ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is entered into as of the 18th day
of November, 1998, by and among Mannatech, Incorporated, a Texas corporation
("Issuer"), the selling shareholders set forth on Schedule A hereto (the
"Selling Shareholders"), J.J.B. Xxxxxxxx, X.X. Xxxxx, Inc., ("Placement Agent")
and Bank One, Kentucky, NA ("Escrow Agent").
R E C I T A L S:
A. Issuer and the Selling Shareholders propose to offer for sale to
subscribers an aggregate of 5,295,015 shares of the capital stock of Issuer,
having a per share par value of $0.0001 per share (the "Shares") at a price of
$8.00 per Share, payable at the time of subscribing for a Share. 2,500,000
shares and the proceeds therefrom shall be subject to this Agreement. The
payment of $20,000,000 for at least 2,500,000 Shares will be paid into the
escrow created by this Agreement.
B. Issuer and the Selling Shareholders intend to sell the Shares on a
best-efforts "minimum or none" basis in a public offering (the "Offering") by
delivering to each subscriber a Prospectus (the "Prospectus") describing the
Offering.
C. Issuer and the Selling Shareholders desire to establish an escrow
account in which funds received from subscribers would be deposited pending
completion of the period during which the Escrow Account shall be open (the
"Escrow Period"). Bank One, Kentucky, NA, agrees to serve as Escrow Agent in
accordance with the terms and conditions set forth herein.
D. The Selling Shareholders have authorized Issuer to take all necessary
action on their behalf to sell the Shares.
AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Issuer, for itself and on behalf of the Selling Shareholders, hereby
appoints Bank One, Kentucky, NA, as Escrow Agent and Escrow Agent shall
establish an escrow account (the "Escrow Account") on its books styled
"Mannatech Subscription Account." Commencing upon the execution of this
Agreement, Escrow Agent shall act as Escrow Agent and hereby agrees to receive
and disburse the proceeds from the offering of the Shares in accordance with the
terms here of. Issuer agrees to notify the Escrow Agent promptly of the closing
of the offering and sale of the Shares.
2. Issuer or Placement Agent shall cause all checks received from
subscribers for Shares to be promptly deposited into the Escrow Account. Issuer
or Placement Agent shall deliver to the Escrow Agent checks of the subscribers
made payable to the Mannatech Subscription Account or endorsed to the Mannatech
Subscription Account. Any checks that are received by Escrow Agent that are not
made
payable or endorsed to the Mannatech, Incorporated Escrow Account shall be
returned to the Issuer. Issuer shall furnish to the Escrow Agent at the time
of each deposit of the above-mentioned funds a list containing the name of
each subscriber, the subscriber's address, the number of Shares subscribed
for, and the amount of the check being delivered to the Escrow Agent. Prior
to the receipt of the Minimum (as described below), the Issuer is aware and
understands that it is not entitled to any proceeds from subscriptions
deposited into the Escrow Account and no amounts deposited in the Escrow
Account during the Escrow Period shall become the property of the Issuer or
any other entity, or be subject to the debts of the Issuer or any other
entity.
3. The Escrow Period shall commence on the date hereof and shall
terminate ten (10) Business Days (as defined below) following the earlier to
occur of the following dates:
(a) The date upon which Escrow Agent confirms upon written request of the
Issuer that it has received into the Escrow Account and collected
gross subscription proceeds from the sale of 2,500,000 Shares
aggregating $20,000,000 in deposited funds (the "Minimum") assuming
that, prior to such date, the S-1 Registration Statement as amended,
File Number 333-63133 has been declared effective by the Securities
and Exchange Commission, and Issuer has received notice that the
Shares have been approved for listing on the NASDAQ NMS subject only
to meeting the public float and market maker requirements for such
listing; or
(b) The "Cessation Date," which for the purposes of this Agreement shall
be January 15, 1999, except as extended in writing by the agreement of
parties.
(c) The date upon which a determination is made by the Issuer to terminate
the Offering prior to the sale of the Minimum, as communicated to
Escrow Agent in writing.
Upon the occurrence of any of the events described in (a), (b) or (c)
above, the Escrow Period shall continue for such ten (10) Business-Day period
solely for the limited purposes of collecting subscribers' checks that have been
deposited prior to such event and disbursing funds from the Escrow Account as
provided herein. Escrow Agent will not accept deposits of subscribers' checks
after notice that any of the events described in subparagraphs (a), (b) and (c)
has occurred.
