CLOSING ESCROW AGREEMENT

 

This Closing Escrow Agreement, dated as of August 20, 2010 (this "Agreement"), is entered into by and between Securities Transfer Corporation (the "Escrow Agent"), SMSA Palestine Acquisition Corp. (the "Company") and each investor identified on the signature pages hereto (the "Investors"), with respect to the following facts:

 

A.           The Company and the Investors entered into a securities purchase agreement (the "Purchase Agreement") dated as of July 23, 2010 pursuant to which the Investors will purchase shares of the Company's common stock, par value $0.001 per share (the "Shares") for an aggregate purchase price of up to $20,000,000 (the "Investment Amount"); and

 

B.           The Company and the Investors desire to deposit all proceeds received from subscriptions for the Shares pursuant to the Purchase Agreement (the "Escrowed Funds") with the Escrow Agent, to be held in escrow until joint written instructions are received by the Escrow Agent from the Company and CID Venture Capital General Partner III, Limited (the "Investor Agent"), from time to time, at which time the Escrow Agent will disburse the Escrowed Funds in accordance with such instructions (a "Closing"); and

 

D.           Escrow Agent has agreed to act as escrow agent pursuant to the terms and conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises herein contained, and intending to be legally bound, the parties hereby agree as follows:

 

1. Appointment of Escrow Agent. Each Investor and the Company hereby appoints Securities Transfer Corporation as Escrow Agent to act in accordance with the Purchase Agreement and 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. The Escrowed Funds shall be deposited in an account maintained by the Escrow Agent with Vision Bank, Texas in immediately available funds by federal wire transfer.  The wire transfer details relating to such account are:

 

UNITED STATES WIRING INSTRUCTIONS

Vision Bank-Texas

ABA#111925472

Credit to:  Securities Transfer Corporation Account L

Acct # 201566

OVERSEAS WIRING INSTRUCTIONS

The Bank of New York

ABA #021000018

Swift Code:  IRVTUS3N

Credit:  TIB Bank

ABA # 111010170

Beneficiary Bank:  Vision Bank-Texas

Acct # 1020288

Final Credit:  Securities Transfer Corporation Account L

Acct # 201566

 

 

3. Escrow Agent to Hold and Disburse Escrowed Funds. The Escrowed Funds shall be segregated from the assets of Escrow Agent and held in trust for the benefit of the Company and the Investors (who shall be deemed to have an interest in such Escrowed Funds in proportion to the percentages indicated in Exhibit A) in accordance herewith. The Escrow Agent will hold and disburse the Escrowed Funds received by it pursuant to the terms of this Escrow Agreement, as follows:

 

(a) Upon receipt of joint instructions from the Company and the Investor Agent, in substantially the form of Exhibit B hereto (the “Joint Instructions”), the Escrow Agent shall release the Escrowed Funds, as directed in the Joint  Instructions; and

 

(b) In the event that the Escrow Agent does not receive any instructions pursuant to subparagraph (a) above by a date that is ten (10) days from the date of this Agreement, the Escrowed Funds shall be returned to the parties from which they were received, without interest thereon or deduction therefrom.

 

4. Interpleader. In the event this Agreement, the Escrowed Funds or the Escrow Agent becomes the subject of litigation, the Company authorizes the Escrow Agent, at its option, to deposit the Escrowed Funds with the clerk of the court in which the litigation is pending, or a court of competent jurisdiction if no litigation is pending, and thereupon the Escrow Agent shall be fully relieved and discharged of any further responsibility with regard thereto; provided, that five (5) Business Days prior to such deposit the Escrow Agent shall notify the Company and the Investor Agent in writing of its intention to so deposit the Escrow Funds. The Company also authorizes the Escrow Agent, if it receives conflicting claims to the Escrowed Funds, is threatened with litigation, to interplead all interested parties in any court of competent jurisdiction and to deposit the Escrowed Funds with the clerk of that court and thereupon the Escrow Agent shall be fully relieved and discharged of any further responsibility hereunder to the parties from which they were received.

 

5. 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 (other than the Purchase 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 or depositing the Escrowed Funds. 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 reas on 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 the Joint 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 responsi bilities of the 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.

 

(c)  Escrow Agent will be indemnified and held harmless by the Company 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 o r 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 5 shall survive the termination of this Agreement.

 

6. Compensation of Escrow Agent. Escrow Agent shall be entitled to compensation for its services as stated in the fee schedule attached hereto as Exhibit C, which compensation shall be paid by the Company. The fee agreed upon for the services rendered hereunder is intended as full compensation for Escrow Agent's services as contemplated by this Escrow Agreement; provided, however, that in the event th at Escrow Agent renders any material service not contemplated in this Escrow Agreement, or any material modification hereof, or if any material controversy arises hereunder, or Escrow Agent is made a party to any litigation pertaining to this Escrow Agreement, or the subject matter hereof, then Escrow Agent shall be reasonably compensated by the Company for such extraordinary services and reimbursed for all costs and expenses, including reasonable attorney's fees, occasioned by any delay, controversy, litigation or event, and the same shall be recoverable from the Company. Prior to incurring any costs and/or expenses in connection with the foregoing sentence, Escrow Agent shall be required to provide written notice to the Company of such costs and/or expenses and the relevancy thereof and Escrow Agent shall not be permitted to incur any such costs and/or expenses which are not related to litigation prior to receiving written approval from the Company, which approval shall not be unreasonably withheld.

