ESCROW AGREEMENT
Exhibit
10.3
This
Escrow Agreement (this “Agreement”),
entered into as of this _____ day of June, 2007, is by and among China Agritech,
Inc., a Delaware corporation (the “Company”),
the
Investors listed in Exhibit
A
hereto
(“Investors”)
and
Securities Transfer Corporation (hereinafter referred to as the “Escrow
Agent”).
All
capitalized terms used but not defined herein shall have the meanings assigned
them in the Purchase Agreement (as hereinafter defined).
BACKGROUND
The
Company and the Investors have entered into a Securities Purchase Agreement
(the
“Purchase
Agreement”)
pursuant to which each Investor has agreed to purchase from the Company, and
the
Company has agreed to sell to each Investor, the number of shares of common
stock, par value $0.001 per share, of the Company identified therein (the
“Shares”).
The
Company and the Investors have agreed to establish an escrow on the terms and
conditions set forth in this Agreement. Xxxx Capital Partners, LLC has acted
as
placement agent in connection with the transactions contemplated by the Purchase
Agreement. The Escrow Agent has agreed to act as escrow agent pursuant to the
terms and conditions of this Agreement.
AGREEMENT
NOW,
THEREFORE, in consideration of the promises of the parties and the terms and
conditions hereof, the parties hereby agree as follows:
1. Appointment
of Escrow Agent.
The
Company and Xxxx hereby appoint the Escrow Agent as escrow agent to act in
accordance with the Purchase Agreement and the terms and conditions set forth
in
this Agreement, and the Escrow Agent hereby accepts such appointment and agrees
to act in accordance with such terms and conditions.
2. Establishment
of Escrow.
All
amounts instructed in the funds flow memorandum attached hereto as Exhibit
C
to be
provided to the Escrow Agent shall be deposited with the Escrow Agent in
immediately available funds by federal wire transfer or cashiers check to the
account set forth in Exhibit
B
to this
Agreement, such funds being referred to herein as the “Escrow
Funds”.
3. Segregation
of Escrow Funds.
The
Escrow Funds shall be segregated from the assets of the Escrow Agent and held
in
trust for the benefit of the Company and the Investors in accordance
herewith.
4. Receipt
and Investment of Funds.
(a) The
Escrow Agent agrees to place the Escrow Funds in a non-interest bearing and
federally insured depository account. At the Company’s direction, the Company
may request, and the Escrow Agent shall, upon the completion of appropriate
documentation by the Company, move the Escrow Funds to an interest bearing
and
federally insured depository account (all interest earned on the interest
bearing account shall be disbursed with the Escrow Funds in accordance with
this
Agreement). Subject to Section 7(c) hereof, the Escrow Agent shall have no
liability for any loss resulting from the deposit of the Escrow
Funds.
(b) The
Escrow Agent shall cause to be prepared all income and other tax returns and
reports as the Escrow Agent, in its sole discretion, deems necessary or
advisable in order to comply with all tax and other laws, rules and regulations
applicable to the Escrow Funds.
5. Disbursement
of the Escrow Funds.
(a) The
Escrow Agent shall continue to hold the Escrow Funds delivered for deposit
hereunder by the Investors until the earlier of: (1) receipt of a joint written
notice from the Company and Xxxx, evidencing termination under Section 6.5(a)
of
the Purchase Agreement, (2) receipt of a written notice from the Company or
Xxxx
evidencing termination under Section 6.5(b) of the Purchase Agreement (each
of
(1) and (2), a “Termination
Election”)
or (3)
receipt of a joint written notice from the Company and Xxxx that the conditions
to closing under the Purchase Agreement have been satisfied and to disburse
the
Escrow Funds in accordance with Section 5(b) below.
(b) If
the
Escrow Agent receives a Termination Election prior to its receipt of the notice
contemplated under Section 5(a)(3), then the Escrow Agent shall return the
Escrow Funds delivered by the Investors as directed by the Investors. If the
Escrow Agent receives the notice contemplated under Section 5(a)(3) prior to
a
Termination Election, then the Escrow Agent shall disburse the Escrow Funds
in
accordance with the funds flow memorandum attached hereto as Exhibit
C.
(c) Following
the Closing, if any, the Holdback Escrow Amount (as hereinafter defined) (which
shall form a part of the Escrow Funds) shall continue to be held in the escrow
account following disbursement of the balance of the Escrow Funds in accordance
with Exhibit
C
to this
Escrow Agreement. An amount of $2,000,000.00 shall be released by the Escrow
Agent to the Company upon the Escrow Agent’s receipt of joint
written notice from the Company and Xxxx Capital Partners, LLC that the Company
has complied with both Section 4.11 and Section 4.15 of the Purchase
Agreement
(the
“Holdback
Escrow Amount”).
If
for any reason, or for no reason whatsoever, the Escrow Agent does not receive
the joint written notice relating to the Holdback Escrow Amount prior to the
six
month anniversary of the Closing Date, then such Holdback Escrow Amount shall
remain in the escrow account until such time as the Escrow Agent receives a
joint written notice from the Company and Xxxx Capital Partners, LLC that the
Company has complied with both Section 4.11 and Section 4.15 of the Purchase
Agreement.
(d) This
Escrow Agreement shall terminate and be of no further force or effect on the
disbursement of all Escrow Funds.
