Unassociated Document


     

    Exhibit
      10.4

    SECURITIES
      ESCROW AGREEMENT

     

    THIS
      SECURITIES ESCROW AGREEMENT (the “Agreement”),
      dated
      as of October 31, 2008, is entered into by and among Lihua International, Inc.,
      a Delaware corporation (the “Company”),
      Vision Opportunity China LP, a closed-ended investment company incorporated
      in
      Guernsey, as representative of the Purchasers (the “Purchaser
      Representative”),
      Magnify Wealth Enterprise Limited, a company organized in the British Virgin
      Islands (the “Principal
      Stockholder”),
      and
      Anslow & Jaclin, LLP, with an address at 195 Route 9 South, Suite 204,
      Manalapan, New Jersey 07726 (the “Escrow
      Agent”).
      Capitalized terms used but not defined herein shall have the meanings set forth
      in the Purchase Agreement (as defined below).

     

    WITNESSETH:

     

    WHEREAS,
      the Purchasers will be purchasing from the Company units consisting of 6,818,182
      shares of the Company’s Series A Convertible Preferred Stock, par value $0.0001
      per share (the “Series
      A Preferred”),
      initially convertible into 6,818,182 shares of the Company’s common stock, par
      value $0.0001 per share (the “Common
      Stock”),
      and
      warrants to purchase, in the aggregate, 1,500,000 shares of Common Stock (the
      “Warrants”)
      pursuant to that certain Securities Purchase Agreement (the “Purchase
      Agreement”)
      dated
      as of the date hereof (the “Closing
      Date”)
      by and
      among the Company and the Purchasers (the “Financing”);
      

     

    WHEREAS,
      the Company has issued shares of its Common Stock to the Principal Stockholder
      pursuant to that certain Share Exchange Agreement dated as of October 31, 2008,
      by and among Magnify Wealth Enterprise Limited, Ally Profit Investments Limited,
      a British Virgin Islands company (“Ally
      Profit”),
      the
      Company and the original controlling stockholders of the Company (the
“Share
      Exchange Agreement”).
      Upon
      consummation of the transactions contemplated by the Share Exchange Agreement,
      Ally Profit, together with its subsidiaries, became the wholly owned
      subsidiaries of the Company (the “Share
      Exchange Transaction”);

     

    WHEREAS,
      the Company and the Purchaser Representative agree that the capitalization
      table
      upon which the transactions contemplated by this Agreement and the Purchase
      Agreement are based is set forth as Schedule
      A
      hereto;
      and 

     

    WHEREAS,
      as an inducement to the Purchasers to enter into the Purchase Agreement, the
      Principal Stockholder has agreed to place the Escrow Shares (as hereinafter
      defined) into escrow for the benefit of the Purchasers in the event the Company
      fails to achieve the following financial performance thresholds for the 12-month
      periods ending December 31, 2008 (“2008”)
      and
      December 31, 2009 (“2009”):

     

    (a) In
      2008,
      both (i) Net Income, as reported by the Company in its audited financial
      statements for 2008 (the “2008
      Financial Statements”)
      equals
      or exceeds $12.0 million, and (ii) 2008 Net Income Earnings Per Share equals
      or
      exceeds $0.50 on a fully diluted basis and adjusted for any stock split,
      dividend, or similar recapitalization. “2008
      Net Income Earnings Per Share”
is
      to
      be calculated by dividing (A) the Net Income, as reported in the 2008 Financial
      Statements (the “2008
      Net Income”)
      by (B)
      the aggregate number of shares of the then outstanding Common Stock on a
      fully-diluted basis, which number shall include, without limitation, (x) the
      number of shares of Common Stock issuable upon conversion of the Company’s then
      outstanding shares of Series A Preferred, and (y) the number of shares of Common
      Stock issuable upon the exercise of any then outstanding preferred stock,
      warrants, convertible debt, options or other convertible securities of the
      Company (the performance thresholds set forth in (a)(i) and (ii) above shall
      be
      collectively referred to herein as the “2008
      Performance Thresholds”);

