ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of , 2004, by and between
Vital Living, Inc., a Nevada corporation with its principal place of business at
0000 Xxxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000 (the "Target
Company"); Gottbetter & Partners, LLP with its principal place of business at
000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX 00000 (the "Escrow Agent"); and Xxxxxxx Park
Investments Plc, a corporation organized under the laws of England and Wales
with its offices at 00 Xxxxxxxxxx Xxxxxx, Xxxxxx XX0X 0XX ("Xxxxxxx").
Recitals
A. Simultaneously with the execution of this Agreement, Xxxxxxx and
the Target Company entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement"), dated as of the date hereof and incorporated herein by reference,
pursuant to which the Target Company has agreed to issue to Xxxxxxx the
Consideration Stock in exchange for the Xxxxxxx Consideration Shares.
B. The parties have agreed that the Consideration Stock and Xxxxxxx
Consideration Shares shall be deposited into escrow pursuant to this Agreement,
including fifty percent (50%) of the Xxxxxxx Consideration Shares to be
deposited into escrow as Downside Price Protection (the "Xxxxxxx Escrow
Shares").
C. The Escrow Agent is willing to act as escrow agent pursuant to
the terms of this Agreement with respect to the purchase of the shares of
Consideration Stock.
D. All capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Stock Purchase Agreement.
NOW, THEREFORE, IT IS AGREED:
1. Deposit into Escrow. At Closing, the parties shall deposit into
escrow (i) the Xxxxxxx Consideration Shares, (ii) the Consideration Stock and
(iii) the stock power executed by Xxxxxxx. The deposit of the Xxxxxxx
Consideration Shares, at the election of Xxxxxxx, may be made as (i) a
certificate in the name of the Target Company or a provisional letter of
allotment for a trading account in the name of the Escrow Agent representing the
Xxxxxxx Escrow Shares and (ii) a certificate in the name of the Target Company
or a provisional letter of allotment for a trading account in the name of the
Escrow Agent for the benefit of the Target Company representing the balance of
the Xxxxxxx Consideration Shares. The Escrow Agent shall hold the Xxxxxxx
Consideration Shares and the Consideration Stock in escrow when delivered.
2. Terms of Escrow. (a) If at any time before September 30, 2004,
the Escrow Agent receives written notice (the "LSE Notice") from Xxxxxxx that
the Xxxxxxx Consideration Shares are listed on the London Stock Exchange plc
(the "London Exchange"), the Escrow Agent is authorized and directed to
distribute, within fourteen (14) Business Days of receipt of such LSE Notice,
(i) the Consideration Stock to Xxxxxxx and (ii) fifty percent (50%) of the
Xxxxxxx Consideration Shares to the Target Company. If the Escrow Agent does not
receive such LSE Notice by September 30, 2004, the Escrow Agent is authorized
and directed to distribute, no later than October 5, 2004, (i) the Consideration
Stock and the stock power executed by Xxxxxxx to the Target Company and (ii) the
Xxxxxxx Consideration Shares to Xxxxxxx; provided, however, that the Target
Company shall have the option to extend the September 30, 2004 deadline by
providing written notice to the Escrow Agent with a written acknowledgement from
Xxxxxxx. At such time, the Consideration Stock and Xxxxxxx Consideration Shares
shall be cancelled.
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(b) If the Market Value of the Common Stock on the date occurring two
years after Closing (the "Two Year Anniversary") is less than the Closing Price,
the Target Company shall sell to Xxxxxxx and Xxxxxxx shall purchase the number
of Xxxxxxx Escrow Shares (the "Xxxxxxx Protection Shares") equal to (a) the
Xxxxxxx Consideration Shares multiplied by (b) the Percentage Decrease, at a
purchase price of 1p per Xxxxxxx Consideration Share (the "Escrow Purchase
Price"). The "Percentage Decrease" shall be equal to 1 - Market Value/the
Closing Price. "Market Value" shall be the average of the ten (10) closing bid
prices per share of the Common Stock during the ten (10) trading days
immediately preceding the Two Year Anniversary.
