MAKE GOOD ESCROW AGREEMENT
This Make Good Escrow Agreement (the "Make Good Agreement"), dated
effective as of October 27, 2006, is entered into by and among Asian Financial,
Inc., a Wyoming corporation (the "Company"), Xxxx Capital Partners, LLC, as
agent ("Xxxx"), Xxxxxx Xxx in his individual capacity ("Guo"), and Xxxxx Fargo
Bank, National Association (hereinafter referred to as "Escrow Agent").
WHEREAS, each of the investors (the "Investors") to the private offering of
securities of the Company has entered into a Securities Purchase Agreement,
dated October __, 2006 (the "SPA"), evidencing their participation in the
Company's private offering (the "Offering") of securities. As an inducement to
the Investors to participate in the Offering and as set forth in the SPA, Guo
agreed to place the "Escrow Shares" (as hereinafter defined) into escrow for the
benefit of the Investors in the event the Company failed to satisfy certain
earnings per share and/or After-Tax Net Income thresholds.
WHEREAS, pursuant to the requirements of the SPA, the Company and Guo have
agreed to establish an escrow on the terms and conditions set forth in this Make
Good Agreement;
WHEREAS, Xxxx has agreed to act as agent for the Investors in connection
with this Make Good Agreement pursuant to the terms and conditions of that
certain Agency Agreement, dated as of the date hereof, by and among Xxxx and the
Investors;
WHEREAS, the Escrow Agent has agreed to act as escrow agent pursuant to the
terms and conditions of this Make Good Agreement; and
WHEREAS, all capitalized terms used but not defined herein shall have the
meanings assigned them in the SPA;
NOW, THEREFORE, in consideration of the mutual promises of the parties and
the terms and conditions hereof, the parties hereby agree as follows:
1. APPOINTMENT OF ESCROW AGENT. Guo and the Company hereby appoint Xxxxx Fargo
Bank, National Association as Escrow Agent to act in accordance with the terms
and conditions set forth in this Make Good Agreement, and Escrow Agent hereby
accepts such appointment and agrees to act in accordance with such terms and
conditions.
2. ESTABLISHMENT OF ESCROW. Upon the execution of this Make Good Agreement, Guo
shall deliver, or cause to be delivered, to the Escrow Agent certificates
evidencing 18,502,896 shares (the "Escrow Shares") of the Company's common
stock, par value $0.001 per share, along with a stock power executed in blank.
3. REPRESENTATIONS OF GUO. Guo hereby represents and warrants to Xxxx as
follows:
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(i) The Escrow Shares are validly issued, fully paid and nonassessable shares of
the Company, and free and clear of all pledges, liens and encumbrances.
(ii) Performance of this Make Good Agreement and compliance with the provisions
hereof will not violate any provision of any applicable law and will not
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon, any of the properties or
assets of Guo pursuant to the terms of any indenture, mortgage, deed of trust or
other agreement or instrument binding upon Guo, other than such breaches,
defaults or liens which would not have a material adverse effect taken as a
whole.
4. DISBURSEMENT OF ESCROW SHARES.
a. FISCAL YEAR ENDED JUNE 30, 2006. Guo agreed with the Investors that in
the event the consolidated financial statements of the Company reflect less than
$12,000,000.00 of After-Tax Net Income for the fiscal year ended June 30, 2006
(the "Guaranteed NI"), Guo would transfer, or cause to be transferred, to the
Investors on a pro rata basis for no consideration other than their part of
their respective Investment Amount at Closing 37.5% of the number of Shares
issued at Closing. In the event that the Guaranteed NI is not achieved based on
the Company's consolidated financial statements for the fiscal year ended June
30, 2006, as filed with the Commission, the Company has agreed that Xxxx will
provide written instruction to the Escrow Agent to issue and deliver
certificates evidencing a total of 6,167,632 of the Escrow Shares to the
Investors, in an amount to each Investor as set forth on Exhibit A attached
hereto, on a pro rata basis (based upon each Investor's Investment Amount
indicated on such Investor's signature page to the SPA) within ten (10) business
days after the date which the 2006 audit report for the Company is filed with
the Commission. The Escrow Agent need only rely on the letter of instruction
from Xxxx in this regard and will disregard any contrary instructions. If the
consolidated financial statements of the Company reflect $12,000,000 or more of
After-Tax Net Income for the fiscal year ended June 30, 2006, Xxxx shall provide
written instructions to the Escrow Agent for the release of 6,167,632 of the
Escrow Shares to Guo or to the registered holder of such shares who originally
deposited such shares with the Escrow Agent.