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    (b) In
      2009,
      both (i) Net Income, as reported by the Company in its audited financial
      statements for 2009 (the “2009
      Financial Statements”)
      equals
      or exceeds $18 million, and (ii) 2009 Net Income Earnings Per Share equals
      or
      exceeds $0.76 on a fully diluted basis and adjusted for any stock split,
      dividend or similar recapitalization. “2009
      Net Income Earnings Per Share”
is
      to
      be calculated by dividing (A) the Net Income, as reported in the 2009 Financial
      Statements (the “2009
      Net Income”)
      by (B)
      the aggregate number of shares of the then outstanding Common Stock on a
      fully-diluted basis, which number shall include, without limitation, (x) the
      number of shares of Common Stock issuable upon conversion of the Company’s then
      outstanding shares of Series A Preferred, and (y) the number of shares of Common
      Stock issuable upon the exercise of any then outstanding preferred stock,
      warrants, convertible debt, options or other convertible securities,
provided,
      however,
      that
      in
      the event the Company consummates a bona fide initial public offering of Common
      Stock such shares of Common Stock that are sold up to the first Five Million
      Dollars ($5,000,000) of such initial public offering shall be excluded from
      this
      calculation (all shares sold in the initial public offering in excess of
      $5,000,000 shall be included in calculating the number of
      shares
      of Common Stock issuable upon the exercise of any then outstanding preferred
      stock, warrants, convertible debt, options or other convertible
      securities)
      (the
      performance thresholds set forth in (b)(i) and (ii) above shall be collectively
      referred to herein as the “2009
      Performance Thresholds”
and
      together with the 2008 Performance Thresholds will be referred to as the
“Performance
      Thresholds”);
      and

    


    (c) For
      the
      purposes hereof, “Net
      Income”
shall
      be as defined in accordance with US GAAP, provided, however, that Net Income
      for
      each of 2008 and 2009 shall be increased by any non-cash charges incurred (i)
      as
      a result of the Financing, including without limitation, as a result of the
      issuance of the Warrants and upon conversion of the Series A Preferred, (ii)
      as
      a result of the release of the Escrow Shares to the Principal Stockholder
      pursuant to the terms of this Agreement, and (iii) as a result of the issuance
      of ordinary shares of the Principal Stockholder to Mr. Zhu Jianhua upon the
      exercise of options granted to Mr. Zhu by the Principal Stockholder, as of
      the
      date hereof.

     

    WHEREAS,
      the Company and the Purchaser Representative 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.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    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

     

    1.1. The
      parties hereby agree to establish an escrow account (the “Escrow
      Account”)
      with
      the Escrow Agent whereby the Escrow Agent shall hold the Escrow Shares as
      contemplated by this Agreement.

     

    1.2. Upon
      the
      execution of this Agreement, the Principal Stockholder shall deliver to the
      Escrow Agent stock certificates equal to the number of shares of Common Stock
      constituting one hundred percent (100%) of the shares of Common Stock underlying
      the Series A Preferred Shares indicated on Schedule
      A
      hereto
      (such shares of Common Stock delivered by the Principal Stockholder plus such
      additional number of shares of Common Stock as may be required to be deposited
      hereunder pursuant to Sections 1.3, 1.4 or 1.5 hereof shall be collectively
      referred to in this Agreement as the “Escrow
      Shares”),
      along
      with updated stock powers executed in blank, signature medallion guaranteed
      or
      in other form and substance acceptable for transfer.

     

    1.3. The
      parties hereby agree that the Escrow Shares shall be distributed based on and
      subject to the achievement of the 2008 Performance Thresholds as set forth
      below:

     

    (i) If
      the
      Company achieves less than 50% of each of the 2008 Performance Thresholds,
      then
      the number of the Escrow Shares to be distributed to each Purchaser shall be
      calculated as follows: 

    


    (a) A
      =
X

     
      Y

    


    (b) B
      =
      (A)(Z)

    


    
      	
            	Where:	
              A
                =
                such Purchaser’s percentage ownership of Escrow
                Shares

            


    

    


    
      
        	
              	B
                =	
                the
                  number of Escrow Shares to be distributed to such
                  Purchaser

              


      

    

    


    
      
