ESCROW AGREEMENT
Exhibit
99.4
This
ESCROW AGREEMENT (this “Agreement”) made as of
December 17, 2009 by and among China Carbon Graphite Group, Inc., (the “Issuer”) and Maxim Group LLC
(the “Placement Agent”),
whose addresses and other information appear on the Information Sheet (as
defined herein) attached to this Agreement, and Continental Stock Transfer &
Trust Company, 00 Xxxxxxx Xxxxx, 0xx
Xxxxx, Xxx Xxxx, XX 00000 (the “Escrow Agent”).
WITNESSETH:
WHEREAS,
the Issuer proposes to sell a minimum of $2,040,000 (the “Offering Amount”) of the
Issuer’s Units comprised of Series B Convertible Preferred Stock and warrants to
purchase common stock of the Issuer (the “Securities”) to investors (the
subscribers of the Securities pursuant to this offering are hereinafter referred
to as “Investors”), in a
private offering to accredited investors on a “best efforts” basis through the
Placement Agent (the “Offering”);
WHEREAS,
the Issuer and the Placement Agent propose to establish an escrow account (the
“Escrow Account”), to
which subscription monies which are received by the Escrow Agent from the
Placement Agent in connection with such private offering are to be credited, and
the Escrow Agent is willing to establish the Escrow Account on the terms and
subject to the conditions hereinafter set forth; and
WHEREAS,
the Escrow Agent has agreed to establish a special bank account at X.X. Xxxxxx
Xxxxx Bank (the “Bank”)
into which the subscription monies, which are received by the Escrow Agent from
the Placement Agent and credited to the Escrow Account, are to be
deposited.
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained, the parties hereto hereby agree as follows:
1. Information
Sheet. Each capitalized term not otherwise defined in this
Agreement shall have the meaning set forth for such term on the information
sheet which is attached to this Agreement as Exhibit A and is
incorporated by reference herein and made a part hereof (the “Information
Sheet”).
2. Establishment of the Bank
Account.
2.1 The
Escrow Agent shall establish a non-interest-bearing bank account at the branch
of Bank selected by the Escrow Agent, and bearing the designation set forth on
the Information Sheet (heretofore defined as the “Bank Account”). The
purpose of the Bank Account is for (a) the deposit of all subscription monies
(checks or wire transfers) which are received by the Placement Agent from
prospective purchasers of the Securities and are delivered by the Placement
Agent to the Escrow Agent, (b) the holding of amounts of subscription monies
which are collected through the banking system and (c) the disbursement of
collected funds, all as described herein.
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2.2 On
or before the date of the initial deposit in the Bank Account pursuant to this
Agreement, the Placement Agent shall notify the Escrow Agent in writing of the
date of the commencement of the Offering (the “Effective Date”), and the
Escrow Agent shall not be required to accept any amounts for credit to the
Escrow Account or for deposit in the Bank Account prior to its receipt of such
notification.
2.3 The
“Offering Period,” which
shall be deemed to commence on the Effective Date, shall consist of the number
of calendar days or business days set forth on the Information
Sheet. The Offering Period shall be extended at the discretion of the
Placement Agent and the Issuer (an “Extension Period”) only if the
Escrow Agent shall have received written notice thereof prior to the expiration
of the Offering Period. The Extension Period, which shall be deemed
to commence on the next calendar day following the expiration of the Offering
Period, shall consist of the number of calendar days or business days set forth
on the Information Sheet. The last day of the Offering Period, or the
last day of the Extension Period (if the Escrow Agent has received written
notice thereof as herein above provided), is referred to herein as the “Termination
Date”. Except as provided in Section 4.3 hereof, after the
Termination Date, the Placement Agent shall not deposit, and the Escrow Agent
shall not accept, any additional amounts representing payments by prospective
purchasers.
3. Deposits to the Bank
Account.
