Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT - China Carbon Graphite Group, Inc. | f8k122209_chinacarbon.htm |
| EX-3.1 - CERTIFICATE OF DESIGNATION TO THE SERIES B CONVERTIBLE PREFERRED STOCK. - China Carbon Graphite Group, Inc. | f8k122209ex3_chinacarbon.htm |
| EX-99.1 - FORM OF SUBSCRIPTION AGREEMENT - China Carbon Graphite Group, Inc. | f8k122209ex99i_chinacarbon.htm |
| EX-99.5 - FORM OF WARRANT ISSUED TO THE INVESTORS - China Carbon Graphite Group, Inc. | f8k122209ex99v_chinacarbon.htm |
| EX-99.6 - WARRANT ISSUED TO MAXIM GROUP LLC - China Carbon Graphite Group, Inc. | f8k122209ex99vi_chinacarbon.htm |
| EX-99.4 - ESCROW AGREEMENT - China Carbon Graphite Group, Inc. | f8k122209ex99iv_chinacarbon.htm |
| EX-99.2 - REGISTRATION RIGHTS AGREEMENT - China Carbon Graphite Group, Inc. | f8k122209ex99ii_chinacarbon.htm |
| EX-99.7 - PRESS RELEASE - China Carbon Graphite Group, Inc. | f8k122209ex99vii_chinacarbon.htm |
Exhibit
99.3
MAKE
GOOD ESCROW AND PLEDGE AGREEMENT
This
MAKE GOOD ESCROW AND PLEDGE
AGREEMENT (this “Agreement”), dated as of
December 22, 2009, is entered into by and among China Carbon Graphite Group,
Inc., a Nevada corporation (the “Company”), the persons or
entities signatory (each, an “Investors” and collectively,
the “Investors”), and
Continental Stock Transfer & Trust Company (the “Escrow Agent”).
WHEREAS, concurrently with the
execution hereof, the Company is consummating a private placement transaction
(the “Financing
Transaction”) with the Investors whereby the Company will issue
investment units comprised of shares of Series B Convertible Preferred Stock of
the Company (the “Preferred
Shares”) and warrants (the “Warrants”) to purchase common
stock, par value $0.001 per share, of the Company (together with any securities
into which such shares may be reclassified, the “Common Stock”);
WHEREAS, in order to provide
security to the Investors in the event that Company fails to meet certain future
financial performance thresholds, the Company has agreed to issue, pledge and
deposit a stock certificate representing 50% of the number of shares of Series B
Preferred Stock issued in the Financing Transaction shares of Common Stock (the
“Escrow Shares”) into
escrow for the benefit of the Investors; and
WHEREAS, the Company and the
Investors 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
Section
1.01 Appointment of Escrow
Agent. The parties hereby agree to appoint the Escrow Agent 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.
Section
1.02 Establishment of Escrow
Account.
(a) Upon the
execution of this Agreement, the Company shall, as a pledge of securities,
deposit the Escrow Agent a certificate or certificates representing the Escrow
Shares, together with duly executed stock powers or other appropriate transfer
documents executed in blank by the Company (such certificates and such transfer
documents, collectively, the “Escrow
Materials”). The Escrow Agent shall hold the Escrow Materials
and distribute the same as contemplated by this Agreement.
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(b) The
Company and the Investors hereby agree that the deposit by the Company of the
Escrow Materials with the Escrow Agent on the terms and conditions set forth
herein is intended to be a bona fide pledge of securities by the Company for the
benefit of the Investors (as pledgees), in each case within the meaning of and
as contemplated by Rule 144(d)(3)(iv) promulgated by the Securities and Exchange
Commission (the “Commission”). In
addition the Escrow Shares, if released to the Investors pursuant to the terms
hereof, shall be considered “Registrable Securities” for purposes of Section
6(d) of that certain Registration Rights Agreement between the Company and the
Investors.
Section
1.03 Performance
Threholds. The distribution of the Escrow Shares shall be
based upon the following financial performance thresholds of the Company (the
“Performance
Thresholds”) for the fiscal years ended December 31, 2010 (“Fiscal Year 2010”) and
December 31, 2011 (“Fiscal Year
2011”):
(a) The
Fiscal Year 2010 Performance Threshold shall be audited Net Income equal to or
greater than $5,100,000 (the “2010 PT”).
(b) The
Fiscal Year 2011 Performance Threshold shall be audited Net Income equal to or
greater than $10,000,000 (the “2011 PT”); provided, however, that if
the Company completes an equity underwritten financing with gross proceeds in
excess of $15,000,000 prior to August 31, 2010, the 2010 PT shall be increased
to $20,000,000.
(c) For the
purposes of this Agreement, the term “Net Income” shall be defined
in accordance with U.S. generally accepted accounting principles, consistently
applied (“U.S. GAAP”)
and reported by the Company in its audited financial statements for each of the
Fiscal Year 2010 and Fiscal Year 2011; provided, however, that Net
Income for each of Fiscal Year 2010 and Fiscal Year 2011 shall be increased by
any non-cash charges incurred: (i) as a result of the Financing Transaction,
including without limitation, as a result of the issuance and/or conversion of
the Preferred Shares, and the issuance and/or exercise of the Warrants, (ii) any
income tax, enterprise tax or similar tax in excess of 25% of income before
income taxes.
Section
1.04 Determination of 2010 PT and
2011 PT; Investor Representative.
(a) The 2010
PT and 2011 PT shall be determined as of the date of the Company’s audited
financial statements for the corresponding fiscal year are required to be filed
with the Commission pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and, if the
Company is not required to file reports pursuant to Section 13(a) or Section
15(d) of the Exchange Act, and therefore prepares and furnishes the documents
required by Section 6 of the Registration Rights Agreement, the 2010 PT and 2011
PT shall be determined in accordance with such prepared documents at such
time.
(b) The
Company will provide the Investors with the Company’s audited financial
statements for the appropriate fiscal year, prepared in accordance with U.S.
GAAP, no later than the date for filing the Company’s Annual Report on Form 10-K
for the corresponding fiscal year, including any extension for filing the Annual
Report which may be requested under Rule 12b-25 of the Securities Exchange Act
of 1934, as amended (the “Annual Report”), with the
Commission so as to allow the Investors the opportunity to evaluate whether each
of the 2010 PT and 2011 PT were attained. Taylor Asset Management,
Inc., as representative of the Investors (the “Investor Representative”)
shall, promptly upon receipt of such financial statements provide each of the
Investors with copies of such financial statements and proposed Disbursement
Instructions (as defined below) (collectively, the “Proposed Disbursement
Materials”). Each of the Investors hereby irrevocably appoints
the Investor Representative to act in such capacity on their behalf as provided
for herein.
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Section
1.05 Distribution of the Escrow
Shares. The parties hereby agree that the Escrow Shares shall
be distributed for the 2010 PT and the 2011 PT based on the following
formula:
(a) In the
event the Company achieves no less than 100% of the applicable Performance
Threshold, all of the Escrow Shares for the corresponding fiscal year shall be
returned to the Company and cancelled.
(b) If the
Company achieves less than 100% of the applicable Performance Threshold, the
Investors shall receive in the aggregate, on a pro rata basis (based upon the
number of Preferred Shares or shares of Common Stock underlying the Preferred
Shares (the “Conversion
Shares”) then owned by each such Investor as of the date of distribution
of the Escrow Shares), an aggregate of 1,080,250 shares of the Escrow Shares for
each percentage by which the applicable Performance Threshold was not achieved
up to the total number of Escrow Shares for the applicable fiscal
year. The number of Escrow Shares payable to each Investor shall be
equal to a fraction of the total number of Escrow Shares potentially issuable
pursuant to the terms hereof, the numerator of which shall be the amount by
which (i) the number of Conversion Shares issued or issuable upon Preferred
Shares which was initially issued to the Investor exceeds (ii) the sum of (x)
the number of Conversion Shares sold or otherwise transferred by the Investor
plus (y) the number of shares of Conversion Shares issued or issuable sold or
otherwise transferred by the Investor, and the denominator of which is the
number of Conversion Shares issued or issuable by the Company in the
Offering. Any Escrow Shares for either Fiscal Year 2010 or Fiscal
Year 2011 which are not transferred to the Investors pursuant to this paragraph
shall be returned to the Company for cancellation.
(c) No
earlier than five (5) and no later than ten (10) business days after the
Investor Representative’s delivery to each of the Investors of the Proposed
Disbursement Materials pursuant to Section 1.04 hereof, the Company and the
Investor Representative shall provide joint written instructions to the Escrow
Agent (the “Disbursement
Instructions”) instructing the Escrow Agent to issue and deliver the
applicable Escrow Shares in accordance with the calculations set forth
herein. Notwithstanding anything to the contrary set forth in this
Agreement: (i) if Escrow Shares are distributed pursuant to Section 1.05(b)
above, only those Investors who own Preferred Shares or Conversion Shares of the
Company at the time that the Escrow Shares are distributed hereunder shall be
entitled to receive the applicable Escrow Shares calculated based on their
ownership interest on the distribution date and (ii) the Investor Representative
shall have no authority to provide or to cause to be provided the Disbursement
Instructions to the Escrow Agent if Investors holding at least a majority of the
Preferred Shares or Conversion Shares on the distribution date (based on the
aggregate number of Preferred Shares and Conversion Shares held by all of the
Investors on the distribution date), by notice given to the Investor
Representative no later than five (5) business days after their receipt of the
Proposed Disbursement Materials pursuant to Section 1.04 hereof, dispute the
calculation of the 2010 PT, the 20101PT and/or the Escrow Shares to be
distributed to the Investors or returned to the Company, as the case may
be. Any Escrow Shares not delivered to any Investor because such
Investor no longer holds Preferred Shares or Conversion Shares shall be returned
to the Company for cancellation.
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(d) If the
Company does not achieve the 2010 PT or the 2011 PT, the Company shall use its
best efforts to promptly cause the applicable Escrow Shares to be delivered to
the Investors, including causing its transfer agent to promptly, but in no event
longer than five (5) business days after delivery of the Disbursement
Instructions, transfer the certificates into the names of the
Investors. The Company shall also instruct its securities counsel to
provide any written instruction required by the Escrow Agent or the transfer
agent in a timely manner so that the issuances and delivery contemplated above
can be achieved within seven (7) business days following delivery of the Fiscal
Year 2010 Annual Report or the Fiscal Year 2011 Annual Report, as applicable, to
the Investor Representative.
Section
1.06 Compensation. For
services rendered pursuant to this Agreement, the Company shall pay a
documentation fee to the Escrow Agent of $2,500.00 out of the proceeds of the
Financing Transaction. If the Escrow Shares are held longer than
January 1, 2012, then thereafter, the Company shall pay a fee of $100 per month
until the Escrow Shares are disbursed.
ARTICLE
II.
REPRESENTATIONS
OF THE COMPANY
Section
2.01 Representations and
Warranties. The Company hereby represents and warrants to the
Investors as follows:
(a) The
Escrow Shares when issued will be 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 Company to
issue, deposit and transfer the Escrow Shares, other than transfer restrictions
under applicable federal and state securities laws.
(b) The
performance of this Agreement and compliance with the provisions hereof will not
violate any provision of any law applicable to the Company and will not conflict
with or result in any material breach of any of the terms, conditions or
provisions of, or constitute a default under the terms of the amended and
restated articles of incorporation or by-laws of the Company, or any indenture,
mortgage, deed of trust or other agreement or instrument binding upon the
Company or affecting the Escrow Shares or result in the creation or imposition
of any lien, charge or encumbrance upon, any of the properties or assets of the
Company, the creation of which would have a material adverse effect on the
business and operations of the Company. 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
Company, other than those already obtained. Upon the transfer of the
Escrow Shares to the Investors pursuant to this Agreement, the Investors will be
the record and beneficial owners of all of such shares and have good and valid
title to all of such shares, free and clear of all encumbrances.
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ARTICLE
III.
ESCROW
AGENT
Section
3.01 The
Escrow Agent’s duties hereunder may be altered, amended, modified or revoked
only by a writing signed by the Company, the Investor Representative and the
Escrow Agent.
Section
3.02 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 or 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 or willful misconduct.
Section
3.03 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.
Section
3.04 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 thereunder in
the absence of gross negligence, fraud or willful misconduct.
Section
3.05 The
Escrow Agent shall be entitled to employ such legal counsel and other experts as
the Escrow Agent may deem necessary to properly 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.
Section
3.06 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
Investors. In the event of any such resignation, the Investors 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.
Section
3.07 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 use its best efforts to join in furnishing such
instruments.
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Section
3.08 It is
understood and agreed that should any dispute arise with respect to the delivery
and/or ownership or right of possession of the Escrow Shares, the Escrow
Materials or the Disbursement Instructions held or reeived 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 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.
Section
3.09 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 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.
ARTICLE
IV.
MISCELLANEOUS
Section
4.01 Waiver. No
waiver of, 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.
Section
4.02 Notices. 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 fax 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 4.02), 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.
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If
to Escrow Agent:
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Continental
Stock Transfer & Trust Company
17
Battery Place, 8th
Floor
New York,
NY 10004
Attention:
Frank A. Di Paolo
Fax
Number: (212) 616-7620
If to the
Company:
c/o
Xinghe Yongle Carbon Co., Ltd.
787
Xicheng Wai
Chengguantown
Xinghe
County
Inner
Mongolia, China
Attention:
Ting Chen
Fax
Number: (718)-661-9959
If to an
Investor, to the information indicated on the signature page of each Investor
hereto.
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.
Section
4.03 Successors and
Assigns. This Agreement shall be binding upon and shall inure
to the benefit of the permitted successors and permitted assigns of the parties
hereto.
Section
4.04 Entire Agreement;
Amendment. This Agreement contains the entire understanding
and agreement of the parties relating to the subject matter hereof and
supersedes all prior and/or contemporaneous understandings and agreements of any
kind and nature (whether written or oral) among the parties with respect to such
subject matter. This Agreement may not be modified, changed,
supplemented, amended 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. Notwithstanding anything to the contrary in this Agreement,
this Agreement may not be modified, changed, supplemented, amended or
terminated, nor may any such provision be waived, without the prior written
consent of the Investors holding a majority of the Preferred Shares as of the
date of such modification, change, supplement, amendment, termination or waiver
(based on the aggregate number of Preferred Shares held by all of the Investors
as of the date of such modification, change, supplement, amendment, termination
or waiver).
7
Section
4.05 Headings. The
section headings contained in this Agreement are inserted for reference purposes
only and shall not affect in any way the meaning, construction or interpretation
of this Agreement. Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate. References to the
singular shall include the plural and vice versa.
Section
4.06 Governing
Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Agreement shall
not be interpreted or construed with any presumption against the party causing
this Agreement to be drafted.
[Signature
Page Follows]
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IN WITNESS WHEREOF, the
parties hereto have executed this Make Good Escrow and Pledge Agreement as of
date first written above.
COMPANY:
CHINA
CARBON GRAPHITE GROUP, INC.
By:
_/s/ Donghai
Yu_________________
Name:
Donghai Yu
Title: Chief
Executive Officer
CONTINENTAL
STOCK TRANSFER
&
TRUST COMPANY
By: _/s/ Cynthia
Jordan_______________
Name:
Title:
INVESTORS:
The
Investors executing the Signature Page in the form attached hereto as Annex A and
delivering the same to the Company or its agents shall be deemed to have
executed this Agreement and agreed to the terms hereof.
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Annex
A
Make
Good Escrow and Pledge Agreement
Investor
Counterpart Signature Page
The
undersigned, desiring to enter into this Make Good Escrow and Pledge Agreement,
dated as of December 22, 2009 (the “Agreement”), between the
undersigned, China Carbon Graphite Group, Inc., a Nevada corporation (the “Company”), and Continental
Stock Transfer & Trust Company, in or substantially in the form furnished to
the undersigned hereby agrees to join the Agreement as a party thereto, with all
the rights and privileges appertaining thereto, and to be bound in all respects
by the terms and conditions thereof.
IN WITNESS WHEREOF, the
undersigned has executed the Agreement as of _____________________,
2009.
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Name
and Address, Fax No. and Social Security No./EIN of
Investor:
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________________________________________________
________________________________________________
________________________________________________
Fax
No.: _________________________________________
Soc.
Sec. No./EIN: _________________________________
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If
a partnership, corporation, trust or other business entity:
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By:_________________________________________
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Name:
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Title:
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If
an individual:
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________________________________________
Signature
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