(e) Each
of
the Investors represents, as to itself or himself only, that, except as
otherwise provided in Section 5(b), (i) any amounts placed into escrow under
this Escrow Agreement or in accordance with the Purchase Agreement are not
refundable to such Investor, (ii) such Investor does not have any control or
discretion over the release of the funds in the escrow account established
by
this Escrow Agreement, and (iii) such Investor has not been issued, or will
not
be entitled to, a refund or repayment of any amounts held in escrow under this
Escrow Agreement.
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6. Interpleader.
Should
any controversy arise among the parties hereto with respect to this Agreement
or
with respect to the right to receive the Escrow Funds, the Escrow Agent shall
have the right to consult counsel and/or to institute an appropriate
interpleader action to determine the rights of the parties. The 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
the Escrow Agent. If the 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 6 shall be filed in any court of competent jurisdiction in New York,
New
York, and the portion of the Escrow Funds in dispute shall be deposited with
the
court and in such event the Escrow Agent shall be relieved of and discharged
from any and all obligations and liabilities under and pursuant to this
Agreement with respect to that portion of the Escrow Funds.
7. Exculpation,
Indemnification and Compensation of Escrow Agent.
(a) The
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. The 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 or depositing the Escrow
Funds. The Escrow Agent will have no duties or responsibilities other than
those
expressly set forth herein. The Escrow Agent will be under no liability to
anyone by reason of any failure on the part of any party hereto (other than
the
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 the Escrow Agent
pursuant to the terms of this Agreement, the 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) The
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 the 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 the 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.
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(c) The
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 the 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 the Escrow Agent hereunder; except, that
if
the Escrow Agent is guilty of willful misconduct, fraud or gross negligence
under this Agreement, then the Escrow Agent will bear all losses, damages and
expenses arising as a result of such willful misconduct, fraud or gross
negligence. 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
Agreement as to which the Escrow Agent performs legal services, its standard
hourly rates and charges then in effect. Promptly after the receipt by the
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, the 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 7 shall survive
the
termination of this Agreement.
(d) Compensation
of Escrow Agent. The Company will pay Escrow Agent $3,000 for
all
services rendered by Escrow Agent hereunder.
8. Resignation
of Escrow Agent.
At any
time, upon ten (10) days’ written notice to the parties hereto, the Escrow Agent
may resign and be discharged from its duties as Escrow Agent hereunder. As
soon
as practicable after its resignation, the Escrow Agent will promptly turn over
to a successor escrow agent appointed by the parties hereto all monies and
property 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 the Escrow Agent, the
parties hereto shall have failed to appoint a successor escrow agent, the Escrow
Agent may interplead the Escrow Funds into the registry of any court having
jurisdiction.
9. Method
of Distribution by Escrow Agent.
All
disbursements by the Escrow Agent pursuant to this Agreement will be made by
wire transfer of immediately available funds in accordance with the funds flow
memorandum attached hereto as Exhibit
C.
10. Records.
The
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,
the
Escrow Agent shall provide the parties hereto, as the case may be, with a
complete copy of such records, certified by the 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 the
Escrow Agent.
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11. Matters
Relating to Xxxx.
The
Company agrees to indemnify Xxxx to the same extent that they indemnify the
Escrow Agent hereunder. Furthermore, Xxxx shall be entitled to the same
exculpatory provisions applicable to the Escrow Agent, as set forth more
specifically in Section 7 herein.
12. Notice.
All
notices, requests, demands and other communications under this 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 Escrow Agent: |
Securities
Transfer Corporation
|
0000
Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Facsimile:
(000)-000-0000
Attn.:
Xxxxx X. Xxxxxx, Xx.
| If to the Company: |
China
Agritech, Inc.
|
A#
Room
0706-0707, The Spaces International Center
Xx.
0,
Xxxxxxxxxx Xxxx
Xxxxxxxx
Xxxxxxxx, Xxxxxxx 100020
People's
Republic of China
Facsimile:
86 10 5870 2108
Attention:
President
| If to an Investor: |
To
the address set forth under such Investor’s name on Exhibit
A
hereto;
|
or
to
such other address and to the attention of such other person as any of the
above
may have furnished to the other parties in writing and delivered in accordance
with the provisions set forth above.
13. Execution
in Counterparts; Facsimile Execution.
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. Facsimile execution and delivery of this Agreement is legal, valid
and binding for all purposes.
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. 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. No other person will acquire or have any rights under, or
by
virtue of, this Agreement. No portion of the Escrow Funds 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. This Agreement may be changed or modified only in writing signed
by
all of the parties hereto.
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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, USA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN.
THE PARTIES EXPRESSLY WAIVE SUCH DUTIES AND LIABILITIES, IT BEING THEIR INTENT
TO CREATE SOLELY AN AGENCY RELATIONSHIP AND HOLD THE ESCROW AGENT LIABLE ONLY
IN
THE EVENT OF ITS WILLFUL MISCONDUCT, FRAUD, OR GROSS NEGLIGENCE. ANY LITIGATION
CONCERNING THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE EXCLUSIVELY PROSECUTED
IN THE COURTS OF NEW YORK COUNTY, NEW YORK, USA, AND ALL PARTIES CONSENT TO
THE
EXCLUSIVE JURISDICTION AND VENUE OF THOSE COURTS.
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.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.
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The
Company:
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CHINA
AGRITECH, INC.
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By:
________________________________
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Name:
Xx Xxxxx
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Title:
Chief Executive Officer
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Escrow
Agent:
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SECURITIES
TRANSFER CORPORATION
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By:
_______________________________
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Name:
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Title:
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Investors:
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___________________________________
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By:
________________________________
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Name:
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Title:
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Address
for notice:
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___________________________________
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