MAKE GOOD SECURITIES ESCROW AGREEMENT
THIS
MAKE
GOOD SECURITIES ESCROW AGREEMENT (the “Make
Good Agreement”),
dated
as of August 28, 2008, is entered into by and among Universal Travel Group,
a
Nevada corporation (the “Company”),
the
investors listed on the Schedule of Buyers in the Securities Purchase Agreement
dated August 28,
2008
(the
“Buyers”),
Xxxxxxxxx Xxxxx (the “Principal
Shareholder”)
and
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP with an address at 00 Xxxxxxxx,
00xx
Xxxxx,
Xxx Xxxx, XX 00000 (the “Escrow
Agent”).
Capitalized
terms used but not defined herein shall have the meanings set forth in the
Securities Purchase Agreement (as defined below).
WITNESSETH:
WHEREAS,
the Buyers will be purchasing from the Company and the Company will be selling
to the Buyers an aggregate of 4,588,708 shares of the Company’s common stock,
par value $0.001 per share (“Common
Stock”),
and
warrants to acquire 2,294,356 shares of Common Stock for a total aggregate
purchase price of approximately $7,112,500 in a private placement financing
transaction (the “Financing
Transaction”)
pursuant to a Securities Purchase Agreement dated as of the date hereof (the
“Closing
Date”)
by and
among the Company and the Buyers (the “Securities
Purchase Agreement”);
WHEREAS,
as an inducement to the Buyers to enter into the Securities Purchase Agreement,
the Principal Shareholder has agreed to place the Escrow Shares (as hereinafter
defined) into escrow for the benefit of the Buyers in the event the Company
fails to achieve the following financial performance thresholds for the 12-month
periods ended December 31, 2008 (“2008”)
and
December 31, 2009 (“2009”):
(a)
In
2008,
Net Income, as defined in accordance with United States generally accepted
accounting principles (“US
GAAP”)
and
reported by the Company in its audited financial statements for 2008 (the
“2008
financial statements”)
exceeds $12,000,000 (the “2008
Performance Threshold”);
(b)
In
2009,
Net Income, as defined in accordance with US GAAP and reported by the Company
in
its audited financial statements for 2008 (the “2009
financial statements”)
exceeds $15,600,000 (the “2009
Performance Threshold”);
and
WHEREAS,
the Company, the Buyers and the Principal Shareholder 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.
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 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 Escrow Agreement shall open a brokerage account
with XX Xxxxxx Xxxxx (the “Escrow Agent Brokerage Account”) whereupon the
Principal Shareholder shall deposit or cause to be deposited at
least
5,000,000 shares of Common Stock into the Escrow Agent Brokerage Account. The
Escrow Agent Brokerage Account shall be in the sole name of the Escrow Agent
and
only the Escrow Agent shall have sole authority to transact the shares placed
therein. In the event that the Principal Shareholder deposits shares in excess
if 5,000,00 shares of Common Stock into the Escrow Agent Brokerage Account,
the
parties agree and hereby irrevocably authorize the Escrow Agent to transfer
such
excess shares back to the Principal Shareholder’s brokerage account upon
instructions from the Principal Shareholder without requiring further
authorization or approval from the Company and the Buyers,In addition, the
Principal Shareholder shall deliver to the Escrow Agent her options to purchase
2,000,000 shares of Common Stock, along with undatedstock powers executed in
blank with signature medallion guaranteed within seven (7) days of the grant
of
the same to her pursuant to Section 4(o) of the Securities Purchase Agreement.
For the avoidance of any doubt, the Escrow Agent shall not be responsible for
procuring the deposit of the options and stock powers from the Principal
Shareholder. The said 5,000,000 shares of Common Stock and the options to
purchase 2,000,000 shares of Common Stock shall collectively be referred to
as
“Escrow
Shares”.
