ESCROW AGREEMENT
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Exhibit
99.2
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Form
of Escrow Agreement
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This
ESCROW AGREEMENT (this “Agreement”) is made
as of September [ ], 2008, by and among (i) Sino Clean Energy
Inc., a Nevada corporation (the “Company”), (ii) Xx.
Xxxxxx Xxx (the “Founder”), (iii)
Ancora Greater China Fund, LP (the “Lead Purchaser”) and the other purchasers
identified on the signature pages hereto (with the Lead Purchaser each a “Purchaser” and
collectively the “Purchasers”) and (v)
Xxxxxxxxxx & Xxxxx LLP, as escrow agent (the “Escrow
Agent”).
Recitals
WHEREAS,
the Company, Founder and the Purchasers have entered into a Securities Purchase
Agreement of even date hereof (the “Purchase
Agreement”);
WHEREAS,
the Company, Founder and the Purchasers desire to appoint the Escrow Agent to
act as escrow agent in the manner hereinafter set forth and the Escrow Agent is
willing to act in such capacity;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and
agreements set forth below and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Definitions.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Purchase Agreement.
2.
Appointment of
Agent. The Company, Founder and the Purchasers hereby appoint the Escrow
Agent as their agent to hold in escrow the Escrow Shares (as defined below), and
to administer the disposition of the Escrow Shares, in accordance with the terms
of this Escrow Agreement, and the Escrow Agent hereby accepts such
appointment.
3.
Establishment of the
Escrow Account.
(a) On
the Closing Date, Founder agrees to deliver or shall cause to be delivered to
the Escrow Agent pursuant to Section 2.2 of the Purchase Agreement certificate
or certificates with signed stock power or stock powers evidencing in the
aggregate [ ]
Common Shares (the “Escrow
Shares”).
(b) The
Escrow Agent agrees to hold the Escrow Shares in a separate account (the “Share Escrow
Account”). The Escrow Shares shall remain registered in the names of
Founder. Any shares of the Company’s Common Shares including shares issued upon
a stock split, stock dividend or other similar event) (“New Shares”) issued
or distributed by the Company in respect of the Escrow Shares that have not been
released from the Share Escrow Account shall be added to the Share Escrow
Account, and become a part thereof; provided, however, any other dividends or
distributions on the Escrow Shares (including on the New Shares) made in cash or
other property shall be currently distributed to the owners of such shares.
Founder shall be responsible for any taxes on such dividends or distributions
received by them. Founder shall retain the ability to direct the voting of that
number of Escrow Shares contributed to the Share Escrow Account on behalf of
Founder (and on any New Shares) so long as such shares are held in the Share
Escrow Account and shall be entitled to direct the disposition of any such
shares in the event of any tender offer or exchange offer made in respect of
such Escrow Shares (provided that the proceeds thereof shall be added to the
Escrow Funds and held in the Escrow Accounts as part thereof).
4.
No Interest in the
Escrow Shares. The Escrow Agent does not own or have any interest in the
Escrow Shares but is serving as escrow holder, having only possession thereof
and agreeing to hold and distribute the Escrow Shares in accordance with the
terms and conditions hereinafter set forth.
5.
Disposition of Escrow
Shares. The Escrow Agent will hold the Escrow Shares in its possession
until authorized, upon receipt of a certificate signed by each of the Company
and the Lead Purchaser, to deliver the Escrow Shares as follows:
(a) For
fiscal years ended December 31, 2008 and 2009, “Net Income” shall
mean the sum of (A) the audited net income as reported on the Company’s annual
report on Form 10-K (the “Annual Report”) for
the applicable fiscal year, plus (B) any non-cash charges incurred by the
Company in the applicable fiscal year as a result of the transactions
contemplated under the Purchase Agreement and the Transaction Documents,
including, without limitation, any non-cash charges incurred as a result of the
Securities issued or issuable pursuant to this Agreement and the Transaction
Documents. For fiscal years ended December 31, 2008 and 2009, “Cash” shall mean the
audited net cash provided from operating activities as reported on the Company’s
Annual Report for the applicable fiscal year.