Within three (3) Business Days of the Two Year Anniversary, Xxxxxxx shall
(i) send a notice ("Sale Notice") to the Target Company and the Escrow Agent of
the Xxxxxxx Protection Shares to be sold by the Target Company to Xxxxxxx, if
any, and (ii) deposit the Escrow Purchase Price with the Escrow Agent, if
necessary. Within fourteen (14) Business Days of the Target Company's and the
Escrow Agent's receipt of the Sale Notice and Escrow Agent's receipt of the
Escrow Purchase Price, the Escrow Agent is authorized and directed (i) to pay
the Escrow Purchase Price to the Target Company, if any, (ii) to deliver the
Xxxxxxx Protection Shares, if any, and (iii) to deliver the remaining Xxxxxxx
Escrow Shares, if any, to the Target Company.
3. Duties and Obligations of the Escrow Agent.
(a) The parties hereto agree that the duties and obligations of the Escrow
Agent shall be only those obligations herein specifically provided and no other.
The Escrow Agent's duties are those of a depositary only, and the Escrow Agent
shall incur no liability whatsoever, except as a direct result of its willful
misconduct or gross negligence in the performance of its duties hereunder;
(b) The Escrow Agent may consult with counsel of its choice, and shall not
be liable for any action taken, suffered or omitted to be taken by it in
accordance with the advice of such counsel;
(c) The Escrow Agent shall not be bound in any way by the terms of any
other agreement to which Xxxxxxx and the Target Company are parties, whether or
not the Escrow Agent has knowledge thereof, and the Escrow Agent shall not in
any way be required to determine whether or not any other agreement has been
complied with by Xxxxxxx and the Target Company, or any other party thereto. 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 jointly by Xxxxxxx and the Target Company and agreed to
in writing by the Escrow Agent;
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(d) If the Escrow Agent shall be uncertain as to its duties or rights
hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, the
Escrow Agent shall be entitled to refrain from taking any action other than
keeping safely the Consideration (as defined below) or taking certain action
until the Escrow Agent is directed otherwise in writing jointly by Xxxxxxx and
the Target Company or by a final judgment of a court of competent jurisdiction;
(e) The Escrow Agent shall be fully protected in relying upon any written
notice, demand, certificate or document which the Escrow Agent, in good faith,
believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement;
(f) The Escrow Agent shall not be required to institute legal proceedings
of any kind and shall not be required to defend any legal proceedings which may
be instituted against it or in respect of the Consideration;
(g) If the Escrow Agent at any time, in its sole discretion, deems it
necessary or advisable to relinquish custody of any of the Securities (to the
extent delivered to the Escrow Agent pursuant hereto, the "Consideration"), it
may do so by delivering the same to another Person that agrees to act as escrow
agent hereunder and whose substitution for the Escrow Agent is agreed upon in
writing by Xxxxxxx and the Target Company; provided, however, that such
successor Escrow Agent must be resident in the United States. If no such escrow
agent is selected within three (3) days after the Escrow Agent gives notice to
Xxxxxxx and the Target Company of the Escrow Agent's desire to so relinquish
custody of the Consideration and resign as Escrow Agent, then the Escrow Agent
may do so by delivering the Consideration to the clerk or other proper officer
of a state or federal court of competent jurisdiction situate in the state and
county of New York. The fee of any court officer shall be borne by the Target
Company. Upon such delivery, the Escrow Agent shall be discharged from any and
all responsibility or liability with respect to the Consideration and this
Agreement and each of the Target Company and Xxxxxxx shall promptly pay all
monies it may owe to the Escrow Agent for its services hereunder, including, but
not limited to, reimbursement of its out-of-pocket expenses pursuant to
paragraph (i) below;
(h) This Agreement shall not create any fiduciary duty on the Escrow
Agent's part to Xxxxxxx or the Target Company, nor disqualify the Escrow Agent
from representing either party hereto in any dispute with the other, including
any dispute with respect to the Purchase Agreement; provided, however, that in
the event of such dispute, the Escrow Agent shall have the right to commence an
interpleader action in any court of competent jurisdiction of the state of New
York or of the United States located in the county and state of New York,
deposit the Consideration with such court;
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(i) The parties acknowledge and agree that the Escrow Agent is counsel to
Xxxxxxx. The parties agree to, and agree not to object to, the Escrow Agent's
engagement as Escrow Agent hereunder;
(j) Upon the full performance of this Agreement, the Escrow Agent shall be
deemed released and discharged of any further obligations hereunder.
