Nutrastar International Inc.: Exhibit 10.3 - Filed by newsfilecorp.com






Exhibit 10.3

ESCROW AGREEMENT 

THIS ESCROW AGREEMENT (this "Escrow
Agreement") is made and executed as of May 27, 2010 by and among Nutrastar
International Inc., a Nevada corporation (the "Company"), ARC China,
Inc., a Shanghai corporation ("ARC China"), Gilford Securities
Incorporated, as the placement agent (the "Placement Agent"), Corporate
Stock Transfer, Inc., as the escrow manager (the "Escrow Manager"), and
United Western Bank, as the bank escrow agent (the "Bank Escrow Agent").
Capitalized terms used but not defined herein shall have the meaning set forth
in the Securities Purchase Agreement (as defined below). 

RECITALS 

A.   The Company is in the
process of raising capital in an offering (the "Offering") placed by the
Placement Agent of up to an aggregate of 250,000 Units, at a price of $28.56 per
Unit and for an aggregate purchase price of up to $7,140,000, with each "Unit"
comprised of (i) one share of the Company's newly designated Series A
convertible preferred stock, par value $0.001 per share, and (ii) warrants to
purchase five shares of the Company's common stock, par value $0.001 per share
("Common Stock"), at an exercise price of $3.40 per share;

B.   Each Purchaser
subscribing to purchase Units will enter into the Securities Purchase Agreement
with the Company and the other Purchasers party thereto (the “Securities
Purchase Agreement”);

C.   The Securities Purchase
Agreement provides that each Purchaser shall deposit its Purchase Price in a
segregated escrow account to be held by Escrow Manager (the “Escrow
Account”) in order to effectuate disbursements to the Company through one
or more closings, which may be held at such times and in such amounts as may be
mutually agreed upon by the Company and ARC China (each, a "Closing", and
together, the "Closings").

D.   The Securities Purchase
Agreement provides that the Aggregate Purchase Price received from all
Purchasers (the “Escrow Funds”) will be held in the Escrow Account until
such time as the Company and Placement Agent authorize the Escrow Manager to
release such funds to the Company and for payment of Closing expenses at the
Closing in accordance with the terms hereof; provided that the Company
acknowledges and agrees that $100,000 of the Escrow Funds (the “IR Cash”)
will remain in the Escrow Account and will not be disbursed to the Company at
the initial Closing for dissemination to investor relations firms mutually
agreeable to the Company and ARC China; provided that any IR Cash not used to
compensate investor relations firms within a period of 12 months of the Closing
Date (the "IR Period") shall be released to the Company;

E.   The Company further
acknowledges and agrees that (i) an additional $250,000 of the Escrow Funds (the
“CFO Cash”), will remain in the Escrow Account and will not be disbursed
to the Company at the first Closing, which will be used as compensation for a
yet-to-be-determined Chief Financial Officer mutually agreeable to the Company
and ARC China (the "CFO Candidate"); and 

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F.   Escrow Manager has
agreed to accept, hold, and disburse the funds and securities deposited with it
in accordance with the terms of this Agreement and the Securities Purchase
Agreement. 

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

1. Appointment of Escrow Manager;
Deposit of Escrow Funds. The Placement Agent and the Company hereby appoint
the Escrow Manager as their agent and custodian to invest and disburse the
Escrow Funds deposited with the Escrow Manager pursuant to the terms of this
Escrow Agreement. The Placement Agent and the Company hereby further appoint the
Escrow Manager as their agent and custodian to invest and disburse the IR Cash
deposited with the Escrow Manager to IR Firms, and the CFO Cash to the CFO
Candidate pursuant to this Escrow Agreement.

2. Methods of Disposition of the
Escrow Funds. The Escrow Manager will invest the Escrow Funds, the IR Cash
and the CFO Cash as specified in this Escrow Agreement until authorized
hereunder to deliver such Escrow Funds, IR Cash and CFO Cash, or a portion
thereof, as follows: 

(a) At
each Closing, upon receipt of a certificate in the form of Schedule I
attached hereto executed by the Placement Agent and the Company, the Escrow
Manager shall deliver the Escrow Funds, (i) net of the IR Cash to be held in
escrow for release to IR Firms and (ii) net of the CFO Cash to be held in escrow
for release to the CFO Candidate, as directed in such certificate;

(b)
Following each Closing, the Escrow Manager will continue to hold the IR Cash
until the Company and ARC China execute one or more certificates in the form of
Schedule II attached hereto directing the Escrow Manager to disburse all
or a portion of the IR Cash pursuant to such certificate. In disbursing the IR
Cash, the Escrow Manager is authorized to rely upon any such certificate from
the Company and ARC China and may accept any signatory from the Company listed
on the signature page to this Agreement and any signature from ARC China that
the Escrow Agent already has on file;

(c)
Following each Closing, the Escrow Manager will continue to hold the CFO Cash
until the Company and ARC China execute one or more certificates in the form of
Schedule III attached hereto directing the Escrow Manager to disburse all
or a portion of the CFO Cash pursuant to such certificate. In disbursing the CFO
Cash, the Escrow Manager is authorized to rely upon any such certificate from
the Company and ARC China and may accept any signatory from the Company listed
on the signature page to this Agreement and any signature from ARC China that
the Escrow Agent already has on file;

(d) At
the expiration of the IR Period, upon receipt of a written request from the
Company, the Escrow Manager shall deliver to the Company the portion of the IR
Cash, if any, that has not been distributed to IR Firms pursuant to
Subsection (b);

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(e) On
or after  May 21, 2012, upon receipt of a written request from the Company, the
Escrow Manager shall deliver to the Company the portion of the CFO Cash, if any,
that has not been distributed to IR Firms pursuant to Subsection (c); or


(f) as
directed pursuant to Sections 6(i), 6(k) or 6(l). 

3. Purpose of the Escrow
Account. The Placement Agent, the Company and ARC China acknowledge and
agree that the purpose of the Escrow Account is threefold: (i) to hold the
Escrow Funds received from the Purchasers pending receipt of instructions for
release in accordance with Section 2 at the Closing; (ii) to hold the IR
Cash for distribution to the IR Firms; and (iii) to hold the CFO Cash for
distribution to a CFO Candidate.

4. Relationship Between Escrow
Manager and Bank Escrow Agent. The Bank Escrow Agent shall take directions
only from the Escrow Manager with respect to the Escrow Funds, the IR Cash and
the CFO Cash.

5. Non-Interest Bearing Account.
The Escrow Manager shall deposit the Escrow Funds, the IR Cash and the CFO Cash
into a non-interest bearing account held with the Bank Escrow Agent. 

6. Concerning the Escrow
Manager. 

(a) The
Escrow Manager shall not be under any duty to give the Escrow Funds, the IR Cash
and the CFO Cash held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any funds held
hereunder except as directed pursuant to Section 5 of this Escrow Agreement.


(b) This Escrow Agreement expressly
sets forth all the duties of the Escrow Manager with respect to any and all
matters pertinent hereto. No implied duties or obligations shall be read into
this Escrow Agreement against the Escrow Manager. The Escrow Manager shall not
be bound by the provisions of any other agreement among the parties hereto
except this Escrow Agreement.


(c) The
Escrow Manager shall not be liable, except for its own gross negligence, willful
misconduct or breach of this Escrow Agreement, and, except with respect to
claims based upon such gross negligence, willful misconduct or breach of this
Escrow Agreement, that are successfully asserted against the Escrow Manager, the
other parties hereto shall jointly and severally indemnify and hold harmless the
Escrow Manager (and any successor Escrow Manager) from and against any and all
losses, liabilities, claims, actions, damages and expenses, including reasonable
attorney's fees and disbursements, arising out of and in connection with this
Escrow Agreement. Without limiting the foregoing, the Escrow Manager shall in no
event be liable in connection with its investment or reinvestment of any Escrow
Funds, IR Cash or CFO Cash held by it hereunder in good faith, in accordance
with the terms hereof, including, without limitation, any liability for any
delays (not resulting from its gross negligence, willful misconduct or breach of
this Escrow Agreement) in the investment or reinvestment of the Escrow Funds,
the IR Cash or the CFO Cash or any loss of interest incident to any such delays.


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(d) The
Escrow Manager shall be entitled to reasonably rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to it
hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the proprieties, validity or the
service thereof. The Escrow Manager may act in reliance upon any instrument or
signature reasonably believed by it to be genuine and may assume that any person
purporting to give notice or advice, accept receipt of or execute any document,
or make any statement in connection with the provisions hereof, has been duly
authorized to do so. 

(e) The
Escrow Manager may act pursuant to the advice of counsel with respect to any
matter relating to this Escrow Agreement and shall not be liable for any action
taken or omitted in accordance with such advice, except for any action
constituting gross negligence, willful misconduct or a breach of this Escrow
Agreement. 

