Exhibit 10.1
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement") dated as of February 10, 2006, by
and among Natural Health Trends Corp., a Delaware corporation ("Natural
Health"), Xxxx X. Xxxxxxxx ("Xxxxxxxx"), Xxxxx X. XxXxxx ("XxXxxx"), XxXxxx and
Xxxxxxxx Partnership (together with Xxxxxxxx and XxXxxx, collectively "Xxxxxxxx
and XxXxxx"), and Xxxxx & Janvey, L.L.P. (the "Escrow Agent").
RECITALS
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WHEREAS, Natural Health and Xxxxxxxx and XxXxxx dispute certain
matters; and
WHEREAS, the Company disputes the validity of certain options issued to
Xxxxxxxx and XxXxxx (the "Options") and the right to Xxxxxxxx and XxXxxx to
retain the Options and the stock issuable upon exercise thereof and other
proceeds thereof; and
WHEREAS, Xxxxxxxx and XxXxxx desire to exercise the Options before they
terminate, and Natural Health is willing to permit the Options to be exercised
provided that the exercise is effected without prejudice to any claim that
Natural Health may have relating to the validity of the Options or the right to
recover the Options or their proceeds and provided that the terms of this
Agreement are complied with; and
WHEREAS, the parties have agreed, in an effort to resolve the disputed
matters, to cause the deposit of the Escrowed Shares (as hereinafter defined)
and the Cash Deposit (as hereinafter defined) with the Escrow Agent, in
accordance with the terms of this Agreement and pending the resolution of the
disputed matters.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound do hereby agree
as follows:
1. Appointment of Escrow Agent. Natural Health and Xxxxxxxx and
XxXxxx hereby irrevocably appoint Xxxxx & Janvey, L.L.P. as the Escrow Agent to
receive, hold, administer and deliver the Escrowed Assets (as hereinafter
defined) in accordance with this Agreement, and the Escrow Agent hereby accepts
such appointment, all subject to and upon the terms and conditions set forth
herein.
2. Establishment of Escrow. The parties agree that common
stock certificates representing an aggregate of 1,081,066 shares of common stock
of Natural Health should be deposited into escrow. As of the date hereof,
Xxxxxxxx and XxXxxx agree, jointly and severally, to deposit with the Escrow
Agent an amount equal to one million two hundred six thousand dollars
($1,206,000) (the "Cash Deposit"). Within five (5) business days following the
date hereof, Natural Health shall forward to the Escrow Agent common stock
certificates representing an aggregate of 1,081,066 shares of common stock of
Natural Health to the Escrow Agent (the "Escrowed Shares", together with the
Cash Deposit shall be referred to as the "Escrowed Assets"). The Escrow Agent
shall promptly acknowledge receipt of the Escrowed Assets in writing to
Xxxxxxxx, XxXxxx and Natural Health. The Escrowed Assets and any and all
additional assets which are from time to time held by the Escrow Agent pursuant
to the terms hereof, and any and all earnings, interest and income earned on the
Escrowed Assets or such additional funds, are referred to herein as the "Escrow
Funds." The Escrow Agent shall hold, release and pay over the Escrow Funds in
accordance with the express provisions of this Agreement, and shall not make, be
required to make or be liable in any manner for its failure to make, any
determination of whether Natural Health, Xxxxxxxx, XxXxxx or the XxXxxx and
Xxxxxxxx Partnership are entitled to delivery of payment of any or all of the
Escrow Funds or to any other rights or remedies hereunder.
3. Investment of Escrow Funds by the Escrow Agent. The Escrow
Agent shall invest and reinvest the Cash Deposit (as well as the interest earned
thereon) in one or more Qualified Investments (as defined below). Income earned
with respect to the Cash Deposit shall be allocated for tax-reporting purposes
to the party ultimately receiving the Cash Deposit. The Escrow Agent will have
no liability for any investment loss, including any loss incurred on any
investment required to be liquidated prior to maturity in order to make a
payment required hereunder, made in accordance with this Section 3. The Escrow
Agent shall not issue an Internal Revenue Service Form 1099 to any party for any
reason arising from the subject matter of this Escrow Agreement until such time
as the parties resolve the dispute described herein.
