SECURITIES ESCROW AGREEMENT
Exhibit
10.4
THIS
SECURITIES ESCROW AGREEMENT (the “Agreement”),
dated
as of October 31, 2008, is entered into by and among Lihua International, Inc.,
a Delaware corporation (the “Company”),
Vision Opportunity China LP, a closed-ended investment company incorporated
in
Guernsey, as representative of the Purchasers (the “Purchaser
Representative”),
Magnify Wealth Enterprise Limited, a company organized in the British Virgin
Islands (the “Principal
Stockholder”),
and
Xxxxxx & Xxxxxx, LLP, with an address at 000 Xxxxx 0 Xxxxx, Xxxxx 000,
Xxxxxxxxx, Xxx Xxxxxx 00000 (the “Escrow
Agent”).
Capitalized terms used but not defined herein shall have the meanings set forth
in the Purchase Agreement (as defined below).
WITNESSETH:
WHEREAS,
the Purchasers will be purchasing from the Company units consisting of 6,818,182
shares of the Company’s Series A Convertible Preferred Stock, par value $0.0001
per share (the “Series
A Preferred”),
initially convertible into 6,818,182 shares of the Company’s common stock, par
value $0.0001 per share (the “Common
Stock”),
and
warrants to purchase, in the aggregate, 1,500,000 shares of Common Stock (the
“Warrants”)
pursuant to that certain Securities Purchase Agreement (the “Purchase
Agreement”)
dated
as of the date hereof (the “Closing
Date”)
by and
among the Company and the Purchasers (the “Financing”);
WHEREAS,
the Company has issued shares of its Common Stock to the Principal Stockholder
pursuant to that certain Share Exchange Agreement dated as of October 31, 2008,
by and among Magnify Wealth Enterprise Limited, Ally Profit Investments Limited,
a British Virgin Islands company (“Ally
Profit”),
the
Company and the original controlling stockholders of the Company (the
“Share
Exchange Agreement”).
Upon
consummation of the transactions contemplated by the Share Exchange Agreement,
Ally Profit, together with its subsidiaries, became the wholly owned
subsidiaries of the Company (the “Share
Exchange Transaction”);
WHEREAS,
the Company and the Purchaser Representative agree that the capitalization
table
upon which the transactions contemplated by this Agreement and the Purchase
Agreement are based is set forth as Schedule
A
hereto;
and
WHEREAS,
as an inducement to the Purchasers to enter into the Purchase Agreement, the
Principal Stockholder has agreed to place the Escrow Shares (as hereinafter
defined) into escrow for the benefit of the Purchasers in the event the Company
fails to achieve the following financial performance thresholds for the 12-month
periods ending December 31, 2008 (“2008”)
and
December 31, 2009 (“2009”):
(a) In
2008,
both (i) Net Income, as reported by the Company in its audited financial
statements for 2008 (the “2008
Financial Statements”)
equals
or exceeds $12.0 million, and (ii) 2008 Net Income Earnings Per Share equals
or
exceeds $0.50 on a fully diluted basis and adjusted for any stock split,
dividend, or similar recapitalization. “2008
Net Income Earnings Per Share”
is
to
be calculated by dividing (A) the Net Income, as reported in the 2008 Financial
Statements (the “2008
Net Income”)
by (B)
the aggregate number of shares of the then outstanding Common Stock on a
fully-diluted basis, which number shall include, without limitation, (x) the
number of shares of Common Stock issuable upon conversion of the Company’s then
outstanding shares of Series A Preferred, and (y) the number of shares of Common
Stock issuable upon the exercise of any then outstanding preferred stock,
warrants, convertible debt, options or other convertible securities of the
Company (the performance thresholds set forth in (a)(i) and (ii) above shall
be
collectively referred to herein as the “2008
Performance Thresholds”);
1
(b) In
2009,
both (i) Net Income, as reported by the Company in its audited financial
statements for 2009 (the “2009
Financial Statements”)
equals
or exceeds $18 million, and (ii) 2009 Net Income Earnings Per Share equals
or
exceeds $0.76 on a fully diluted basis and adjusted for any stock split,
dividend or similar recapitalization. “2009
Net Income Earnings Per Share”
is
to
be calculated by dividing (A) the Net Income, as reported in the 2009 Financial
Statements (the “2009
Net Income”)
by (B)
the aggregate number of shares of the then outstanding Common Stock on a
fully-diluted basis, which number shall include, without limitation, (x) the
number of shares of Common Stock issuable upon conversion of the Company’s then
outstanding shares of Series A Preferred, and (y) the number of shares of Common
Stock issuable upon the exercise of any then outstanding preferred stock,
warrants, convertible debt, options or other convertible securities,
