AMENDED AND RESTATED ESCROW AGREEMENT
AMENDED AND RESTATED ESCROW AGREEMENT, dated as of the 31st day of July,
1997 and effective as of the Effective Date (as defined herein), amending and
restating the Amended and Restated Escrow Agreement, dated as of April 30, 1997,
by and among American Stock Transfer & Trust Company, a New York corporation
(hereinafter referred to as the "Escrow Agent"), HealthCore Medical Solutions,
Inc., a Delaware corporation (the "Company"), and the stockholders of the
Company who have executed the Escrow Agreement (collectively called the
"Stockholders"), is entered into by and among the Escrow Agent, the Company and
the Stockholders.
WHEREAS, the Company contemplates a public offering ("Public Offering") of
Units ("Units"), each Unit consisting of one share of its Class A Common Stock,
par value $.01 per share (the "Class A Common Stock"), and one redeemable Class
A Warrant (the "Class A Warrant") through X.X. Xxxxx Investment Banking Corp. as
underwriter (the "Underwriter") pursuant to a Registration Statement (the
"Registration Statement") on Form SB-2 to be filed with the Securities and
Exchange Commission ("SEC"); and
WHEREAS, the Stockholders have agreed to deposit in escrow an aggregate of
900,000 shares of Class A Common Stock and Class B Common Stock, par value $.01
per share (the "Class B Common Stock" and, together with the Class A Common
Stock, the "Common Stock"), upon the terms and conditions set forth herein.
In consideration of the mutual covenants and promises herein contained, the
parties hereto agree as follows:
1. The Stockholders and the Company hereby appoint American Stock Transfer
& Trust Company as Escrow Agent and agree that the Stockholders will, prior to
the filing of the Registration Statement relating to the Public Offering,
deliver to the Escrow Agent to hold in accordance with the provisions hereof,
certificates representing an aggregate of 900,000 shares of Common Stock owned
of record by the Stockholders in the respective amounts set forth on Exhibit A
hereto (the "Escrow Shares"), together with stock powers executed in blank. The
Escrow Agent, by its execution and delivery of this Agreement hereby
acknowledges receipt of the Escrow Shares and accepts its appointment as Escrow
Agent to hold the Escrow Shares in escrow, upon the terms, provisions and
conditions hereof.
2. This Agreement shall become effective upon the date on which the
Securities and Exchange Commission declares effective the Registration Statement
("Effective Date") and shall continue in effect until the earlier of (i) the
date specified in paragraph 4(e) hereof or (ii) the distribution by the Escrow
Agent of all of the Escrow Shares in accordance with the terms hereof (the
"Termination Date"). The period of time from the Effective Date until the
Termination Date is referred to herein as the "Escrow Period."
3. During the Escrow Period, the Escrow Agent shall receive all of the
money, securities, rights or property distributed in respect of the Escrow
Shares then held in escrow, including any such property distributed as dividends
or pursuant to any stock split, merger, recapitalization, dissolution, or total
or partial liquidation of the Company, such property to be held and distributed
as herein provided and hereinafter referred to collectively as the "Escrow
Property."
-2-
4. (a) The Escrow Shares are subject to release to the Stockholders only in
the event the conditions set forth herein are met. The Escrow Agent, upon notice
to such effect from the Company as provided in paragraph 5 hereof, shall deliver
the Escrow Shares, together with stock powers executed in blank, and the Escrow
Property deposited in escrow with respect to such Escrow Shares, to the
respective Stockholders, if, and only if, one of the following conditions is
met:
(i) 400,000 of the Escrow Shares and Escrow Property related to such
Escrow Shares will be released in the event that:
(A) the Company's net income before provision for Federal, state and
local income taxes (the "Minimum Pretax Income") equals or
exceeds $3,800,000 for the fiscal year ending September 30, 1998;
or
(B) the Minimum Pretax Income equals or exceeds $5,500,000 for the
fiscal year ending September 30, 1999; or
(C) the Minimum Pretax Income equals or exceeds $7,500,000 for the
fiscal year ending September 30, 2000; or
(D) The Closing Price (as defined herein) of the Company's Class A
Common Stock shall average in excess of $12.50 per share for any
30 consecutive business days during the period commencing on the
Effective Date and ending 18 months from the Effective Date; or
(E) The Closing Price (as defined herein) of the Company's Class A
Common Stock shall average in excess of $16.50 per share for any
30 consecutive business days during the period commencing 18
months after the Effective Date and ending 36 months from the
Effective Date; or
(F) The Company is acquired by or merged into another entity in a
transaction in which stockholders of the Company receive per
share consideration at least equal to the levels set forth in (D)
or (E) above during the respective time periods set forth in (D)
or (E) above.