b. FISCAL YEAR ENDING JUNE 30, 2007. Guo agreed with the Investors that in
the event either: (i) the earnings per share reported in the Annual Report on
Form 10-KSB of the Company for the fiscal year ending June 30, 2007, as filed
with the Commission, is less than $0.60 on a fully diluted basis (the "2007
EPS") or (ii) the after tax net income reported in the Annual Report on Form
10-KSB of the Company for the fiscal year ending June 30, 2007, as filed with
the Commission, is less than $16,000,000.00 (the "2007 ATNI"), Guo would
transfer, or cause to be transferred, to the Investors on a pro rata basis for
no consideration other than their part of their respective Investment Amount at
Closing 37.5% of the number of Shares issued at Closing. In the event that
either (i) the earnings per share reported in the Annual Report on Form 10-KSB
of the Company for the fiscal year ending June 30, 2007, as filed with the
Commission, is less than the 2007 EPS or (ii) the after tax net income reported
in the Annual Report on Form 10-KSB of the Company for the fiscal year ending
June 30, 2007, as filed with the Commission, is less than the 2007 ATNI, the
Company has agreed that Xxxx will provide written instruction to the Escrow
Agent instructing the Escrow Agent to issue and deliver certificates evidencing
a total of 6,167,632 of the Escrow Shares to the Investors, in an amount to each
Investor as set forth on Exhibit A attached hereto, on a pro rata basis (based
upon each Investor's Investment Amount indicated on such Investor's signature
page to the SPA) within 10 Business Days after the date which the Annual Report
on Form 10-KSB for the Company for the fiscal year ending June 30, 2007 is filed
with the Commission. The Escrow Agent need only rely on the letter of
instruction from Xxxx in this regard and will disregard any contrary
instructions. In the event that both the (i) earnings per share reported in the
Annual Report on Form 10-KSB of the Company for the fiscal year ending June 30,
2007, as filed with the Commission, is equal to or greater than the 2007 EPS and
(ii) the after tax net income reported in the Annual Report on Form 10-KSB of
the Company for the fiscal year ending June 30, 2007, as filed with the
Commission, is equal to or greater than the 2007 ATNI, Xxxx shall provide
written instructions to the Escrow Agent for the release of 6,167,632 of the
Escrow Shares to Guo or to the registered holder of such shares who originally
deposited such shares with the Escrow Agent.
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c. FISCAL YEAR ENDING JUNE 30, 2008. Guo agreed with Investors that in the
event either: (i) the earnings per share reported in the Annual Report on Form
10-KSB of the Company for the fiscal year ending June 30, 2008, as filed with
the Commission, is less than $0.89 on a fully diluted basis (the "2008 EPS") or
(ii) the after tax net income reported in the Annual Report on Form 10-KSB of
the Company for the fiscal year ending June 30, 2008, as filed with the
Commission, is less than $23,900,000.00 (the "2008 ATNI"), Guo would transfer,
or cause to be transferred, to the Investors on a pro rata basis for no
consideration other than their part of their respective Investment Amount at
Closing 37.5% of the number of Shares issued at Closing. In the event that
either (i) the earnings per share reported in the Annual Report on Form 10-KSB
of the Company for the fiscal year ending June 30, 2008, as filed with the
Commission, is less than the 2008 EPS or (ii) the after tax net income reported
in the Annual Report on Form 10-KSB of the Company for the fiscal year ending
June 30, 2008, as filed with the Commission, is less than the 2008 ATNI, the
Company has agreed that Xxxx will provide written instruction to the Escrow
Agent instructing the Escrow Agent to issue and deliver certificates evidencing
a total of 6,167,632 of the Escrow Shares to the Investors, in an amount to each
Investor as set forth on Exhibit A attached hereto, on a pro rata basis (based
upon each Investor's Investment Amount indicated on such Investor's signature
page to the SPA) within 10 Business Days after the date which the Annual Report
on Form 10-KSB for the Company for the fiscal year ending June 30, 2008 is filed
with the Commission. The Escrow Agent need only rely on the letter of
instruction from Xxxx in this regard and will disregard any contrary
instructions. In the event that both the (i) earnings per share reported in the
Annual Report on Form 10-KSB of the Company for the fiscal year ending June 30,
2008, as filed with the Commission, is equal to or greater than the 2008 EPS and
(ii) the after tax net income reported in the Annual Report on Form 10-KSB of
the Company for the fiscal year ending June 30, 2008, as filed with the
Commission, is equal to or greater than the 2008 ATNI, Xxxx shall provide
written instructions to the Escrow Agent for the release of 6,167,632 of the
Escrow Shares to Guo or to the registered holder of such shares who originally
deposited such shares with the Escrow Agent.