(b) In the event that the Company’s Net Income or
Cash, calculated in accordance with GAAP and reported in the Annual Report for
fiscal year ended December 31, 2008, is less than the Fiscal Year 2008
Performance Threshold, then, within ten (10) Business Days after such Annual
Report is filed with the Commission, the Escrow Agent shall transfer to each
Purchaser that number of Escrow Shares equal to the product of one-half of the
Escrow Shares multiplied by the quotient of such Purchaser’s Purchase Price
divided by the Aggregate Purchase Price; and if the Net Income for fiscal year
ended December 31, 2008, is greater than or equal to the Fiscal Year 2008
Performance Threshold, then one-half of the Escrow Shares shall be returned to
Founder; and
(c) In the event that the Company’s Net Income or
Cash, calculated in accordance with GAAP and reported in the Annual Report for
fiscal year ended December 31, 2009, is less than the Fiscal Year 2009
Performance Threshold, then, within ten (10) Business Days after such Annual
Report is filed with the Commission, the Escrow Agent shall transfer to each
Purchaser that number of Escrow Shares equal to the product of the Escrow Shares
then in escrow multiplied by the quotient of such Purchaser’s Purchase Price
divided by the Aggregate Purchase Price; and if the Net Income for fiscal year
ended December 31, 2009, is greater than or equal to the Fiscal Year 2009
Performance Threshold, then all Escrow Shares then in escrow shall be returned
to Founder.
(d) In
case the number of Escrow Shares represented by the certificate or certificates
surrendered by Founder to the Escrow Agent pursuant to this Agreement and to be
released from time to time in accordance with this Section 4 exceeds the number
of shares so released under this Section 4, the Company shall, upon surrender of
such certificate or certificates, execute and deliver to the Escrow Agent new
certificates for the number of shares of Escrow Shares that are to be released
and that are not to be released, respectively
(e) With
respect to the disposition of Escrow Shares, any dispute relating thereto will
be settled by (i) mutual agreement of the Company and the Purchasers (as
evidenced by appropriate joint instructions in writing to the Escrow Agent) or
(ii) a final and nonappealable order of a court of competent jurisdiction. Upon
receipt of a copy of a final and nonappealable order of a court of competent
jurisdiction, accompanied by a certificate from the presenting party to the
effect that the order complies with this Section 4(e), the Escrow Agent will
deliver the Escrow Shares as directed by the order.
6. Escrow
Agent.
(a) The
Escrow Agent will have no duties or responsibilities except those expressly set
forth herein. Except for this Escrow Agreement, the Escrow Agent is not a party
to, or bound by, any agreement that may be required under, evidenced by, or
arise out of the Purchase Agreement.
(b) If
the Escrow Agent will be uncertain as to its duties or rights hereunder or will
receive instructions from any of the undersigned with respect to the Escrow
Shares, that, in its opinion, are in conflict with any of the provisions of this
Escrow Agreement, it will be entitled to refrain from taking any action until it
will be directed otherwise in writing jointly by the Company, Founder and the
Purchasers or by a final nonappealable order of a court of competent
jurisdiction.
(c) The
Escrow Agent will not be liable for any error or judgment or for any act done or
step taken or omitted by it in good faith or for any mistake of fact or law, or
for anything that it may do or refrain from doing in connection herewith, except
its own bad faith, gross negligence or willful misconduct, and the Escrow Agent
will have no duties to anyone except the Company, Founder and the Purchasers.
Escrow Agent shall not be liable for any action taken or omitted or for any loss
or injury resulting from its actions or its performance or lack of performance
of its duties hereunder in the absence of bad faith, gross negligence or willful
misconduct on its part. In no event shall Escrow Agent be liable (i) for acting
in accordance with or relying upon any instruction, notice, demand, certificate
or document provided to the Escrow Agent in accordance with the terms of this
Agreement, (ii) for any consequential, punitive or special damages, (iii) for
the acts or omissions of its nominees, correspondents, designees, subagents or
sub-custodians selected by Escrow Agent in its reasonable business judgment and
in good faith with the prior consent of the Company, Founder, and the
Purchasers, or (iv) for an amount in excess of the value of the Escrow Shares,
valued as of the date of deposit.
(d) The
Escrow Agent may consult legal counsel in the event of any dispute or question
as to the construction of this Escrow Agreement, or the Escrow Agent’s duties
hereunder, and the Escrow Agent will incur no liability and will be fully
protected with respect to any action taken or omitted in good faith in
accordance with the opinion and instructions of such counsel.
