ESCROW AGREEMENT
This
ESCROW AGREEMENT (this “Agreement”)
made
as of June
11,
2008 by and between China Advanced Construction Materials 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 American Stock Transfer & Trust
Company, 00 Xxxxxx Xxxx, Xxx Xxxx, XX 00000 (the “Escrow
Agent”).
WITNESETH:
WHEREAS,
the Issuer proposes to sell units (“Units”),
each
consisting of (i) one share of Issuer’s Series A Convertible Preferred
Stock, par value $.001 per share, each share of which shall be convertible
into
four (4) shares of the Issuer’s Common Stock, par value $0.001 per share (the
“Common
Stock”)
and
(ii) a warrant to purchase two (2) shares of Common Stock, par value $0.001
per share;
WHEREAS,
the Issuer is offering to “accredited investors,” on a “best efforts” basis, up
to 875,000 Units at a purchase price per Unit of $8.00 (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 or the Issuer 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;
WHEREAS,
the Escrow Agent has an agreement with XX Xxxxxx Xxxxx Bank (the “Bank”)
to
establish a special bank account into which the subscription monies, which
are
received by the Escrow 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 the 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 from prospective purchasers of
the
Units and are delivered 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.
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 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 mutual discretion of both the Company
and the Placement Agent (an “Extension
Period”)
only
if the Escrow Agent shall have received 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, same shall
be credited to the Escrow Account. All checks delivered to the Escrow Agent
shall be made payable to “China
Advanced Construction Materials Group Escrow Account.”
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 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.
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 or wires that are not accompanied
by
the appropriate subscription information.
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.
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3.5 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 the Issuer and
the
Placement Agent.
3.7 If
prior
to the disbursement of the Fund in accordance with Section 4.2 below, the Escrow
Agent has received notice from the Issuer that the subscription of a purchaser
has been rejected since such purchaser does not qualify as an investor in the
Offering, the Escrow Agent shall promptly refund to such 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
therefrom, by drawing a check on the Bank Account for the amount of such payment
and transmitting it to the purchaser.
4. Disbursement
from the Bank Account.
4.1 Subject
to Section 4.3 below, if the Offering is terminated before the Termination
Date
by the Issuer, the Escrow Agent shall, upon its receipt of written instructions
signed by both the Issuer and the Placement Agent, refund to each prospective
subscriber the aggregate amount of the payment from said subscriber then held
in
the Fund or which thereafter clears the banking system, without interest thereon
or deduction therefrom.
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 has received joint written instructions
from the Issuer and the Placement Agent that all conditions for release of
funds
and the issuance of
Securities have been met for closing, the Escrow Agent shall promptly disburse
the Fund in accordance with such instructions; the parties hereto acknowledge
and agree that
there will only be one closing of the Offering prior to the Termination
Date.
4.3 Upon
disbursement of all amounts in 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 with respect to the Escrow Account. 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 subscription agreement or any other agreement between
the Placement Agent and the Issuer and any prospective purchaser nor shall
the
Escrow Agent be responsible for the performance by the Issuer of its obligations
under this Agreement.
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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 and date of such payments; however,
the Escrow Agent shall notify the Placement Agent or the Issuer 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.
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, except in the case of willful misconduct or gross negligence
on
the part of Escrow Agent.
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.
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6. Amendment:
Resignation.