        	
              	X
                =	
                the
                  number of shares of Series A Preferred (on an as converted basis)
                  and
                  Conversion Shares owned by such Purchaser as of the date of distribution
                  of the Escrow Shares (the “Distribution
                  Date”)

              


      

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
            	Y
              =	
              number
                of Series A Preferred Shares issued on the Closing Date (on an
                as-converted basis)

            


    

    


    
      	
            	Z
              =	
              the
                Escrow Shares

            


    

    


    Within
      five (5) business days of the Purchaser Representative’s receipt of the 2008
      Financial Statements pursuant to Section 1.7 hereof, the Purchaser
      Representative shall provide sole written instructions to the Escrow Agent
      instructing the Escrow Agent to issue and deliver the Escrow Shares to the
      Purchasers in accordance with the calculation above. Any Escrow Shares remaining
      after disbursement to the Purchasers in accordance with the calculation above
      shall be returned to the Escrow Account. Within five (5) business days after
      the
      release of the Escrow Shares to the Purchasers, the Principal Stockholder shall
      deposit into the Escrow Account stock certificates equal to the number of shares
      of Common Stock necessary to maintain one hundred percent (100%) of the shares
      of Common Stock underlying the Preferred Shares initially issuable under the
      Purchase Agreement in the Escrow Account.

     

    (ii) If
      the
      Company achieves at least 50% but less than 95% of the 2008 Performance
      Thresholds, the Escrow Agent shall deliver to each Purchaser its number of
      Escrow Shares in accordance with the calculation below. 

    


    (a) A
      =
X
      

     
      Y

    


    (b) B
      =
      2*(Z*A) 

    


    
      	
            	Where:	
              A
                =
                such Purchaser’s percentage ownership of Escrow Shares

            


    

    


    
      	
            	B
              =	
              the
                number of Escrow Shares to be distributed to such
                Purchaser

            


    

    


    
      	
            	X
              =	
              the
                number of shares of Series A Preferred (on an as converted basis)
                and
                Conversion Shares owned by such Purchaser as of the Distribution
                Date

            


    

    


    
      	
            	Y
              =	
              number
                of Series A Preferred Shares issued on the Closing Date (on an
                as-converted basis)

            


    

    


    
      	
            	Z
              =	
              the
                Escrow Shares multiplied by the Lowest Threshold
                Percentage

            


    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    For
      purposes hereof, the “Lowest
      Threshold Percentage”
means
      the percentage by which the lowest of the applicable Performance Thresholds
      was
      not achieved. By way of example, if the Company’s Earnings Per Share for 2008 is
      an amount equal to 60% of the 2008 Performance Thresholds and the Company’s Net
      Income reported on the 2008 Financial Statements is an amount equal to 70%
      of
      the 2008 Performance Thresholds, the Lowest Threshold Percentage would be 40%
      (100%-60%). Within five (5) business days of the Purchaser Representative’s
      receipt of the 2008 Financial Statements pursuant to Section 1.7 hereof, the
      Purchaser Representative shall provide sole written instructions to the Escrow
      Agent instructing the Escrow Agent to issue and deliver the Escrow Shares to
      the
      Purchasers in accordance with the calculation above. Any Escrow Shares remaining
      after disbursement to the Purchasers in accordance with the calculation above
      shall be returned to the Escrow Account. Within five (5) business days after
      the
      release of the Escrow Shares to the Purchasers, the Principal Stockholder shall
      deposit into the Escrow Account stock certificates equal to the number of shares
      of Common Stock necessary to maintain one hundred percent (100%) of the shares
      of Common Stock underlying the Preferred Shares initially issuable under the
      Purchase Agreement in the Escrow Account.

     

    (iii) If
      the
      Company achieves at least 95% of each of the 2008 Performance Thresholds, then
      the Escrow Shares shall continue to be held in escrow hereunder. 