"Business Day" shall mean a day on which commercial banks in
Louisville, Kentucky, are open for the general transaction of business. If any
action or time for performance pursuant to this Agreement is to occur on any
Saturday, Sunday or holiday, such time for action or performance shall be
extended to the next Business Day.
4. The Escrow Agent will deposit the subscribers' checks for collection
and credit the proceeds to the Escrow Account to be held by it under the terms
of this Agreement. Notwithstanding anything to the contrary contained herein,
Escrow Agent is under no duty or responsibility to enforce collection of any
checks delivered to Escrow Agent hereunder. The Escrow Agent hereby is
authorized to forward each check for collection and deposit the proceeds
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in the Escrow Account. As an alternative, the Escrow Agent may telephone the
bank on which the check is drawn to confirm that the check has been paid.
Additionally, to insure that such funds have cleared normal banking channels
for collection, Escrow Agent is authorized to hold for ten (10) Business Days
funds to be released. Issuer shall immediately reimburse Escrow Agent any
monies paid to it if thereafter the subscriber's check is returned unpaid.
Any item returned unpaid to the Escrow Agent on its first presentation for
payment shall be returned to Issuer and need not be again presented by the
Escrow Agent for collection. Issuer agrees to reimburse Escrow Agent for the
cost incurred with any returned check. The Escrow Agent shall not be
required to invest any funds deposited in the Escrow Account and shall in no
event be liable for any investment loss. For purposes of this Agreement, the
term "collected funds" or the term "collected" when referring to the proceeds
of subscribers' checks shall mean all funds received by Escrow Agent that
have cleared normal banking channels and are in the form of cash
5. If prior to the Cessation Date, subscribers' checks in an amount of at
least the Minimum have been deposited in the Escrow Account, upon request from
Issuer, Escrow Agent will confirm the amounts collected by it from subscribers'
checks. If such amount is at least equal to the Minimum, the Issuer may send
Escrow Agent a written notice providing a list of all accepted subscribers,
specifying the total amount of their subscription to be remitted to Issuer, and
containing a request to terminate the Escrow Period and remit such amount, less
any fees or other amounts then owing from Issuer to Escrow Agent hereunder, to
the Issuer as promptly as possible, but in no event later than ten (10) Business
Days after such termination, by issuing its bank check payable to the Issuer or
by depositing such amount directly into the account of Issuer maintained with
Bank One, Kentucky, NA, as designated in writing by Issuer to Escrow Agent. The
Escrow Period shall not terminate upon receipt by Escrow Agent of such notice,
but shall continue for such (10) Business-Day period solely for the limited
purposes of collecting subscribers' checks that have been deposited prior to
Escrow Agent's receipt of such notice and disbursing funds from the Escrow
Account as provided herein. Escrow Agent will not accept deposits of
subscribers' checks after receipt of such notice.
If, on the Cessation Date, the Minimum Amount has not been deposited with
the Escrow Agent and collected, or if Issuer notifies the Escrow Agent in
writing that Issuer elects to terminate the Offering as provided in paragraph
3(c) above, the Escrow Agent shall then issue and mail its bank checks to the
subscribers in the amount of the subscribers' respective checks, without
deduction, penalty or expense to the subscriber, and shall, for this purpose, be
authorized to rely upon the names and addresses of subscribers furnished it as
contemplated above. No subscriber shall be paid interest with respect to such
deposited funds. The purchase money returned to each subscriber shall be free
and clear of any and all claims of the Issuer and any of its creditors. For
each subscription for which the Escrow Agent has not collected funds but has
submitted the subscriber's check for collection, the Escrow Agent shall promptly
issue a check to such subscriber in the amount of the collected funds from such
subscriber's check after the Escrow Agent has collected such funds. If Escrow
Agent has not yet submitted such subscriber's check for collection, the Escrow
Agent shall promptly remit the subscriber's check directly to such subscriber.
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At such time as Escrow Agent shall have made the payments and remittances
provided in the Agreement, the Escrow Agent shall be completely discharged and
released of any and all further liabilities and responsibilities hereunder.
6. As consideration for its agreement to act as Escrow Agent as herein
described, Issuer agrees to pay the Escrow Agent an acceptance fee/establishment
fee of $250.00 and an administration fee of $2,500.00 upon execution of this
Agreement, plus the fees described on the attached fee schedule. Further,
Issuer agrees to pay all disbursements and advances incurred or made by the
Escrow Agent in performance of its duties hereunder, including reasonable fees,
expenses and disbursements of its counsel, all in accordance with the attached
fee schedule or the other provisions of this Agreement. No such fees or
reimbursements shall be paid out of or chargeable to the funds on deposit in the
Escrow Account until such time as the Minimum has been collected.
