ESCROW AGREEMENT
Exhibit
10.2
This
Escrow Agreement (this “Agreement”), dated as of June ____, 2007, is entered
into by and among China Agritech, Inc., a Delaware corporation (the “Company”),
each of the parties listed below who were Investors to the private offering
of
securities of the Company, ▇▇▇▇▇ ▇▇, in his individual capacity (“▇▇▇▇▇”), and
Securities Transfer Corporation (hereinafter referred to as “Escrow
Agent”).
WHEREAS,
each of the Investors has entered into a Securities Purchase Agreement, dated
as
of the date hereof (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, ▇▇▇▇▇
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 the
“Performance Thresholds” (as hereinafter defined);
WHEREAS,
pursuant to the requirements of the SPA, the Company, ▇▇▇▇▇ and the Investors
have agreed to establish an escrow on the terms and conditions set forth in
this
Agreement;
WHEREAS,
Escrow Agent has agreed to act as escrow agent pursuant to the terms and
conditions of this 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.
The
Investors, ▇▇▇▇▇ and the Company hereby appoint Securities Transfer Corporation
as Escrow Agent to act in accordance with the terms and conditions set forth
in
this 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 Agreement, ▇▇▇▇▇ shall deliver to Escrow Agent a stock
certificate evidencing 1,124,564 shares (the “Escrow Shares”) of the Company’s
common stock, par value $0.001 per share (the “Common Stock”) along with a Stock
Power executed in blank. As used in this Agreement, “Transfer Agent” means
Securities Transfer Corporation, or such other entity hereafter retained by
the
Company as its stock transfer agent as specified in a writing from the Company
to Escrow Agent.
3. Representations
and Covenants of the Company and ▇▇▇▇▇ Each
of
the Company and ▇▇▇▇▇ hereby individually and not severally represent and
warrant to the Investors as follows:
(i) Authorization;
Enforcement. ▇▇▇▇▇ has the requisite capacity and authority to enter into and
to
consummate the transactions contemplated by each of this Agreement and the
Stock
Power (the “Documents”) and otherwise to carry out his obligations thereunder.
The execution and delivery of each of the Documents by ▇▇▇▇▇ and the
consummation of the transactions contemplated thereby have been duly authorized
by all necessary action on the part of ▇▇▇▇▇ and third parties and no further
action is required by ▇▇▇▇▇ or third parties in connection therewith. Each
of
the Documents has been duly executed by ▇▇▇▇▇ and constitutes the valid and
binding obligation of ▇▇▇▇▇ and is enforceable against ▇▇▇▇▇ in accordance
with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws
relating to, or affecting generally the enforcement of, creditors’ rights and
remedies or by other equitable principles of general application.
(ii) Escrow
Shares. The Escrow Shares are validly issued, fully paid and nonassessable
shares of the Company, and free and clear of all pledges, liens and
encumbrances.
(iii) Title
to
Escrow Shares. ▇▇▇▇▇ has, and will provide to the Escrow Agent, good and valid
title to the Escrow Shares to be transferred and delivered on behalf of ▇▇▇▇▇
to
the Investors hereunder, free and clear of all liens, encumbrances, equities
or
claims.
(iv) No
Conflicts. ▇▇▇▇▇’▇ execution and delivery of the Documents, ▇▇▇▇▇’▇ performance
of his obligations under the Documents and the consummation of the transactions
contemplated thereby do not and will not (i) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of,
any agreement, credit facility, debt or other instrument or other understanding
to which ▇▇▇▇▇, the Company or any Subsidiary is a party or by which any
property or asset of ▇▇▇▇▇, the Company or any Subsidiary is bound or affected,
or (ii) result (with or without notice, lapse of time or both) in the creation
or imposition of any lien, charge or encumbrance upon the Escrow
Shares.
(v) Filings,
Consents and Approvals. Except
for the filing with the PRC State Administration of Foreign Exchange with
respect to the change of share structure in the Company, neither
▇▇▇▇▇ nor the Company is required to obtain any consent, waiver, authorization
or order of, give any notice to, or make any filing or registration with, any
U.S. or PRC court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance
by
▇▇▇▇▇ and Escrow Agent of the Transaction Documents to which they are a party
or
the consummation of the transactions contemplated by any of the Transaction
Documents.
(vi) No
Impairment of Investor Rights. Neither ▇▇▇▇▇ nor the Company shall take any
action which could impair Investors’ rights in the Escrow
Shares.