    


    (iv) Notwithstanding
      anything to the contrary set forth herein, only those Purchasers who own shares
      of Series A Preferred or Conversion Shares of the Company at the time that
      the
      Escrow Shares are distributed hereunder shall be entitled to receive Escrow
      Shares calculated based on their ownership interest at the time such Escrow
      Shares are distributed hereunder. Any Escrow Shares not delivered to any
      Purchaser because such Purchaser no longer holds shares of Series A Preferred
      or
      Conversion Shares will be returned to the Escrow Account. If any Purchaser
      transfers Preferred Shares purchased pursuant to the Purchase Agreement, the
      rights to the Escrow Shares shall similarly transfer to such transferee,
      pursuant to the terms in this Agreement, with no further action required by
      the
      Purchaser, the transferee or the Company.

     

    1.4. The
      parties hereby agree that the Escrow Shares shall be distributed based upon
      and
      subject to the achievement of the 2009 Performance Thresholds as set forth
      below:

     

    (i) If
      the
      Company achieves less than 50% of each of the 2009 Performance Thresholds,
      then
      the number of the Escrow Shares to be distributed to each Purchaser shall be
      calculated using the same formula set forth in Section 1.3(i) above. Within
      five
      (5) business days of the Purchaser Representative’s receipt of the 2009
      Financial Statements pursuant to Section 1.7 hereof, the Purchaser
      Representative shall provide sole written instruction to the Escrow Agent
      instructing the Escrow Agent to issue and deliver the Escrow Shares to the
      Purchasers in accordance with the calculation set forth in Section 1.3(i) above.
      Any Escrow Shares remaining after disbursement to the Purchasers shall be
      returned to the Principal Stockholder. 

     

    (ii) If
      the
      Company achieves at least 50% but less than 95% of the 2009 Performance
      Thresholds, the Escrow Agent shall deliver to each Purchaser its number of
      Escrow Shares in accordance with the calculation set forth in Section 1.3(ii)
      above. Within five (5) business days of the Purchaser Representative’s receipt
      of the 2009 Financial Statements pursuant to Section 1.7 hereof, the Purchaser
      Representative shall provide sole written instruction to the Escrow Agent
      instructing the Escrow Agent to issue and deliver the Escrow Shares to the
      Purchasers in accordance with the calculation set forth in Section 1.3(ii)
      above. Any Escrow Shares remaining after disbursement to the Purchasers shall
      be
      returned to the Principal Stockholder. 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (iii) In
      the
      event the Company achieves at least 95% of each of the 2009 Performance
      Thresholds, all of the Escrow Shares shall be returned to the Principal
      Stockholder at the address set forth in Section 3.2 hereof.

     

    (iv) 
      Notwithstanding anything to the contrary set forth herein, only those Purchasers
      who own shares of Series A Preferred or Conversion Shares of the Company at
      the
      time that the Escrow Shares are distributed hereunder shall be entitled to
      receive Escrow Shares calculated based on their ownership interest at the time
      when such Escrow Shares are distributed hereunder. If any Purchaser transfers
      Preferred Shares purchased hereunder, any Escrow Shares pursuant to this
      Agreement shall similarly transfer to such transferee with no further action
      required by the Purchaser, the transferee or the Company. Any Escrow Shares
      not
      delivered to any Purchaser because such Purchaser no longer holds shares of
      Series A Preferred or Conversion Shares will be returned to the Principal
      Stockholder.

     

    1.5. If
      the
      Company and the Principal Stockholder fail to timely comply with their
      respective obligations set forth in Section 3.22 of the Purchase Agreement
      (the
“Listing
      Obligation”),
      then
      upon sole written instruction by the Purchaser Representative to the Escrow
      Agent, 750,000 of the Escrow Shares (the “Penalty
      Shares”)
      shall
      be distributed from the Escrow Account. Each Purchaser shall receive such number
      of Penalty Shares calculated as follows: 

    


    A
      =
      (Z)*(X/Y)

     

    
      	
            	Where:	
              A
                =
                the number of Penalty Shares to be distributed to such Purchaser
                

            


    

    


    
      	
            	X
              =	
              the
                number of shares of Series A Preferred (on an as converted basis)
                and
                Conversion Shares owned by such Purchaser as of the Distribution
                Date

            


    

    


    
      	
            	Y
              =	
              the
                number of Series A Preferred Shares issued as of the Closing Date
                (on an
                as converted basis)

            


    

    


    
      	
            	Z
              =	
              the
                Penalty Shares

            


    

    


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    


    Within
      five (5) business days after the release of the Penalty Shares to the
      Purchasers, the Principal Stockholder shall deposit into the Escrow Account,
      stock certificates evidencing an aggregate of 750,000 shares of Common Stock.
      