provided,
however,
that
in
the event the Company consummates a bona fide initial public offering of Common
Stock such shares of Common Stock that are sold up to the first Five Million
Dollars ($5,000,000) of such initial public offering shall be excluded from
this
calculation (all shares sold in the initial public offering in excess of
$5,000,000 shall be included in calculating the number of
shares
of Common Stock issuable upon the exercise of any then outstanding preferred
stock, warrants, convertible debt, options or other convertible
securities)
(the
performance thresholds set forth in (b)(i) and (ii) above shall be collectively
referred to herein as the “2009
Performance Thresholds”
and
together with the 2008 Performance Thresholds will be referred to as the
“Performance
Thresholds”);
and
(c) For
the
purposes hereof, “Net
Income”
shall
be as defined in accordance with US GAAP, provided, however, that Net Income
for
each of 2008 and 2009 shall be increased by any non-cash charges incurred (i)
as
a result of the Financing, including without limitation, as a result of the
issuance of the Warrants and upon conversion of the Series A Preferred, (ii)
as
a result of the release of the Escrow Shares to the Principal Stockholder
pursuant to the terms of this Agreement, and (iii) as a result of the issuance
of ordinary shares of the Principal Stockholder to Xx. Xxx Jianhua upon the
exercise of options granted to Xx. Xxx by the Principal Stockholder, as of
the
date hereof.
WHEREAS,
the Company and the Purchaser Representative have requested that the Escrow
Agent hold the Escrow Shares on the terms and conditions set forth in this
Agreement and the Escrow Agent has agreed to act as escrow agent pursuant to
the
terms and conditions of this Agreement.
2
NOW,
THEREFORE, in consideration of the covenants and mutual promises contained
herein and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE
I
TERMS
OF
THE ESCROW
1.1. The
parties hereby agree to establish an escrow account (the “Escrow
Account”)
with
the Escrow Agent whereby the Escrow Agent shall hold the Escrow Shares as
contemplated by this Agreement.
1.2. Upon
the
execution of this Agreement, the Principal Stockholder shall deliver to the
Escrow Agent stock certificates equal to the number of shares of Common Stock
constituting one hundred percent (100%) of the shares of Common Stock underlying
the Series A Preferred Shares indicated on Schedule
A
hereto
(such shares of Common Stock delivered by the Principal Stockholder plus such
additional number of shares of Common Stock as may be required to be deposited
hereunder pursuant to Sections 1.3, 1.4 or 1.5 hereof shall be collectively
referred to in this Agreement as the “Escrow
Shares”),
along
with updated stock powers executed in blank, signature medallion guaranteed
or
in other form and substance acceptable for transfer.
1.3. The
parties hereby agree that the Escrow Shares shall be distributed based on and
subject to the achievement of the 2008 Performance Thresholds as set forth
below:
(i) If
the
Company achieves less than 50% of each of the 2008 Performance Thresholds,
then
the number of the Escrow Shares to be distributed to each Purchaser shall be
calculated as follows:
(a) A
=
X
Y
(b) B
=
(A)(Z)
| Where: |
A
=
such Purchaser’s percentage ownership of Escrow
Shares
|
| B = |
the
number of Escrow Shares to be distributed to such
Purchaser
|
| X = |
the
number of shares of Series A Preferred (on an as converted basis)
and
Conversion Shares owned by such Purchaser as of the date of distribution
of the Escrow Shares (the “Distribution
Date”)
|
3
| Y = |
number
of Series A Preferred Shares issued on the Closing Date (on an
as-converted basis)
|
| Z = |
the
Escrow Shares
|
Within
five (5) business days of the Purchaser Representative’s receipt of the 2008
Financial Statements pursuant to Section 1.7 hereof, the Purchaser
Representative shall provide sole written instructions to the Escrow Agent
instructing the Escrow Agent to issue and deliver the Escrow Shares to the
Purchasers in accordance with the calculation above. Any Escrow Shares remaining
after disbursement to the Purchasers in accordance with the calculation above
shall be returned to the Escrow Account. Within five (5) business days after
the
release of the Escrow Shares to the Purchasers, the Principal Stockholder shall
deposit into the Escrow Account stock certificates equal to the number of shares
of Common Stock necessary to maintain one hundred percent (100%) of the shares
of Common Stock underlying the Preferred Shares initially issuable under the
Purchase Agreement in the Escrow Account.
