Unassociated Document


    HOLDBACK
      ESCROW AGREEMENT

     

    This
      Holdback Escrow Agreement, dated as of May 30, 2008 (this “Agreement”),
      is
entered
      into by and among Genesis
      Pharmaceuticals Enterprises, Inc., a Florida corporation
      (the
“Company”),
      the
      investors set forth on Exhibit
      A
      and
      signatory hereto (collectively, the “Investors”),
      and
      Loeb & Loeb LLP
      (the
“Escrow
      Agent”).
      The
      principal address of each of the parties hereto is set forth
      on
Exhibit
      A.
      

     

    WITNESSETH:
      

     

    WHEREAS,
      the Company proposes
      to make a private offering to the Investors
      (the
“Offering”)
      of the
      Company’s 6% Convertible Notes due May 30, 2011 (“Notes”)and warrants to
      purchase shares of the Company’s common stock, par value $0.001 per share
      (“Common Stock”) pursuant
      to that
      certain Securities Purchase Agreement, dated as of the date hereof, by and
      among
      the Company, the Investors and certain other parties signatory thereto
      (the
      “Securities
      Purchase Agreement”),
      in an
      aggregate amount of approximately Thirty Million dollars
      ($30,000,000)
      (capitalized terms used but not otherwise defined herein shall have the
      respective meanings given to such terms in the Securities Purchase
      Agreement);

     

    WHEREAS,
      pursuant to the Securities Purchase Agreement, the Company has agreed that
      an
      aggregate of $4,000,000 of the aggregate Investment Amounts paid by Investors
      to
      the escrow account established in accordance with the Closing Escrow Agreement
      (the “Escrowed
      Funds”),
      will
      be deposited at Closing with the Escrow Agent, to continue to be held in
escrow,
      administered and distributed as described in Section 4.12 of the Securities
      Purchase Agreement and in accordance with Section 3 of this
      Agreement;
      and

     

    WHEREAS,
      as a material inducement for the Investors to
      enter
      into the Securities Purchase Agreement and consummate the Closing, the Company
      and Escrow Agent have agreed to enter into 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.
      The
      Company hereby appoints Escrow Agent to act as escrow
      agent in accordance with the terms of this Agreement, and the Escrow
Agent
      hereby accepts such appointment.

     

    2.  Delivery
      of the Escrowed Funds.

     

    2.1 The
      Company hereby directs that the Escrowed
      Funds be delivered simultaneously with the Closing to the Escrow Agent’s account
      (the “Escrow
      Account”)
      as
      follows:


    
      
        
        

      

      
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              Bank
                Name:

            	
              CITI
                PRIVATE BANK

            
	
              Bank
                Address:

            	
              666
                Fifth Avenue, New York, NY 10103

            
	
              ABA
                Number:

            	
              021000089

            
	
              Beneficiary:

            	
              Genesis
                Pharmaceuticals Enterprises, Inc.

            
	
              Escrowed
                Funds:

            	
              $4,000,000.00

            


    

    


    3. Escrow
      Agent to Hold and Disburse Escrowed Funds.
      Promptly following the Closing, the Escrow Agent will provide written notice
      to
      the Company (for simultaneous distribution to the Investors) that the Escrow
      Agent has received the entire amount of Escrowed Funds in the Escrow Account.
      The Escrow Agent will hold and
      disburse the Escrowed Funds received by it pursuant to the terms of this
      Agreement, as follows: 

     