If the Issuer rejects any subscription for which Escrow Agent has already
collected funds, the Escrow Agent shall promptly issue a refund check to the
rejected subscriber in the amount of the subscriber's check. If the Issuer
rejects any subscription for which the Escrow Agent has not yet collected funds
but has submitted the subscriber's check for collection, the Escrow Agent shall
promptly issue a check in the amount of the collected funds from the
subscriber's check to the rejected subscriber after the Escrow Agent has cleared
such funds. If Escrow Agent has not yet submitted a rejected subscriber's check
for collection, the Escrow Agent shall promptly remit the subscriber's check
directly to the subscriber.
7. This Agreement shall automatically terminate upon the earlier of (i)
twenty (20) days after the Cessation Date or (ii) twenty (20) days after the
date upon which the Escrow Agent has delivered the final portion of Escrow
Account funds pursuant to the terms of this Agreement.
8. It is understood that the Escrow Agent reserves the right to resign as
Escrow Agent at any time by giving written notice of its resignation, specifying
the effective date thereof, to each other party hereto. Within thirty (30) days
after receiving the aforesaid notice, the other party or parties hereto shall
appoint a successor Escrow Agent to which the Escrow Agent may distribute the
property then held hereunder, less its fees, costs and expenses (including
counsel fees and expenses) which may remain unpaid at that time. If a successor
Escrow Agent has not been appointed and has not accepted such appointment by the
end of such thirty (30) day period, the Escrow Agent may apply to a court of
competent jurisdiction for the appointment of a successor Escrow Agent and the
fees, costs and expenses (including reasonable counsel fees and expenses) which
it incurs in connection with such a proceeding shall be paid by the Company.
9. The parties hereto agree that the following provisions shall control
with respect to the rights, duties, liabilities, privileges and immunities of
the Escrow Agent:
a. Escrow Agent shall have no obligation to invest the Escrow Account.
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b. The Escrow Agent shall have no responsibility except for the
safekeeping and delivery of the amounts deposited in the Escrow
Account in accordance with this Agreement. The Escrow Agent shall not
be liable for any act done or omitted to be done under this Agreement
or in connection with the amounts deposited in the Escrow Account,
except as a result of the Escrow Agent's gross negligence or willful
misconduct. The Escrow Agent is not a party to nor is it bound by,
nor need it give consideration to the terms of provisions of, even
though it may have knowledge of, (i) any agreement or undertaking by,
between or among the Issuer and any other party, except this
Agreement, (ii) any agreement or undertaking that may be evidenced by
this Agreement, (iii) any other agreements that may now or in the
future be deposited with the Escrow Agent in connection with this
Agreement. The Escrow Agent is not a party to, is not responsible
for, and makes no representation with respect to the offer, sale or
distribution of the Shares including, but not limited to, matters set
forth in any offering documents prepared and distributed in connection
with the offer, sale and distribution of the Shares. The Issuer
covenants that it will not commence any action against the Escrow
Agent at law, in equity, or otherwise as a result of any action taken
or thing done by the Escrow Agent pursuant to this Agreement, or for
any disbursement made as authorized herein upon failure of the Issuer
to give the notice within the times herein prescribed. The Escrow
Agent has no duty to determine or inquire into any happening or
occurrence of or of any performance or failure of performance of the
Issuer or of any other party with respect to agreements or
arrangements with any other party. If any question, dispute or
disagreement arises among the parties hereto and/or any other party
with respect to the funds deposited in the Escrow Account or the
proper interpretation of this Agreement, the Escrow Agent shall not be
required to act and shall not be held liable for refusal to act until
the question or dispute is settled, and the Escrow Agent has the
absolute right at its discretion to do either or both of the
following:
(i) withhold and/or stop all further performance under this Agreement
until the Escrow Agent is satisfied, by receipt of a written
document in form and substance satisfactory to the Escrow Agent
and executed and binding upon all interested parties hereto (who
may include the subscribers), that the question, dispute, or
disagreement had been resolved; or
(ii) file a suit in interpleader and obtain by final judgment,
rendered by a court of competent jurisdiction, an order binding
all parties interested in the matter. In any such suit, or
should the Escrow Agent become involved in litigation in any
manner whatsoever on account of this Agreement or the Escrow
Account, the Escrow Agent shall be entitled to recover from the
Issuer its attorneys' fees and costs.