4. Indemnification.
(a) Xxxxxxx hereby indemnifies and holds free and harmless the Escrow
Agent from any and all losses, expenses, liabilities and damages (including but
not limited to reasonable attorney's fees, and amounts paid in settlement)
resulting from claims asserted by the Target Company against the Escrow Agent
with respect to the performance of any of the provisions of this Agreement;
(b) The Target Company hereby indemnifies and holds free and harmless the
Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amount paid in
settlement) resulting from claims asserted by Xxxxxxx against the Escrow Agent
with respect to the performance of any of the provisions of this Agreement;
(c) Xxxxxxx and the Target Company, jointly and severally, hereby
indemnify and hold the Escrow Agent harmless from and against any and all
losses, damages, taxes, liabilities and expenses that may be incurred by the
Escrow Agent, arising out of or in connection with its acceptance of appointment
as the Escrow Agent hereunder and/or the performance of its duties pursuant to
this Agreement, the Purchase Agreement and the Securities, including, but not
limited to, all legal costs and expenses of the Escrow Agent incurred defending
itself against any claim or liability in connection with its performance
hereunder, provided that the Escrow Agent shall not be entitled to any indemnity
for any losses, damages, taxes, liabilities or expenses that directly result
from its willful misconduct or gross negligence in its performance as Escrow
Agent hereunder
(d) In the event of any Proceeding involving any of the parties to this
Agreement which is brought to enforce or otherwise adjudicate any of the rights
or obligations of the parties hereunder, the non-prevailing party or parties
shall pay the legal fees of the prevailing party or parties and the legal fees,
if any, of the Escrow Agent.
5. Miscellaneous.
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(a) All notices, including Notices of Conversion and Notices of Exercise,
objections, requests, demands and other communications sent to any party
hereunder shall be deemed duly given if (x) in writing and sent by facsimile
transmission to the Person for whom intended if addressed to such Person at its
facsimile number set forth below or such other facsimile number as such Person
may designate by notice given pursuant to the terms of this Section 5 and (y)
the sender has confirmation of transmission:
(i) If to the Target Company: Vital Living, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: CEO
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
(ii) If to Xxxxxxx: Xxxxxxx Park Investments PLC
00 Xxxxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Attn: Xxxxx Xxxxx
Tel: 00.000.000.0000
Fax: 00.000.000.0000
(iii) If to the Escrow
Agent: Gottbetter
& Partners, LLP
000 Xxxxxxx Xxx.
Xxx Xxxx, Xxx Xxxx
00000 Attn: Xxxx
X. Xxxxxxxxxx,
Esq. Tel: (212)
000-0000 Fax:
(000) 000-0000
(b) This Agreement has been prepared, negotiated and delivered in the
state of New York and shall be governed by and construed and enforced in
accordance with the laws of the state of New York applicable to contracts
entered into and performed entirely within New York, without giving effect to
the principles of New York law relating to the conflict of laws.
(c) 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.
(d) This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The assignment by a party of
this Agreement or any rights hereunder shall not affect the obligations of such
party under this Agreement.
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6. Termination of Escrow. The term of this Escrow Agreement shall begin
upon the date hereof and shall continue until terminated upon the earlier to
occur of (i) the Xxxxxxx Escrow Shares are fully distributed or (ii) the written
agreement of the parties to terminate this Agreement. Upon the termination of
this Escrow Agreement pursuant to subsection (ii), the Escrow Agent shall
distribute any of the Xxxxxxx Escrow Shares then held by it pursuant to the
terms of the written agreement of the parties.
[ SIGNATURE PAGE FOLLOWS ]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed the day and year first above written.
The Target Company:
Vital Living, Inc.
By: ______________________________
Name:
Title:
Xxxxxxx:
Dungarvon Associates, Inc. on behalf of
Xxxxxxx Park Investments Plc.
By: ______________________________
Name:
Title:
Escrow Agent:
Gottbetter & Partners, LLP
By:______________________________
Name: Xxxx X Xxxxxxxxxx
Title: Managing Partner
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