-3-
(ii) The remaining 500,000 of the Escrow Shares and Escrow Property related
to such Escrow Shares will be released in the event that:
(A) the Company's net income before provision for Federal, state and
local income taxes (the "Minimum Pretax Income") equals or
exceeds $4,600,000 for the fiscal year ending September 30, 1998;
or
(B) the Minimum Pretax Income equals or exceeds $6,600,000 for the
fiscal year ending September 30, 1999; or
(C) the Minimum Pretax Income equals or exceeds $9,000,000 for the
fiscal year ending September 30, 2000; or
(D) The Closing Price (as defined herein) of the Company's Class A
Common Stock shall average in excess of $15.00 per share for any
30 consecutive business days during the period commencing on the
Effective Date and ending 18 months from the Effective Date; or
(E) The Closing Price (as defined herein) of the Company's Class A
Common Stock shall average in excess of $18.00 per share for any
30 consecutive business days during the period commencing 18
months after the Effective Date and ending 36 months from the
Effective Date; or
(F) The Company is acquired by or merged into another entity in a
transaction in which stockholders of the Company receive per
share consideration at least equal to the levels set forth in (D)
or (E) above during the respective time periods set forth in (D)
or (E) above.
(b) As used in this Section 4, the term "Closing Price" shall be subject to
adjustments in the event of any stock dividend, stock distribution, stock split
or other similar event and shall mean:
(i) If the principal market for the Class A Common Stock is a national
securities exchange or the Nasdaq National Market, the closing sales
price of the Class A Common Stock as reported by such exchange or
market, or on a consolidated tape reflecting transactions on such
exchange or market; or
-4-
(ii) if the principal market for the Class A Common Stock is not a national
securities exchange or the Nasdaq National Market and the Class A
Common Stock is quoted on the Nasdaq SmallCap Market, the closing bid
price of the Class A Common Stock as quoted on the Nasdaq SmallCap
Market; or
(iii)if the principal market for the Class A Common Stock is not a national
securities exchange or the Nasdaq National Market and the Class A
Common Stock is not quoted on the Nasdaq SmallCap Market, the closing
bid for the Class A Common Stock as reported by the National Quotation
Bureau, Inc. ("NQB") or at least two market makers in the Class A
Common Stock if quotations are not available from NQB but are
available from market makers.
(c) The determination of Minimum Pretax Income shall be determined by the
Company's independent public accountants in accordance with U.S. generally
accepted accounting principles provided that such determination is calculated
exclusive of any extraordinary earnings or charges (including any charges
incurred by the Company in connection with the release from escrow of the Escrow
Shares and any Escrow Property in respect thereof pursuant to the provisions of
this paragraph 4).
(d) In the event of any issuance (such issuance being herein called a
"Change of Shares") of additional shares of Class A Common Stock (or securities
convertible into or exchangeable for Class A Common Stock without the payment of
additional consideration, referred to as "Convertible Securities") after the
Effective Date, then each of the Minimum Pretax Income amounts set forth in
subparagraph (a) above shall be increased to an amount (the "Adjusted Minimum
Pretax Income") calculated in accordance with the formula set forth in
subparagraph (ii) below.