The Escrow Agent shall never be required to post a bond in connection
with any services hereunder. The Escrow Agent may consult with
counsel of its own choice and shall have full and complete
authorization and protection for and shall not be liable for any
action taken or suffered by it hereunder in good faith and
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believed by it to be authorized hereby, nor for action taken or
omitted by it in accordance with the advice of such counsel (who
shall not be counsel for the Issuer).
c. The Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth in this Agreement and may rely
and shall be protected in acting or refraining from acting upon any
written notice, instruction or request furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by
the proper party or parties and to take statements made therein as
authorized and correct without any affirmative duty of investigation.
d. The Issuer hereby agrees to indemnify the Escrow Agent for, and to
hold it harmless against, any loss, liability, or expense (including,
without limitation, all legal expenses incurred in enforcing any of
the provisions of this Agreement or otherwise in connection herewith)
incurred without gross negligence or willful misconduct on the part of
the Escrow Agent, arising out of or in connection with its entering
into this Agreement and carrying out its duties hereunder, including
the costs and expenses of defending itself against any claim of
liability hereunder or arising out of or in connection with the sale
of the Shares. This covenant shall survive the termination of this
Agreement.
e. The Escrow Agent shall not be bound by any modification, amendment,
termination, cancellation, rescission or supersession of this
Agreement unless the same shall be in writing and signed by all of the
other parties hereto and, if its duties as Escrow Agent hereunder are
affected thereby, unless it shall have given prior written consent
thereto.
f. Escrow Agent shall not be liable for any damage, loss, liability, or
delay caused by accidents, strikes, fire, flood, war, riot, equipment
breakdown, electrical or mechanical failure, acts of God or any cause
which is reasonably unavoidable or beyond its reasonable control.
10. Notices required to be sent hereunder shall be delivered by hand, sent
by an express mail service or sent via United States mail, postage prepaid,
certified, return receipt requested, to the following address:
If to Placement Agent: J.J.B. Xxxxxxxx, X.X. Xxxxx, Inc.
Corporate Finance Division
000 X. 0xx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
If to Issuer: Mannatech, Incorporated
000 X. Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxx
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If to Escrow Agent: Bank One, Kentucky, NA
Corporate Trust Department
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
No notice to the Escrow Agent shall be deemed to be delivered until
actually received by the Escrow Agent. From time to time any party hereto may
designate an address other than the address listed above by giving the other
parties hereto not less than five (5) days advance notice of such change in
address in accordance with the provisions hereof.
11. This Agreement shall be construed, enforced and administered in
accordance with the laws of the Commonwealth of Kentucky.
12. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature page were an original thereof.
[remainder of page left intentionally blank]
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EXECUTED on the date first written above.
SELLING SHAREHOLDERS: ISSUER:
(Named in Schedule A Hereto) Mannatech, Incorporated
By: By:
-------------------------- ------------------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxxxx X. Xxxxxxxx
Title: Attorney-in-Fact Title: Chief Executive Officer
Tax I.D. #00-0000000
By: ESCROW AGENT:
-------------------------- Bank One, Kentucky, NA
Name: Xxxxxx X. Xxxxxx
Title: Attorney-in-Fact
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
PLACEMENT AGENT:
J.J.B. Xxxxxxxx, X.X. Xxxxx, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Tax I.D. #
-------------------------
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SCHEDULE A
SELLING SHAREHOLDERS
Name Number of Shares
---- ----------------
Minimum Offering Maximum Offering
---------------- ----------------
Xxxxxx X. Xxxxxx 105,980 360,000
Xxxxxxx X. Xxxxxxxx 300,620 760,000
Xxxxxxx X. Xxxxxxxx 105,980 360,000
Xxxxx X. Xxxxxxxx 38,928 105,000
Xxxxxxx X. Xxxx 48,660 150,000
H. Xxxxxxxx XxXxxxxx 37,031 55,000
Xxxxxxxxxxx X. Xxxxxxx 17,031 475,015
Xxxx Xxxxxxx, Xx. 97,320 300,000
Xxx Xxxxxxx 29,196 60,000
Xxxx Xxxxxx 48,660 200,000
Xxxx X. XxXxxxxxx 29,196 60,000
Xxxxx X. Xxxxxx 19,500 65,000
Xxx Xxxxxx 12,165 25,000
Xxxxx Xxxxxxxx 9,733 20,000
Xxxxxxx X. Xxxxx 100,000 100,000
