ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of January 26,
2010, by and among Worldwide Energy and Manufacturing USA, Inc. a Colorado
corporation (the "Company"), the purchasers signatory hereto (each a "Purchaser"
and together the "Purchasers"), Xxxxx and Xxxxx Xxxx, residing at 000 X. Xxxxx
Xxxxxx, Xxxxx X&X, Xxxxx Xxx Xxxxxxxxx, XX 00000 (the "Wangs" and, together with
the Company, if necessary, the "Make Good Pledgors"), and Sichenzia Xxxx
Xxxxxxxx Xxxxxxx LLP, with an address at 00 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(the "Escrow Agent"). CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN SHALL HAVE
THE MEANINGS SET FORTH IN THE SECURITIES PURCHASE AGREEMENT REFERRED TO IN THE
FIRST RECITAL.
W I T N E S S E T H:
WHEREAS, the Purchasers will be purchasing from the Company,
severally and not jointly with the other Purchasers, in the aggregate, up to
$8,000,000 of shares of Common Stock and Warrants of the Company on the Closing
Date as set forth in the Securities Purchase Agreement dated the date hereof
between the Purchasers and the Company (the "Purchase Agreement"), which
securities will be issued under the terms contained herein and in the Purchase
Agreement; and
WHEREAS, it is intended that the purchase of the securities be
consummated in accordance with the requirements set forth in Regulation D
promulgated under the Securities Act of 1933, as amended; and
WHEREAS, the Company may be obligated to issue to each Purchaser
such number of Make Good Shares to the terms herein;
WHEREAS, the Company and the Purchasers have agreed that up to
1,777,777 shares of Common Stock (the "Make Good Shares") shall be deposited in
escrow with the Escrow Agent pursuant to the terms herein;
WHEREAS, the Company and the Purchasers have agreed that the Wangs
shall deposit up to 1,620,954 (the "Executive Make Good Shares") of the Make
Good Shares in escrow with the Escrow Agent pursuant to the terms herein;
WHEREAS, the Company and the Purchasers have agreed that the Company
shall deposit the balance of the Make Good Shares (the "Company Make Good
Shares"), as necessary, up to 1,777,777 shares of Common Stock, such that the
number of Makes Good Shares shall equal the number of Shares issued to the
Purchasers pursuant to the Purchase Agreement, in escrow with the Escrow Agent
pursuant to the terms herein
WHEREAS, the Company, the Purchasers and the Wangs have requested
that the Escrow Agent hold the Make Good Shares in escrow upon the terms set
forth herein;
- 1 -
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:
TERMS OF THE ESCROW
The parties hereby agree to establish an escrow account with the Escrow
Agent whereby the Escrow Agent shall hold the Make Good Shares.
1. APPOINTMENT OF ESCROW AGENT. The Make Good Pledgors and the Company
hereby appoint Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP as Escrow Agent to act in
accordance with the terms and conditions set forth in this Escrow Agreement, and
Escrow Agent hereby accepts such appointment and agrees to act in accordance
with such terms and conditions.
2. ESTABLISHMENT OF ESCROW. On or before April 22, 2010, the Wangs
shall deliver, or cause to be delivered, to the Escrow Agent the Executive Make
Good Shares in the form of certificates evidencing up to 1,620,954 shares of the
Company's common stock, no par value, and the Company shall deliver the Company
Make Good Shares, as necessary, up to 1,777,777 shares of Common Stock,
representing the balance of the Make Good Shares, along with medallion
guaranteed stock powers (or such other signed instrument of transfer acceptable
to the Company's transfer agent to enable the transfer of such Make Good Shares
in accordance with Section 4). The Make Good Pledgors hereby agree that their
obligation to transfer shares of Common Stock to Purchasers pursuant to the
terms of the Purchase Agreement and this Escrow Agreement shall not continue to
run to the benefit of any Investor who shall have transferred or sold all or any
portion of its Shares.
3. REPRESENTATIONS OF THE WANGS AND THE COMPANY. The Wangs and the
Company hereby represent and warrant, severally and not jointly, as to
themselves and itself only, to the Purchasers as follows:
a. The Make Good Shares of the Make Good Pledgors are validly
issued, fully paid and nonassessable shares of the Company, and free and clear
of all pledges, liens and encumbrances. Upon any transfer of Make Good Shares
to Purchasers hereunder, Purchasers will receive full right, title and authority
to such shares as holders of Common Stock.
b. Performance of this Escrow 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 any of the Make Good Pledgors pursuant to the terms of any indenture,
mortgage, deed of trust or other agreement or instrument binding upon any of the
Make Good Pledgors, other than such breaches, defaults or liens which would not
have a material adverse effect taken as a whole.