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 for any
reason upon five (5) business days' written notice to the Issuer and the
Placement Agent. Should the Escrow Agent resign as herein provided, it shall
not
be required to accept any deposit, make any disbursement or otherwise dispose
of
the Escrow Amounts or the Fund, but its only duty shall be to hold the Escrow
Amounts until they clear the banking system and the Fund for a period of not
more than five (5) business days following the effective date of such
resignation, at which time (a) if a successor escrow agent shall have been
appointed and written notice thereof (including the name and address of such
successor escrow agent) shall have been given to the resigning Escrow Agent
by
the Issuer or the Placement Agent and such successor escrow agent, then the
resigning Escrow Agent shall deliver over to the successor escrow agent the
Fund, less any portion thereof previously paid out in accordance with this
Agreement; or (b) if the resigning Escrow Agent shall not have received written
notice signed by the Issuer or the Placement Agent, and a successor escrow
agent, then the resigning Escrow Agent shall promptly refund the amount in
the
Fund to each prospective purchaser, without interest thereon or deduction
therefrom, and the resigning Escrow Agent shall promptly notify the Issuer
and
the Placement Agent in writing of its liquidation and distribution of the Fund;
whereupon, in either case, the Escrow Agent shall be relieved of all further
obligations and released from all liability under this Agreement.
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.
8. Fees
and Expenses.
The
Escrow Agent shall be entitled to the Escrow Agent Fees set forth on the
Information Sheet, payable by the Issuer as and when stated therein. In
addition, the Issuer agrees to reimburse the Escrow Agent for any reasonable
expenses incurred in connection with this Agreement, including, but not limited
to, reasonable counsel fees of one counsel. The Escrow Agent confirms that
no
additional expenses shall be incurred absent extraordinary conditions.
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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
any 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
reasonable 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.
9.3 The
provisions of this Section 9 shall survive any termination of this Agreement,
whether by disbursement of the Fund, resignation of the Escrow Agent or
otherwise.
10. Governing
Law and Assignment.
This
Agreement shall be construed in accordance with and governed by the laws of
the
State of New York 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.
11. 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, or by overnight courier, 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.
12. 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.
13. Execution
in Several Counterparts.
This
Agreement may be executed in several counterparts or by separate instruments,
and all of such counterparts and instruments shall constitute one agreement,
binding on all of the parties hereto.
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14. 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.
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IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the day
and
year first above written.
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AMERICAN STOCK TRANSFER & TRUST COMPANY
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By:
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/s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
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Title: Vice President
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CHINA ADVANCED CONSTRUCTION MATERIALS
GROUP, INC.
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By:
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/s/ Xxxxxx Xxx
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Name: Xxxxxx Xxx
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Title: Chief Executive Officer
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MAXIM
GROUP LLC
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By:
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/s/ Xxxxxxxx X. Xxxxxx
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Name: Xxxxxxxx X. Xxxxxx
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Title: Director of Investment Banking
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EXHIBIT
A
ESCROW
AGREEMENT INFORMATION SHEET
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1.
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The
Issuer
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Name:
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Address:
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c/o
Xin Ao Construction Materials, Inc.
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Yingu
Xxxxx 0, Xxxxxxxxxx Xxxx, Xxxxx 0000
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Xxxxxx
Xxxxxxxx, Xxxxxxx 100080 PRC
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State
of
incorporation of organization: Delaware
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2.
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The
Placement Agent
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Name:
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Maxim
Group LLC
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Address:
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000
Xxxxxxxxx Xxxxxx
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Xxx
Xxxx, Xxx Xxxx 00000
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3. The
Securities
Description
of the securities to be offered: 875,000 Units (each consists of one share
of
the Company’s Series A Convertible Preferred Stock and one warrant to purchase
two (2) shares of the Company’s Common Stock) to accredited investors only, on a
“best efforts” basis, at a purchase price of $8.00 per unit. The warrants will
expire in five years and have an exercise price of $2.40.
4. Minimum
Amounts and Conditions Required for Disbursement of the Escrow
Account
Aggregate
dollar amount that must be collected before the Escrow Account may be disbursed
to the Issuer: There is no minimum.
5. Plan
of Distribution of the Securities:
Initial
Offering Period: Through June 15, 2008
Extension
Period: Up to June 30, 2008
6. Title
of Escrow Account
“China
Advanced Construction Materials Group Escrow Account”
7. Account
Number
8. Escrow
Agent Fees and Charges
$2,500:
payable at the Closing