"Qualified Investments", as used herein, means:
(i) Marketable obligations of the United States in
registered form and having a maturity of not more than three months
from the date of acquisition;
(ii) Marketable obligations directly and fully guaranteed
by the United States in registered form and having a maturity of not
more than three months from the date of acquisition; and
(iii) Interest-bearing bank accounts, certificates of
deposit, and other interest-bearing obligations issued by any bank
organized under the laws of the United States or any state thereof with
capital, surplus and undivided profits aggregating at least
$50,000,000, in each case having a maturity of not more than three
months from the date of acquisition.
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4. Release of Escrow Funds.
(a) Upon the receipt by the Escrow Agent of written
instructions executed by Natural Health and Xxxxxxxx and XxXxxx instructing the
Escrow Agent to release and pay over Escrow Funds to Natural Health, Xxxxxxxx
and XxXxxx or third parties, as the case may be, the Escrow Agent shall promptly
thereafter release and pay over the Escrow Funds in accordance with such written
instructions.
(b) Notwithstanding anything to the contrary in this
Agreement, (i) the Escrow Agent may at any time deposit all or any portion of
the Escrow Funds with the clerk of any court of competent jurisdiction in the
State of Delaware (in accordance with Section 14 below) upon commencement of an
action in the nature of interpleader or in the course of any court proceedings
in the State of Delaware and (ii) if at any time the Escrow Agent receives a
final non-appealable order of a court of competent jurisdiction, together with a
legal opinion in a form reasonably satisfactory to the Escrow Agent regarding
finality and jurisdiction, the Escrow Agent shall comply with such order.
(c) Upon any delivery or deposit of all of the Escrow
Funds as provided in this Section 4, the Escrow Agent shall thereupon be
released and discharged from any and all further obligations thereafter arising
in connection with this Agreement.
5. Escrow Agent. (a) Natural Health and Xxxxxxxx and XxXxxx
acknowledge and agree that the Escrow Agent (i) shall be obligated only for the
performance of such duties as are specifically set forth in this Agreement; (ii)
shall not be obligated to take any legal or other action hereunder which might
in its judgment involve expense or liability unless it shall have been furnished
with indemnity acceptable to it; (iii) may rely on and shall be protected in
acting or refraining from acting upon any written notice, instruction
(including, without limitation, wire transfer instructions, whether incorporated
herein or provided in a separate written instruction), instrument, statement,
request or document furnished to it hereunder and believed by it to be genuine
and to have been signed or presented by the proper person, and shall have no
responsibility for determining the accuracy thereof; and (iv) shall be obligated
only for the performance of such duties as are expressly and specifically set
forth in this Escrow Agreement on its part to be performed, each of which are
ministerial (and shall not be construed to be fiduciary) in nature, and no
implied duties or obligations of any kind shall be read into this Agreement
against or on the part of the Escrow Agent.
(b) Neither the Escrow Agent nor any of its partners or
employees shall be liable to anyone for any action taken or omitted to be taken
by it or any of partners or employees hereunder except in the case of gross
negligence, bad faith or willful misconduct. Natural Health and Xxxxxxxx and
XxXxxx hereby covenant and agree to jointly but not severally indemnify the
Escrow Agent and hold it harmless without limitation from and against any loss,
liability or expenses and other costs, including but not limited to reasonable
attorney's fees and other costs of defending or preparing to defend against any
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claim of liability, unless such loss, liability or expense shall be caused by
the Escrow Agent's gross negligence, bad faith or willful misconduct. In no
event shall the Escrow Agent be liable for indirect, punitive, special or
consequential damages. In the event of any payment by Natural Health or Xxxxxxxx
and XxXxxx pursuant to the indemnification obligation set forth in this
paragraph (b), such obligation shall first be satisfied out of the income earned
with respect to the Cash Deposit, and if such income is insufficient to satisfy
such obligation then Natural Health on the one hand and Xxxxxxxx and XxXxxx on
the other, shall pay the remainder of such obligation in two equal shares.
(c) Natural Health on the one hand and Xxxxxxxx and
XxXxxx on the other, agree to reimburse in two equal shares the Escrow Agent for
all reasonable out-of-pocket expenses incurred in connection with the
administration of the escrow created hereby, provided that such expenses shall
not exceed $10,000 in the aggregate. Natural Health and Xxxxxxxx and XxXxxx
agree that the amounts required to be paid pursuant to this paragraph (c) shall
first be satisfied out of the income earned with respect to the Cash Deposit,
and if such income is insufficient to satisfy such amounts then Natural Health
on the one hand and Xxxxxxxx and XxXxxx on the other, shall pay the remainder of
such obligation in two equal shares.
(d) The Escrow Agent may at any time resign as Escrow
Agent hereunder by giving ten (10) days prior written notice of resignation to
the other parties hereto; provided however, that such resignation shall not be
effective until a successor escrow agent has been duly appointed and authorized.
Prior to the effective date of the resignation as specified in such notice,
Natural Health and Xxxxxxxx and XxXxxx will issue to the Escrow Agent a written
instruction authorizing redelivery of the Escrow Funds to a successor escrow
agent that they select. If no successor escrow agent is named by Natural Health
or Xxxxxxxx and XxXxxx, the Escrow Agent may apply to a court of competent
jurisdiction in the State of Delaware (in accordance in the paragraph 14) for
the appointment of a successor escrow agent. The provisions of paragraph (d) of
this Section 5 shall survive the resignation or removal of the Escrow Agent or
the termination of this Escrow Agreement.
6. Special Agreements.
(a) Tax Reporting. For tax reporting purposes, Natural
Health shall not issue an Internal Revenue Service Form W-2 or 1099 or any state
law equivalent thereof to XxXxxx, Woodburn or the XxXxxx and Xxxxxxxx
Partnership associated with the exercise of the Option, unless and until the
dispute relating to the Escrowed Shares has been resolved in favor of XxXxxx,
Woodburn or the XxXxxx and Xxxxxxxx Partnership and then only to the extent that
such Escrowed Shares are released into custody of XxXxxx and Xxxxxxxx in
resolution of such dispute.
(b) Dispute Resolution. It is understood and agreed that
should any dispute arise with respect to the delivery, ownership, right of
possession, and/or disposition of the Escrow Funds or should any claim be made
upon any Escrow Funds by a third party, the Escrow Agent upon receipt of a
written notice of such dispute or claim by Natural Health or Xxxxxxxx and XxXxxx
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hereto or third party, is authorized and directed to retain in its possession
without liability to anyone, all or any of such Escrow Funds until such dispute
shall have been settled either by the mutual agreement of Natural Health and
Xxxxxxxx and XxXxxx, or by a final order, decree or judgment of a court in the
United States of America, the time for perfection of an appeal of such order,
decree or judgment having expired. The Escrow Agent may, but shall be under no
duty whatsoever to, institute or defend any legal proceeding which relates to
Escrow Funds.
7. Notices.
(a) Notice Addresses. Any notice permitted or required
hereunder shall be in writing, and shall be sent by personal delivery, overnight
delivery by a recognized courier or delivery service, mailed by registered or
certified mail, return receipt requested, postage prepaid, or by confirmed
telecopy accompanied by mailing of the original on the same day by first class
mail, postage prepaid, in each case the parties at their address set forth below
(or to such other address as any such party may hereafter designate by written
notice to the other parties).
If to Natural Health:
Natural Health Trends Corp.
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Attention: General Counsel
With a copy to:
Xxxx X. Xxxxxx
Xxxxx Xxxxxxx Xxxxxxx Israels LLP
Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
If to Xxxxxxxx and XxXxxx:
Xxxx X. Xxxxxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxx 00000
Xxxxx XxXxxx
0000 Xxxxxxxxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
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With a copy to:
Xxxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxxxxx X. Xxxxxxxxxxx, Esq.
Xxxxxx And Xxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
Xxxxx X. Xxxxx
Xxxxx X. Xxxx
XxXxxxxxx & Xxxxx, X.X.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Plaza of the Americas - Xxxxx Xxxxx
Xxxx Xxx Xx.000
Xxxxxx, Xxxxx 00000-0000
If to Escrow Agent:
Xxxxx & Janvey, L.L.P.