    3.1 Board
      Holdback Escrow.
      Pursuant to Section 4.12(a) of the Securities Purchase Agreement, the Company
      has undertaken that no later than 120 days following the Closing Date, the
      Board
      of Directors of the Company shall be comprised of a minimum of five members
      (at
      least two of whom shall be fluent English speakers who possess
      experience such that he or she can fulfill its fiduciary obligations and other
      responsibilities as a director of
      a
      United States publicly listed company incorporated in the United States), a
      majority of which shall be “independent directors” as such term is defined in
      NASDAQ Marketplace Rule 4200(a)(15) acceptable to Pope. Accordingly, $2,000,000
      (the
      “Board
      Holdback Escrow
      Amount”)
      of the
      Escrowed Funds is to be held in the Escrow Account subject to the satisfaction
      of the Company’s obligations under this Section 3.1 and Section 4.12(a) of the
      Securities Purchase Agreement. Upon the Company’s satisfaction of the aforesaid
      obligations in this Section 3.1 and Section 4.12(a) of the Securities Purchase
      Agreement, the Company and Investors that have invested at least a majority
      of
      the total Investment Amount under the Purchase Agreement (a “Majority
      in Interest of the Investors”)
      shall
      execute and deliver written instructions with reference to this Section 3.1
      to
      release the Board Holdback Escrow Amount to the Company (“Instructions
      to Release Board Holdback”).
      Within one (1) Business Day following its receipt of Instructions to Release
      Board Holdback (with wire instructions attached) jointly executed by the Company
      and a Majority in Interest of the Investors, the Escrow Agent shall distribute
      the Board Holdback Escrow Amount to the Company. In the event that the Escrow
      Agent does not receive Instructions to Release Board Holdback on or prior to
      the
      125th date after the Closing Date, then upon receipt of written instructions
      from a Majority in Interest of the Investors, the Escrow Agent shall release
      the
      Board Holdback Amount to the Investors, pro rata, based upon the Investment
      Amounts paid by the Investors pursuant to the Securities Purchase
      Agreement.

     

    3.2 CFO
      Holdback Escrow.
      Pursuant to Section 4.12(b) of the Securities Purchase Agreement, the Company
      has undertaken that no later than six (6) months following the Closing Date,
      the
      Company will hire a full-time chief financial officer who has experience as
      the
      chief financial officer of a United States public reporting company and who
      is
      (i) a certified public accountant, (ii) fluent in English, and (iii) an expert
      in (x) GAAP and (y) auditing procedures and compliance for United States public
      companies (such a chief financial officer being referred to as a “Qualified
      CFO”),
      which
      Qualified CFO shall be acceptable to Pope. Pope
      hereby agrees that the Company has complied with this covenant as of the Closing
      Date by virtue of its hiring of Elsa Sung as the Company’s Chief Financial
      Officer. Should the Qualified CFO be dismissed at any time while the Notes
      are
      outstanding, then the Company shall replace the Qualified CFO with a chief
      financial officer who fits the criteria set forth herein as soon as practicable.
      By
      9:00
      a.m. (New York time) on the second Trading Day following the hiring of such
      Qualified CFO, the Company will file a Current Report on Form 8-K disclosing
      the
      information required by Item 5.02 of Form 8-K. Accordingly, $2,000,000
(the
      “CFO
      Holdback Escrow
      Amount”)
      of the
      Escrowed Funds is to be held in the Escrow Account subject to the satisfaction
      of the Company’s obligations under this Section 3.2 and Section 4.12(b) of the
      Securities Purchase Agreement. Upon the Company’s satisfaction of the aforesaid
      obligations in this Section 3.2 and Section 4.12(b) of the Securities Purchase
      Agreement, the Company and a Majority in Interest of the Investors shall execute
      and deliver written instructions with reference to this Section 3.2 to release
      the CFO Holdback Escrow Amount to the Company (“Instructions
      to Release CFO Holdback”).
      Within one (1) Business Day following its receipt of Instructions to Release
      CFO
      Holdback (with wire instructions attached) jointly executed by the Company
      and a
      Majority in Interest of the Investors, the Escrow Agent shall distribute the
      CFO
      Holdback Escrow Amount to the Company. In the event that the Escrow Agent does
      not receive Instructions to Release CFO Holdback on or prior to six (6) months
      after the Closing Date, then upon receipt of written instructions from a
      Majority in Interest of the Investors, the Escrow Agent shall release the CFO
      Holdback Amount to the Investors, pro rata, based upon the Investment Amounts
      paid by the Investors pursuant to the Securities Purchase
      Agreement.


    
      
        
        

      

      
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    4.
       Interpleader.
      Should
      any controversy arise among the parties hereto with respect
      to this Agreement or with respect to the right to receive the Escrowed Funds,
      the Escrow Agent shall have the right to consult counsel and/or to institute
      an
      appropriate interpleader
      action to determine the rights of the parties. The 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 the Escrow
      Agent. If the 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 4 shall be filed in any court of competent jurisdiction in New York,
      and
      the portion of the Escrowed Funds in dispute shall be deposited with the court
      and in such event the Escrow Agent shall be relieved of and discharged from
      any
      and all obligations and liabilities under and pursuant to this Agreement with
      respect to that portion of the Escrowed Funds.