(i) For purposes of the foregoing paragraph, a Change of Shares shall
exclude shares of Class A Common Stock sold in the Public Offering or
Class A Common Stock or Convertible Securities issued in connection
with a stock split or stock dividend or distribution but shall include
any shares of
-5-
Class A Common Stock or Convertible Securities that are issued upon
the exercise of the Class A Warrants or any other options or warrants
outstanding as of the Effective Date or granted after the Effective
Date by the Company (excluding options granted under the Company's
1997 Stock Option Plan which, in the aggregate, do not exceed 10% of
the then outstanding shares of Class A Common Stock and Convertible
Securities, including Escrow Shares).
(ii) Each Adjusted Minimum Pretax Income amount shall be calculated by
multiplying the applicable Minimum Pretax Income amount prior to the
Change of Shares by a fraction, the numerator of which shall be the
weighted average number of shares of Class A Common Stock outstanding
during the fiscal year for which the determination is being made
(including the Escrow Shares and any shares of Class A Common Stock
issuable upon conversion of any Convertible Securities, but excluding
treasury stock), and the denominator of which shall be the sum of (x)
the number of shares of Class A Common Stock outstanding on the
Effective Date (including the Escrow Shares and any shares of Class A
Common Stock issuable upon conversion of Convertible Securities
outstanding immediately prior to the Effective Date) plus (y) the
number of shares of Class A Common Stock sold by the Company pursuant
to the Prospectus included in the Registration Statement, after
adjustment for any stock dividends, stock splits or similar events.
The Adjusted Minimum Pretax Income amounts shall be calculated
successively whenever such a Change of Shares occurs.
(f) If the Escrow Agent has not received the notice provided for in
Paragraph 5 hereof and delivered all of the Escrow Shares and related Escrow
Property in accordance with the provisions of this Paragraph 4 on or prior to
the earlier of (i) the date of the closing of a transaction referred to in
Subparagraph 4(a)(i)(F) or 4(a)(ii)(F) or (ii) December 31, 2000, the Escrow
Agent shall deliver the certificates representing all or the remaining Escrow
Shares, together with stock powers executed in blank, and any related Escrow
Property to the Company to be placed in the Company's treasury for cancellation
thereof as a contribution to capital. After such date, the Stockholders shall
have no further rights as a stockholder of the Company with respect to any of
the cancelled Escrow Shares.
-6-
5. Upon the occurrence or satisfaction of any of the events or conditions
specified in Paragraph 4 hereof, the Company shall promptly give appropriate
notice to the Escrow Agent, the Underwriter (and if the transfer agent of the
Company's Common Stock is different from the Escrow Agent, such transfer agent)
and present such documentation as is reasonably required by the Escrow Agent to
evidence the satisfaction of such conditions.
6. It is understood and agreed by the parties to this Agreement as follows:
(a) The Escrow Agent is not and shall not be deemed to be a trustee
for any party for any purpose and is merely acting as a depository and in a
ministerial capacity hereunder with the limited duties herein prescribed.
(b) The Escrow Agent does not have and shall not be deemed to have any
responsibility in respect of any instruction, certificate or notice
delivered to it or of the Escrow Shares or any related Escrow Property
other than faithfully to carry out the obligations undertaken in this
Agreement and to follow the directions in such instruction or notice
provided in accordance with the terms hereof.
(c) The Escrow Agent is not and shall not be deemed to be liable for
any action taken or omitted by it in good faith and may rely upon, and act
in accordance with, the advice of its counsel without liability on its part
for any action taken or omitted in accordance with such advice. In any
event, its liability hereunder shall be limited to liability for gross
negligence, willful misconduct or bad faith on its part.
(d) The Escrow Agent may conclusively rely upon and act in accordance
with any certificate, instruction, notice, letter, telegram, cablegram or
other written instrument believed by it to be genuine and to have been
signed by the proper party or parties.