3.1 The
Placement Agent shall promptly deliver to the Escrow Agent all monies which it
receives from prospective purchasers of the Securities, which monies shall be in
the form of checks or wire transfers, provided however that "Cashiers" checks
and "Money Orders" must be in amounts greater than $10,000; Cashiers checks or
Money Orders in amounts less than $10,000 shall be rejected by the Escrow
Agent. Upon the Escrow Agent’s receipt of such monies, they shall be
credited to the Escrow Account. All checks delivered to the Escrow Agent shall
be made payable to “Continental Stock Transfer & Trust Company AAF China
Carbon Graphite Group, Inc.” Any check payable other than to the
Escrow Agent as required hereby shall be returned to the prospective purchaser,
or if the Escrow Agent has insufficient information to do so, then to the
Placement Agent (together with any Subscription Information, as defined below or
other documents delivered therewith) by noon of the next business day following
receipt of such check by the Escrow Agent, and such check shall be deemed not to
have been delivered to the Escrow Agent pursuant to the terms of this
Agreement.
3.2 Promptly
after receiving subscription monies as described in Section 3.1, the Escrow
Agent shall deposit the same into the Bank Account. Amounts of monies
so deposited are hereinafter referred to as “Escrow
Amounts”. The Escrow Agent shall cause the Bank to process all
Escrow Amounts for collection through the banking
system. Simultaneously with each deposit to the Escrow Account, the
Placement Agent (or the Issuer, if such deposit is made by the Issuer) shall
inform the Escrow Agent in writing of the name, address, and the tax
identification number of the purchaser, the amount of Securities subscribed for
by such purchase, and the aggregate dollar amount of such subscription
(collectively, the “Subscription
Information”).
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3.3 The
Escrow Agent shall not be required to accept for credit to the Escrow Account or
for deposit into the Bank Account checks which are not accompanied by the
appropriate Subscription Information, which at minimum shall include the name
address, tax identification number and the number of Units subscribed
for. Wire transfers representing payments by prospective purchasers
shall not be deemed deposited in the Escrow Account until the Escrow Agent has
received in writing the Subscription Information required with respect to such
payments.
3.4 The
Escrow Agent shall not be required to accept in the Escrow Account any amounts
representing payments by prospective purchasers, whether by check or wire,
except during the Escrow Agent’s regular business hours.
3.5 Only
those Escrow Amounts, which have been deposited in the Bank Account and which
have cleared the banking system and have been collected by the Escrow Agent, are
herein referred to as the “Fund.”
3.6 If
the Offering is terminated before the Termination Date, the Escrow Agent shall
refund any portion of the Fund prior to disbursement of the Fund in accordance
with Article 4 hereof upon instructions in writing signed by both the Issuer and
the Placement Agent.
4. Disbursement from the Bank
Account.
4.1 Subject
to Section 4.3 below, if by the close of regular banking hours on the
Termination Date the Escrow Agent determines that the amount in the Fund is less
than the Offering Amount, as indicated by the Subscription Information submitted
to the Escrow Agent, then in either such case, the Escrow Agent shall promptly
refund to each prospective purchaser the amount of payment received from such
purchaser which is then held in the Fund or which thereafter clears the banking
system, without interest thereon or deduction there from, by drawing checks on
the Bank Account for the amounts of such payments and transmitting them to the
purchasers. In such event, the Escrow Agent shall promptly notify the Issuer and
the Placement Agent of its distribution of the Fund.
4.2 Subject
to Section 4.3 below, if at any time up to the close of regular banking hours on
the Termination Date, the Escrow Agent determines that the amount in the Fund
represents the sale of the Offering Amount, the Escrow Agent shall promptly
notify the Issuer and the Placement Agent of such fact in
writing. Upon written notification from the Issuer and the Placement
Agent that the closing of the Offering has occurred, the Escrow Agent shall
promptly disburse the Fund, by drawing checks on the Bank Account in accordance
with instructions in writing signed by both the Issuer and the Placement Agent
as to the disbursement of the Fund, promptly after it receives such
instructions.
