Exhibit 10.94
STOCK ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of this day of May 8, 1998, between and
among Xxxxxx X. Xxxxxx, in his capacity as President and Chief Executive Officer
(the "Escrow Agent") of Sparta Surgical Corporation, a Delaware corporation
("Sparta"), Sparta and Xxxxxx X. Xxxxxx ("Xxxxxx");
WITNESSETH THAT:
WHEREAS, Xxxxxx has agreed to the cancellation of certain shares of the
common stock, $0.002 par value of Sparta (the "Common Stock") listed on Schedule
A hereto, which were to have been issued to him by Sparta for the consideration
set forth on such Schedule A (the "Shares");
WHEREAS, Sparta is issuing to Xxxxxx on or about the date hereof, 952,986
shares of Common Stock, which shares are being issued for the consideration set
forth on Schedule A hereto, and which shares are to be held by the Escrow Agent
for the benefit of Sparta until the expiration of this agreement, in which case
such shares shall be released back to Sparta, or until the occurrence of an
earlier condition of release to Xxxxxx, all upon the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual undertakings contained
herein and in consideration for Xxxxxx'x agreement to cancel the Shares before
issuance, and each party's entering into this Agreement, the parties hereto,
intending to be legally bound, agree as follows:
1. Xxxxxx and Sparta hereby appoint Xxxxxx X. Xxxxxx as the Escrow Agent
for the purposes herein.
2. This Agreement shall be effective for a period of six (6) years from the
date hereof (the "Term").
3. The securities being placed in escrow subject to this Agreement shall
include: (a) the 952,986 shares of Common Stock being issued to Xxxxxx (to be
held in his name and as to which Xxxxxx shall be considered the owner for
purposes of Rule 144 under the Securities Act of 1933) on or about the date
hereof, (b) any stock or cash dividends that may be paid thereon during the term
of this Agreement, (c) any additional securities issued through, or by reason of
stock split or reverse split (for the sole purpose of keeping the Escrowed
Securities from becoming diluted by such issuances), and (d) any other dividends
or distributions of any kind with respect to the securities being held subject
to escrow under this Agreement. All of the foregoing shall be collectively
referred to herein as the "Escrowed Securities".
Any dividends or distributions of any kind with respect to the Escrowed
Securities that may be paid during the term of this Agreement shall be paid to
the Escrow Agent and held pursuant to the terms hereof. Such dividends or
distributions of any kind with respect to the Escrowed Securities shall be
available for distribution in accordance with the provisions of Paragraph 5
hereof.
4. Upon issuance the certificates evidencing the Escrowed Securities shall
be delivered to the Escrow Agent for deposit pursuant to the terms hereof.
5. The Escrowed Securities shall be held in escrow hereunder until the end
of the Term, in which case they shall be released and assigned over to Sparta
for cancellation or deposit into Sparta's treasury, or upon the occurrence of
any the following conditions:
(a) Up to 35% of the Escrowed Securities, in the event that Sparta has net
sales in excess of $2.4 Million during any fiscal year (as determined
from Sparta's audited financial statements), upon Xxxxxx'x providing
the Escrow Agent with written notice of his intention that such event
be grounds for the release of the Escrowed Shares from escrow (which
notice may be given at any time, in the sole discretion of Xxxxxx,
during the Term);
(b) Up to 70% of the Escrowed Securities (less the percentage of any of
the Escrowed Securities previously released), in the event that Sparta
has net sales in excess of $2.6 Million during any fiscal year (as
determined from Sparta's audited financial statements), upon Xxxxxx'x
providing the Escrow Agent with written notice of his intention that
such event be grounds for the release of the Escrowed Shares from
escrow (which notice may be given at any time, in the sole discretion
of Xxxxxx, during the Term);
(c) Up to 100% of the Escrowed Securities (less the percentage of any of
the Escrowed Securities previously released), in the event that Sparta
has net sales in excess of $2.75 Million during any fiscal year (as
determined from Sparta's audited financial statements), upon Xxxxxx'x
providing the Escrow Agent with written notice of his intention that
such event be grounds for the release of the Escrowed Shares from
escrow (which notice may be given at any time, in the sole discretion
of Xxxxxx, during the Term);
(d) Up to 50% of the Escrowed Securities (less the percentage of any of
the Escrowed Securities previously released), in the event that Sparta
has Income from Operations (as hereinafter defined) in excess of
$200,000 during any fiscal year (as determined from Sparta's audited
financial statements), upon Xxxxxx'x providing the Escrow Agent with