4. DISBURSEMENT OF MAKE GOOD SHARES.
- 2 -
a. The Company shall achieve at least $4,000,000 in Adjusted
EBITDA, on a consolidated basis with each of the Subsidiaries for the fiscal
year ending December 31, 2010, as disclosed in the Company's Form 10-K for the
fiscal year ending December 31, 2010 (the "2010 EBITDA Milestone", the date of
disclosure of such 2010 EBITDA Milestone, including any permitted extensions,
the "2010 EBITDA Milestone Date" and such 10-K, the "2010 10-K"). If the
Company fails to achieve the 2010 EBITDA Milestone, then, in accordance with the
terms of the Share Escrow Agreement, the Share Escrow Agent will transfer to the
Purchasers from such escrow account, on a pro-rata basis (based on such
Purchaser's Subscription Amount and the aggregate Subscription Amount
hereunder), an aggregate number of shares of Common Stock equal to the following
formula:
-------------------------
|E | | |
---------------
|((A / B) X D)| | |
-------------------------
For the purposes of the foregoing formula:
A = 2010 Adjusted EBITDA
B = 2010 EBITDA Milestone
C = Total number of Shares issued to the Purchasers
D = 4.50
E = Total Subscription Amount
In the event that the Company fails to file the 2010 10-K with the
Commission on or before the last date that such form is required to be filed
(after any permitted extensions under the Exchange Act), the Company shall be
irrevocably deemed to have failed to achieve the 0000 XXXXXX Milestone, and the
2010 EBITDA Milestone Date shall be deemed to be the last date that the Company
was permitted to file the 2010 10-K (after any permitted extensions under the
Exchange Act). In addition, notwithstanding anything herein to the contrary, in
the event that the Company reports an Adjusted EBITDA for the fiscal year ending
December 31, 2010 of $2,000,000 or less or the Company fails to file its 2010
10-K with the Commission on or before the last date that such form is required
to be filed (after any permitted extensions under the Exchange Act), all of the
Make Good Shares shall be issued pro-rata to the Purchasers (based on such
Purchaser's Subscription Amount and the aggregate Subscription Amount hereunder)
(b) Company Make Good Shares. On or before April 22, 2010, the
Company shall deliver the Company Make Good Shares, which, added to the
Executive Make Good Shares, shall equal the number of Shares issued to the
Purchasers hereunder, to the Share Escrow Agent for deposit in the escrow
account pursuant to the Share Escrow Agreement. The parties hereto acknowledge
that, as of the date hereof and pursuant to the 2008 Share Escrow Agreement,
Company counsel as escrow agent holds in escrow 1,620,954 shares of Common Stock
that were deposited by the Wangs (such shares, "2008 Escrow Shares") and that,
subject to the terms and conditions of the 2008 Share Escrow Agreement, all or a
portion of the 2008 Escrow Shares shall be transferred by Company counsel as
escrow agent to the Share Escrow Agent to be held in escrow and distributed in
accordance with the terms and conditions of the Share Escrow Agreement.
- 3 -
(c) [RESERVED]
(d) Within five days after the determination of the number of Make
Good Shares to which the Purchasers are entitled calculated in the manner set
forth above, the Purchasers and the Company shall give joint written
instructions to the Share Escrow Agent to, and upon receipt of such written
instructions, the Share Escrow Agent shall, within five Business Days after
receipt of such instructions, deliver to the Purchasers on a "pro rata" basis
(based on such Purchaser's Subscription Amount and the aggregate Subscription
Amount hereunder) such number of Make Good Shares. If none or less than all of
the Make Good Shares are delivered to the Purchasers, the Share Escrow Agent
shall return the undistributed Make Good Shares to the Executives, or the
Company, as the case may be, pursuant to the joint instructions of the
Purchasers and the Company.
(e) Notwithstanding anything to the contrary set forth herein,
only those Purchasers who own the Shares issued hereunder and remain
shareholders of the Company at the time that any of the Make Good Shares become
deliverable hereunder shall be entitled to their pro rata portion of the Make
Good Shares calculated based on their ownership interest at the time when the
applicable Make Good Shares become deliverable
(f) For clarity and avoidance of doubt, all references to share
prices and shares of Common Stock in this Section shall be subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur
after the date of this Agreement
5. DURATION. This Escrow Agreement shall terminate on the distribution
of all the Make Good Shares to either the Purchasers or back to the Make Good
Pledgors, as the case may be. 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. MAKE GOOD SHARES. If any Make Good Shares are deliverable to the
Purchasers pursuant to the Purchase Agreement and in accordance with this Escrow
Agreement, (i) the Make Good Pledgors 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 Make Good
Shares from the Make Good Pledgors to the Purchasers and (ii) following its
receipt of the documents referenced in Section 6(i), the Company covenants and
agrees to promptly reissue such Make Good Shares in the applicable Investor's
name and deliver the same as directed by such Investor. Until such time as (if
at all) the Make Good Shares are required to be delivered pursuant to the
Purchase Agreement and in accordance with this Escrow Agreement, any dividends
payable in respect of the Make Good Shares and all voting rights applicable to
the Make Good Shares shall be retained by the Make Good Pledgors. Should the
Escrow Agent receive dividends or voting materials, such items shall be passed
immediately on to the Make Good Pledgors and shall not be invested or held for
any time longer than is needed to effectively re-route such items to the Make
Good Pledgors.