(ii) If
the
Company achieves at least 50% but less than 95% of the 2008 Performance
Thresholds, the Escrow Agent shall deliver to each Purchaser its number of
Escrow Shares in accordance with the calculation below.
(a) A
=
X
Y
(b) B
=
2*(Z*A)
| Where: |
A
=
such Purchaser’s percentage ownership of Escrow Shares
|
| B = |
the
number of Escrow Shares to be distributed to such
Purchaser
|
| X = |
the
number of shares of Series A Preferred (on an as converted basis)
and
Conversion Shares owned by such Purchaser as of the Distribution
Date
|
| Y = |
number
of Series A Preferred Shares issued on the Closing Date (on an
as-converted basis)
|
| Z = |
the
Escrow Shares multiplied by the Lowest Threshold
Percentage
|
4
For
purposes hereof, the “Lowest
Threshold Percentage”
means
the percentage by which the lowest of the applicable Performance Thresholds
was
not achieved. By way of example, if the Company’s Earnings Per Share for 2008 is
an amount equal to 60% of the 2008 Performance Thresholds and the Company’s Net
Income reported on the 2008 Financial Statements is an amount equal to 70%
of
the 2008 Performance Thresholds, the Lowest Threshold Percentage would be 40%
(100%-60%). Within five (5) business days of the Purchaser Representative’s
receipt of the 2008 Financial Statements pursuant to Section 1.7 hereof, the
Purchaser Representative shall provide sole written instructions to the Escrow
Agent instructing the Escrow Agent to issue and deliver the Escrow Shares to
the
Purchasers in accordance with the calculation above. Any Escrow Shares remaining
after disbursement to the Purchasers in accordance with the calculation above
shall be returned to the Escrow Account. Within five (5) business days after
the
release of the Escrow Shares to the Purchasers, the Principal Stockholder shall
deposit into the Escrow Account stock certificates equal to the number of shares
of Common Stock necessary to maintain one hundred percent (100%) of the shares
of Common Stock underlying the Preferred Shares initially issuable under the
Purchase Agreement in the Escrow Account.
(iii) If
the
Company achieves at least 95% of each of the 2008 Performance Thresholds, then
the Escrow Shares shall continue to be held in escrow hereunder.
(iv) Notwithstanding
anything to the contrary set forth herein, only those Purchasers who own shares
of Series A Preferred or Conversion Shares of the Company at the time that
the
Escrow Shares are distributed hereunder shall be entitled to receive Escrow
Shares calculated based on their ownership interest at the time such Escrow
Shares are distributed hereunder. Any Escrow Shares not delivered to any
Purchaser because such Purchaser no longer holds shares of Series A Preferred
or
Conversion Shares will be returned to the Escrow Account. If any Purchaser
transfers Preferred Shares purchased pursuant to the Purchase Agreement, the
rights to the Escrow Shares shall similarly transfer to such transferee,
pursuant to the terms in this Agreement, with no further action required by
the
Purchaser, the transferee or the Company.