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5. DURATION. This Make Good Agreement shall terminate on the sooner of (i) the
distribution of all the Escrow Shares or (ii) three years from the date hereof.
The Company agrees to provide the Escrow Agent written notice of the filing with
the Commission of any financial statements or reports referenced herein.
6. ESCROW SHARES. If any Escrow Shares are deliverable to the Investors pursuant
to the SPA and in accordance with this Make Good Agreement, (i) Guo covenants
and agrees to execute all such instruments of transfer (including stock powers
and assignment documents) as are customarily executed to evidence and consummate
the transfer of the Escrow Shares from Guo to the Investors and (ii) following
its receipt of the documents referenced in Section 6(i), the Company covenants
and agrees to promptly reissue such Escrow Shares in the applicable Investor's
name and deliver the same as directed by such Investor. Until such time as (if
at all) the Escrow Shares are required to be delivered pursuant to the SPA and
in accordance with this Make Good Agreement, any dividends payable in respect of
the Escrow Shares and all voting rights applicable to the Escrow Shares shall be
retained by Guo.
7. INTERPLEADER. Should any controversy arise among the parties hereto with
respect to this Make Good Agreement or with respect to the right to receive the
Escrow Shares, Escrow Agent and/or Xxxx shall have the right to consult counsel
and/or to institute an appropriate interpleader action to determine the rights
of the parties. Escrow Agent and/or Xxxx are also each hereby authorized to
institute an appropriate interpleader action upon receipt of a written letter of
direction executed by the parties so directing either Escrow Agent or Xxxx. If
Escrow Agent or Xxxx 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 7
shall be filed in any court of competent jurisdiction in the State of New York
or the State of California, and the Escrow Shares in dispute shall be deposited
with the court and in such event Escrow Agent and Xxxx shall be relieved of and
discharged from any and all obligations and liabilities under and pursuant to
this Make Good Agreement with respect to the Escrow Shares and any other
obligations hereunder.
8. EXCULPATION AND INDEMNIFICATION OF ESCROW AGENT AND XXXX.
(a) 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. Escrow Agent acts under
this Make Good 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. Escrow Agent will
have no duties or responsibilities other than those expressly set forth herein.
Escrow Agent will be under no liability to anyone by reason of any failure on
the part of any party hereto (other than 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 Make Good Agreement and
instructions to Escrow Agent pursuant to the terms of this Make Good Agreement,
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. Xxxx'x sole obligation under this Make Good Agreement is to
provide written instruction to Escrow Agent (following such time as the Company
files certain periodic financial reports as specified in Section 4 hereof)
directing the distribution of the Escrow Shares. Xxxx will provide such written
instructions upon review of the relevant earnings per share and/or After-Tax Net
Income amount reported in such periodic financial reports as specified in
Section 4 hereof. Xxxx is not charged with any obligation to conduct any
investigation into the financial reports or make any other investigation related
thereto. In the event of any actual or alleged mistake or fraud of the Company,
its auditors or any other person (other than Xxxx) in connection with such
financial reports of the Company, Xxxx shall have no obligation or liability to
any party hereunder.
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(b) 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, absent gross negligence or
willful misconduct. Escrow Agent 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 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 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 Make Good 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.
(c) The Company and Guo each hereby, jointly and severally, indemnify and hold
harmless each of Escrow Agent, Xxxx and any of their principals, partners,
agents, employees and affiliates from and against any expenses, including
reasonable attorneys' fees and disbursements, damages or losses suffered by
Escrow Agent or Xxxx in connection with any claim or demand, which, in any way,
directly or indirectly, arises out of or relates to this Make Good Agreement or
the services of Escrow Agent or Xxxx hereunder; except, that if Escrow Agent or
Xxxx is guilty of willful misconduct, gross negligence or fraud under this Make
Good Agreement, then Escrow Agent or Xxxx, as the case may be, will bear all
losses, damages and expenses arising as a result of such willful misconduct,
gross negligence or fraud. Promptly after the receipt by Escrow Agent or Xxxx of
notice of any such demand or claim or the commencement of any action, suit or
proceeding relating to such demand or claim, Escrow Agent or Xxxx, as the case
may be, 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 8 shall survive the termination of this Make Good
Agreement.