     

    


    5.
      Exculpation
      and Indemnification of Escrow Agent

     

    5.1
       The
      Escrow Agent shall have no duties or responsibilities other
      than those expressly set forth herein. The Escrow Agent shall have no
duty
      to
      enforce any obligation of any person other than itself to make any payment
      or
      delivery, or to direct
      or
      cause any payment or delivery to be made, or to enforce any obligation of any
      person
      to
      perform any other act. The Escrow Agent shall be under no liability
      to the other parties hereto or anyone else, by reason of any failure, on the
      part of any
      other
      party hereto or any maker, guarantor, endorser or other signatory of a document
      or any
      other
      person, to perform such person’s obligations under any such document. Except for
      amendments to this Agreement
      referenced below, and except for written instructions given to the Escrow Agent
      by the Company and a Majority in Interest of the Investors relating to the
      Escrowed Funds, the Escrow Agent shall not be obligated to recognize any other
      agreement.


    
      
        
        

      

      
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    5.2 The
      Escrow Agent shall not be liable to the Company or to
      anyone
      else for any action taken or omitted by it, or any action suffered by it to
      be
taken
      or
      omitted, in good faith and acting upon any order, notice, demand, certificate,
      opinion
      or advice of counsel (including counsel chosen by the 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 believed by the Escrow Agent to
be
      genuine and to be signed or presented by the proper person or persons. The
      Escrow Agent
      shall not be bound by any of the terms thereof, unless evidenced by written
      notice delivered
      to the Escrow Agent signed by the proper party or parties and, if the duties
      or
rights
      of
      the Escrow Agent are affected, unless it shall give its prior written consent
      thereto.

     

    5.3
       The
      Escrow Agent shall not be responsible for the sufficiency
      or accuracy of the form, or of the execution, validity, value or genuineness
      of,
any
      document or property received, held or delivered to it hereunder, or of any
      signature or
      endorsement thereon, or for any lack of endorsement thereon, or for any
      description therein;
      nor shall the Escrow Agent or the Investors be responsible or liable to the
      Company or
      to
      anyone else in any respect on account of the identity, authority or rights,
      of
      the person
      executing or delivering or purporting to execute or deliver any document or
      property or this Agreement.
      The
      Escrow Agent shall have no responsibility with respect
      to the use or application of the Escrowed Funds pursuant to the provisions
      hereof.

     

    5.4
       The
      Escrow Agent shall have the right to assume, in the absence of written
notice
      to
      the contrary from the proper person or persons, that a fact or an event, by
      reason of
      which
      an action would or might be taken by the Escrow Agent, does not exist or has
      not
      occurred, without incurring liability to the Company or to anyone else for
      any
      action taken or omitted to be taken or omitted, in good faith and in the
      exercise of its own best judgment, in reliance upon such
      assumption.

    


    5.5 To
      the
      extent that the Escrow Agent becomes liable for the payment of taxes,
      including withholding taxes, in respect of income derived from the investment
      of
the
      Escrowed Funds, or any payment made hereunder, the Escrow Agent may pay such
      taxes;
      and the Escrow Agent may withhold from any payment to the Company of the
      Escrowed Funds such
      amount as the Escrow Agent estimates to be sufficient to provide for the payment
      of such
      taxes not yet paid, and may use the sum withheld for that purpose. The Escrow
      Agent
      shall be indemnified and held harmless by the Company against any liability
      for
      taxes and for any penalties
      in respect of taxes, on such investment income or payments in the manner
provided
      in Section 5.6.


    
      
        
        

      

      
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    5.6 The
      Escrow Agent will be indemnified and held harmless by the Company
      from and against all expenses, including all counsel fees and disbursements,
      or
loss
      suffered by the Escrow Agent in connection with any action, suit or proceedings
      involving
      any claim, or in connection with any claim or demand, which in any way,
directly
      or indirectly, arises out of or relates to this Agreement, the services of
      the
Escrow
      Agent hereunder, except for claims resulting from the gross negligence or
      willful malfeasance of the Escrow Agent or
      breach
      of this Agreement by the Escrow Agent, or the monies or other property
      held by it hereunder. Promptly after the receipt of the Escrow Agent of notice
      of any demand or claim or the commencement of any action, suit or proceeding,
      the Escrow Agent shall, if a claim in respect thereof is to be made against
      the
      Company,
      notify
      it thereof in writing, but the failure by the Escrow Agent to give such notice
      shall
      not
      relieve any such party from any liability which the Company may have to
the
      Escrow Agent hereunder.