-7-
(e) The Company agrees (i) to pay the Escrow Agent's reasonable fees
and to reimburse it for its reasonable expenses including attorney's fees
incurred in connection with duties hereunder and (ii) to save harmless,
indemnify and defend the Escrow Agent for, from and against any loss,
damage, liability, judgment, cost and expense whatsoever, including counsel
fees, suffered or incurred by it by reason of, or on account of, any
misrepresentation made to it or its status or activities as Escrow Agent
under this Agreement except for any loss, damage, liability, judgment, cost
or expense resulting from gross negligence, willful misconduct or bad faith
on the part of the Escrow Agent. The obligation of the Escrow Agent to
deliver the Escrow Shares to either the Stockholders or the Company shall
be subject to the prior satisfaction upon demand from the Escrow Agent, of
the Company's obligations to so save harmless, indemnify and defend the
Escrow Agent and to reimburse the Escrow Agent or otherwise pay its fees
and expenses hereunder.
(f) The Escrow Agent shall not be required to defend any legal
proceeding which may be instituted against it in respect of the subject
matter of this Agreement unless requested to do so by the Stockholders and
indemnified to the Escrow Agent's satisfaction against the cost and expense
of such defense by the party requesting such defense. If any such legal
proceeding is instituted against it, the Escrow Agent agrees promptly to
give notice of such proceeding to the Stockholders and the Company. The
Escrow Agent shall not be required to institute legal proceedings of any
kind.
(g) The Escrow Agent shall not, by act, delay, omission or otherwise,
be deemed to have waived any right or remedy it may have either under this
Agreement or generally, unless such waiver be in writing,
-8-
and no waiver shall be valid unless it is in writing, signed by the Escrow
Agent, and only to the extent expressly therein set forth. A waiver by the
Escrow Agent under the term of this Agreement shall not be construed as a
bar to, or waiver of, the same or any other such right or remedy which it
would otherwise have on any other occasion.
(h) The Escrow Agent may resign as such hereunder by giving 30 days
written notice thereof to the Stockholders and the Company. Within 20 days
after receipt of such notice, the Stockholders and the Company shall
furnish to the Escrow Agent written instructions for the release of the
Escrow Shares and any related Escrow Property (if such shares and property,
if any, have not yet been released pursuant to Paragraph 4 hereof) to a
substitute Escrow Agent which (whether designated by written instructions
from the Stockholders and the Company jointly or in the absence thereof by
instructions from a court of competent jurisdiction to the Escrow Agent)
shall be a bank or trust company organized and doing business under the
laws of the United States or any state thereof. Such substitute Escrow
Agent shall thereafter hold any Escrow Shares and any related Escrow
Property received by it pursuant to the terms of this Agreement and
otherwise act hereunder as if it were the Escrow Agent originally named
herein. The Escrow Agent's duties and responsibilities hereunder shall
terminate upon the release of all shares then held in escrow according to
such written instruction or upon such delivery as herein provided. This
Agreement shall not otherwise be assignable by the Escrow Agent without the
prior written consent of the Company.
7. The Stockholders shall have the sole power to vote the Escrow Shares and
any securities deposited in escrow under this Agreement while they are being
held pursuant to this Agreement.
-9-
8. (a) Each of the Stockholders agrees that during the term of this
Agreement he will not sell, transfer, hypothecate, negotiate, pledge, assign,
encumber or otherwise dispose of any or all of the Escrow Shares set forth
opposite his name on Exhibit A hereto, unless and until the Company shall have
given the notice as provided in Paragraph 5. This restriction shall not be
applicable to transfers upon death, by operation of law, to family members of
the Stockholders or to any trust for the benefit of the Stockholders, provided
that such transferees agree to be bound by the provisions of this Agreement.
(b) The Stockholders will take any action necessary or appropriate,
including the execution of any further documents or agreements, in order to
effectuate the transfer of the Escrow Shares to the Company if required pursuant
to the provisions of this Agreement.