(e) In
the event of any disagreement between the undersigned or any of them, and/or any
other person, resulting in adverse claims and demands being made in connection
with or for the Escrow Shares, the Escrow Agent will be entitled at its option
to refuse to comply with any such claim or demand, so long as such disagreement
will continue, and in so doing the Escrow Agent will not be or become liable for
damages or interest to the undersigned or any of them or to any person named
herein for its failure or refusal to comply with such conflicting or adverse
demands. The Escrow Agent will be entitled to continue so to refrain and refuse
so to act until all differences with respect thereto will have been resolved by
agreement of Founder and the Purchasers and the Escrow Agent will have been
notified thereof in writing signed by Founder and the Purchasers. In the event
of such disagreement that continues for sixty (60) days or more, the Escrow
Agent in its discretion may file a suit in interpleader for the purpose of
having the respective rights of the claimants adjudicated, if the Escrow Agent
determines such action to be appropriate under the circumstances, and may
deposit with the court all documents and property held hereunder. Founder and
the Purchasers agree to pay all reasonable out-of-pocket costs and expenses
incurred by the Escrow Agent in such action, including reasonable attorney’s
fees, it being understood that the parties will use reasonable efforts to cause
such costs and expenses to be included and apportioned between (i) Founder and
(ii) the Purchasers in the judgment in any such action (and absent such
apportionment, Founder, and the Purchasers will bear equal shares of such costs
and expenses).
(f) The
Company, Founder and the Purchasers hereby agree to jointly and severally
indemnify the Escrow Agent, its agents, nominees, partners, employees, officers
and directors from all claims, losses, liabilities, costs, damages or expenses
(including reasonable attorneys’ fees and expenses) (collectively, “Losses”)
arising from or in connection with or related to this Escrow Agreement or being
Escrow Agent hereunder (including but not limited to Losses incurred by Escrow
Agent in connection with its successful defense, in whole or in part, of any
claim of bad faith, gross negligence or willful misconduct on its part),
provided, however, that nothing contained herein shall require Escrow Agent to
be indemnified for Losses that have resulted from the bad faith, willful
misconduct or gross negligence of the Escrow Agent. Such indemnification (i)
will be borne in equal proportions by the Company, Founder and the Purchasers
and (ii) will survive termination of this Escrow Agreement and resignation or
removal of the Escrow Agent until extinguished by any applicable statute of
limitations.
(g) The
Escrow Agent does not own or have any interest in the Escrow Shares deposited
hereunder but is serving as escrow holder only and having only possession
thereof and agreeing to hold and distribute the Escrow Shares in accordance with
the terms and conditions of this Agreement. This paragraph will survive
notwithstanding any termination of this Escrow Agreement or the resignation or
removal of the Escrow Agent.
(h) The
Escrow Agent (and any successor Escrow Agent) may at any time resign as such by
delivering the Escrow Shares to (i) any banking corporation or trust company
organized under the laws of the United States or of any state that is jointly
designated by the other parties hereto in writing as successor escrow agent and
consents in writing to act as successor escrow agent or (ii) any court of
competent jurisdiction; whereupon the Escrow Agent will be discharged of and
from any and all further obligations arising in connection with this Escrow
Agreement. The resignation of the Escrow Agent will take effect on the earlier
of (x) the appointment
of a successor escrow agent by designation by the other parties hereto and
delivery of the Escrow Shares to such successor escrow agent (or delivery of the
Escrow Shares to any court of competent jurisdiction) or (y) the day that is sixty (60)
days after the date of delivery of its written notice of resignation to the
other parties. If at that time the Escrow Agent has not received a designation
of a successor Escrow Agent, the Escrow Agent’s sole responsibility after that
time will be to safe-keep the Escrow Shares until receipt of a designation of
successor Escrow Agent, or a joint written instruction as to disposition of the
Escrow Shares by the other parties, or a final order of a court of competent
jurisdiction mandating disposition of the Escrow Shares.
(i) The
Escrow Agent hereby accepts its appointment and agrees to act as escrow agent
under the terms and conditions of this Escrow Agreement and acknowledges receipt
of the Escrow Shares. Escrow Agent shall not be compensated for its services
hereunder, provided that Founder and the Purchasers agree to reimburse the
Escrow Agent for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by the Escrow Agent in the performance of its duties
hereunder (including reasonable fees, and out-of-pocket expenses and
disbursements, of its counsel). Founder and the Purchasers will pay one-half of
the amounts required to be paid to the Escrow Agent pursuant to this Section
6(i).