     

    5.7 For
      purposes hereof, the term “expense or loss” shall include all amounts
paid
      or
      payable to satisfy any claim, demand or liability, or in settlement of any
      claim, demand, action, suit or proceeding settled with the express written
      consent of the Escrow Agent, and all costs and expenses, including, but not
      limited to, counsel fees and disbursements, paid or incurred in investigating
      or
      defending against any such claim, demand, action, suit or
      proceeding.

     

    6. Resignation
      of Escrow Agent.
      The
      Escrow Agent may resign at any time and be discharged from its duties
      as
      Escrow Agent hereunder by giving the Company and the Investors at least ten
      (10)
      Business Days written
      notice thereof (the “Notice
      Period”).
      As
      soon as practicable after its resignation, the
      Escrow Agent shall, if it receives notice from the Company within the Notice
      Period, turn
      over
      to a successor escrow agent appointed by the Company all Escrowed Funds
(less
      such amount as the Escrow Agent is entitled to retain pursuant to Section 8)
      upon presentation
      of the document appointing the new escrow agent and its acceptance thereof.
      If
      no new
      agent is so appointed within the Notice Period, the Escrow Agent shall return
      the
      Escrowed Funds to or as directed by the Investors who delivered the same,
      without interest or deduction with the understanding that such Escrowed Funds
      will continue to be subject to the provisions of this Agreement.

     

    7. Form
      of Payments by Escrow Agent.

     

    7.1 Any
      payments of the Escrowed Funds by the Escrow Agent pursuant to the
      terms
      of this Agreement
      shall be
      made by wire transfer unless directed to be made by check by the receiving
      party.

     

    7.2 All
      amounts referred to herein are expressed in United States Dollars (US$) and
      all
      payments by the Escrow Agent shall be made in such dollars.

     

    8. Compensation. Escrow
      Agent shall be entitled to the following compensation from
      the
      Company (it being understood that no Investor shall be responsible to pay the
      Escrow Agent any compensation or fees hereunder):

     

    8.1 Documentation
      Fee: The
      Company shall pay a documentation fee to the Escrow
      Agent of $2,000.


    
      
        
        

      

      
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    9. Notices. All
      notices, requests, demands, and other communications provided herein shall
      be in
      writing, shall be delivered by hand or by first-class mail, shall be
deemed
      given when received and shall be addressed to parties hereto at their respective
      addresses All notices, requests, demands and other communications required
      or
      permitted to be given hereunder shall be in writing and shall be deemed to
      have
      been duly given if sent by hand-delivery, by facsimile (followed by first-class
      mail), by nationally recognized overnight courier service or by prepaid
      registered or certified mail, return receipt requested, to the addresses set
      forth below.

     

    If
      to
      Investors:

    


    To
      the
      address set forth on the signature pages hereto. 

    


    With
      a copy to:

    


    Wells,
      Moore, Simmons & Hubbard PLLC

    4550
      Old
      Canton Road STE 200

    P.O.
      Box
      1970

    Jackson,
      MS 39215

    Attn:
      Calvin Wells, Esq

    Fax:
      (601) 355-5850 

    


    If
      to
      the Company:

    


    Genesis
      Pharmaceuticals Enterprises, Inc.

    Middle
      Section, Longmao Street, Area A, Laiyang Waixiangxing Industrial
      Park

    Laiyang
      City, Yantai, Shandong Province, People’s Republic of China 710075

    Attn.:
      President

    Facsimile:
      (954) 727-8448

     

    With
      a copy to:

     

    Loeb
      & Loeb, LLP

    345
      Park
      Avenue

    New
      York,
      New York 10154

    Attn.:
      Mitchell Nussbaum

    Facsimile:
      (212) 407-4097

    


    If
      to
      Escrow Agent:

    


    Loeb
      & Loeb, LLP

    345
      Park
      Avenue

    New
      York,
      New York 10154

    Attn.:
      Mitchell Nussbaum

    Facsimile:
      (212) 407-4097


    
      
        
        

      

      
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    10. Further
      Assurances. From
      time
      to time on and after the date hereof, the Company
      shall deliver or cause to be delivered to the Escrow Agent such further
documents
      and instruments and shall do and cause to be done such further acts as the
      Escrow Agent shall reasonably request (it being understood that the Escrow
      Agent
      shall have
      no
      obligation to make any such request) to carry out more effectively the
      provisions and
      purposes of this Agreement, to evidence compliance herewith or to assure
itself
      that it is protected in acting hereunder.

