CLOSING ESCROW AGREEMENT
Exhibit
10.3
CLOSING
ESCROW AGREEMENT,
dated
May 3, 2007 (“Escrow
Agreement”),
is
entered into by and between Millennium Quest, Inc., a Delaware corporation
(the
“Company”),
Xxxxxx Xxxx Xxxxx Raysman & Xxxxxxx LLP (the “Escrow
Agent”)
and
Sterne Agee & Xxxxx, Inc., as agent (“Sterne
Agee”).
BACKGROUND
Concurrently
herewith the Company and Investors are entering into a Securities Purchase
Agreement, dated as of the date hereof (the “Purchase
Agreement”),
pursuant to which each Investor (as defined therein) has agreed to purchase
from
the Company, and the Company has agreed to sell to each Investor, the number
of
Shares and Warrants identified therein (capitalized terms used and not otherwise
defined herein shall have the meanings given such terms in the Purchase
Agreement).
Pursuant
to the Purchase Agreement, the Company and the Investors have agreed to
establish an escrow on the terms and conditions set forth in this Escrow
Agreement and the Escrow Agent is willing to accept appointment as Escrow Agent
for only the expressed duties outlined herein.
NOW,
THEREFORE,
in
consideration of the premises set forth above and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1.
Proceeds
to be Escrowed. A
copy of
the Purchase Agreement is attached as Exhibit
A.
All
amounts provided by the Investors in connection with their acquisition of the
Shares and Warrants as set forth in the Purchase Agreement shall be deposited
directly with the Escrow Agent in immediately available funds by federal wire
transfer, such funds being referred to herein as the “Escrow
Funds.”
The
Escrow Funds shall be retained in escrow by the Escrow Agent in a separate
account and invested as stated below.
2.
Identity
of Investors. Concurrent
with the execution of the Escrow Agreement, the Company shall furnish to the
Escrow Agent the information comprising the identity of the Investors in the
format set forth in the “List
of Investors”
attached as Exhibit
B,
or in
an electronic spreadsheet format with the same information. All Escrow Funds
shall remain the property of the Investors and shall not be subject to any
liens
or charges by the Company or the Escrow Agent or judgments or creditors' claims
against the Company, until released to the Company as hereinafter provided.
Escrow Agent will not use the information provided to it by the Company for
any
purpose other than to fulfill its obligations as Escrow Agent. The Company
and
the Escrow Agent will treat all Investor information as
confidential.
3.
Disbursement
of Funds.
(a) The
Escrow Agent shall continue to hold the Escrow Funds delivered for deposit
hereunder by an Investor until the earlier of: (1) receipt of a joint written
notice from the Company and the Investors evidencing termination under Section
7.5(a) of the Purchase Agreement, (2) receipt of a written notice from the
Company or such Investor evidencing termination under Section 7.5(b) of the
Purchase Agreement (each of (1) and (2), a “Termination
Election”)
and
(3) receipt of both (x) written notice from the Company that the conditions
to
closing under Section 6.1 of the Purchase Agreement have been satisfied and
(y)
joint written notice from the Company and Sterne Agee, who acted as placement
agent in connection with the transactions contemplated by the Purchase
Agreement, to effect the Closing.
(b) If
the
Escrow Agent receives a Termination Election prior to its receipt of the notices
contemplated under Section 3(a)(3), then the Escrow Agent shall return the
Escrow Funds delivered by such Investor as directed by such Investor. If the
Escrow Agent receives the notices contemplated under Section 3(a)(3) prior
to a
Termination Election, then the Escrow Agent shall disburse the portion of the
Escrow Funds for which the foregoing is the case in accordance with Exhibit
C
to this
Escrow Agreement.
4.
Duty
and Limitation on Liability of the Escrow Agent. The
sole
duty of the Escrow Agent shall be to receive the Escrow Funds and to hold them
subject to release, in accordance herewith, and the Escrow Agent shall be under
no duty to determine whether the Company is complying with requirements of
the
Escrow Agreement or the Purchase Agreement. The Escrow Agent may conclusively
rely upon and shall be protected in acting upon any statement, certificate,
notice, request, consent, order or other document believed by it to be genuine
and to have been signed or presented by the proper party or parties. The Escrow
Agent shall have no duty or liability to verify any such statement, certificate,
notice, request, consent, order or other document, and its sole responsibility
shall be to act only as expressly set forth in the Escrow Agreement. The Escrow
Agent shall be under no obligation to institute or defend any action, suit
or
proceeding in connection with the Escrow Agreement unless first indemnified
to
its satisfaction. The Escrow Agent may consult counsel of its own choice with
respect to any question arising under the Escrow Agreement and the Escrow Agent
shall not be liable for any action taken or omitted in good faith upon advice
of
such counsel.
