ESCROW AGREEMENT
This
Escrow Agreement (this “Agreement”) is entered into as of February 16, 2010, by
and among Li3 Energy, Inc., a Nevada corporation (the “Buyer”), Next Lithium
Corp., an Ontario corporation (“Next”), Next Lithium (Nevada) Corp., a Nevada
corporation (“Next Nevada” and together with Next, the “Seller Group”), and
Gottbetter & Partners, LLP (the “Escrow Agent”).
WHEREAS,
the Buyer and the Seller Group have entered into an Asset Purchase Agreement
(the “AP Agreement”) pursuant to which the Buyer will acquire certain assets of
the Seller Group in exchange for shares of common stock of the
Buyer;
WHEREAS,
the AP Agreement provides that an escrow account will be established to secure
the indemnification obligations of the Seller Group as of the Closing Date (as
defined in the AP Agreement) to the Buyer; and
WHEREAS,
the parties hereto desire to establish the terms and conditions pursuant to
which such escrow account will be established and maintained.
NOW,
THEREFORE, the parties hereto hereby agree as follows:
1. [RESERVED]
2. Escrow and
Indemnification.
(a) Escrow of
Shares. Simultaneously with the Closing (as defined in the AP
Agreement), the Buyer shall deposit with the Escrow Agent certificates
representing an aggregate of 4,000,000 shares of common stock of the Buyer, as
determined pursuant to Section 2.4 of the AP Agreement, issued in the name of
Next Nevada. The shares deposited with the Escrow Agent pursuant to
the first sentence of this Section 2(a) are referred to herein as the
“Escrow Shares.” The Escrow Shares shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party hereto. The Escrow
Agent agrees to hold the Escrow Shares in an escrow account (the “Escrow
Account”), subject to the terms and conditions of this Agreement.
(b) Indemnification. The
Seller Group has agreed in Section 10.2 of the AP Agreement to indemnify and
hold harmless the Buyer from and against certain Losses (as defined in Section
10.2 of the AP Agreement). The Escrow Shares (i) shall be security
for such indemnity obligation of the Seller Group, subject to the limitations
and in the manner provided, in this Agreement and the AP Agreement and (ii)
shall be a non-exclusive means for the Parent to collect any Losses with respect
to which the Parent is entitled to indemnification under Article X of the AP
Agreement.
(c) Dividends,
Etc. Any securities distributed in respect of or in exchange
for any of the Escrow Shares, whether by way of stock dividends, stock splits or
otherwise, shall be issued in the name of Next Nevada and shall be delivered to
the Escrow Agent, who shall hold such securities in the Escrow
Account. Such securities shall be considered Escrow Shares for
purposes hereof. Any cash dividends or property (other than
securities) distributed in respect of the Escrow Shares shall promptly be
distributed by the Escrow Agent to Next Nevada.
(d) Voting of
Shares. Next Nevada shall have the right, in its sole
discretion, on behalf of the Seller Group, to direct the Escrow Agent in writing
as to the exercise of any voting rights pertaining to the Escrow Shares, and the
Escrow Agent shall comply with any such written instructions. In the
absence of such instructions, the Escrow Agent shall not vote any of the Escrow
Shares. Next Nevada shall have no obligation to solicit consents or
proxies from the other member of the Seller Group for purposes of any such
vote.
(e) Transferability. The
respective interests of each member of the Seller Group in the Escrow Shares
shall not be assignable or transferable, other than by operation of
law. Notice of any such assignment or transfer by operation of law
shall be given to the Escrow Agent and the Buyer, and no such assignment or
transfer shall be valid until such notice is given.
3. Distribution of Escrow
Shares.
(a) The
Escrow Agent shall distribute the Escrow Shares only in accordance with (i) a
written instrument delivered to the Escrow Agent that is executed by both the
Buyer and the Seller Group and that instructs the Escrow Agent as to the
distribution of some or all of the Escrow Shares, (ii) an order of a court
of competent jurisdiction, a copy of which is delivered to the Escrow Agent by
either the Buyer or the Seller Group, that instructs the Escrow Agent as to the
distribution of some or all of the Escrow Shares, or (iii) the provisions
of Section 3(b) hereof.