     

    11. Miscellaneous.

     

    11.1 This
      Agreement shall be construed without regard to any presumption
      or other rule requiring construction against the party causing such instrument
      to be drafted. The terms “hereby,” “hereof,” “hereunder,” and any similar
terms,
      as
      used in this Agreement, refer to the Agreement in its entirety and
      not
      only to the particular portion of this Agreement
      where
      the term is used. The word “person” shall mean any natural person, partnership,
      corporation, government and any other form of business of legal entity. All
      words or terms used in this Agreement,
      regardless of the number or gender in which they were used, shall be deemed
      to
      include any other number and any other gender as the context may require. This
      Agreement
      shall
      not be admissible in evidence to construe the provisions of any prior
      agreement.

     

    11.2 This
      Agreement
      and the
      rights and obligations hereunder of the Company may be assigned by the Company
      only following the prior written consent
      of the Majority in Interest of the Investors.
      This
Agreement
      and the
      rights and obligations hereunder of the Escrow Agent may be assigned by the
      Escrow Agent only with the prior consent
      of the Company and the Majority in Interest of the Investors. An Investor may
      assign its rights under this Agreement without any consent from any other party.
      This
      Agreement
      may not
      be changed orally or modified, amended or supplemented without an express
      written agreement executed by the Escrow Agent, the Company and the Majority
      in Interest of the Investors.
      This
Agreement
      is
      binding upon and intended to be for the sole benefit of the parties hereto
      and
      their
      respective successors, heirs and permitted assigns, and none of the provisions
      of this
      Agreement are intended to be, nor shall they be construed to be, for the
benefit
      of any third person.

     

    11.3 This
      Agreement shall be governed by, and construed in accordance
      with, the internal laws of the State of New
      York.
      The
      representations and warranties contained in this Agreement
      shall
      survive the execution and delivery hereof
      and any investigations made by any party. Each
      party agrees that all legal proceedings concerning the interpretations,
      enforcement and defense of the transactions contemplated by this Agreement
      shall
      be commenced exclusively in the state and federal courts sitting in the City
      of
      New York, Borough of Manhattan (the “New
      York Courts”).
      Each
      party hereto hereby irrevocably submits to the exclusive jurisdiction of the
      New
      York Courts for the adjudication of any dispute hereunder or in connection
      herewith, and hereby irrevocably waives, and agrees not to assert in any such
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such New York Court, or that such proceeding has been commenced in an
      improper or inconvenient forum. Each party hereto hereby irrevocably waives
      personal service of process and consents to process being served in any such
      proceeding by mailing a copy thereof via registered or certified mail or
      overnight delivery (with evidence of delivery) to such party at the address
      in
      effect for notices to it under this Agreement and agrees that such service
      shall
      constitute good and sufficient service of process and notice thereof. Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any manner permitted by law. 


    
      
        
        

      

      
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    11.4 This
      Agreement may be executed in a number
      of
      counterparts, by facsimile, each of which shall be deemed to be an original
      as
of
      those
      whose signature appears thereon, and all of which shall together constitute
      one
and
      the
      same instrument. This Agreement shall become binding when one or more of the
      counterparts hereof, individually or taken together, are signed by all the
      parties.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGES FOLLOW]


    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the parties have executed and delivered this Agreement on
      the
      day and year first above written.

    


    
      	
              Loeb
                & Loeb LLP, as ESCROW AGENT

            
	 	 
	
              By:

            	
              /s/
                Mitchell Nussbaum

            
	 	
              Name:
                Mitchell Nussbaum

            
	 	
              Title:
                Partner

            
	 	 
	
              GENESIS
                PHARMACEUTICALS ENTERPRISES, INC.

            
	 	 
	
              By:

            	
              /s/
                Cao Wubo

            
	 	
              Name:
                Cao Wubo

            
	 	
              Title:
                Chief Executive Officer

            
	 	 
	
              INVESTORS:

            
	 
	
              [NAME
                OF INVESTOR]

            
	 	 
	
              By:

            	
               

            
	 	
              Name:
                

            
	 	
              Title:

            
	 	 
	
              [NAME
                OF INVESTOR]

            
	 
	
              By:

            	
               

            
	 	
              Name:
                

            
	 	
              Title:

            
	 	 
	
              [NAME
                OF INVESTOR]

            
	 	 
	
              By:

            	
               

            
	 	
              Name:
                

            
	 	
              Title:

            


    


    
      
        
        

      

      
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