ESCROW AGREEMENT
Public Offering
Xxxxxxx Xxxxxxx, Inc. - Best Efforts Underwriter
THIS ESCROW AGREEMENT made and entered into this ____ day of ____,
2007, by and between CHINA AGRI-BUSINESS, INC., located at 00 Xxxx 00xx Xxxxxx,
Xxx Xxxx, XX 00000 (hereinafter called the Issuer or the Company), Xxxxxxx
Xxxxxxx, Inc., an NASD Regulation, Inc. member broker dealer located at 0000
Xxxxx Xxxxxxxx Xxx, Xxxxx 000, Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000 (hereinafter
called Underwriter), and Xxxxx Fargo Bank, N.A., c/o Corporate Trust & Escrow
Services, 0000 Xxxxxxxx, XXX X0000-000, Xxxxxx, XX 00000 (hereinafter called the
Escrow Agent).
WITNESSETH THAT:
WHEREAS, Issuer proposes to issue, and has engaged Underwriter to offer
and sell by public offering (the "Public Offering"), pursuant to the
registration provision of the Securities Act of 1933, as amended (the "Act")
provided by Form SB-2 thereunder, Units consisting of duly authorized $0.001 par
value Common Stock of the Company and warrants to purchase $0.001 par value
Common Stock of the Company on a "best efforts" basis. Each Unit shall consist
of (i) one share of $0.001 par value Common Stock of the Company, (ii) one
warrant to purchase one share of the Company's $0.001 par value Common Stock at
an exercise price of $1.50 per share (the "$1.50 Unit Warrants"), and (iii) one
warrant to purchase one share of the Company's $0.001 par value Common Stock at
an exercise price of $2.00 per share (the "$2.00 Unit Warrants"). The $1.50 Unit
Warrants shall be exercisable for a period of three years from the date of
issuance. The $2.00 Unit Warrants shall be exercisable only if the holder of
such Warrant has exercised and paid to the Company the exercise price of the
$1.50 Warrants in full. If they become exercisable, the $2.00 Unit Warrants will
remain exercisable for a period of three years from the date of issuance. The
warrants contain a call provision, as described in the Registration Statement,
which will require, upon 30 days notice to the record holder of the Unit
Warrants, that the holder exercise the Unit Warrants or forfeit the right to
exercise them at the end of the 30-day period. The maximum Units offered
pursuant to this offering is 1,000,000 Units for a total sales price of
$1,000,000. The minimum Units offered pursuant to this offering is 300,000 Units
for a total sales price of $300,000; and
Underwriter has agreed to use its best efforts to effect the sale of
such interests pursuant to the final Offering Prospectus prepared by the
Company, a copy of which will be incorporated by reference hereto; and
WHEREAS, the parties wish to enter into an agreement pursuant to which
the gross proceeds from up to 1,000,000 Units sold in the Public Offering would
be impounded in escrow, which gross proceeds may be released to the Company only
in the event of the sale of the first 300,000 Units within the time set forth
herein and otherwise the escrowed gross proceeds are to be returned by the
Escrow Agent to the subscribers of the Units; and
WHEREAS, the Issuer, the Underwriter and the Escrow Agent desire to
enter into an agreement with respect to the said escrow of proceeds;
NOW THEREFORE, in consideration of the premises and agreement set forth
herein, the parties hereto agree as follows;
1. The Underwriter (the Company's sales agent) shall deliver to the
Escrow Agent, promptly upon receipt thereof, all proceeds from the sale of up to
1,000,000 Units in the Public Offering at an initial offering price of $1.00 per
Unit (a total of $1,000,000) (the "Investor Funds"), together with a written
account of each sale, which account shall set forth, among other things, the
names and addresses of the purchasers, the number of Units purchased by them,
the amount paid therefor, the date of the sale, and whether the consideration
received was in the form of cash or evidenced by a check.
2. All proceeds received from the sale of the securities subject to
this Escrow Agreement shall be promptly delivered to the Escrow Agent for
deposit in a non-interest bearing escrow account. During the term of this Escrow
Agreement, the Issuer and the Underwriter shall cause all checks received by
them in payment of such securities to be payable to Xxxxx Fargo Bank, N.A. for
the benefit of CHINA AGRI-BUSINESS, INC. Escrow Account . Funds may also be
directly delivered by wire to Corporate Clearing Trust, Xxxxx Fargo Bank, N.A.
via Routing Number 000000000 and the escrow account number.
In the event that any checks deposited in the Escrow Account prove
uncollectible after the funds represented thereby have been released by the
Escrow Agent, then the Issuer shall promptly reimburse the Escrow Agent for any
and all costs incurred for such, upon request, and the Escrow Agent shall
deliver the returned checks to the Issuer.
3. The Issuer and the Underwriter shall furnish the Escrow Agent
simultaneously with each deposit the names, addresses, tax identification number
and respective amounts paid by each purchaser whose funds comprise the deposit.
The information comprising the identity of investors shall be provided to the
Escrow Agent in the format set forth in the List of Investors, attached hereto
as Exhibit B. The Escrow Agent shall prepare and deliver to the Issuer and the
Underwriter, at their respective addresses, a report upon the close of each
month commencing with the date of the Escrow Agreement, showing the account
activity during the month and the total amount on deposit in the escrow account
at the end of each such period and the names, addresses, and respective amounts
paid by each purchaser whose funds comprise the month end balance.
4. The Escrow Agent shall accept said deposits upon the terms set forth
herein and shall treat the funds so deposited as funds in escrow. All proceeds
so deposited shall remain the property of the subscribers and shall not be
subject to any liens or charges by the Escrow Agent or judgments or creditors'
claims against the Issuer until released to the Issuer as hereinafter provided.
However, no purchasers shall be entitled to any refund of their subscription
unless the minimum offering of 300,000 Units or $300,000 is not achieved.
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5. The minimum Units offered pursuant to this offering is 300,000 Units
for a total sales price of $300,000. Gross proceeds may be released to the
Company only in the event of the sale of the first 300,000 Units within the time
set forth herein. Thereafter, Funds will be released from escrow on the last
business day of each week or as otherwise mutually agreed by the Issuer and the
Underwriter in a writing delivered to the Escrow Agent and paid as follows: (i)
on the first $300,000, ninety-two percent (92%) to the Issuer and eight percent
(8%) to the Underwriter; and (ii) for amounts thereafter, eighty-nine percent
(89%)] to the Issuer and eleven percent (11%) to the Underwriter, at their
respective addresses or by wire or electronic transfer to accounts specified by
the Issuer and Underwriter. By agreement of the Underwriter and the Issuer, the
Underwriter may be reimbursed for costs advanced on behalf of the Issuer from
escrow proceeds otherwise payable to the Issuer pursuant to the distribution
schedule above.
6. The escrow period shall begin on the date of this Escrow Agreement
and shall terminate on the earliest of the following dates: (1) when the total
amount deposited in the escrow account reaches the maximum offering amount of
$1,000,000, or (2) the termination date as stated in the final offering
Prospectus (the offering termination date), unless the offering is extended for
such additional period, not to exceed 60 days in all, in accordance with the
terms of the Offering Prospectus at the sole discretion of the Issuer.
7. In the event the Escrow Period terminates pursuant to Paragraph 6
before the minimum of 300,000 Units is sold for a total sales price of $300,000,
the Escrow Agent, as promptly as possible, but in no event later than five (5)
business days after such termination and on the basis of its records, shall
return to each of the purchasers of the Units the amounts paid by them for the
purchase of the Units and collected by the Escrow Agent, without interest and
with no deductions. Each amount paid or payable to each purchaser pursuant to
this paragraph shall be deemed to be the property of each purchaser, free and
clear of any or all claims of the Issuer or of any of its creditors, and the
respective agreements to purchase the Units made and entered into in the Public
Offering shall thereupon be deemed to be canceled without any further liability
of said purchasers to pay for the Units purchased. The Escrow Agent shall be
required to make such payment only to the person named in the written account of
each sale to be furnished by the Issuer and the Underwriter pursuant to
Paragraph 1 and 3 hereof at the address given in the written account provided
thereunder. With regard to any funds payable to purchasers of Units which the
Escrow Agent cannot disburse to said purchasers because the address given in the
written account provided pursuant to Paragraph 1 and 3 hereof is defective, the
Escrow Agent shall at its option and sole discretion either: (a) deposit said
funds with the Clerk of the United States District Court for the District Court
of the Escrow Agent's choosing, and interplead the parties hereto, or (b) retain
such funds until a valid determination regarding such purchaser can be made.