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4.3 This
Section 4.3 applies only if a Collection Period has been provided for by the
appropriate indication on the Information Sheet. If the Escrow Agent
or the Placement Agent has on hand at the close of business on the Termination
Date any uncollected amounts which when added to the Fund would raise the amount
in the Fund to the Offering Amount and result in the Fund representing the sale
of the Offering Amount, the Collection Period (consisting of the number of
business days set forth on the Information Sheet) shall be utilized to allow
such uncollected amounts to clear the banking system. During the
Collection Period, the Placement Agent (and the Issuer) shall not deposit, and
the Escrow Agent shall not accept, any additional amounts; provided, however, that such
amounts as were received by the Placement Agent (or the Issuer) by the close of
business on the Termination Date may be deposited with the Escrow Agent by noon
of the next business day following the Termination Date. If at the
close of business on the last day of the Collection Period an amount sufficient
to raise the amount in the Fund to represent the sale of the Offering Amount
shall not have cleared the banking system, the Escrow Agent shall promptly
notify the Issuer and the Placement Agent in writing of such fact and shall
promptly return all amounts then in the Fund, and any amounts which thereafter
clear the banking system, to the prospective purchasers as provided in Section
4.2 hereof.
4.4 Upon
disbursement of the Fund pursuant to the terms of this Article 4, the Escrow
Agent shall be relieved of further obligations and released from all liability
under this Agreement. It is expressly agreed and understood that in
no event shall the aggregate amount of payments made by the Escrow Agent exceed
the amount of the Fund.
5. Rights, Duties and
Responsibilities of Escrow Agent. It is understood and agreed that the
duties of the Escrow Agent are purely ministerial in nature, and
that:
5.1 The
Escrow Agent shall notify the Placement Agent, on a daily basis, of the Escrow
Amounts which have been deposited in the Bank Account and of the amounts,
constituting the Fund, which have cleared the banking system and have been
collected by the Escrow Agent.
5.2 The
Escrow Agent shall not be responsible for or be required to enforce any of the
terms or conditions of the selling agreement or any other agreement between the
Placement Agent and the Issuer nor shall the Escrow Agent be responsible for the
performance by the Placement Agent or the Issuer of their respective obligations
under this Agreement.
5.3 The
Escrow Agent shall not be required to accept from the Placement Agent (or the
Issuer) any Subscription Information pertaining to prospective purchasers unless
such Subscription Information is accompanied by checks or wire transfers meeting
the requirements of Section 3.1, nor shall the Escrow Agent be required to keep
records of any information with respect to payments deposited by the Placement
Agent (or the Issuer) except as to the amount of such payments; however, the
Escrow Agent shall notify the Placement Agent within a reasonable time of any
discrepancy between the amount set forth in any Subscription Information and the
amount delivered to the Escrow Agent therewith. Such amount need not
be accepted for deposit in the Escrow Account until such discrepancy has been
resolved.
5.4 The
Escrow Agent shall be under no duty or responsibility to enforce collection of
any check delivered to it hereunder. The Escrow Agent, within a
reasonable time, shall return to the Placement Agent any check received which is
dishonored, together with the Subscription Information, if any, which
accompanied such check.
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5.5 The
Escrow Agent shall be entitled to rely upon the accuracy, act in reliance upon
the contents, and assume the genuineness of any notice, instruction,
certificate, signature, instrument or other document which is given to the
Escrow Agent pursuant to this Agreement without the necessity of the Escrow
Agent verifying the truth or accuracy thereof. The Escrow Agent shall
not be obligated to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or instructions or to
execute any such certificate, instrument or other document.
5.6 If
the Escrow Agent is uncertain as to its duties or rights hereunder or shall
receive instructions with respect to the Bank Account, the Escrow Amounts or the
Fund which, in its sole determination, are in conflict either with other
instructions received by it or with any provision of this Agreement, it shall be
entitled to hold the Escrow Amounts, the Fund, or a portion thereof, in the Bank
Account pending the resolution of such uncertainty to the Escrow Agent’s sole
satisfaction, by final judgment of a court or courts of competent jurisdiction
or otherwise.
5.7 The
Escrow Agent shall not be liable for any action taken or omitted hereunder, or
for the misconduct of any employee, agent or attorney appointed by it, except in
the case of willful misconduct or gross negligence. The Escrow Agent
shall be entitled to consult with counsel of its own choosing and shall not be
liable for any action taken, suffered or omitted by it in accordance with the
advice of such counsel.
5.8 The
Escrow Agent shall have no responsibility at any time to ascertain whether or
not any security interest exists in the Escrow Amounts, the Fund or any part
thereof or to file any financing statement under the Uniform Commercial Code
with respect to the Fund or any part thereof.