(b) Within
five business days after February 16, 2011 (the “Termination Date”), the Escrow
Agent shall, automatically, without any notice required, distribute to Next
Nevada all of the Escrow Shares then held in escrow. Notwithstanding
the foregoing, if the Buyer has previously delivered to the Escrow Agent a copy
of a Claim Notice (as hereinafter defined) and the Escrow Agent has not received
written notice of the resolution of the claim covered thereby, or if the Buyer
has previously delivered to the Escrow Agent a copy of an Expected Claim Notice
(as hereinafter defined) and the Escrow Agent has not received written notice of
the resolution of the anticipated claim covered thereby, the Escrow Agent shall
retain in escrow after the Termination Date such number of Escrow Shares as have
a Value (as defined in Section 4 below) equal to the Claimed Amount (as
hereinafter defined) covered by such Claim Notice or equal to the estimated
amount of Losses set forth in such Expected Claim Notice, as the case may
be. Any Escrow Shares so retained in escrow shall be distributed only
in accordance with the terms of clauses (i) or (ii) of Section 3(a)
hereof. For purposes of this Agreement, a Claim Notice means a
written notification under the AP Agreement given by the Buyer to the Seller
Group which contains (i) a description and the amount (the “Claimed Amount”) of
any Losses incurred or reasonably expected to be incurred by the Buyer, (ii) a
statement that the Buyer is entitled to indemnification under Article 10 of
the AP Agreement for such Losses and a reasonable explanation of the basis
therefor, and (iii) a demand for payment in the amount of such
Losses. For purposes of this Agreement, an Expected Claim Notice
means a notice delivered pursuant to the AP Agreement by the Buyer to the Seller
Group, before expiration of a representation or warranty, to the effect that, as
a result a legal proceeding instituted by or written claim made by a third
party, the Buyer reasonably expects to incur Losses as a result of a breach of
such representation or warranty.
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4. Valuation of Escrow
Shares. For purposes of this Agreement, the “Value” of any
Escrow Shares shall be $0.125 per share, multiplied by the number of such Escrow
Shares.
5. Fees and Expenses of Escrow
Agent. The Buyer shall pay the fees and expenses of the Escrow
Agent for the services to be rendered by the Escrow Agent hereunder, which fees
shall not exceed $1,000 in the aggregate.
6. Limitation of Escrow Agent’s
Liability.
(a) The
Escrow Agent shall incur no liability with respect to any action taken or
suffered by it in reliance upon any notice, direction, instruction, consent,
statement or other documents believed by it to be genuine and duly authorized,
nor for other action or inaction except its own willful misconduct or gross
negligence. The Escrow Agent shall not be responsible for the
validity or sufficiency of this Agreement. In all questions arising
under this Agreement, the Escrow Agent may rely on the advice of counsel, and
the Escrow Agent shall not be liable to anyone for anything done, omitted or
suffered in good faith by the Escrow Agent based on such advice. The
Escrow Agent shall not be required to take any action hereunder involving any
expense unless the payment of such expense is made or provided for in a manner
reasonably satisfactory to it. In no event shall the Escrow Agent be
liable for indirect, punitive, special or consequential damages.
(b) The
Buyer and the Seller Group agree to indemnify the Escrow Agent for, and hold it
harmless against, any loss, liability or expense incurred without gross
negligence or willful misconduct on the part of the Escrow Agent, arising out of
or in connection with its carrying out of its duties hereunder. The
Buyer, on the one hand, and the Seller Group, on the other hand, shall each be
liable for one-half of such amounts.
7. [RESERVED]
8. [RESERVED]
9. Termination. This
Agreement shall terminate upon the distribution by the Escrow Agent of all of
the Escrow Shares in accordance with this Agreement; provided that the
provisions of Sections 6 and 7 shall survive such termination.
10. Notices. All
notices, instructions and other communications given hereunder or in connection
herewith shall be in writing. Any such notice, instruction or
communication shall be sent either (i) by registered or certified mail,
return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed
to have been delivered five business days after it is sent by registered or
certified mail, return receipt requested, postage prepaid, or one business day
after it is sent via a reputable nationwide overnight courier
service.
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If to the
Buyer:
Xx. Xxxxx
x Xxxxxx 000 Xx. 000
Xxx
Xxxxxx, Xxxx
Xxxx
Attn: Xxxx
Xxxxx, Chief Executive Officer
Telephone: 00-0-000-0000
with a
copy to (which shall not constitute notice hereunder):
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx Xxxx,
XX 00000
Attn: Xxxx
X. Xxxxxxxxxx, Esq.
Facsimile: (000)
000-0000
If to the
Seller Group:
Next
Lithium Corp.