9. Each of the certificates representing the Escrow Shares will bear
legends to the following effect, as well as any other legends required by
applicable law:
(a) "The sale, transfer, hypothecation, negotiation, pledge, assignment,
encumbrance or other disposition of the shares evidenced by this
certificate are restricted by and are subject to all of the terms,
conditions and provisions of a certain Amended and Restated Escrow
Agreement entered into among HealthCore Medical Solutions, Inc. and
its Stockholders, dated as of July __, 1997, a copy of which may be
obtained from the Company. No transfer, sale or other disposition of
these shares may be made unless specific conditions of such agreement
are satisfied.
(b) "The shares evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended. No transfer, sale or
other disposition of these shares may be made unless a registration
statement with respect to these shares has become effective under said
act, or the Company is furnished with an opinion of counsel
satisfactory in form and substance to it that such registration is not
required."
-10-
Upon execution of this Agreement, the Company shall direct the transfer
agent for the Company to place stop transfer orders with respect to the Escrow
Shares and to maintain such orders in effect until the transfer agent and the
Underwriter shall have received written notice from the Company as provided in
Paragraph 5.
10. Each notice, instruction or other certificate required or permitted by
the terms hereof shall be in writing and shall be communicated by personal
delivery, fax or registered or certified mail, return receipt requested, to the
parties hereto at the addresses set forth below, or at such other address as any
of them may designate by notice to each of the others:
(i) If to the Company, to:
HealthCore Medical Solutions, Inc.
00000 Xxxx Xxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Att: Xxxx X. Xxxxx, Chairman
(ii) If to the Stockholders to their respective addresses
as set forth on Exhibit A hereto.
(iii) If to the Escrow Agent, to:
American Stock Transfer & Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(iv) If to the Underwriter, to:
X.X. Xxxxx Investment Banking Corp.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Att: Xxxxxx X. Xxxx, Esq.
Fax: 000-000-0000
All notices, instructions or certificates given hereunder to the Escrow Agent
shall be effective upon receipt by the Escrow Agent. All notices given hereunder
by the Escrow Agent shall be
-11-
effective and deemed received upon personal delivery or transmission by fax or,
if mailed, five (5) calendar days after mailing by the Escrow Agent.
A copy of all communications sent to the Company, the Stockholders or the
Escrow Agent shall be sent by ordinary mail to Bachner, Tally, Xxxxxxx & Xxxxxx
LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxx X. Xxxxxxxx, Esq. A
copy of all communications sent to the Underwriter shall be sent by ordinary
mail to Paul, Hastings, Xxxxxxxx & Xxxxxx LLP, 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, XX 00000, Attention: Xxxxx X. Xxxxxx, Esq.
11. Except as set forth in paragraph 12 hereof, this Agreement may not be
modified, altered or amended in any material respect or cancelled or terminated
except with the prior consent of the holders of two-thirds of the outstanding
shares of Common Stock of the Company, other than shares held by the
Stockholders.
12. In the event that (i) the Registration Statement is not declared
effective by the SEC within one year from the date of the filing of the
Registration Statement with the SEC or (ii) the Registration Statement is not
declared effective by the SEC within six months from the date of the filing of
the Registration Statement with the SEC and such delay was caused by the failure
of the Underwriter to reasonably and in good faith proceed diligently to
consummate the Public Offering or (iii) the Public Offering is not consummated
within twenty-five (25) days of the Effective Date of the Registration
Statement, this Agreement shall terminate and be of no further force and effect
and the Escrow Agent, upon written notice from both the Company and the
Underwriter in accordance with paragraph 10 hereof of such termination, will
return the Escrow Shares and any Escrow Property in respect thereof to the
Stockholders.
-12-
13. This Agreement shall be governed by and construed in accordance with
the laws of New York and shall be binding upon and inure to the benefit of all
parties hereto and their respective successors in interest and assigns.