1.3. The
Company will provide the Buyers with (i) the Company’s audited financial
statements for 2008, prepared in accordance with US GAAP, on or before March
31,
2009 and (ii) the Company’s audited financial statements for 2009, prepared in
accordance with US GAAP, on or before March 31, 2010, so as to allow the Buyers
the opportunity to evaluate whether the 2008 Performance Threshold and the
2009
Performance Threshold were attained. In the event that any Buyer receives the
financial information prior to its dissemination by the Company in either a
press release or in the Company’s SEC Documents, the Company shall issue a press
release announcing the information or file a Form 8-K within one trading day
of
a request by the Buyer to make such information public.
1.4. The
parties hereby agree that the Escrow Shares shall be delivered to the Buyers
as
set forth below:
(i) If
Net
Income for 2008 shall be at least ten per cent (10%) less than the 2008
Performance Threshold, then (x) the 2008 Escrow Shares (defined below) shall
be
distributed on a pro rata basis to the Buyers based on the number of shares
of
Common Stock purchased by each Buyer pursuant to the Securities Purchase
Agreement, and (y) within five (5) business
days after March 31, 2009, the Company shall provide written instructions to
the
Escrow Agent instructing the Escrow Agent to issue and deliver the 2008 Escrow
Shares to each Buyer on a pro rata basis based on the number of shares of Common
Stock purchased by that Buyer pursuant to the Securities Purchase Agreement,
and
shall provide a copy of such instructions to each Buyer. “2008
Escrow Shares”
shall
be number of Escrow Shares equivalent to the percentage by which the Company
missed the 2008 Performance Threshold. For example, if the Company were to
miss
the 2008 Performance Threshold by 15%, the 2008 Escrow Shares shall comprise
750,000 shares of Common Stock and options to purchase 300,000 shares of Common
Stock. For the avoidance of any doubt, no 2008 Escrow Shares shall be
transferred to any Buyer in the event the Company misses the 2008 Performance
Threshold by less than 10%.
2
(ii) If
Net
Income for 2009 shall be at least ten per cent (10%) less than the 2009
Performance Threshold, then (x) the 2009 Escrow Shares (defined below) shall
be
distributed on a pro rata basis to the Buyers based on the number of shares
of
Common Stock purchased by each Buyer pursuant to the Securities Purchase
Agreement, and (y) within five (5) business
days after March 31, 2010, the Company shall provide written instructions to
the
Escrow Agent instructing the Escrow Agent to issue and deliver the 2009 Escrow
Shares to each Buyer on a pro rata basis based on the number of shares of Common
Stock purchased by that Buyer pursuant to the Securities Purchase Agreement,
and
shall provide a copy of such instructions to each Buyer. “2009
Escrow Shares”
shall
be the number of Escrow Shares equivalent to the percentage by which the Company
missed the 2009 Performance Threshold. For example, if the Company were to
miss
the 2009 Performance Threshold by 25%, the 2009 Escrow Shares shall comprise
1,250,000 shares of Common Stock and options to purchase 500,000 shares of
Common Stock. For the avoidance of any doubt, no 2009 Escrow Shares shall be
transferred to any Buyer in the event the Company misses the 2009 Performance
Threshold by less than 10%.
1.5 In
the
event 2008 Escrow Shares are delivered to the Buyers, the Principal Shareholder
shall forthwith deposit in Escrow Agent Brokerage Account, in the case of shares
of Common Stock, and deliver to the Escrow Agent, in the case of options, such
additional number of shares of Common Stock and stock options along with undated
stock powers executed in blank with signature medallion guaranteed to Escrow
Agent so as to ensure that the Escrow Shares include 5,000,000 shares of Common
Stock together with options to purchase an additional 2,000,000 shares of Common
Stock or an additional number of shares of Common Stock.