written notice of his intention that such event be grounds for the
release of the Escrowed Shares from escrow (which notice may be given
at any time, in the sole discretion of Xxxxxx, during the Term);
(e) Up to 100% of the Escrowed Securities (less the percentage of any of
the Escrowed Securities previously released), in the event that Sparta
has Income from Operations (as hereinafter defined) in excess of
$300,000 during any fiscal year (as determined from Sparta's audited
financial statements), upon Xxxxxx'x providing the Escrow Agent with
written notice of his intention that such event be grounds for the
release of the Escrowed Shares from escrow (which notice may be given
at any time, in the sole discretion of Xxxxxx, during the Term);
(f) Upon any "change in control" of Sparta. A "change in control" occurs
upon the occurrence of one of the following events, but only if Xxxxxx
notifies Sparta in writing of his intention that such event be treated
as a change in control (which notice may be given at any time, in the
sole discretion of Xxxxxx, during the Term): (i) An event that would
be required to be reported in response to Item 5 (f) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of
1934 (the "Exchange Act"), or any successor thereof, assuming that
Sparta was a reporting company or was otherwise required to file
reports under the Exchange Act, (ii) Any "person" (as such term is
defined in Sections 13 (d) and 14 (d) (2) of the Exchange Act) who is
not currently an owner of securities of Sparta, is or becomes the
beneficial owner, directly or indirectly, of securities of Sparta
representing 20% or more of the combined voting power of Sparta's then
outstanding securities pursuant to a tender offer or otherwise, or
(iii) During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of
Sparta cease for any reason to constitute at least a majority thereof
unless the election of each director, who was not a director at the
beginning of the period, was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the
beginning of the period;
(g) Upon the termination of Xxxxxx'x employment with Sparta for any reason
(including his resignation), or Xxxxxx'x being terminated as
President, Chief Executive Officer or Chairman of Sparta, upon
Xxxxxx'x providing the Escrow Agent with written notice of his
intention that such event be grounds for the release of the Escrowed
Shares from escrow (which notice may be given at any time, in the sole
discretion of Xxxxxx, during the Term); and
(h) If (i) an order is entered for relief against Sparta, or declaring
that Sparta is insolvent, or resulting in a finding that Sparta is
insolvent, or if Sparta voluntarily files for bankruptcy, or if
similar relief is granted with respect to Sparta, under any law now or
hereafter in effect relating to bankruptcy, insolvency, relief of
debtors, protection of creditors; (ii) a receiver, trustee, custodian,
liquidator, assignee, sequestrator or other similar official is
appointed for such Sparta or for all or any substantial part of
Sparta's property; or (iii) if a proceeding is brought under the
federal bankruptcy code, Sparta fails to file a proper answer thereto
(including a request that the petitioner post adequate bond under
Section 303(e) of said code) within thirty days of receipt of notice
of said proceeding, upon Xxxxxx'x providing the Escrow Agent with
written notice of his intention that such event be grounds for the
release of the Escrowed Shares from escrow (which notice may be given
at any time, in the sole discretion of Xxxxxx, during the Term).
The parties agree and acknowledge that in the event Xxxxxx fails to provide
any of the written notices specified in subparagraphs (a) through (h), that the
condition shall not be considered to have occurred and that the Escrowed
Securities shall remain in escrow pursuant to this Agreement. Upon receipt by
the Escrow Agent of the required written notice by Xxxxxx which states that one
of the conditions referred to in subparagraphs (a) through (h) of this Paragraph
5 have occured (which absent any actual knowledge on the part of the Escrow
Agent to the contrary shall be accepted as absolute grounds for release
hereunder), the Escrowed Securities shall be shall be released by the Escrow
Agent to Xxxxxx. Following the release of the Escrowed Securities hereunder,
this Agreement shall terminate and the Escrow Agent shall be relieved of all
responsibility hereunder.
For purposes of this paragraph 5, the term "Income from Operations" shall
mean net sales, less cost of goods sold and selling, general and administrative
expenses, and shall not have deducted from it any depreciation or amortization
expense or any extraordinary charges or expenses.
6. During the existence of this Agreement, the parties agree that the
Escrowed Securities may not in any way be offered for sale, sold, pledged,
hypothecated, transferred, assigned or in any other manner disposed of, except
as expressly provided for in this Agreement.