 

 

 

7. Resignation of Escrow Agent. At any time, upon ten (10) days' written notice to the Company and the Investor Agent, 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 and the Investor Agent all monies and property 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 and the Investor Agent s hall have failed to appoint a successor escrow agent, Escrow Agent may interplead the Escrowed Funds into the registry of any court having jurisdiction.

 

8. Method of Distribution by Escrow Agent. All disbursements by Escrow Agent to a party to this Agreement will be made by wire transfer of immediately available funds to an account designated in writing by the party (it being understood that the Exhibits hereto constitute such writings) to receive any such payment.

 

9. 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.

 

10. 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 following addresses:

 

If to Escrow Agent:		Securities Transfer Corporation
		2591 Dallas Parkway, Suite 102
		Frisco, Texas 75034
		Attention: Kevin Halter
If to the Company:		SMSA Palestine Acquisition Corp.
		Shuinan Industrial Area
		Songxi County, Fujian Province, China 610000
		Attention: Chief Executive Officer
With a copy to:		Sheppard Mullin Richter & Hampton LLP
		122275 El Camino Real, Suite 200
		San Diego, CA 92130 USA
		Attn.: James A Mercer III, Esq.

If to a Investor:		To the address set forth on such Investor's
		signature page to the Purchase Agreement

 

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.

 

11.Entire Agreement.  This 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 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.

 

12. 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. 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 Escrowed Funds 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.

 

13.Merger or Consolidation of Escrow Agent.  Any corporation or association into which the 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 the 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.

 

14.Applicable Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, USA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN. THE PARTIES EXPRESSLY WAIVE SUCH DUTIES AND LIABILITIES, IT BEING THEIR INTENT TO CREATE SOLELY AN AGENCY RELATIONSHIP AND HOLD THE ESCROW AGENT LIABLE ONLY IN THE EVENT OF ITS WILLFUL MISCONDUCT, FRAUD, OR GROSS NEGLIGENCE. ANY LITIGATION CONCERNING THE SUBJECT MATTER OF THIS AGREEMENT SHALL BE EXCLUSIVELY PROSECUTED IN THE STATE OR FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, STATE OF NEW YORK, AND ALL PARTIES CONSENT TO THE EXCLUSIVE JURI SDICTION AND VENUE OF THOSE COURTS.

 

 

 

15.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.

 

16.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.

17. Headings.  The headings contained in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement.

 

18.Construction.  Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine. This 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.

 

19.Further Instruments.  If this Agreement reasonably requires other or further instruments in connection with this Agreement or obligations in respect hereto, the necessary parties hereto shall use its best efforts to join in furnishing such instruments.

 

20.Execution in Counterparts.  This Agreement may be executed in counterparts and may be delivered by facsimile transmission or electronic mail in portable document format or other means intended to preserve the original graphic content of a signature.  Each such counterpart shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

 

 

 

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first indicated above.

 

	SMSA PALESTINE ACQUISITION CORP.
	By:  /s/ Yang Yongjie
	Name: Yang Yongjie
	Title: Chief Executive Officer
	SECURITIES TRANSFER CORPORATION
	By:  /s/ Kevin Halter Jr.
	Name: Kevin Halter Jr.
	Title: Presdient

 

  

 

   IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first indicated above.

 

	INVESTOR:
	By: ___________________________
	Name:
	Title:

 

 

 

Name of Investor:
Address of Investor:
Aggregate Investment Amount:
Percentage of Total:
Aggregate Number of Shares:
Taxpayer ID Number:
Social Security Number:

 

 

 

 

__________, 2010

 

SECURITIES TRANSFER CORPORATION, as Escrow Agent

 

2591 Dallas Parkway, Suite 102

 

Frisco, Texas 75034

 

Attention: Kevin Halter

 

Re: SMSA Palestine Acquisition Corp. - Disbursement Request and Wire Transfer Instructions

 

Ladies and Gentlemen:

 

     Pursuant to that certain Closing Escrow Agreement by and among SMSA Palestine Acquistion Corp., the Investors named therein and the Escrow Agent, the undersigned hereby request disbursement of the Purchase Price by wire transfer from your trust account per the instructions set forth on Schedule 1 attached hereto.

 

	SMSA PALESTINE ACQUISITION CORP.
	By: ________________________________
	Name:
	Title:
	CID Venture Capital General Partner III, Limited
	By: ________________________________
	Name:
	Title: