), statement, instrument, report or
other paper or document (not only as to its due execution and the validity
and
effectiveness of its provisions, but also as to the truth and acceptability
of
any information therein contained) which is reasonably believed by Escrow Agent
to be genuine and to be signed or presented by the proper person or persons.
The
duties and responsibilities of the Escrow Agent hereunder shall be determined
solely by the express provisions of this Agreement and no other or further
duties or responsibilities shall be implied, including, but not limited to,
any
obligation under or imposed by any laws of the State of New York upon
fiduciaries.
(c) Escrow
Agent will be indemnified and held harmless by the Company from and against
any
expenses, including reasonable attorneys’ fees and disbursements, damages or
losses suffered by Escrow Agent in connection with any claim or demand, which,
in any way, directly or indirectly, arises out of or relates to this Agreement
or the services of Escrow Agent hereunder; except, that if Escrow Agent is
guilty of willful misconduct, fraud or gross negligence under this Agreement,
then Escrow Agent will bear all losses, damages and expenses arising as a result
of such willful misconduct, fraud or gross negligence except for consequential
damages. Promptly after the receipt by Escrow Agent of notice of any such demand
or claim or the commencement of any action, suit or proceeding relating to
such
demand or claim, Escrow Agent will notify the other parties hereto in writing.
For the purposes hereof, the terms “expense” and “loss” will include all amounts
paid or payable to satisfy any such claim or demand, or in settlement of any
such claim, demand, action, suit or proceeding settled with the express written
consent of the parties hereto, and all costs and expenses, including, but not
limited to, reasonable attorneys’ fees and disbursements, paid or incurred in
investigating or defending against any such claim, demand, action, suit or
proceeding. The provisions of this Section 8 shall survive the termination
of
this Agreement.
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9. Compensation
of Escrow Agent. The
Company will pay Escrow Agent in accordance with
Exhibit
A
attached
hereto for all services rendered by Escrow Agent hereunder.
10. Resignation
and Discharge of Escrow Agent. At
any time, upon ten (10) days’ prior written notice to the
Company and the Investors, Escrow Agent may resign from its duties as Escrow
Agent hereunder. At any time, upon ten (10) days’ prior written notice to the
Escrow Agent, the Company and the Investors holding two-thirds (66 2/3%) of
the
Shares may discharge the Escrow Agent from its duties as Escrow Agent hereunder.
As soon as practicable after its resignation or discharge, Escrow Agent will
promptly turn over to a successor escrow agent appointed jointly by the Company
and the Investors the Escrow Shares held hereunder upon presentation of a
document appointing the new escrow agent and evidencing its acceptance thereof.
If, by the end of the 10-day period following the giving of notice of
resignation by Escrow Agent the Company and the Investors shall have failed
to
appoint a successor escrow agent, then (a) Escrow
Agent’s sole responsibility after that time shall be to retain and safeguard the
Escrow Shares until receipt of a designation of successor Escrow Agent or joint
written instructions by the Company and the Investors or a final, nonappealable
order of a court of competent jurisdiction and (b) Escrow
Agent may interplead the Escrow Shares into the registry of any court having
jurisdiction.
11. Records. Escrow
Agent shall maintain accurate records of all
transactions hereunder. Promptly after the termination of this Agreement or
as
may reasonably be requested by the parties hereto from time to time before
such
termination, Escrow Agent shall provide the parties hereto, as the case may
be,
with a complete copy of such records, certified by Escrow Agent to be a complete
and accurate account of all such transactions. The authorized representatives
of
each of the parties hereto shall have access to such books and records at all
reasonable times during normal business hours upon reasonable notice to Escrow
Agent.
12. Notice. All
notices, communications and instructions required or desired to be given under
this Agreement must be in writing and shall be deemed to be duly given if sent
by either (i) (A) U.S. first class, registered or certified mail, return receipt
requested or (B) overnight courier, to the address listed on the signature
pages
hereto or (ii) by facsimile at the facsimile number specified on the signature
pages hereto.
13. Execution
in Counterparts. This
Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
14. Assignment
and Modification. This
Agreement and the rights and obligations hereunder of
any of the parties hereto may not be assigned without the prior written consent
of the other parties hereto, except that the parties hereby agree that the
Company’s obligation to transfer Escrow Shares to Investors pursuant to this
Agreement shall continue to run to the benefit of an Investor who shall have
transferred or sold all or any portion of its Shares, and that Investors shall
have the right to assign its rights to receive all or any such Escrow Shares
to
other Persons in conjunction with negotiated sales or transfers of any of its
Escrow Shares. Subject to the foregoing, this Agreement will be binding upon
and
inure to the benefit of each of the parties hereto and their respective
successors and permitted assigns and no other Person will acquire or have any
rights under, or by virtue of, this Agreement. No portion of the Escrow Shares
shall be subject to interference or control by any creditor of any party hereto,
or be subject to being taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of any such party hereto prior
to
the disbursement thereof to such party hereto in accordance with the provisions
of this Agreement. No provision of this Agreement may be waived or amended
except in a written instrument signed by the Escrow Agent, the Company and
the
Investors holding at least two-thirds (66 2/3%) of the Shares. No waiver of
any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
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15. Applicable
Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the principles of conflicts of laws thereof.