7.
Other
Deliverables. Prior to the Closing date, the Company, Founder and the
Purchasers agree to provide the Escrow Agent with the following
items:
(a) An
incumbency certificate for each of the Company and the Purchasers, which
certificate shall set forth the name, title and signature of each person
permitted to authorize documents on their behalf pursuant to this Agreement,
respectively; and
(b) A
written investment direction executed by the Company, Founder and the
Purchasers.
8.
Notices.
All notices or other communications required or permitted hereunder shall be in
writing, and shall be sent as set forth in the Purchase Agreement.
9.
Termination.
This Agreement will automatically terminate upon the final distribution of the
Escrow Shares in accordance with the terms hereof.
10. Successors and
Assigns. This Agreement will be binding upon and inure to the benefit of
the respective successors and permitted assigns of the parties, provided that no rights or
obligations arising under this Agreement may be assigned by any party without
the prior written consent of the other parties.
11. Severability. If any
term or other provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or under public policy, all other conditions
and provisions of this Agreement will nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto will negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
12. Entire Agreement.
This Agreement, together with any documents, instruments and certificates
explicitly referred to herein, constitutes the entire agreement among the
parties and supersedes any and all prior communications, agreements and
understandings, written and oral, with respect to the subject matter
hereof.
13. Amendments. This
Agreement may not be amended or modified at any time except by a written
instrument executed by each of Founder, the Escrow Agent (or any successor
escrow agent designated in accordance with the provisions of Section 7 above),
the Company and the Purchaser.
14. Waiver. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
will impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor will any
single or partial exercise of any such right preclude any other or further
exercise thereof or of any other right. No waiver by any party will be effective
unless such waiver is specifically contained in a writing signed by such waiving
party.
15. Headings. The
headings contained in this Agreement are inserted only for reference as a matter
of convenience and in no way define, limit, or describe the scope or intent of
this Agreement, and will not affect in any way the meaning or interpretation of
this Agreement.
16. Governing Law. This
Agreement, and all claims arising in whole or in part out of, related to, based
upon, or in connection herewith or the subject matter hereof will be governed by
and construed in accordance with the domestic substantive laws of the State of
New York, without giving effect to any choice or conflict of law provision or
rule that would cause the application of the laws of any other
jurisdiction.
17. Jurisdiction and Venue;
Waiver of Jury Trial. Each of the parties submits to the exclusive
jurisdiction of any state or federal court sitting in the City of New York, New
York, in any action or proceeding arising out of or relating to this Agreement,
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each of the
parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety or other security
that might be required of any other party with respect thereto. Each party
agrees that service of summons and complaint or any other process that might be
served in any action or proceeding may be made on such party by sending or
delivering a copy of the process to the party to be served at the address of the
party and in the manner provided for the giving of notices in Section 8. Nothing
in this Section 17, however, shall affect the right of any party to serve legal
process in any other manner permitted by law. Each party agrees that a final,
non-appealable judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL
RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT.
18. Force Majeure. No
party to this Escrow Agreement is liable to any other party for losses due to,
or if it is unable to perform its obligations under the terms of this Escrow
Agreement because of, acts of God, fire, floods, strikes, equipment or
transmission failure, or other causes reasonably beyond its
control.
19. Counterparts. This
Agreement may be executed in any number of counterparts, and by the different
parties hereto in separate counterparts, each of which will be deemed an
original for all purposes and all of which together will constitute one and the
same instrument. This Agreement may be executed by facsimile signature by any
party and such signature will be deemed binding for all purposes hereof without
delivery of an original signature being thereafter required.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as of the
date first above written.
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THE
ESCROW AGENT:
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XXXXXXXXXX
& XXXXX LLP
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By:____________________________
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Name:
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Title:
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THE
COMPANY:
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By:____________________________
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Name:
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Title:
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FOUNDER:
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BAOWEN
REN
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By:____________________________
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Name:
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Title:
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[PURCHASER SIGNATURE PAGE
FOLLOWS]
IN
WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as of the
date first above written.
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THE
PURCHASERS:
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By:____________________________
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Name:
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Title:
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