     

    1.6. If
      the
      Company does not achieve either of the 2008 Performance Thresholds or either
      of
      the 2009 Performance Thresholds and/or if the Company does not comply with
      the
      Listing Obligation, the Company shall use reasonable best efforts to promptly
      cause the Escrow Shares or the Penalty Shares, as applicable, to be delivered
      to
      the Purchasers, including causing its transfer agent to promptly, but in no
      event longer than five (5) business days, transfer the certificates into the
      names of the Purchasers and causing its securities counsel to provide any
      written instruction required by the Escrow Agent in a timely manner so that
      the
      issuances and delivery contemplated above can be achieved within five business
      days following delivery of the 2008 Financial Statements or 2009 Financial
      Statements, as applicable, to the Purchaser Representative, or, within five
      business days of October 31, 2009, in the case of the Penalty
      Shares.

     

    1.7. The
      Company will provide the Purchaser Representative with (i) the Company’s audited
      financial statements for 2008, prepared in accordance with US GAAP, no later
      than the date for filing the Company’s Annual Report on Form 10-K for 2008,
      including any extension for filing the 2008 Annual Report which may be requested
      under Rule 12b-25 of the Securities Exchange Act of 1934, as amended (the
“Annual
      Report”)
      with
      the Securities and Exchange Commission (“SEC”),
      and
      (ii) the Company’s audited financial statements for 2009, prepared in accordance
      with US GAAP, on or before the date for filing the Company’s 2009 Annual Report
      with the SEC, so as to allow the Purchaser Representative the opportunity to
      evaluate whether each of the 2008 Performance Thresholds and each of the 2009
      Performance Thresholds were attained. In the event that the Purchaser
      Representative receives the financial information prior to its dissemination
      by
      the Company in either a press release or in the Company’s periodic reports filed
      with the SEC, the Company shall issue a press release announcing the information
      or file a Form 8-K as required under Regulation FD.

      

    ARTICLE
      II

    REPRESENTATIONS
      OF THE PRINCIPAL STOCKHOLDER

     

    2.1. The
      Principal Stockholder hereby represents and warrants to the Purchasers and
      the
      Purchaser Representative as follows:

     

    (i) The
      Principal Stockholder is the record and beneficial owner of the Escrow Shares
      placed into escrow pursuant to this Agreement and owns such Escrow Shares,
      free
      and clear of all pledges, liens, claims and encumbrances, except encumbrances
      created by this Agreement and the Principal Stockholder Lock-Up Agreement
      entered into as of even date herewith and in connection with the Financing.
      There are no restrictions on the ability of the Principal Stockholder to
      transfer the Escrow Shares placed into escrow pursuant to this Agreement or
      to
      enter into this Agreement other than transfer restrictions under the Principal
      Stockholder Lock-Up Agreement and/or applicable federal and state securities
      laws. 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (ii) The
      performance of this Agreement and compliance with the provisions hereof will
      not
      violate any provision of any law applicable to the Principal Stockholder 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
      certificate of incorporation or by-laws of the Principal Stockholder, or any
      indenture, mortgage, deed of trust or other agreement or instrument binding
      upon
      the Principal Stockholder 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 Principal Stockholder, the creation of which would
      have a material adverse effect on the business and operations of the Principal
      Stockholder. 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 Principal Stockholder, other than those
      already obtained.

     

    ARTICLE
      III

    MISCELLANEOUS

     

    3.1. The
      Company, at the time of the Closing, will pay Escrow Agent a total of $2,000
      for
      all services rendered by Escrow Agent hereunder.

     

    3.2. 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.

     

    3.3 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 telecopier 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 3.3), or the refusal to accept same, the notice, demand, consent,
      request, instruction or other communication shall be deemed received on the
      third 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.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

      If
        to
        Escrow
        Agent:            Anslow
        & Jaclin, LLP

      195
        Route
        9 South, Suite 204

      Manalapan,
        New Jersey 07726

      Attention:
        Joseph M. Lucosky, Esq.