1.4. The
parties hereby agree that the Escrow Shares shall be distributed based upon
and
subject to the achievement of the 2009 Performance Thresholds as set forth
below:
(i) If
the
Company achieves less than 50% of each of the 2009 Performance Thresholds,
then
the number of the Escrow Shares to be distributed to each Purchaser shall be
calculated using the same formula set forth in Section 1.3(i) above. Within
five
(5) business days of the Purchaser Representative’s receipt of the 2009
Financial Statements pursuant to Section 1.7 hereof, the Purchaser
Representative shall provide sole written instruction to the Escrow Agent
instructing the Escrow Agent to issue and deliver the Escrow Shares to the
Purchasers in accordance with the calculation set forth in Section 1.3(i) above.
Any Escrow Shares remaining after disbursement to the Purchasers shall be
returned to the Principal Stockholder.
(ii) If
the
Company achieves at least 50% but less than 95% of the 2009 Performance
Thresholds, the Escrow Agent shall deliver to each Purchaser its number of
Escrow Shares in accordance with the calculation set forth in Section 1.3(ii)
above. Within five (5) business days of the Purchaser Representative’s receipt
of the 2009 Financial Statements pursuant to Section 1.7 hereof, the Purchaser
Representative shall provide sole written instruction to the Escrow Agent
instructing the Escrow Agent to issue and deliver the Escrow Shares to the
Purchasers in accordance with the calculation set forth in Section 1.3(ii)
above. Any Escrow Shares remaining after disbursement to the Purchasers shall
be
returned to the Principal Stockholder.
5
(iii) In
the
event the Company achieves at least 95% of each of the 2009 Performance
Thresholds, all of the Escrow Shares shall be returned to the Principal
Stockholder at the address set forth in Section 3.2 hereof.
(iv)
Notwithstanding anything to the contrary set forth herein, only those Purchasers
who own shares of Series A Preferred or Conversion Shares of the Company at
the
time that the Escrow Shares are distributed hereunder shall be entitled to
receive Escrow Shares calculated based on their ownership interest at the time
when such Escrow Shares are distributed hereunder. If any Purchaser transfers
Preferred Shares purchased hereunder, any Escrow Shares pursuant to this
Agreement shall similarly transfer to such transferee with no further action
required by the Purchaser, the transferee or the Company. Any Escrow Shares
not
delivered to any Purchaser because such Purchaser no longer holds shares of
Series A Preferred or Conversion Shares will be returned to the Principal
Stockholder.
1.5. If
the
Company and the Principal Stockholder fail to timely comply with their
respective obligations set forth in Section 3.22 of the Purchase Agreement
(the
“Listing
Obligation”),
then
upon sole written instruction by the Purchaser Representative to the Escrow
Agent, 750,000 of the Escrow Shares (the “Penalty
Shares”)
shall
be distributed from the Escrow Account. Each Purchaser shall receive such number
of Penalty Shares calculated as follows:
A
=
(Z)*(X/Y)
| Where: |
A
=
the number of Penalty Shares to be distributed to such Purchaser
|
| X = |
the
number of shares of Series A Preferred (on an as converted basis)
and
Conversion Shares owned by such Purchaser as of the Distribution
Date
|
| Y = |
the
number of Series A Preferred Shares issued as of the Closing Date
(on an
as converted basis)
|
| Z = |
the
Penalty Shares
|
6
Within
five (5) business days after the release of the Penalty Shares to the
Purchasers, the Principal Stockholder shall deposit into the Escrow Account,
stock certificates evidencing an aggregate of 750,000 shares of Common Stock.
1.6. If
the
Company does not achieve either of the 2008 Performance Thresholds or either
of
the 2009 Performance Thresholds and/or if the Company does not comply with
the
Listing Obligation, the Company shall use reasonable best efforts to promptly
cause the Escrow Shares or the Penalty Shares, as applicable, to be delivered
to
the Purchasers, including causing its transfer agent to promptly, but in no
event longer than five (5) business days, transfer the certificates into the
names of the Purchasers and causing its securities counsel to provide any
written instruction required by the Escrow Agent in a timely manner so that
the
issuances and delivery contemplated above can be achieved within five business
days following delivery of the 2008 Financial Statements or 2009 Financial
Statements, as applicable, to the Purchaser Representative, or, within five
business days of October 31, 2009, in the case of the Penalty
Shares.