1.6 The
parties hereby agree that in determining the 2008 Performance Threshold and
the
2009 Performance Threshold, the parties shall not
take
into account (and such amounts shall not be included in determining Net
Income):
(i) the
offering and transactional costs associated with the Financing Transaction,
including without limitation, legal and audit costs, registration and filing
fees;
(ii) losses
the Company has suffered or reasonably calculated to have suffered as a result
of a force majeure event, which shall mean (i) acts of God such as earthquakes
with an intensity of more than 7.0 on the Xxxxxxx scale in geographic areas
where the Company derives more than 50% of
its
revenue, or (ii) snow storms, rainstorms, floods and other natural catastrophes
of such intensity and/or duration that exceed the average monthly amount for
that geographic area by more than 100% in geographic areas in which the Company
derives more than 50% of its revenue;
3
(iii)
the
costs and expense incurred by the Company in 2008 and incurred in 2009 in
establishing an employee stock option plan pursuant to Section 4(o) of the
Securities Purchase Agreement and granting stock options to the Principal
Shareholder thereunder; and
(iv)
any
compensation expense incurred by the Company in connection with the release
of
any Escrow Shares to the Principal Shareholder.
1.7 If
the
Company does not achieve either the 2008 Performance Threshold or the 2009
Performance Threshold, the Company shall use its commercially reasonable efforts
to promptly cause the 2008 Escrow Shares or the 2009 Escrow Shares, as the
case
may be, to be delivered to the Buyers, including causing its transfer agent
promptly to issue the certificates in the names of the Buyers 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 ten (10) business days after March 31, 2009 or March
31,
2010, as applicable. For the avoidance of any doubt, the Escrow Agent shall
not
be responsible to procure written instructions from the Company to transfer
the
2008 Escrow Shares or the 2009 Escrow Shares to the Buyers.
1.8 Upon
the
written instructions of the Company, the Escrow Agent shall deliver the 2008
Escrow Shares and the 2009 Escrow Shares, as applicable, to each Buyer or the
Principal Shareholder, and shall be held harmless from any claim, loss or
expense regarding such delivery regardless of whether the other provisions
of
this Make Good Securities Escrow Agreement are complied with or
met.
1.9 The
Escrow Agent shall upon the delivery of 2008 Escrow Shares and 2009 Escrow
Shares to the Buyers, but in no event no later than April 15, 2010, return
to
the Principal Shareholder any Escrow Shares not required to be delivered to
the
Buyers pursuant to the terms hereof.
ARTICLE
II
REPRESENTATIONS
OF THE PRINCIPAL SHAREHOLDER
2. The
Principal Shareholder hereby represents and warrants to the Buyers as
follows:
(i) The
Escrow Shares placed into escrow hereunder by the Principal Shareholder are
validly issued, fully paid and nonassessable shares of the Company. The
Principal Shareholder is the record and beneficial owner of the Escrow Shares
placed into escrow pursuant to this Agreement by the Principal Shareholder
and
has good title to such Escrow Shares, free and clear of all pledges, liens,
claims and encumbrances, except encumbrances created by this Agreement. There
are no restrictions on the ability of the Principal Shareholder to transfer
the
Escrow Shares placed into escrow pursuant to this Agreement by the Principal
Shareholder or to enter into this Agreement other than transfer restrictions
under the Lock-Up Agreement and/or applicable federal and state securities
laws.
While any Escrow Shares remain in escrow, the Principal Shareholder will not
pledge any Escrow Shares and will not create or permit to be created or to
exist
any lien, claim or encumbrance upon any Escrow Share. Upon any delivery of
Escrow Shares placed into escrow pursuant to this Agreement by the Principal
Shareholder to the Buyers hereunder, the Buyers will acquire good and valid
title to such Escrow Shares, free and clear of any pledges, liens, claims and
encumbrances.
4
(ii) The
performance of this Agreement and compliance with the provisions hereof will
not
violate any provision of any law applicable to the Principal Shareholder 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 the Principal Shareholder pursuant to the terms of the certificate
of
incorporation or by-laws of the Company or any indenture, mortgage, deed of
trust or other agreement or instrument binding upon the Principal Shareholder
or
affecting the Escrow Shares. 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
Shareholder.
ARTICLE
III
MISCELLANEOUS
3.1 The
Company will pay Escrow Agent a total of $1,000 for all services rendered by
Escrow Agent hereunder.
3.2 No
waiver
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
second 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.
5
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If
to Escrow Agent:
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Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
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00
Xxxxxxxx, 00xx
Xxxxx,
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Xxx
Xxxx, XX 00000
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Attention: Xxxxxxxx
Xxx, Esq.