      Tel
        No.:
        732-409-1212

      Fax
        No.:
        732-588-1188

    

     

    If
      to the
      Company or the Principal Stockholder:

    


    Lihua
      International, Inc.

    c/o
      Lihua
      Holdings Limited,

    Houxiang
      Five Star Industry District

    Danyang
      City, Jiangsu Province, PRC

    Attention:
      Mr. Zhu Jianhua  

    Tel.
      No.:
      86 -511-8631-7399

    Fax
      No.:
      86-511-8631-2040

     

    With
      a
      copy to (which shall not constitute notice):

    Loeb
      & Loeb LLP

    345
      Park
      Avenue

    New
      York,
      NY 10154

    Attention:
      Mitchell S. Nussbaum, Esq.

    Tel.
      No.:
      (212) 407-4000

    Fax
      No.:
      (212) 407-4990 

     

    If
      to the
      Purchaser Representative: 

    Vision
      Opportunity China LP

    20
      W.
      55th Street, 5th Floor

    New
      York,
      New York 10019

    Attention:
      Yiting Liu

    Tel.
      No.:
      (212) 849-8238

    Fax
      No.:
      (212) 867-1416

    


    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.

     

    3.4. This
      Escrow Agreement shall be binding upon and shall inure to the benefit of the
      permitted successors and permitted assigns of the parties hereto.

     

    3.5. 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.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    3.6. 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. 

     

    3.7. 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, without regard to conflicts of law principles that would
      result in the application of the substantive laws of another jurisdiction.
      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, Borough of Manhattan.

     

    3.8. The
      Escrow Agent’s duties hereunder may be altered, amended, modified or revoked
      only by a writing signed by the Company, the Principal Stockholder, the
      Purchaser Representative and the Escrow Agent.

     

    3.9. 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.

     

    3.10. 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.

     

    3.11. 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.

     

    3.12. 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. The
      Escrow Agent has acted as legal counsel for one of the Purchasers and may
      continue to act as legal counsel for such Purchaser from time to time,
      notwithstanding its duties as the Escrow Agent hereunder. The Company and the
      Purchasers consent to the Escrow Agent in such capacity as legal counsel for
      one
      of the Purchasers and waive any claim that such representation represents a
      conflict of interest on the part of the Escrow Agent. The Company and the
      Purchasers understand that the Escrow Agent is relying explicitly on the
      foregoing provision in entering into this Escrow
      Agreement.

     

    
      
        
        

      

      
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    3.13. 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.

     

    3.14. 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.

     

    3.15. 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 Shares
      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 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.

     

    3.16. 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.

     

    [Signature
      Page Follows]


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    [SIGNATURE
      PAGE TO SECURITIES ESCROW AGREEMENT]

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Agreement as of this
      31st
      day of
      October, 2008.

     

    LIHUA
      INTERNATIONAL, INC.

    


    
      	
              By:

            	
              /s/
                Zhu Jianhua

            


    

    Name:
      Zhu
      Jianhua

    Title:
      Chief Executive Officer and President

     

    PURCHASER
      REPRESENTATIVE:

     

    VISION
      OPPORTUNITY CHINA
      LP

    


    
      	
              By:

            	
              /s/
                Adam Benowitz

            


    

    Name: 
      Adam Benowitz

    Title:
      Authorized Signatory

     

    ESCROW
      AGENT:

     

    ANSLOW
      & JACLIN, LLP

    


    
      	
              By:

            	
              /s/
                Greg
                E. Jaclin

            


    

    Name:
      Gregg E. Jaclin

    Title:
      Partner

    


    PRINCIPAL
      STOCKHOLDER:

    


    
      	
              By:

            	
              
                /s/
                  Zhu Jianhua

              

            


    

    Name:
      Magnify Wealth Enterprise Limited

    Authorized
      Signatory: Zhu Jianhua


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    


    Schedule
      A

     

    6,818,182
      shares of Common Stock to be deposited as Escrow Shares

     

    
      
        
        

      

      
        13