7. INTERPLEADER. Should any controversy arise among the parties hereto
with respect to this Escrow Agreement or with respect to the right to receive
the Make Good Shares, Escrow Agent shall have the right to consult counsel
and/or to institute an appropriate interpleader action
- 4 -
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 7 shall be filed in any court
of competent jurisdiction in the State of New York, and the Make Good 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 Escrow Agreement with respect to the Make Good Shares and
any other obligations hereunder.
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 Escrow 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 Escrow Agreement and
instructions to Escrow Agent pursuant to the terms of this Escrow 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. 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
Escrow 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.
b. The Company and the Make Good Pledgors each hereby, jointly
and severally, indemnify and hold harmless the Escrow Agent 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 in connection with any claim or demand, which,
in any way, directly or indirectly, arises out of or relates to this Escrow
Agreement or the services of Escrow Agent hereunder; except, that if Escrow
Agent is guilty of willful misconduct, gross negligence or fraud under this
Escrow Agreement, then Escrow Agent 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 of notice of any such demand
- 5 -
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 shall survive the termination of
this Escrow Agreement.
9. RECORDS. Escrow Agent shall maintain accurate records of all
transactions hereunder. Promptly after the termination of this Escrow 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.
10. NOTICE. All notices, communications and instructions required or
desired to be given under this Escrow 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.
11. EXECUTION IN COUNTERPARTS. This Escrow 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.
12. ASSIGNMENT AND MODIFICATION. This Escrow 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 and the
Purchasers. Subject to the foregoing, this Escrow 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 Escrow Agreement. No portion of the Make
Good 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 Escrow Agreement. This Escrow Agreement may be amended or
modified only in writing signed by all of the parties hereto
MISCELLANEOUS
13.1 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.
13.2 This Escrow Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and permitted assigns of the
parties hereto.
13.3 This Escrow Agreement is the final expression of, and contains the
entire agreement between, the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect
thereto. This Escrow Agreement may not be modified, changed,
supplemented or terminated, nor may any obligations hereunder be
waived, except by written instrument signed by the parties to be
charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein. Except as expressly set forth herein, all
fees and expenses of the Escrow Agent in connection with this Escrow
Agreement and the performance of its duties hereunder shall be paid by
the Company.
13.4 Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the
feminine. This Escrow Agreement shall not be construed as if it had
been prepared by one of the parties, but rather as if all parties had
prepared the same. Unless otherwise indicated, all references to
Articles are to this Escrow Agreement.
13.5 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. 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.
13.6 The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by the Company, each
Purchaser and the Escrow Agent.
13.7 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.
13.8 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.
13.9 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 the Purchase Agreement
or any documents or papers deposited or called for thereunder in the
absence of gross negligence, fraud and willful misconduct.
13.10 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; provided that the costs of such
compensation shall be borne by the Escrow Agent.
13.11 The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by giving written notice to
the Company and the Purchasers. In the event of any such resignation,
the Purchasers and the Company shall appoint a successor Escrow Agent
and the Escrow Agent shall deliver to such successor Escrow Agent any
escrow funds and other documents held by the Escrow Agent.
13.12 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.
13.13 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 funds 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
funds until such disputes shall have been settled either by mutual
written agreement of the parties concerned by a final order, decree or
judgment or a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, but the Escrow
Agent shall be under no duty whatsoever to institute or defend any
such proceedings or (2) to deliver the escrow funds 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 in accordance with the applicable
procedure therefore
13.14 The Company and each Purchaser agree jointly and severally 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 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.
13.15 The Escrow Agent shall be permitted to act as counsel for the
Company in any transaction and/or dispute including any dispute
between the Company and the Purchasers, whether or not the Escrow
Agent is then holding the documents or escrow funds held by the Escrow
Agent hereunder.
************************
- 6 -
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of date first written above.
WORLDWIDE ENERGY AND MANUFACTURING USA, INC.
By:__________________________________________
Name: Xxxxx Xxxx
Title: Chief Executive Officer
With a copy to (which shall not constitute notice):
ESCROW AGENT:
SICHENZIA XXXX XXXXXXXX XXXXXXX LLP
By:__________________________________________
Name:
Title:
__________________________________________
Xxxxx Xxxx
__________________________________________
Xxxxx Xxxx
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
[SIGNATURE PAGE OF PURCHASERS TO WEMU ESCROW AGREEMENT ]
Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing entity: __________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: _____________________