1.7. The
Company will provide the Purchaser Representative with (i) the Company’s audited
financial statements for 2008, prepared in accordance with US GAAP, no later
than the date for filing the Company’s Annual Report on Form 10-K for 2008,
including any extension for filing the 2008 Annual Report which may be requested
under Rule 12b-25 of the Securities Exchange Act of 1934, as amended (the
“Annual
Report”)
with
the Securities and Exchange Commission (“SEC”),
and
(ii) the Company’s audited financial statements for 2009, prepared in accordance
with US GAAP, on or before the date for filing the Company’s 2009 Annual Report
with the SEC, so as to allow the Purchaser Representative the opportunity to
evaluate whether each of the 2008 Performance Thresholds and each of the 2009
Performance Thresholds were attained. In the event that the Purchaser
Representative receives the financial information prior to its dissemination
by
the Company in either a press release or in the Company’s periodic reports filed
with the SEC, the Company shall issue a press release announcing the information
or file a Form 8-K as required under Regulation FD.
ARTICLE
II
REPRESENTATIONS
OF THE PRINCIPAL STOCKHOLDER
2.1. The
Principal Stockholder hereby represents and warrants to the Purchasers and
the
Purchaser Representative as follows:
(i) The
Principal Stockholder is the record and beneficial owner of the Escrow Shares
placed into escrow pursuant to this Agreement and owns such Escrow Shares,
free
and clear of all pledges, liens, claims and encumbrances, except encumbrances
created by this Agreement and the Principal Stockholder Lock-Up Agreement
entered into as of even date herewith and in connection with the Financing.
There are no restrictions on the ability of the Principal Stockholder to
transfer the Escrow Shares placed into escrow pursuant to this Agreement or
to
enter into this Agreement other than transfer restrictions under the Principal
Stockholder Lock-Up Agreement and/or applicable federal and state securities
laws.
7
(ii) The
performance of this Agreement and compliance with the provisions hereof will
not
violate any provision of any law applicable to the Principal Stockholder and
will not conflict with or result in any material breach of any of the terms,
conditions or provisions of, or constitute a default under the terms of the
certificate of incorporation or by-laws of the Principal Stockholder, or any
indenture, mortgage, deed of trust or other agreement or instrument binding
upon
the Principal Stockholder or affecting the Escrow Shares or result in the
creation or imposition of any lien, charge or encumbrance upon, any of the
properties or assets of the Principal Stockholder, the creation of which would
have a material adverse effect on the business and operations of the Principal
Stockholder. No notice to, filing with, or authorization, registration, consent
or approval of any governmental authority or other person is necessary for
the
execution, delivery or performance of this Agreement or the consummation of
the
transactions contemplated hereby by the Principal Stockholder, other than those
already obtained.
ARTICLE
III
MISCELLANEOUS
3.1. The
Company, at the time of the Closing, will pay Escrow Agent a total of $2,000
for
all services rendered by Escrow Agent hereunder.
3.2. No
waiver
of, or any breach of any covenant or provision herein contained shall be deemed
a waiver of any preceding or succeeding breach thereof, or of any other covenant
or provision herein contained. No extension of time for performance of any
obligation or act shall be deemed an extension of the time for performance
of
any other obligation or act.
3.3 All
notices, demands, consents, requests, instructions and other communications
to
be given or delivered or permitted under or by reason of the provisions of
this
Agreement or in connection with the transactions contemplated hereby shall
be in
writing and shall be deemed to be delivered and received by the intended
recipient as follows: (i) if personally delivered, on the business day of such
delivery (as evidenced by the receipt of the personal delivery service), (ii)
if
mailed certified or registered mail return receipt requested, two (2) business
days after being mailed, (iii) if delivered by overnight courier (with all
charges having been prepaid), on the business day of such delivery (as evidenced
by the receipt of the overnight courier service of recognized standing), or
(iv)
if delivered by facsimile transmission, on the business day of such delivery
if
sent by 6:00 p.m. in the time zone of the recipient, or if sent after that
time,
on the next succeeding business day (as evidenced by the printed confirmation
of
delivery generated by the sending party’s telecopier machine). If any notice,
demand, consent, request, instruction or other communication cannot be delivered
because of a changed address of which no notice was given (in accordance with
this Section 3.3), or the refusal to accept same, the notice, demand, consent,
request, instruction or other communication shall be deemed received on the
third business day the notice is sent (as evidenced by a sworn affidavit of
the
sender). All such notices, demands, consents, requests, instructions and other
communications will be sent to the following addresses or facsimile numbers
as
applicable.