7. During the Term or until such time as all of the Escrowed Securities are
released to Xxxxxx, Xxxxxx shall retain full voting power over such shares,
which total 952,986 shares.
8. This Agreement shall inure to the benefit of and be binding upon Sparta,
and its successors and assigns, and Xxxxxx and his heirs, personal
representatives or assigns.
9. A legend in substantially the following form has been or will be placed
upon any certificate or other document evidencing the Escrowed Securities:
The securities evidenced by this certificate are subject to
restrictions on their sale, pledge, or other transfer as set
forth in a certain Stock Escrow Agreement dated May 8, 1998, by
and among Sparta Surgical Corporation ("Sparta"), Xxxxxx X.
Xxxxxx and the Escrow Agent (as defined thereunder). Sparta will
furnish to the record owner of this certificate a copy of said
Agreement without charge upon written request to Sparta at its
principal place of business. The rights of the holder of this
certificate are subject to all of the terms and conditions of
such Agreement, by which the holder, by the acceptance of this
certificate, agrees to be bound.
Stop transfer instructions to Sparta's transfer agent have been or will be
placed with respect to the Escrowed Securities so as to restrict their sale,
pledge or other transfer. The foregoing legend and stop transfer instructions
will be placed with respect to any new certificate or document issued upon the
presentment of any original certificates or other documents evidencing the
Escrowed Securities. Upon the release of any of the Escrowed Securities from the
escrow hereunder, the Escrow Agent and/or Sparta shall be required to notify
Sparta's transfer agent to remove the legend set forth on the share certificates
evidencing those of the Escrowed Securities being released and the transfer
agent shall be entitled to rely upon such notification in so doing.
10. Sparta agrees to indemnify and hold harmless the Escrow Agent and
Xxxxxx from any costs, damages, expenses, losses or claims, including attorneys
fees, which the Escrow Agent or Xxxxxx may incur or sustain as a result of or
arising out of this Agreement or the Escrow Agent's or Xxxxxx'x duties relating
thereto, and agrees to pay such costs, damages, expenses, losses or claims to
the Escrow Agent on demand.
IN WITNESS WHEREOF, Sparta, Xxxxxx and the Escrow Agent have caused this
Escrow Agreement to be executed by their respective authorized agents.
ESCROW AGENT SPARTA SURGICAL CORPORATION
Xxxxxx X. Xxxxxx Xxxxx X. Xxxx
---------------------------- ----------------------------
Xxxxxx X. Xxxxxx Xxxxx X. Xxxx, Director,
duly authorized
Schedule A
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Date of Number of
Original Issuance Shares Consideration
----------------- ------ -------------
7/25/1997 80,000 Xxxxxx'x providing his personal guaranty
in an amount up to $250,000 as to the
obligations owing from Sparta to its
secured lender NationsCredit Commercial
Corporation
2/10/1998 198,000 Xxxxxx'x personally guarantying the
obligations owing from Sparta to Xxxx
Xxxxxxx for the purpose of obtaining a
reasonable settlement for Sparta in
litigation with Xxxxxxx and Xxxxxx'x
continued efforts to advance funding to
Sparta through $200,000 Credit Facility
between Xxxxxx and Sparta pursuant to
that certain agreement dated May 1997,
notwithstanding the unstable financial
condition of Sparta, and to otherwise
advance amounts to Sparta, thus
permitting Sparta to avoid a default
penalty with Xxxxxxx
2/19/1998 299,986 Xxxxxx'x giving personal guaranty as to
$715,000 of Sparta's indebtedness,
including: Lyon Credit, $100,000.00,
7/95, Computer Lease; J&C Resources,
$165,000.00, 12/17/96, Bridge Loan; J&C
Resources, $375,000.00, 3/17/97, Bridge
Loan; and Mercedes Benz, $ 75,000.00,
8/4/94, Company Auto Lease
2/25/1998 150,000 Xxxxxx'x increasing the amount of the
Credit Facility between he and Sparta to
$250,000, due to Sparta's continued
negative cash flow and loss from
operations
4/03/1998 75,000 Xxxxxx'x increasing the amount of the
Credit Facility between he and Sparta to
$300,000, due to Sparta's continued
negative cash flow and loss from
operations
4/09/1998 150,000 Xxxxxx'x increasing the amount of the
Credit Facility between he and Sparta to
$400,000, due to Sparta's continued
negative cash flow and loss from
operations