(vii) No
Sale
of Shares. ▇▇▇▇▇ shall not sell, transfer, assign or otherwise dispose of (by
operation of law or otherwise) or grant any option with respect to any Escrow
Shares prior to the termination of this Agreement. For so long as this Agreement
is in effect, the Company shall cause the Transfer Agent to maintain stop
transfer instructions on its records with respect to all transfers of the Escrow
Shares, except for the transfer and delivery to the Investors contemplated
hereby.
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(viii) Attorney-in-Fact.
Escrow Agent is hereby appointed the attorney-in-fact of ▇▇▇▇▇ for the purpose
of carrying out the provisions of this Agreement and taking any action and
executing any instrument that Escrow Agent reasonably may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, Escrow Agent has full power and authority
to
effect any transfer of the Escrow Shares permitted under the terms of this
Agreement.
4. Disbursement
of Escrow Shares ▇▇▇▇▇
hereby agrees with and for the benefit of the Investors that if the After-Tax
Net Income for the fiscal year ended December 31, 2007 reported in the Company’s
Annual Report on Form 10-K for the fiscal year ending December 31, 2007, as
filed with the Commission (the “2007
Annual Report”)
is
$8,350,000 or less (the “2007
Guaranteed ATNI”),
Escrow
Agent shall, on behalf of ▇▇▇▇▇, transfer to each Investor on a pro rata basis
(based upon such Investor’s Investment Amount relative to the aggregate
Investment Amount of all Investors) for no additional consideration, the Escrow
Shares. If the 2007 Annual Report reflects After-Tax Net Income equal to or
less
than the 2007 Guaranteed ATNI, then the Company shall provide written
instruction to Escrow Agent instructing Escrow Agent to issue and deliver
certificates evidencing a certain number of Escrow Shares, as applicable, in
accordance with Exhibit
A,
to each
Investor, within ten (10) Business Days of the date the audit report for the
fiscal year ending December 31, 2007 is filed with the Commission. Escrow Agent
shall rely only on the letter of instruction from the Company in this regard.
If
the 2007 Annual Reports reflect After-Tax Net Income of greater than the 2007
Guaranteed ATNI for the fiscal year ending December 31, 2007, the Company shall
provide written instruction to Escrow Agent for the release of the Escrow Shares
to ▇▇▇▇▇. Notwithstanding anything to the contrary contained
herein, in the event that the release of the Escrow Shares to the
Investors or ▇▇▇▇▇ is deemed to be an expense or deduction from revenues/income
of the Company for the applicable year, as required under U.S. generally
accepted accounting principles, then such expense or deduction shall be
excluded for purposes of determining whether or not the 2007 Guaranteed
ATNI has been achieved by the Company.
5. Duration
This
Agreement shall terminate upon the distribution of all the Escrow Shares. The
Company agrees to promptly provide the Escrow Agent written notice of the filing
with the Commission of any financial statements or reports referenced
herein.
6. Escrow
Shares. If
the
Escrow Shares are deliverable to the Investors pursuant to in accordance with
this Agreement, and as required by the SPA, ▇▇▇▇▇, the Company and Escrow Agent
covenant and agree to cooperate with the Transfer Agent so that the Transfer
Agent promptly reissues such Escrow Shares in the applicable Investor’s name and
delivers the same as directed by such Investor. Until such time as the Escrow
Shares are required to be delivered pursuant to the SPA and in accordance with
this Agreement, any dividends payable in respect of the Escrow Shares and all
voting rights applicable to the Escrow Shares shall be retained by ▇▇▇▇▇. Should
Escrow Agent receive dividends or voting materials, such items shall not be
held
by Escrow Agent, but shall be passed immediately on to ▇▇▇▇▇ and shall not
be
invested or held for any time longer than is needed to effectively re-route
such
items to ▇▇▇▇▇. In the event that Escrow Agent receives a communication
requiring the conversion of the Escrow Shares to cash or the exchange
of the Escrow Shares for that of an acquiring company, the Escrow Agent shall
solicit and follow the written instructions of ▇▇▇▇▇; provided,
that
the cash or exchanged shares are instructed to be redeposited into the Escrow
Account. ▇▇▇▇▇ shall be responsible for all taxes resulting from any such
conversion or exchange.