8
If
to
Escrow
Agent: Xxxxxx
& Xxxxxx, LLP
000
Xxxxx
0 Xxxxx, Xxxxx 000
Xxxxxxxxx,
Xxx Xxxxxx 00000
Attention:
Xxxxxx X. Xxxxxxx, Esq.
Tel
No.:
000-000-0000
Fax
No.:
000-000-0000
If
to the
Company or the Principal Stockholder:
Lihua
International, Inc.
c/o
Lihua
Holdings Limited,
Houxiang
Five Star Industry District
Danyang
City, Jiangsu Province, PRC
Attention:
Xx. Xxx Xxxxxxx
Tel.
No.:
86 -511-8631-7399
Fax
No.:
00-000-0000-0000
With
a
copy to (which shall not constitute notice):
Loeb
& Loeb LLP
000
Xxxx
Xxxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxxx X. Xxxxxxxx, Esq.
Tel.
No.:
(000) 000-0000
Fax
No.:
(000) 000-0000
If
to the
Purchaser Representative:
Vision
Opportunity China LP
00
X.
00xx Xxxxxx, 0xx Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxx Xxx
Tel.
No.:
(000) 000-0000
Fax
No.:
(000) 000-0000
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.
3.4. This
Escrow Agreement shall be binding upon and shall inure to the benefit of the
permitted successors and permitted assigns of the parties hereto.
3.5. This
Escrow Agreement is the final expression of, and contains the entire agreement
between, the parties with respect to the subject matter hereof and supersedes
all prior understandings with respect thereto. This Escrow Agreement may not
be
modified, changed, supplemented or terminated, nor may any obligations hereunder
be waived, except by written instrument signed by the parties to be charged
or
by its agent duly authorized in writing or as otherwise expressly permitted
herein.
9
3.6. Whenever
required by the context of this Escrow Agreement, the singular shall include
the
plural and masculine shall include the feminine. This Escrow Agreement shall
not
be construed as if it had been prepared by one of the parties, but rather as
if
all parties had prepared the same.
3.7. The
parties hereto expressly agree that this Escrow Agreement shall be governed
by,
interpreted under and construed and enforced in accordance with the laws of
the
State of New York, without regard to conflicts of law principles that would
result in the application of the substantive laws of another jurisdiction.
Any
action to enforce, arising out of, or relating in any way to, any provisions
of
this Escrow Agreement shall only be brought in a state or Federal court sitting
in New York City, Borough of Manhattan.
3.8. The
Escrow Agent’s duties hereunder may be altered, amended, modified or revoked
only by a writing signed by the Company, the Principal Stockholder, the
Purchaser Representative and the Escrow Agent.
3.9. The
Escrow Agent shall be obligated only for the performance of such duties as
are
specifically set forth herein and may rely and shall be protected in relying
or
refraining from acting on any instrument reasonably believed by the Escrow
Agent
to be genuine and to have been signed or presented by the proper party or
parties. The Escrow Agent shall not be personally liable for any act the Escrow
Agent may do or omit to do hereunder as the Escrow Agent while acting in good
faith and in the absence of gross negligence, fraud or willful misconduct,
and
any act done or omitted by the Escrow Agent pursuant to the advice of the Escrow
Agent’s attorneys-at-law shall be conclusive evidence of such good faith, in the
absence of gross negligence, fraud or willful misconduct.
3.10. The
Escrow Agent is hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In
case the Escrow Agent obeys or complies with any such order, judgment or decree,
the Escrow Agent shall not be liable to any of the parties hereto or to any
other person, firm or corporation by reason of such decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered
without jurisdiction.