6. Amendment; Resignation or
Removal of Escrow Agent. This Agreement may be altered or
amended only with the written consent of the Issuer, the Placement Agent and the
Escrow Agent. The Escrow Agent may resign and be discharged from its
duties hereunder at any time by giving written notice of such resignation to the
Issuer and the Placement Agent specifying a date when such resignation shall
take effect and upon delivery of the Fund to the successor escrow agent
designated by the Issuer or the Placement Agent in writing. Such
successor Escrow Agent shall become the Escrow Agent hereunder upon the
resignation date specified in such notice. If the Company fails to
designate a successor Escrow Agent within thirty (30) days after such notice,
then the resigning Escrow Agent shall promptly refund the amount in the Fund to
each prospective purchaser, without interest thereon or
deduction. The Escrow Agent shall continue to serve until its
successor accepts the escrow and receives the Fund. The Company shall
have the right at any time to remove the Escrow Agent and substitute a new
escrow agent by giving notice thereof to the Escrow Agent then
acting. Upon its resignation and delivery of the Fund as set forth in
this Section 6, the Escrow Agent shall be discharged of and from any and all
further obligations arising in connection with the escrow contemplated by this
Agreement. Without limiting the provisions of Section 8 hereof, the
resigning Escrow Agent shall be entitled to be reimbursed by the Issuer and the
Placement Agent for any expenses incurred in connection with its resignation,
transfer of the Fund to a successor escrow agent or distribution of the Fund
pursuant to this Section 6.
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7. Representations and
Warranties. The Issuer and the Placement Agent hereby severally represent
and warrant to the Escrow Agent that:
7.1 No
party other than the parties hereto and the prospective purchasers have, or
shall have, any lien, claim or security interest in the Escrow Amounts or the
Fund or any part thereof.
7.2 No
financing statement under the Uniform Commercial Code is on file in any
jurisdiction claiming a security interest in or describing (whether specifically
or generally) the Escrow Amounts or the Fund or any part thereof.
7.3 The
Subscription Information submitted with each deposit shall, at the time of
submission and at the time of the disbursement of the Fund, be deemed a
representation and warranty that such deposit represents a bona fide payment by
the purchaser described therein for the amount of Securities set forth in such
Subscription Information.
7.4 All
of the information contained in the Information Sheet is, as of the date hereof,
and will be, at the time of any disbursement of the Fund, true and
correct.
7.5 Reasonable
controls have been established and required due diligence performed to comply
with "Know Your Customer" regulations, USA Patriot Act, Office of Foreign Asset
Control (OFAC) regulations and the Bank Secrecy Act.
8. Fees and
Expenses. The Escrow Agent shall be entitled to the Escrow
Agent Fees set forth on the Information Sheet, payable as and when stated
therein. In addition, the Issuer and the Placement Agent jointly and
severally agree to reimburse the Escrow Agent for any reasonable expenses
incurred in connection with this Agreement, including, but not limited to,
reasonable counsel fees.
9. Indemnification and
Contribution.
9.1 The
Issuer and the Placement Agent (collectively referred to as the “Indemnitors”) jointly and
severally agree to indemnify the Escrow Agent and its officers, directors,
employees, agents and shareholders (collectively referred to as the “Indemnitees”) against, and
hold them harmless of and from, any and all loss, liability, cost, damage and
expense, including without limitation, reasonable counsel fees, which the
Indemnitees may suffer or incur by reason of any action, claim or proceeding
brought against the Indemnitees arising out of or relating in any way to this
Agreement or any transaction to which this Agreement relates, unless such
action, claim or proceeding is the result of the willful misconduct or gross
negligence of the Indemnitees.
9.2 If
the indemnification provided for in Section 9.1 is applicable, but for any
reason is held to be unavailable, the Indemnitors shall contribute such amounts
as are just and equitable to pay, or to reimburse the Indemnitees for, the
aggregate of any and all losses, liabilities, costs, damages and expenses,
including counsel fees, actually incurred by the Indemnitees as a result of or
in connection with, and any amount paid in settlement of, any action, claim or
proceeding arising out of or relating in any way to any actions or omissions of
the Indemnitors.
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9.3 The
provisions of this Article 9 shall survive any termination of this Agreement,
whether by disbursement of the Fund, resignation of the Escrow Agent or
otherwise.