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Assuming
▇▇▇▇▇ provides good and valid title to the Escrow Shares to be transferred
and
delivered on behalf of ▇▇▇▇▇ to the Investors hereunder, free and clear of
all
liens, encumbrances, equities or claims, the Escrow Agent will ensure that
upon
delivery of the Escrow Shares, good and valid title to the Escrow Shares, free
and clear of all liens, encumbrances, equities or claims will pass to the
Investors. The
Escrow Agent shall not take any action which could impair Investors’ rights in
the Escrow Shares. The Escrow Agent shall not sell, transfer, assign or
otherwise dispose of (by operation of law or otherwise) or grant any option
with
respect to any Escrow Shares prior to the termination of this
Agreement.
7. Interpleader
Should
any controversy arise among the parties hereto with respect to this Agreement
or
with respect to the right to receive the Escrow Shares, Escrow Agent shall
have
the right to consult counsel and/or to institute an appropriate interpleader
action to determine the rights of the parties. Escrow Agent is also hereby
authorized to institute an appropriate interpleader action upon receipt of
a
written letter of direction executed by the parties so directing Escrow Agent.
If Escrow Agent 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 6 shall be filed
in any court of competent jurisdiction in the State of New York, and the Escrow
Shares in dispute shall be deposited with the court and in such event Escrow
Agent shall be relieved of and discharged from any and all obligations and
liabilities under and pursuant to this Agreement with respect to the Escrow
Shares.
8. Exculpation
and Indemnification of Escrow Agent (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
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 Agreement and instructions
to Escrow Agent pursuant to the terms of this 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.
(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, in good faith and in the exercise
of its
own best judgment, and 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 Escrow Agent hereunder shall be determined
solely
by the express provisions of this 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.
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(c) Escrow
Agent will be indemnified and held harmless, jointly and severally, by the
Company and ▇▇▇▇▇ from and against any expenses, including reasonable attorneys’
fees and disbursements, damages or losses suffered by Escrow Agent in connection
with any claim or demand, which, in any way, directly or indirectly, arises
out
of or relates to this Agreement or the services of Escrow Agent hereunder;
except, that if Escrow Agent is guilty of willful misconduct, fraud or gross
negligence under this Agreement, then Escrow Agent will bear all losses, damages
and expenses arising as a result of such willful misconduct, fraud or gross
negligence. Promptly after the receipt by Escrow Agent 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 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 7 shall survive
the
termination of this Agreement.
9. Compensation
of Escrow Agent. The
Company will pay Escrow Agent $3,000 for all services rendered by Escrow Agent
hereunder.
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 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.
12. Notice
All
notices, communications and instructions required or desired to be given under
this 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 address listed on the signature pages hereto.
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13. Execution
in Counterparts This
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
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, except that any Investor shall have the right to assign its rights
to
receive all or any portion of the Escrow Shares deliverable to such Investor
without the consent of any other party to this Agreement. Subject to the
foregoing, this 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
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 Agreement. This Agreement
may be changed or modified only in writing signed by all of the parties
hereto.
15. General.
This
Agreement and the performance hereunder shall be governed by the laws of the
State of New York. ▇▇▇▇▇ consents to jurisdiction and venue for any litigation
arising out of this Agreement of the United States District Court for the
Southern District of New York and of the Supreme Court of the State of New
York,
New York County.
16. Headings
The
headings contained in this Agreement are for convenience of reference only
and
shall not affect the construction of this 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 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. Merger
or Consolidation.
Any
corporation or association into which Escrow Agent may be converted or merged,
or with which it may be consolidated, or to which it may sell or transfer all
or
substantially all of its corporate trust business and assets as a whole or
substantially as a whole, or any corporation or association resulting from
any
such conversion, sale, merger, consolidation or transfer to which Escrow Agent
is a party, shall be and become the successor escrow agent under this Agreement
and shall have and succeed to the rights, powers, duties, immunities and
privileges as its predecessor, without the execution or filing of any instrument
or paper or the performance of any further act.
[REMAINDER
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IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
set forth opposite their respective names.
CHINA
AGRITECH, INC.
By:
___________________________
Name:
▇▇
▇▇▇▇▇
Title:
Chief Executive Officer
Address
for Notice:
______________________________
▇▇
▇▇▇▇▇
Address
for Notice:
SECURITIES
TRANSFER CORPORATION
By:
___________________________
Name:
Title:
Address
for Notice:
INVESTORS
____________________
By:
___________________________
Name:
Title:
Address
for Notice:
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