Upon so depositing such funds and filing its complaint in interpleader under
subparagraph (a), the Escrow Agent shall be completely discharged and released
from all further liability or responsibility under the terms hereof. If the
Escrow Agent elects to invoke subparagraph (a), the parties hereto, for
themselves, their heirs, successors and assigns, do hereby submit themselves to
the jurisdiction of the agent for service of all process in connection with the
proceeding mentioned in this paragraph.
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8. The Issuer agrees to pay the Escrow Agent a reasonable fee attached
hereto as Exhibit A for its services under this Escrow Agreement, which fee and
other terms and standard conditions for Escrow Agent's services may be fixed by
a separate agreement, but the agreement herein to pay such reasonable fees is
deemed to be full and valid consideration to the Escrow Agent for its services
hereunder; however, in the event that the conditions for the disbursement of
funds under the Escrow Agreement are not fulfilled, or the Escrow Agent renders
any material service not contemplated in the Escrow Agreement, or there is any
assignment of interest in the subject matter of the Escrow Agreement, or any
material modification hereof, or if any material controversy arises hereunder,
or the Escrow Agent is made a party to any litigation pertaining to the Escrow
Agreement, or the subject matter hereof, then the Escrow Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs and expenses, including reasonable attorney fees, occasioned by any delay,
controversy, litigation or event, and the same shall be recoverable from the
Issuer. No such fee, reimbursement for costs, or indemnification for any damages
incurred by the Escrow Agent shall be paid out of or chargeable to the funds on
deposit in the escrow account.
9. The escrow account shall not earn interest income. The balance of
the escrow account shall be in cash and uninvested. No tax reporting will be
required of the Escrow Agent.
10. Until the terms of this Agreement have been met and the funds
hereunder released to the Issuer, the Issuer may not issue any certificates or
other evidences of securities, except subscription agreements.
11. The sole duty of the Escrow Agent shall be to receive Investor
Funds and hold them subject to release, in accordance herewith, and the Escrow
Agent shall be under no duty to determine whether the Issuer or the Underwriter
is complying with the requirements of this Escrow Agreement, the Offering or
applicable law in tendering the Investor Funds to the Escrow Agent. No other
agreement entered into between the parties, or any of them, shall be considered
as adopted or binding, in whole or in part, upon the Escrow Agent
notwithstanding that any such other agreement may be referred to herein or
deposited with the Escrow Agent or the Escrow Agent may have knowledge thereof,
and the Escrow Agent's rights and responsibilities shall be governed solely by
this Escrow Agreement. The Escrow Agent shall not be responsible for or be
required to enforce any of the terms or conditions of the Public Offering or any
other agreement between the Underwriter and the Issuer. The Escrow Agent may
conclusively rely upon and shall be protected in acting upon any statement,
certificate, notice, request, consent, order or other document believed by it to
be genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall have no duty or liability to verify any such statement,
certificate, notice, request, consent, order or other document, and its sole
responsibility shall be to act only as expressly set forth in this Escrow
Agreement. Concurrent with the execution of this Escrow Agreement, the Issuer
shall deliver to the Escrow Agent an authorized signers C-1 form and the
Underwriter shall deliver to the Escrow Agent an authorized signers C-2 form.
The Escrow Agent shall be under no obligation to institute or defend any action,
suit or proceeding in connection with this Escrow Agreement unless first
indemnified to its satisfaction. The Escrow Agent may consult counsel of its own
choice with respect to any question arising under this Escrow Agreement and the
Escrow Agent shall not be liable for any action taken or omitted in good faith
upon advice of such counsel.