(f) The
Escrow Manager is serving as escrow manager only and has no interest in the
Escrow Funds, the IR Cash or the CFO Cash deposited hereunder. Any payments of
income from this Escrow Agreement shall be subject to withholding regulations
then in force with respect to United States Taxes. The Company will provide the
Escrow Manager with appropriate W-9 forms for tax identification number
certification or nonresident alien certifications if duly requested. This
Section 6(f) and Section 6(c) shall survive notwithstanding any termination of
this Escrow Agreement or the resignation of the Escrow Manager. 

(g) The
Escrow Manager makes no representation as to the validity, value, genuineness or
the collectibility of any security or other documents or instrument held by or
delivered to it. 

(h) The
Escrow Manager shall not be called upon to advise any party as to the wisdom in
selling or retaining or taking or refraining from any action with respect to any
securities or other property deposited hereunder. 

(i) The
Escrow Manager (and any successor Escrow Manager) may at any time resign as such
by delivering the Escrow Funds, the IR Cash and the CFO Cash to any successor
Escrow Manager jointly designated by the other parties hereto in writing, or to
any court of competent jurisdiction, whereupon the Escrow Manager shall be
discharged of and from any and all further obligations arising in connection
with this Escrow Agreement. The resignation of the Escrow Manager will take
effect on the earlier of (i) the appointment of a successor (including a court
of competent jurisdiction) or (ii) the day which is 30 days after the date of
delivery of its written notice of resignation to the other parties hereto. If at
that time the Escrow Manager has not received a designation of a successor
Escrow Manager, the Escrow Manager's sole responsibility after that time shall
be to safekeep the Escrow Funds, the IR Cash and the CFO Cash until receipt of a
designation of successor Escrow Manager or a joint written disposition
instruction by the other parties hereto or a final order of a court of competent
jurisdiction. 

(j) The
Escrow Manager shall have no responsibility for the contents of any writing of
the arbitrators or any third party contemplated herein as a means to resolve
disputes and may rely without any liability upon the contents thereof. 

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(k) In
the event of any disagreement between the other parties hereto resulting in
adverse claims or demands being made in connection with the Escrow Funds, the IR
Cash and the CFO Cash or in the event that the Escrow Manager in good faith is
in doubt as to what action it should take hereunder, the Escrow Manager shall be
entitled to retain the Escrow Funds, the IR Cash or the CFO Cash until the
Escrow Manager shall have received (i) a final nonappealable order of a court of
competent jurisdiction directing delivery of the Escrow Funds, the IR Cash or
the CFO Cash, or (ii) a written agreement executed by the other parties hereto
directing delivery of the Escrow Funds, the IR Cash or the CFO Cash, in which
event the Escrow Manager shall disburse the Escrow Funds, the IR Cash or the CFO
Cash in accordance with such order or agreement. Any court order referred to in
clause (i) above shall be accompanied by a legal opinion of counsel for the
presenting party satisfactory to the Escrow Manager to the effect that said
court order is final and nonappealable. The Escrow Manager shall act on such
court order and legal opinions without further question. 

(l)
Notwithstanding anything to the contrary contained herein, in the event of any
dispute between the parties hereto as to the facts of default, the validity or
meaning of these instructions or any other fact or matter relating to the
transaction between the parties, the Escrow Manager is instructed as follows:


(i) That
it shall be under no obligation to act, except as and to the extend directed
under process or order of court, or until it has been adequately indemnified to
its full satisfaction, and shall sustain no liability for its failure to act
pending such process or court order or indemnification; and 

(ii)
That it may in its sole and absolute discretion, deposit the property herein or
so much thereof as remains in its hands with the then Clerk, or acting Clerk, of
the District Court of the City and County of Denver, State of Colorado,
interplead the parties hereto, and upon so depositing such property and filing
its complaint in interpleader it shall be relieved of all liability under the
terms hereof as to the property so deposited, and furthermore, the parties
hereto for themselves, their heirs, legal representatives, successors and
assigns do hereby submit themselves to the jurisdiction of said court and do
hereby appoint the then Clerk, or acting Clerk, of said court as their Agent for
the service of all process in connection with such proceedings. The institution
of any such interpleader action shall not impair the rights of the Escrow
Manager under Section 6(c) above. 

(m) The
Company agrees to pay the Escrow Manager as compensation for the services of the
Escrow Manager hereunder, an aggregate of $4,000 per year as payment in
full for the services to be rendered by the Escrow Manager hereunder. In
addition, the Company agrees to pay all reasonable expenses, disbursements and
advances incurred or made by the Escrow Manager in performance of its duties
hereunder (including reasonable fees, expenses and disbursements of its
counsel).