14. This Agreement may be executed in several counterparts, which taken
together shall constitute a single instrument.
-13-
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Escrow Agreement to be executed by their duly authorized officers on
the day and year first above written.
HEALTHCORE MEDICAL SOLUTIONS, INC.
By: /s/ Xxxx X. Xxxxx
-----------------------------------
Title: Chairman
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Title: Vice President
STOCKHOLDERS:
/s/ Xxxx X. Xxxxx /s/ Xxxx X. Xxxxx
----------------------------------- ----------------------------------
Xxxx X. Xxxxx Xxxx X. Xxxxx, as Custodian
for Xxxxxxx Xxxxx
/s/ Xxxxxxxx X. Xxxxx, Xx. /s/ Xxx X. Xxxxxxx
----------------------------------- ----------------------------------
Xxxxxxxx X. Xxxxx, Xx. Xxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxx
----------------------------------- ----------------------------------
Xxxxxx X. Xxxxxxx Xxxxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxx /s/ Xxxx X. Xxxxxx
----------------------------------- ----------------------------------
Xxxxxxx X. Xxxxxx Xxxx X. Xxxxxx
/s/ Xxxxxx Xxxxxx /s/ Xxxxxxxx X. Xxxxxx
----------------------------------- ----------------------------------
Xxxxxx Xxxxxx, Trustee under the Xxxxxxxx X. Xxxxxx, Trustee under
Xxxxxx X. Xxxxxx Revocable Trust the Xxxxxxxx X. Xxxxxx Revocable
Trust
/s/ Xxxxxxx X. Xxxxxxxx /s/ Xxxx X. Xxxxxxxx
----------------------------------- ----------------------------------
Xxxxxxx X. Xxxxxxxx, Co-Trustee under Xxxx X. Xxxxxxxx, Co-Trustee under
the Xxxxxxx X. Xxxxxxxx Revocable Trust the Xxxxxxx X. Xxxxxxxx Revocable
Trust
/s/ Xxxxxx Xxxxxxx
___________________________________ ----------------------------------
Xxxxxx XxXxxxxxxx 1164 Associates
/s/ Xxxxxxx Xxxxx
-----------------------------------
Xxxxxxx Xxxxx
EXHIBIT A
STOCKHOLDERS' LIST
Name and Address Stock
of Stockholder (1) Certificate Nos. Number of Escrow Shares
-------------------- --------------------- -----------------------
[Tier 1] [Tier 2] [Tier 1] [Tier 2]
Xxxx X. Xxxxx 1 2 56,000* 70,000*
Xxxx X. Xxxxx, as Custodian 3 4 16,000* 20,000*
for Xxxxxxx Xxxxx
Xxxxxxxx X. Xxxxx, Xx. 5 6 48,000* 60,000*
Xxx X. Xxxxxxx 7 8 38,000 47,500
Xxxxxx X. Xxxxxxx 9 10 38,000 47,500
Xxxxxx X. Xxxxxx, 11 12 22,000 27,500
Trustee under the
Xxxxxx X. Xxxxxx
Revocable Trust
Xxxxxxxx X. Xxxxxx, 13 14 22,000 27,500
Trustee under the
Xxxxxxxx X. Xxxxxx
Revocable Trust
Xxxxxxx X. Xxxxxxxx and 15 16 44,000 55,000
Xxxx X. Xxxxxxxx,
Trustees under the
Xxxxxxx X. Xxxxxxxx
Revocable Trust
Xxxxxx Xxxxxx 17 18 44,000 55,000
Xxxxxxx X. Xxxxxx and 19 20 12,000 15,000
Xxxx X. Xxxxxx
Xxxxxx XxXxxxxxxx 21 22 8,000 10,000
1164 Associates 23 24 8,000 10,000
Xxxxxxx Xxxxx 25 26 44,000 55,000
====== ======
TOTAL 400,000 500,000
----------------
* Constitutes Class B Common Stock