000 Xxxxx
Xxxxxx Xxxx, Xxxxx Xxxxxxxxx
Xxxxxxx,
Xxxxxxx X0X 0X0
Xxxxxx
Attn: President
Facsimile: (000)
000-0000
with a
copy to (which shall not constitute notice hereunder):
WeirFoulds
LLP
0000-000
Xxxx Xxxxxx Xxxx
Xxxxxxx,
Xxxxxxx X0X 0X0
Xxxxxx
Attn: Xxxxxx
Xxxxx
Facsimile: (000)-000-0000
If to the
Escrow Agent:
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx Xxxx,
XX 00000
Attn: Xxxx
X. Xxxxxxxxxx, Esq.
Facsimile: (000)
000-0000
4
Any party
may give any notice, instruction or communication in connection with this
Agreement using any other means (including personal delivery, telecopy or
ordinary mail), but no such notice, instruction or communication shall be deemed
to have been delivered unless and until it is actually received by the party to
whom it was sent. Any party may change the address to which notices,
instructions or communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this
Section 10.
11. Successor Escrow
Agent. In the event the Escrow Agent becomes unavailable or
unwilling to continue in its capacity herewith, the Escrow Agent may resign and
be discharged from its duties or obligations hereunder by delivering a
resignation to the parties to this Agreement, not less than 30 days prior
to the date when such resignation shall take effect. The Buyer may
appoint a successor Escrow Agent without the consent of the Seller Group so long
as such successor is a chartered bank and may appoint any other successor Escrow
Agent with the consent of the Seller Group, which shall not be unreasonably
withheld. If, within such notice period, the Buyer provides to the
Escrow Agent written instructions with respect to the appointment of a successor
Escrow Agent and directions for the transfer of any Escrow Shares then held by
the Escrow Agent to such successor, the Escrow Agent shall act in accordance
with such instructions and promptly transfer such Escrow Shares to such
designated successor. If no successor Escrow Agent is named as
provided in this Section 11 prior to the date on which the resignation of the
Escrow Agent is to properly take effect, the Escrow Agent may apply to a court
of competent jurisdiction for appointment of a successor Escrow
Agent.
12. General.
(a) Governing Law;
Assigns. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
conflict-of-law principles and shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and assigns.
(b) Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
(c) Entire
Agreement. Except for those provisions of the AP Agreement
referenced herein, this Agreement constitutes the entire understanding and
agreement of the parties with respect to the subject matter of this Agreement
and supersedes all prior agreements or understandings, written or oral, between
the parties with respect to the subject matter hereof.
(d) Waivers. No
waiver by any party hereto of any condition or of any breach of any provision of
this Agreement shall be effective unless in writing. No waiver by any
party of any such condition or breach, in any one instance, shall be deemed to
be a further or continuing waiver of any such condition or breach or a waiver of
any other condition or breach of any other provision contained
herein.
(e) Amendment. This
Agreement may be amended only with the written consent of the Buyer, the Escrow
Agent and the Seller Group.
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(f) Consent to Jurisdiction and
Service. The parties hereby absolutely and irrevocably consent
and submit to the jurisdiction of the courts in the State of New York and of any
federal court located in the State of New York in connection with any actions or
proceedings brought against any party hereto by the Escrow Agent arising out of
or relating to this Agreement. In any such action or proceeding, the
parties hereby absolutely and irrevocably waive personal service of any summons,
complaint, declaration or other process and hereby absolutely and irrevocably
agree that the service thereof may be made by certified or registered
first-class mail directed to such party, at their respective addresses in
accordance with Section 10 hereof.
(g) Acknowledgement and Waiver
of Conflict. The parties hereby acknowledge that the Escrow
Agent has represented the Buyer in connection with the AP
Agreement. The Buyer and the Seller Group hereby waive any conflict
of interest arising by virtue of the Escrow Agent’s representation of the Buyer,
and hereby agree to acknowledge and approve the taking of any action by the
Escrow Agent reasonably necessary to protect and preserve its rights under this
Agreement.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
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IN
WITNESS WHEREOF, the parties have duly executed this Escrow Agreement as of the
day and year first above written.
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By:
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/s/ Xxxx Xxxxx
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Name:
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Xxxx
Xxxxx
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Title:
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CEO
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NEXT
LITHIUM CORP.
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By:
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/s/ Xxxxx X. XxxXxxxxxxx
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Name:
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Xxxxx
X. XxxXxxxxxxx
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Title:
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President
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NEXT
LITHIUM (NEVADA) CORP.
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By:
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/s/ Xxxxx X. XxxXxxxxxxx
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Name:
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Xxxxx
X. XxxXxxxxxxx
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Title:
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President
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GOTTBETTER
& PARTNERS, LLP
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By:
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/s/ Xxxx X. Xxxxxxxxxx
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Name:
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Xxxx
X. Xxxxxxxxxx, Esq.
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Title:
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Partner
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