In
no
event shall the Escrow Agent be liable, directly or indirectly, for any (a)
damages or expenses arising out of the services provided hereunder, other than
damages which result from the Escrow Agent’s gross negligence or willful
misconduct or (b) special or consequential damages, even if the Escrow Agent
has
been advised of the possibility of such damages.
The
Escrow Agent shall be obligated only to perform the duties specifically set
forth in this Escrow Agreement, which shall be deemed purely ministerial in
nature, and shall under no circumstances be deemed to be a fiduciary to the
Company, Sterne Agee or any other person. The Escrow Agent shall not assume
any
responsibility for the failure of the Company to perform in accordance with
this
Escrow Agreement. This Escrow Agreement sets forth all matters pertinent to
the
escrow contemplated hereunder, and no additional obligations of the Escrow
Agent
shall be implied by nor inferred from the terms of any other agreement,
including, without limitation, the Purchase Agreement.
Under
no
circumstances shall the Escrow Agent be expected or required to use, risk or
advance its own funds in the performance of its duties or exercise of its rights
hereunder.
The
Investors (by agreeing to use this form of Closing Escrow Agreement) and Sterne
Agee acknowledge that they are aware that the Escrow Agent has represented
the
Company in connection with the Purchase Agreement and this Escrow Agreement
and
that Escrow Agent may continue to represent the Company in that connection
and
in connection with the transactions contemplated by those agreements, including,
but not limited to, in connection with any disputes that may arise under either
of those agreements. The Escrow Agent shall not be precluded from or restricted
from representing the Company or any of its affiliates or otherwise acting
as
attorneys for the Company or any of its affiliates in any matter, including,
but
not limited to, any court proceeding or other matter related to the Purchase
Agreement or the transactions contemplated by the Purchase Agreement, or this
Escrow Agreement or the Escrow Funds, whether or not there is a dispute between
the Investors, Sterne Agee and/or the Company with respect to any such
matter.
5.
Interpleader.
The
Escrow Agent may at any time commence an action in the nature of interpleader
or
other legal proceedings and may deposit the Escrow Deposit with the clerk of
the
court. In the event of any dispute regarding who is entitled to the Escrow
Deposit at any time, the Escrow Agent may determine not to release the Escrow
Deposit to either any Investor or the Company and may commence an interpleader
action as aforesaid or may cause the Escrow Deposit to be deposited with a
court
of competent jurisdiction whereupon it shall cease to have any further
obligation hereunder. Upon any delivery or deposit of the Escrow Deposit as
provided in this Section 5, the Escrow Agent shall be released and discharged
from any further obligation under this Agreement.
6.
Investment
of Proceeds. The
Escrow Funds shall be credited by Escrow Agent and recorded in a non-interest
bearing escrow account. The
Company agrees to indemnify and hold Escrow Agent harmless from and against
any
taxes, additions for late payment, interest, penalties and other expenses that
may be assessed against Escrow Agent on or with respect to any payment or other
activities under this Escrow Agreement unless any such tax, addition for late
payment, interest, penalties and other expenses shall arise out of or be caused
by the gross negligence or willful misconduct of the Escrow Agent.
The
Company acknowledges that Escrow Agent is not providing investment supervision,
recommendations or advice.
7.
Notices.
All
notices, requests, demands and other communications under the Escrow Agreement
shall be in writing and shall be deemed to have been duly given (a) on the
date
of service if served personally on the party to whom notice is to be given,
(b)
on the day of transmission if sent by facsimile/email transmission to the
facsimile number/email address given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, (c) on the day
after delivery to Federal Express or similar overnight courier or the Express
Mail service maintained by the United States Postal Service or (d) on the fifth
day after mailing, if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid, and properly
addressed, return receipt requested, to the party as follows:
| If to the Company: | Millennium Quest, Inc.
Beihuan
Road
Junan
County
Shandong,
China 276600
Attn:
Mr. Xx Xxxx, Chairman and Chief Executive Officer
Facsimile:
(0086539) 7314886 7311026
|
|
|
|
||
| If to Escrow Agent: | Xxxxxx Xxxx Xxxxx Raysman & Xxxxxxx
LLP
000
0xx
Xxxxxx XX
Xxxxxxxxxx,
X.X. 00000
Attn.:
Xxxxx X. Xxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
|
|
| If to Sterne Agee: |
Sterne
Agee & Xxxxx, Inc.,
0000
X. Xxxxx Xxxxxxx, Xxx. 000
Xxxxxxx
Xxxxx, XX 00000
Attn:
Xxxxxxx X. Xxxxxx
Facsimile:
(000) 000-0000
|
|
| If to an Investor: | To the address set forth under such Investor’s name on its signature page to the Purchase Agreement. |
Any
party
may change its address for purposes of this paragraph by giving the other party
written notice of the new address in the manner set forth above.