16. Headings. The
headings contained in this Agreement are for convenience
of reference only and shall not affect the construction of this
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 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 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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SIGNATURE
PAGES TO FOLLOW]
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IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
set forth opposite their respective names.
| SINO GAS INTERNATIONAL HOLDINGS, INC. | ||
| By: |
/s/
Xxxx Xxxx
|
|
| Name: Xxxx Xxxx | ||
| Title: Chief Financial Officer | ||
| Address for Notice: | ||
|
MANUFACTURERS
AND TRADERS TRUST
COMPANY
|
||
| By: |
/s/ Xxxxxx Xxxxxx
|
|
| Name: Xxxxxx Xxxxxx | ||
| Title: Vice President | ||
| Address for Notice: | ||
[REMAINDER
OF PAGE INTENTIONALLY BLANK-
SIGNATURE
PAGES FOR INVESTORS TO FOLLOW]
7
| INVESTORS | ||
|
SEI
Private Trust Co FAO The XX Xxxxxxx Co Investor Trust
|
||
| By: |
/s/ Xxxx Xxxxxx
|
|
| Name: Xxxx Xxxxxx | ||
| Title: | ||
| Address for Notice: |
|
|
| Facsimile: |
|
8
| INVESTORS | ||
|
Ancora
Greater China Fund, LP
|
||
| By: |
/s/ Xxxx
X. Xxxxxxxxxx
|
|
| Name: Xxxx X. Xxxxxxxxxx | ||
| Title: VP | ||
| Address for Notice: |
|
|
| Facsimile: |
|
9
| INVESTORS | ||
|
Jayhawk
Private Equity Co-Invest Fund, L.P.
|
||
| By: |
/s/ Xxxxxxx
X. Xxxxxxx
|
|
| Name: Xxxxxxx X. Xxxxxxx | ||
| Title: CFO | ||
| Address for Notice: |
|
|
| Facsimile: |
|
10
| INVESTORS | ||
|
Jayhawk
Private Equity Fund, L.P.
|
||
| By: |
/s/ Xxxxxxx
X. Xxxxxxx
|
|
| Name: Xxxxxxx X. Xxxxxxx | ||
| Title: | ||
| Address for Notice: |
|
|
| Facsimile: |
|
11
| INVESTORS | ||
|
Enable
Opportunity Partners LP
|
||
| By: |
/s/ Xxxxxxx
X’Xxxx
|
|
| Name: Xxxxxxx X’Xxxx | ||
| Title: Principal & Portfolio Manager | ||
| Address for Notice: |
|
|
| Facsimile: |
|
12
| INVESTORS | ||
|
Enable
Growth Partners LP
|
||
| By: |
/s/ Xxxxxxx
X’Xxxx
|
|
| Name: Xxxxxxx X’Xxxx | ||
| Title: Principal & Portfolio Manager | ||
| Address for Notice: |
|
|
| Facsimile: |
|
13
| INVESTORS | ||
|
Xxxxxx
Diversified Strategy Master Fund LLC
|
||
| By: |
/s/ Xxxxxxx
X’Xxxx
|
|
| Name: Xxxxxxx X’Xxxx | ||
| Title: | ||
| Address for Notice: |
|
|
| Facsimile: |
|
14
| INVESTORS | ||
|
Xxxxxx
Capital Investments, LLC
|
||
| By: |
/s/ Xxxxxx
X. Xxxxxx
|
|
| Name: Xxxxxx X. Xxxxxx | ||
| Title: CEO | ||
| Address for Notice: |
|
|
| Facsimile: |
|
15
| INVESTORS | ||
|
CGM
as c/f Xxxxxx X. Xxxxxx XXX
|
||
| By: |
/s/ Xxxxxx
X. Xxxxxx
|
|
| Name: Xxxxxx X. Xxxxxx | ||
| Title: | ||
| Address for Notice: |
|
|
| Facsimile: |
|
16
| INVESTORS | ||
|
Whitebox
Intermarket Partners, LP
|
||
| By: |
/s/ Xxxxxxxx
Xxxx
|
|
| Name: Xxxxxxxx Xxxx | ||
| Title: Director / CEO | ||
| Address for Notice: |
|
|
| Facsimile: |
|
17
| INVESTORS | ||
|
Midsouth
Investor Fund LP
|
||
| By: |
/s/ Xxxxx
Xxxxxxx
|
|
| Name: Xxxxx Xxxxxxx | ||
| Title: G.P. | ||
| Address for Notice: |
|
|
| Facsimile: |
|
18
| INVESTORS | ||
|
Precept
Capital Management
|
||
| By: |
/s/ D.
Xxxxx Xxxxx
|
|
| Name: D. Xxxxx Xxxxx | ||
| Title: Man Memer, Precept Management LLC. | ||
| Address for Notice: |
|
|
| Facsimile: |
|
19
| INVESTORS | ||
|
Xxxxxx
Partners LP
|
||
| By: |
/s/
Xxxxx
Xxxxxxx
|
|
| Name: Xxxxx Xxxxxxx | ||
| Title: CFO | ||
| Address for Notice: |
|
|
| Facsimile: |
|
20
| INVESTORS | ||
|
Xxxxxx
GEPT Partners LP
|
||
| By: |
/s/
Xxxxx
Xxxxxxx
|
|
| Name: Xxxxx Xxxxxxx | ||
| Title: | ||
| Address for Notice: |
|
|
| Facsimile: |
|
21
| INVESTORS | ||
|
X.
Xxxx Price Small
Cap Value Fund
|
||
| By: |
/s/
Xxxxxxx
X. XxXxxxxxxx
|
|
| Name: Xxxxxxx X. XxXxxxxxxx | ||
| Title: VP | ||
| Address for Notice: |
|
|
| Facsimile: |
|
22
| INVESTORS | ||
|
Vision
Opportunity
Master Fund
|
||
| By: |
/s/
Xxxx
Xxxxxxxx
|
|
| Name: Xxxx Xxxxxxxx | ||
| Title: | ||
| Address for Notice: |
|
|
| Facsimile: |
|
23
EXHIBIT
A
Fee
Schedule
24
EXHIBIT
B
Schedule
of Distribution of Escrow Shares, if Necessary
|
Name
of Investor and Address
|
Number
of Make Good Shares
|
|
25