(n) No
printed or other matter in any language (including, without limitation,
prospectuses, notices, reports and promotional materials) which mentions the
Escrow Manager's name or the rights, powers or duties of the Escrow Manager
shall be issued by the other parties hereto or on such parties' behalf unless
the Escrow Manager shall first have given its specific written consent to such mention(s). 

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     7.
Notices. Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder shall be in writing. All
such notices shall be delivered personally, by facsimile or by reputable
overnight courier (costs prepaid), and shall be deemed given or made when
delivered personally, the business day sent if sent by facsimile or one business
day after delivery to the overnight courier for next business day delivery. All
such notices are to be given or made to the parties at the following addresses
(or to such other address as any party may designate by a notice given in
accordance with the provisions of this Section): 

If to the Company: 

Nutrastar Inc. 
7/F (Jinhua Mansion)

41 Hanguang Street 
Nangang District 
P.R. China 150080 
Attention:
Han Lianyun 
Facsimile: [______________] 

With a copy to (which shall not be deemed notice): 

Pillsbury Winthrop Shaw Pittman LLP

50 Fremont Street 
San Francisco, California 94105-2228 
Attention:
Scott C. Kline 
Facsimile: (415) 983-1200 

If to the Placement Agent: 

Gilford Securities Incorporated
 777
Third Avenue, 17th Floor 
New York, New York 10017 
Attention: Robert
Maley 
Facsimile: (212) 223-1683 

If to ARC China: 

ARC China, Inc. 
The Bank of China
Building, 14/F 
23 Zhongshan East No. 1 Road 
Shanghai 200002, P.R. China

Attention: Adam Roseman 
Facsimile: (310) 402-5932

If to the Escrow Manager: 

Corporate Stock Transfer, Inc. 

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3200 Cherry Creek Drive, Suite 430

Denver, CO 80209 
Attention: Carylyn Bell 
Facsimile: (303)
282-5800 

If to the Bank Escrow Agent: 

United Western Bank 
700 Seventeenth
Street, Suite 100 
Denver, CO 80202 
Attention: John Fiedler

Facsimile: ________________


8. Waivers and Amendments. This
Escrow Agreement may be amended, superseded, canceled, renewed or extended and
the terms hereof may be waived only by a written instrument signed by the
Placement Agent, ARC China, the Company and the Escrow Manager.

9. Counterparts; Facsimile
Signatures. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Signatures provided by facsimile or electronic
transmission will be deemed to be original signatures.

10. Governing Law; Severability.
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Colorado, without reference to the choice of law
or conflicts of law principles thereof. Should any clause, section or part of
this Agreement be held or declared to be void or illegal for any reason, all
other clauses, sections or parts of this Agreement shall nevertheless continue
in full force and effect. 

11. Assignment. Neither the
rights nor the obligations of any party to this Agreement may be transferred or
assigned, except by the express written agreement of the parties hereto. Any
purported assignment of this Agreement shall be null, void and of no effect.


12. Termination. This Escrow
Agreement shall terminate upon the complete distribution of the Escrow Funds,
the IR Cash and the CFO Cash in accordance with the terms hereof. If any Escrow
Funds are subject to a dispute under Section 6(l), this Escrow Agreement shall
remain in full force and effect until such dispute is resolved in accordance
with such Section 6(l). 

13. Binding Effect. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective representatives, successors and permitted assigns.

* * * * * 

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IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be signed on the date and year first written
above. 


	THE COMPANY: 
	 
	NUTRASTAR INTERNATIONAL INC. 
	  
	By:  /s/ Han Lianyun                                       
    
	Name: Han Lianyun
	Title: Chief Executive Officer and Chairperson 
	  
	THE PLACEMENT AGENT: 
	 
	GILFORD SECURITIES INCORPORATED 
	  
	By: /s/ Robert Maley                                       
    
	Name: Robert Maley 
	Title: President 





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THE ESCROW MANAGER: 

CORPORATE STOCK TRANSFER, INC. 

By: /s/ Carylyn Bell                                          

Name: Carylyn Bell

Title: President 

THE BANK ESCROW AGENT: 

UNITED WESTERN BANK 

By: /s/ John Fiedler                                            

Name: John Fiedler
Title: Regional President 


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	ARC CHINA: 
	  
	ARC CHINA, INC. 
	  
	  
	By:  /s/ Adam M. Roseman                                 
    
	Name: Adam M. Roseman 
	Title: Chief Executive Officer 




 
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