3.11. The
Escrow Agent shall not be liable in any respect on account of the identity,
authorization or rights of the parties executing or delivering or purporting
to
execute or deliver any documents or papers deposited or called for thereunder
in
the absence of gross negligence, fraud or willful misconduct.
3.12. The
Escrow Agent shall be entitled to employ such legal counsel and other experts
as
the Escrow Agent may deem necessary to properly advise the Escrow Agent in
connection with the Escrow Agent’s duties hereunder, may rely upon the advice of
such counsel, and may pay such counsel reasonable compensation therefor which
shall be paid by the Escrow Agent. The
Escrow Agent has acted as legal counsel for one of the Purchasers and may
continue to act as legal counsel for such Purchaser from time to time,
notwithstanding its duties as the Escrow Agent hereunder. The Company and the
Purchasers consent to the Escrow Agent in such capacity as legal counsel for
one
of the Purchasers and waive any claim that such representation represents a
conflict of interest on the part of the Escrow Agent. The Company and the
Purchasers understand that the Escrow Agent is relying explicitly on the
foregoing provision in entering into this Escrow
Agreement.
10
3.13. The
Escrow Agent’s responsibilities as escrow agent hereunder shall terminate if the
Escrow Agent shall resign by giving written notice to the Company and the
Purchasers. In the event of any such resignation, the Purchasers and the Company
shall appoint a successor Escrow Agent and the Escrow Agent shall deliver to
such successor Escrow Agent any escrow funds and other documents held by the
Escrow Agent.
3.14. If
the
Escrow Agent reasonably requires other or further instruments in connection
with
this Escrow Agreement or obligations in respect hereto, the necessary parties
hereto shall use its best efforts to join in furnishing such
instruments.
3.15. It
is
understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the documents or the Escrow Shares
held by the Escrow Agent hereunder, the Escrow Agent is authorized and directed
in the Escrow Agent’s sole discretion (1) to retain in the Escrow Agent’s
possession without liability to anyone all or any part of said documents or
the
Escrow Shares until such disputes shall have been settled either by mutual
written agreement of the parties concerned by a final order, decree or judgment
or a court of competent jurisdiction after the time for appeal has expired
and
no appeal has been perfected, but the Escrow Agent shall be under no duty
whatsoever to institute or defend any such proceedings or (2) to deliver the
Escrow Shares and any other property and documents held by the Escrow Agent
hereunder to a state or Federal court having competent subject matter
jurisdiction and located in the City of New York, Borough of Manhattan, in
accordance with the applicable procedure therefor.
3.16. The
Company agrees to indemnify and hold harmless the Escrow Agent and its partners,
employees, agents and representatives from any and all claims, liabilities,
costs or expenses in any way arising from or relating to the duties or
performance of the Escrow Agent hereunder or the transactions contemplated
hereby other than any such claim, liability, cost or expense to the extent
the
same shall have been determined by final, unappealable judgment of a court
of
competent jurisdiction to have resulted from the gross negligence, fraud or
willful misconduct of the Escrow Agent.
[Signature
Page Follows]
11
[SIGNATURE
PAGE TO SECURITIES ESCROW AGREEMENT]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
31st
day of
October, 2008.
LIHUA
INTERNATIONAL, INC.
|
By:
|
/s/
Xxx Xxxxxxx
|
Name:
Xxx
Xxxxxxx
Title:
Chief Executive Officer and President
PURCHASER
REPRESENTATIVE:
VISION
OPPORTUNITY CHINA
LP
|
By:
|
/s/
Xxxx Xxxxxxxx
|
Name:
Xxxx Xxxxxxxx
Title:
Authorized Signatory
ESCROW
AGENT:
XXXXXX
& XXXXXX, LLP
|
By:
|
/s/
Xxxx
X. Xxxxxx
|
Name:
Xxxxx X. Xxxxxx
Title:
Partner
PRINCIPAL
STOCKHOLDER:
|
By:
|
/s/
Xxx Xxxxxxx
|
Name:
Magnify Wealth Enterprise Limited
Authorized
Signatory: Xxx Xxxxxxx
12
Schedule
A
6,818,182
shares of Common Stock to be deposited as Escrow Shares
13