10. Termination of
Agreement. This Agreement shall terminate on the final
disposition of the Fund pursuant to Section 4, provided that the rights of the
Escrow Agent and the obligations of the other parties hereto under Section 9
shall survive the termination hereof and the resignation or removal of the
Escrow Agent.
11. Governing Law and
Assignment. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, without regard to the
conflicts of laws principles thereof, and shall be binding, upon the parties
hereto and their respective successors and assigns; provided, however, that any
assignment or transfer by any party of its rights under this Agreement or with
respect to the Escrow Amounts or the Fund shall be void as against the Escrow
Agent unless (a) written notice thereof shall be given to the Escrow Agent; and
(b) the Escrow Agent shall have consented in writing to such assignment or
transfer.
12. Notices. All notices
required to be given in connection with this Agreement shall be sent by
registered or certified mail, return receipt requested, or by hand delivery with
receipt acknowledged, or by the Express Mail service offered by the United
States Postal Service, and addressed, if to the Issuer or the Placement Agent,
at their respective addresses set forth on the Information Sheet, and if to the
Escrow Agent, at its address set forth above, to the attention of the Trust
Department.
13. Severability. If
any provision of this Agreement or the application thereof to any person or
circumstance shall be determined to be invalid or unenforceable, the remaining
provisions of this Agreement or the application of such provision to persons or
circumstances other than those to which it is held invalid or unenforceable
shall not be affected thereby and shall be valid and enforceable to the fullest
extent permitted by law.
14. Execution in Several
Counterparts. This Agreement may be executed in several counterparts or
by separate instruments and by facsimile transmission, and all of such
counterparts and instruments shall constitute one agreement, binding on all of
the parties hereto.
15. Entire
Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings (written or oral) of the
parties in connection therewith.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and
year first above written.
CONTINENTAL
STOCK TRANSFER
&
TRUST COMPANY
By:
/s/ Xxxxxxx
Xxxxxx
Name:
Title:
By:
/s/ Xxxx Xxxx
Name: Xxxx
Xxxx
Title: CFO
MAXIM GROUP LLC
By: /s/ Xxxxxxxx Xxxxxx
Name:
Xxxxxxxx X. Xxxxxx
Title: Executive
Director, Investment Banking
8
EXHIBIT
A
ESCROW
AGREEMENT INFORMATION SHEET
1. The
Issuer
Address:
c/o Xinghe Yongle Carbon Co.,
Ltd.
000
Xxxxxxx Xxx
Xxxxxxxxxxxxx
Xxxxxx
Xxxxxx
Inner
Mongolia, China
Tax
Identification Number: 00-0000000
2. The Placement
Agent
Name:
Maxim Group
LLC
Address: 000 Xxxxxxxxx
Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
3. The
Securities
Description
of the Securities to be offered: Issuer’s Units, which are comprised
of Issuer’s Series B Convertible Preferred Stock and a warrant to purchase
common stock of the Issuer.
4. Minimum Amounts and
Conditions Required for Disbursement of the Escrow Account
Aggregate
dollar amount which must be collected before the Escrow Account may be disbursed
to the Issuer: $2,040,000
million
5. Plan of Distribution of the
Securities
Initial
Offering Period: Through December 31,
2009.
Extension
Period, if any: No later than
45 days subsequent to the Initial Offering Period.
6. Title of Escrow
Account
“Continental
Stock Transfer & Trust Company AAF China Carbon Graphite Group, Inc.”
7. Escrow Agent Fees and
Charges
$2,500:
$1250.00 payable at signing of the Escrow Agreement, plus $1250.00 payable prior
to the Closing. A $250.00 will be assessed to review and process a
term extension request and a fee of $500 will be payable for document review
services related to each amendment to the Escrow Agreement. In addition,
the Escrow Agent shall be paid a fee of $500.00 for each additional
closing. Should the Escrow Agent continue for more than one year, the
Escrow Agent shall receive a fee of $500.00 per month, or any portion thereof,
payable in advance or the first business day of each month.
Distribution
charges:
$15.00
per check
$35.00
per wire
$100.00
per check returned (NSF) check
$100.00
lost check replacement fee