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9. COMPENSATION OF ESCROW AGENT. Escrow Agent shall be entitled to compensation
for its services as stated in the fee schedule attached hereto as Exhibit B,
which compensation shall be paid by the Company. The fee agreed upon for the
services rendered hereunder is intended as full compensation for Escrow Agent's
services as contemplated by this Make Good Agreement; provided, however, that in
the event that Escrow Agent renders any material service not contemplated in
this Make Good Agreement, or there is any assignment of interest in the subject
matter of this Make Good Agreement, or any material modification hereof, or if
any material controversy arises hereunder, or Escrow Agent is made a party to
any litigation pertaining to this Make Good Agreement, or the subject matter
hereof, then Escrow Agent shall be reasonably compensated by the Company for
such extraordinary services and reimbursed for all costs and expenses, including
reasonable attorney's fees, occasioned by any delay, controversy, litigation or
event, and the same shall be recoverable from the Company. Prior to incurring
any costs and/or expenses in connection with the foregoing sentence, Escrow
Agent shall be required to provide written notice to the Company of such costs
and/or expenses and the relevancy thereof and Escrow Agent shall not be
permitted to incur any such costs and/or expenses prior to receiving written
approval from the Company, which approval shall not be unreasonably withheld.
10. RESIGNATION OF ESCROW AGENT. At any time, upon ten (10) days' written notice
to the Company, Escrow Agent may resign and be discharged from its duties as
Escrow Agent hereunder. As soon as practicable after its resignation, Escrow
Agent will promptly turn over to a successor escrow agent appointed by the
Company the Escrow Shares 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
Escrow Agent, the Company shall have failed to appoint a successor escrow agent,
Escrow Agent may interplead the Escrow Shares into the registry of any court
having jurisdiction.
11. RECORDS. Escrow Agent shall maintain accurate records of all transactions
hereunder. Promptly after the termination of this Make Good Agreement or as may
reasonably be requested by the parties hereto from time to time before such
termination, Escrow Agent shall provide the parties hereto, as the case may be,
with a complete copy of such records, certified by 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 Escrow
Agent and at the requesting party's expense.
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12. NOTICE. All notices, communications and instructions required or desired to
be given under this Make Good Agreement must be in writing and shall be deemed
to be duly given if sent by registered or certified mail, return receipt
requested, or overnight courier, to the addresses listed on the signature page
hereto.
13. EXECUTION IN COUNTERPARTS. This Make Good 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.
14. ASSIGNMENT AND MODIFICATION. This Make Good 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 Make Good 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 Make
Good Agreement. No portion of the Escrow Shares 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 Make Good Agreement. This
Make Good Agreement may be amended or modified only in writing signed by all of
the parties hereto.
15. APPLICABLE LAW. This Make Good Agreement shall be governed by and construed
in accordance with the laws of the State of New York without giving effect to
the principles of conflicts of laws thereof.
16. HEADINGS. The headings contained in this Make Good Agreement are for
convenience of reference only and shall not affect the construction of this Make
Good 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
Make Good 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.
18. AUTHORIZED SIGNERS. The Company will execute Exhibit C-1 and deliver an
executed Exhibit C-2 to this Make Good Agreement concurrent with the execution
hereof.
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IN WITNESS WHEREOF, the parties have duly executed this Make Good
Agreement as of the date set forth opposite their respective names.
COMPANY:
ASIAN FINANCIAL, INC.
By: _______________________________
Name: Xxxxxx Xxx
Title: Chief Executive Officer
Address:
XXXXXX XXX:
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Address:
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ESCROW AGENT:
XXXXX FARGO BANK, NATIONAL ASSOCIATION
By:_______________________________
Name: Xxxx Xxx
Title: Assistant Vice President
Address: 000 Xxxxxxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
AGENT:
XXXX CAPITAL PARTNERS, LLC
By:_______________________________
Name:
Title:
Address:
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