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The Escrow Agent shall not be liable for any action taken or omitted by it in
good faith except to the extent that a court of competent jurisdiction
determines that the Escrow Agent's gross negligence or willful misconduct was
the primary cause of loss. The Escrow Agent is acting solely as escrow agent
hereunder and owes no duties, covenants or obligations, fiduciary or otherwise,
to any other person by reason of this Escrow Agreement, except as otherwise
stated herein, and no implied duties, covenants or obligations, fiduciary or
otherwise, shall be read into this Escrow Agreement against the Escrow Agent. In
the event of any disagreement between any of the parties to this Escrow
Agreement, or between any of them and any other person, including any Investor,
resulting in adverse claims or demands being made in connection with the matters
covered by this Escrow Agreement, or in the event that the Escrow Agent is in
doubt as to what action it should take hereunder, the Escrow Agent may, at its
option, refuse to comply with any claims or demands on it, or refuse to take any
other action hereunder, so long as such disagreement continues or such doubt
exists, and in any such event, the Escrow Agent shall not be or become liable in
any way or to any person for its failure or refusal to act, and the Escrow Agent
shall be entitled to continue so to refrain from acting until (i) the rights of
all interested parties shall have been fully and finally adjudicated by a court
of competent jurisdiction, or (ii) all differences shall have been adjudged and
all doubt resolved by agreement among all of the interested persons, and the
Escrow Agent shall have been notified thereof in writing signed by all such
persons. Notwithstanding the foregoing, the Escrow Agent may in its discretion
obey the order, judgment, decree or levy of any court, whether with or without
jurisdiction and the Escrow Agent is hereby authorized in its sole discretion to
comply with and obey any such orders, judgments, decrees or levies. In the event
that any controversy should arise with respect to this Escrow Agreement the
Escrow Agent shall have the right, at its option, to institute an interpleader
action in any court of competent jurisdiction to determine the rights of the
parties. In no event shall the Escrow Agent be liable, directly or indirectly,
for any special, indirect or consequential losses or damages of any kind
whatsoever (including without limitation lost profits), even if the Escrow Agent
has been advised of the possibility of such losses or damages and regardless of
the form of action. The parties agree that the Escrow Agent has no role in the
preparation of the offering documents, has not reviewed any such documents and
makes no representations or warranties with respect to the information contained
therein or omitted therefrom. The Escrow Agent shall have no obligation, duty or
liability with respect to compliance with any federal or state securities,
disclosure or tax laws concerning the offering documents or the issuance,
offering or sale of the securities. The Escrow Agent shall have no duty or
obligation to monitor the application and use of the Investor Funds once
transferred to the Issuer, that being the sole obligation and responsibility of
the Issuer.
12. The Issuer and Underwriter jointly and severally hereby indemnify
and hold harmless the Escrow Agent from and against any and all loss, liability,
cost, damage and expense, including, without limitation, reasonable counsel
fees, which the Escrow Agent may suffer or incur by reason of any action, claim
or proceeding brought against the Escrow Agent arising out of or relating in any
way to the Escrow Agreement or any transaction to which the Escrow Agreement
relates unless such action, claim or proceeding is the result of the willful
misconduct of the Escrow Agent.
13. Except as otherwise provided in the Escrow Agreement, no party
hereto shall assign the Escrow Agreement or any rights or obligations hereunder
without the prior written consent of the other parties hereto and any such
attempted assignment without such prior written consent shall be void and of no
force and effect. The Escrow Agreement shall inure to the benefit of and shall
be binding upon the successors and permitted assigns of the parties hereto.
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14. This Escrow Agreement shall be construed, performed, and enforced
in accordance with, and governed by, the internal laws of the State of Colorado,
without giving effect to the principles of conflicts of laws thereof.
15. In the event that any part of this Escrow Agreement is declared by
any court or other judicial or administrative body to be null, void, or
unenforceable, said provision shall survive to the extent it is not so declared,
and all of the other provisions of this Escrow Agreement shall remain in full
force and effect.