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
8. Severability. Any provision of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9. Assignment. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective successors and
permitted assigns, and shall not be enforceable by or inure to the benefit of
any third party. No party may assign any of its rights or obligations under this
Agreement without the prior written consent of the other parties, and any
purported assignment without such consent shall be null and void, except that
the Escrow Agent may avail itself of Section 5 hereof.
10. Amendments; Waivers. This Agreement may be modified or
terminated, other than according to its terms, only by a writing signed by all
of the parties hereto, and no waiver hereunder shall be effective unless in a
writing signed by the party to be charged. The failure of a party at any time or
times to require performance of any provision hereof shall in no manner affect
the party's right at a later time to enforce the same. No waiver by any party of
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the breach of any term contained in this Agreement, in any one or more
instances, shall be deemed to be construed as a further or continuing waiver of
any such breach or of the breach of any other terms of this Agreement.
11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
12. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Delaware without regard to its conflict
of laws provisions.
13. Reproduction of Documents. This Escrow Agreement and all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, and (b) certificates and
other information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties hereto agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction shall likewise be admissible in evidence.
14. Consent to Jurisdiction and Service. Each of the parties
hereto hereby absolutely and irrevocably consent and submit to the exclusive
jurisdiction of the courts of the State of Delaware in connection with any
actions or proceedings brought by or against them arising out of or relating to
this Agreement. In any such action or proceedings, each of the parties hereto
hereby absolutely and irrevocably waive personal service of any summons,
complaint, declaration or other process and hereby absolutely and irrevocably
agree that service thereof may be made by certified or registered first class
mail directed to such party, as the case may be, at their respective addresses
in accordance with Section 7 hereof.
15. Reservation of Rights. Natural Health and Xxxxxxxx and XxXxxx
have asserted a number of claims against each other. Notwithstanding the
execution and delivery of this Agreement, Natural Health and Xxxxxxxx and XxXxxx
each reserve any and all rights, claims, defenses and causes of actions
whatsoever and regarding any matter that each may have presently, or may have at
any time in the future, against the other, including without limitation, the
right to contest the validity of the Escrowed Shares and/or the options
exercised in connection with the issuance of the Escrowed Shares. Natural Health
and Xxxxxxxx and XxXxxx, and their respective affiliates, shall each be estopped
from asserting that the exercise of the Options results in any election of
remedies, waiver or release of any claims, or estoppel to assert any claims.
16. Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties in respect of the subject matter
hereof and supersedes all prior agreements, arrangements, presentations and
understandings relative to the subject matter hereof, whether written or oral,
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express or implied. No oral or written statement, representation, warranty or
promise made prior to or contemporaneously with the execution of this Agreement
shall be binding upon any party with respect to the subject matter hereof or
shall otherwise affect the enforceability of this Agreement in accordance with
its terms.
17. Proxy. As a condition to the Company depositing the Escrowed
Shares with the Escrow Agent, the Company shall receive from the Escrow Agent an
irrevocable proxy with respect to the Escrowed Shares in form and substance
reasonably satisfactory to the Company.
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[Signature Page to Escrow Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written.
ESCROW AGENT: NATURAL HEALTH:
XXXXX & JANVEY, L.L.P. NATURAL HEALTH TRENDS CORP.
By: /s/ XXXXX X. XXXXXX By: /s/ XXXX X. XXXXXXX
--------------------------------- --------------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxx X. Xxxxxxx
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Its: Partner Its: General Counsel
--------------------------------- --------------------------------
XXXX X. XXXXXXXX XXXXX X. XXXXXX
/s/ XXXX X. XXXXXXXX /s/ XXXXX X. XXXXXX
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Xxxx X. Xxxxxxxx Xxxxx X. XxXxxx
XXXXXX AND XXXXXXXX PARTNERSHIP
By: /s/ XXXX X. XXXXXXXX
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Xxxx X. Xxxxxxxx
By: /s/ XXXXX X. XXXXXX
--------------------------------
Xxxxx X. XxXxxx
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