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Tel
No.:000-000-0000
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Fax
No.: 000-000-0000
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If
to the
Company or the Principal Shareholder:
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Attention:
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Xx.
Xxxxxxxxx Xxxxx
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Address:
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0/X
Xxxxxxx Xxxxxxxx, Xx. 0000 Xxxxxxx Xxxx, Xxxxxxx Futian
District,
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City
& State:
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Shenzhen,
The People’s Republic of China
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Telephone:
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00-000-00000000
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Fax:
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00-000-00000000
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Email:
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00@xxxxx.xx
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With
a
copy to:
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Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
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00
Xxxxxxxx, 00xx
Xxxxx
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Xxx
Xxxx, XX 00000
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Attention:
Xxxxxxxx Xxx, Esq.
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Tel.
No.: (000) 000-0000
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Fax
No.: (000) 000-0000
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If
to the Buyers:
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to
each Buyer at the address and facsimile numbers set out below that
Buyers
signature
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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 Escrow Shares, and the subject matter
hereof and supersedes all prior understandings with respect to the Escrow
Shares. This Escrow Agreement is one of a series of agreements relating to
the
Financing Transaction, and the terms hereof shall not relate to any aspect
of
the Financing Transaction other than the Escrow Shares and the escrow hereby
created. 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.
6
3.6 Whenever
required by the context of this Escrow Agreement, the singular shall include
the
plural and each gender shall include all other genders. This Escrow Agreement
shall not be construed as if it had been prepared by one of the parties, but
rather as if both parties had prepared the same. Unless otherwise indicated,
all
references to Articles are to articles of this Escrow
Agreement.
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 Shareholder, each Buyer
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 and 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 and 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 hereunder
in
the absence of gross negligence, fraud and willful
misconduct.
7
3.12 The
Escrow Agent shall be entitled to employ such legal counsel and other experts
as
the Escrow Agent may deem necessary properly to 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 the Company and the Principal
Shareholder and may continue to act as legal counsel for the Company and the
Principal Shareholder from time to time, notwithstanding its duties as the
Escrow Agent hereunder. The Buyers consent to the Escrow Agent in such capacity
as legal counsel for the Company and the Principal Shareholder and waive any
claim that such representation represents a conflict of interest on the part
of
the Escrow Agent. The Buyers understand that the Escrow Agent is relying
explicitly on the foregoing provision in entering into this Escrow
Agreement.
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
Buyers. In the event of any such resignation, the Buyers and the Company shall
appoint a successor Escrow Agent and the Escrow Agent shall deliver to such
successor Escrow Agent any Escrow Shares 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 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 or 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 or by the Securities Purchase Agreement 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]
[SIGNATURE
PAGE TO SECURITIES ESCROW AGREEMENT]
8
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of
this 28th day of August, 2008.
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By:
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Name:
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Title:
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ESCROW
AGENT:
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Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
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By:
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Name:
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Title:
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PRINCIPAL
SHAREHOLDER:
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By:
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Name:
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Title:
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BUYER:
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ACCESS
AMERICA FUND, LP
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By:
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Name:
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Title:
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9
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BUYER:
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CHINAMERICA
FUND LP
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By:
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Name:
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Title:
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BUYER:
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XXXX
INVESTMENT II LLC
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By:
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Name:
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Title:
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BUYER:
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XXXXXX
CAPITAL INVESTMENTS, LLC
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By:
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Name:
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Title:
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BUYER:
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CGM
as C/F XXXXXX X. XXXXXX XXX
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By:
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Name:
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Title:
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10
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BUYER:
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INVESTMENT
HUNTER, LLC
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By:
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Name:
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Title:
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BUYER:
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MARED
INVESTMENTS
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By:
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Name:
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Title:
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BUYER:
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HIGH
CAPITAL FUNDING, LLC
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By:
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Name:
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Title:
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11
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BUYER:
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XXXXXXX
LYNCH, PIERCE, XXXXXX &
XXXXX,
FBO XXXX X. XXXXXXX
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By:
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Name:
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12