16. This Escrow Agreement may be amended or modified, and any of the
terms, covenants, representations, warranties, or conditions hereof may be
waived, only by a written instrument executed by the parties hereto, or in the
case of a waiver, by the party waiving compliance. Any waiver by any party of
any condition, or of the breach of any provision, term, covenant,
representation, or warranty contained in this Escrow Agreement, in any one or
more instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation, or warranty of this Escrow Agreement.
17. This Escrow Agreement contains the entire understanding among the
parties hereto with respect to the escrow contemplated hereby and supersedes and
replaces all prior and contemporaneous agreements and understandings, oral or
written, with regard to such escrow.
18. This Escrow Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute the same
instrument. Facsimile copies of this Escrow Agreement will be deemed originals.
19. Escrow Agent may resign upon 30 days advance written notice to the
parties hereto. If a successor Escrow Agent is not appointed within the 30-day
period following such notice, Escrow Agent may petition any court of competent
jurisdiction to name a successor Escrow Agent or interplead the Investor Funds
with such court, whereupon Escrow Agent's duties hereunder shall terminate.
The Issuer, the Underwriter and Escrow Agent have entered into this
Escrow Agreement on the day, month and year above written.
ISSUER:
CHINA AGRI-BUSINESS, INC.
By: ___________________________
Xxxxxxxx Xxxx
Its: CFO
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UNDERWRITER:
XXXXXXX XXXXXXX, INC.
By: __________________________
Xxxxxx Xxxxx
Its: President
ESCROW AGENT
Xxxxx Fargo Bank, National Association
By: __________________________
Xxxx X. Xxxxxx
Its: Vice President
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Exhibit A
XXXXX
FARGO
Schedule of Fees for Services as
Escrow Agent for
XXXXXXX XXXXXXX, INC
ACCEPTANCE FEE: $250.00
A one-time charge covering review and negotiation of documents with
underwriter, issuer and attorneys and account set up.
ESCROW AGENT COUNSEL: NONE ANTICIPATED
Xxxxx Fargo does not anticipate using outside counsel to review
transaction documents. This assumes that an opinion of Trustee Counsel
will not be required. Should a legal opinion from the trustee be
required, Xxxxx Fargo will engage necessary counsel with fees for such
services billed at cost.
ANNUAL ADMINISTRATION FEE: $1,000.00
Payable at closing and annually thereafter. Compensates Xxxxx Fargo for
normal agent administrative duties.
OUT-OF-POCKET EXPENSE: AT COST
Xxxxx Fargo reserves the right to xxxx at cost for out-of-pocket
expenses such as express mail, wire charges and travel expenses, if
required, incurred in connection with a non-Denver, CO closing.
NOTE: The transaction underlying this proposal, and all related legal
documentation, is subject to review and acceptance by Xxxxx Fargo Bank
in accordance with industry standards. Should the actual transaction
materially differ from the assumptions used herein, Xxxxx Fargo Bank
reserves the right to modify this proposal.
THE ABOVE-REFERENCED FEES ARE SUBJECT TO UPDATE ON THE DATE OF THE ESCROW
AGREEMENT.
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Exhibit B
LIST OF INVESTORS
Pursuant to the Escrow Agreement dated __ ___, 2007 by and between
CHINA AGRI-BUSINESS, INC. (hereinafter called the Issuer), Xxxxxxx Xxxxxxx,
Inc., an NASD Regulation, Inc. member broker dealer (hereinafter called
Underwriter), and Xxxxx Fargo Bank, National Association (the "Escrow Agent"),
the Issuer and Underwriter hereby certify that the following Investors have paid
money for the purchase of Units consisting of (i) one share of $0.001 par value
Common Stock of the Company, (ii) one warrant to purchase one share of the
Company's $0.001 par value Common Stock at an exercise price of $1.50 per share
(the "$1.50 Unit Warrants"), and (iii) one warrant to purchase one share of the
Company's $0.001 par value Common Stock at an exercise price of $2.00 per share
(the "Units"), and the money has been deposited with the Escrow Agent:
1. Name of Investor
Address
Tax Identification Number
Amount of Units subscribed for
Amount of money paid and deposited with Escrow Agent
2. Name of Investor
Address
Tax Identification Number
Amount of money paid and deposited with Escrow Agent
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