8.
Indemnification
of Escrow Agent. The Company
hereby indemnifies and holds harmless the Escrow Agent from and against any
and
all loss, liability, cost, damage and expense, including, without limitation,
reasonable counsel fees, which the Escrow Agent may suffer or incur by reason
of
any action, claim or proceeding brought against the Escrow Agent arising out
of
or relating in any way to the Escrow Agreement or any transaction to which
the
Escrow Agreement relates unless such action, claim or proceeding is the result
of the willful misconduct or gross negligence of the Escrow Agent. For this
purpose, the term "attorneys' fees" includes fees payable to any counsel
retained by the Escrow Agent in connection with its services under this
Agreement and, with respect to any matter arising under this Escrow Agreement
as
to which the Escrow Agent performs legal services, if and to the extent that
the
Escrow Agent itself is a law firm, its standard hourly rates and charges then
in
effect. All of the Escrow Agent's rights of indemnification provided for in
this
Escrow Agreement shall survive the resignation of the Escrow Agent, its
replacement by a successor Escrow Agent, its delivery or deposit of the Escrow
Funds in accordance with this Escrow Agreement, the termination of this Escrow
Agreement, and any other event that occurs after this date.
9.
Successors
and Assigns. Except
as
otherwise provided in the Escrow Agreement, no party hereto shall assign the
Escrow Agreement or any rights or obligations hereunder without the prior
written consent of the other parties hereto, and any such attempted assignment
without such prior written consent shall be void and of no force and effect.
The
Escrow Agreement shall inure to the benefit of and shall be binding upon the
successors and permitted assigns of the parties hereto.
10. Governing
Law; Jurisdiction. The
Escrow Agreement shall be construed, performed and enforced in accordance with,
and governed by the internal laws of the State of New York, without giving
effect to the principles of conflicts of laws thereof.
11.
Severability. In
the
event that any part of the Escrow Agreement is declared by any court or other
judicial or administrative body to be null, void, or unenforceable, said
provision shall survive to the extent it is not so declared, and all of the
other provisions of the Escrow Agreement shall remain in full force and
effect.
12.
Amendments; Waivers. The
Escrow Agreement may be amended or modified, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, only by a
written instrument executed by each of the Company, the Escrow Agent and Sterne
Agee. Any waiver by any party of any condition or of the breach of any
provision, term, covenant, representation or warranty contained in the Escrow
Agreement, in any one or more instances, shall not be deemed to be nor construed
as further or continuing waiver of any such condition, or of the breach of
any
other provision, term, covenant, representation or warranty of the Escrow
Agreement.
13.
Entire Agreement. The
Escrow Agreement contains the entire understanding among the parties hereto
with
respect to the escrow contemplated hereby and supersedes and replaces all prior
and contemporaneous agreements and understandings, oral or written, with regard
to such escrow.
14.
Section Headings. The
section headings in the Escrow Agreement are for reference purposes only and
shall not affect the meaning or interpretation of the Escrow
Agreement.
15.
Counterparts. The
Escrow Agreement may be executed in counterparts, each of which shall be deemed
an original, but all of which shall constitute the same instrument.
16.
Resignation. Escrow
Agent may resign upon 30 days advance written notice to the Company. If a
successor escrow agent is not appointed within the 30-day period following
such
notice, Escrow Agent may petition any court of competent jurisdiction to name
a
successor escrow agent or interplead the Escrow Funds with such court, whereupon
Escrow Agent’s duties hereunder shall terminate.
17.
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto, the Investors
and
their respective successors and permitted assigns and is not for the benefit
of,
nor may any provision hereof be enforced by, any other person or
entity.
[Signature
page follows]
IN
WITNESS WHEREOF,
the
parties hereto have caused the Escrow Agreement to be executed the day and
year
first set forth above.
MILLENNIUM
QUEST, INC.
/s/Xx
Xxxx
By:
Xx
Xxxx
Its:
Chief Executive Officer
XXXXXX
XXXX XXXXX RAYSMAN & XXXXXXX LLP
By:
/s/Xxxxx
X. Xxxxxxxxxx
Name:
Xxxxx X. Xxxxxxxxxx
Title:
Partner
STERNE
AGEE & XXXXX, INC.
/s/Xxxx
Xxxx
By:
Xxxx
Xxxx
Its:
Managing Director, Capital Markets
