EXHIBIT E
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as of May
18, 1999 by and between Medcare Technologies, Inc., a Delaware corporation
(referred to herein as the "Company"), the investors listed on Schedule A
attached hereto (collectively, "Buyers"), and American National Bank and Trust
Company of Chicago, as escrow agent (sometimes referred to herein as the "Bank"
or the "Escrow Agent").
RECITALS
Through a private placement (the "Placement"), the Company has sold to
Buyers pursuant to the terms and conditions set forth in that certain Securities
Purchase Agreement (the "Purchase Agreement") dated May 18, 1999, an aggregate
of 400 shares of the Company's Series B Convertible Preferred Stock (the
"Initial Preferred Shares") along with the related warrants (the "Warrants").
The Company wishes to appoint the Bank as Escrow Agent to hold the
aggregate amount of consideration that the Buyers are required to deliver in
connection with the purchase of the Initial Preferred Shares at the Initial
Closing (such amount, the "Escrow Amount"), as contemplated under the Purchase
Agreement, and subsequently to dispose of such Escrow Amount as hereinafter
provided.
AGREEMENTS
In consideration of the mutual promises and covenants contained in this
Agreement, the parties hereto agree as follows:
1. Appointment of Escrow Agent; Acceptance. The Company hereby appoints and
designates the Bank as Escrow Agent for the purposes set forth herein, and
the Bank hereby accepts such appointment on the terms and conditions set
forth herein.
2. Delivery of Escrow Amount to the Escrow Agent. On the Initial Closing Date,
each Buyer shall deposit its proportionate amount of the Escrow Amount, as
determined pursuant to the Purchase Agreement, with the Escrow Agent by wire
transfer of immediately available funds in accordance with the Escrow
Agent's written wire instructions.
3. Release and Disbursement of the Escrow Amount Upon Approval Notice. At (i)
the Company's 1999 Annual Meeting of Shareholders, or (ii) a Special Meeting
of Shareholders, as the case may be, the Company's shareholders will vote
whether to approve the issuance of the Series B Convertible Preferred Stock
and related warrants pursuant to the terms and conditions of the Purchase
Agreement (the "Transaction"). Within one (1) business day of the Company's
Annual Meeting, the President of the Company shall cause American Stock
Transfer Company ("ASTC"), or, in the event ASTC is not the Company's
transfer agent at such time, LaSalle National Bank, Xxxxxx Trust and Savings
Bank or another independent third party mutually acceptable to the Company
and the Buyers, as the case may be, to deliver to the Escrow Agent, with a
copy to each of the Buyers, a letter certifying the outcome of the vote of
the Company's shareholders regarding the Transaction (the "Certification
Letter"). In the event that the Certification Letter notifies the Escrow
Agent that the Company's shareholders approved the Transaction (such, an
"Approval Notice"), the Escrow Agent shall immediately disburse to the
Company the entire Escrow Amount, including all interest thereon.
4. Release and Disbursement of Escrow Amount Upon Disapproval Notice or Lack of
Approval. In the event that the Escrow Agent (a) receives a Certification
Letter indicating that the Company's shareholders have not approved the
Transaction (such, a "Disapproval Notice"), (b) has neither received an
Approval Notice nor a Disapproval Notice on or before August 2, 1999 (the
"Notice Cut-Off Date") or (c) on or prior to the date that is seven (7) days
after the date hereof, receives a Due Diligence Notice (as defined below),
then (unless, solely in the case of the circumstance set forth in sub-clause
(b), the Escrow Agent has received specific written instructions from
holders of at least two-thirds (2/3) of the Initial Preferred Shares
outstanding, which instructions agree to extend the
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Notice Cut-Off Date), the Escrow Agent shall disburse the Escrow Amount and
all interest earned thereon to the Buyers (at their respective addresses set
forth on the Schedule of Buyers attached hereto) in accordance with their
respective contributions to the Escrow Amount. Each Buyer hereby
acknowledges and agrees that in the event the Escrow Amount and all interest
earned thereon is returned to the Buyers by the Escrow Agent pursuant to
this Section 4, such receipt by the Buyers shall constitute, without further
action or execution or delivery of documents of transfer, a full and
complete redemption by the Company of the Initial Preferred Shares
(including accrued but unpaid dividends thereon) held by each such Buyer.
Each Buyer shall, promptly (but in no event later than three (3) business
days following receipt of its allocable portion of the Escrow Amount and
related interest) deliver to the Company, or to cause to be delivered to the
Company, any and all certificates evidencing the Initial Preferred Shares
(the "Preferred Stock Certificates") and Warrants issued to it or on its
behalf pursuant to the terms and conditions of the Purchase Agreement. "Due
Diligence Notice" shall mean a written notification executed by counsel to
the Buyers indicating that, in the course of its due diligence review of the
material agreements and other material documents (the "Material Documents")
of the Company, it has determined that the consummation of the Transaction
by the Company would violate, breach, conflict, contravene or constitute a
default under any such Material Document.
5. Covenants of Buyers During Pendency of Escrow. Unless and until the earlier
of (a) the date the Escrow Amount is disbursed to the Company in accordance
with the terms of Section 3 hereof, and (b) August 2, 1999, the Buyers agree
and covenant that, notwithstanding the rights of the Buyers or agreements
made with respect to the Initial Preferred Shares or the Warrants, whether
in the Certificate of Designations, Preferences and Rights relating to the
Series B Convertible Preferred Stock (the "Certificate"), the Purchase
Agreement, or otherwise, no Buyer shall, either separately or jointly,
directly or indirectly, do any of the following: (a) exercise or transfer
(including without limitation by sale, exchange or hypothecation) all or any
portion of its respective rights, title and interest in and to the Warrants;
(b) transfer (including without limitation by sale, exchange or
hypothecation) all or any portion of its respective rights, title and
interest in and to the Initial Preferred Shares; (c) exercise its rights to
convert all or any portion of the Initial Preferred Shares into Common Stock
of the Company in accordance with Section 2 of the Certificate; or (d)
exercise its rights to have the Company redeem all or any portion of the
Initial Preferred Shares in accordance with Section 3 of the Certificate
(except such Buyer's rights of redemption as set forth in Section 4(l) of
the Purchase Agreement or Section 4 of this Escrow Agreement).
6. Investment of Funds. The Escrow Agent shall invest the Escrow Amount in
interest-bearing securities, bank deposits and/or so-called "money market
funds" established and managed by nationally recognized firms, as selected
by the Company. All interest earned on the Escrow Amount shall be paid as
specifically provided in this Agreement.
7. Responsibility of Escrow Agent. The Company agrees that the Escrow Agent
shall not be liable to the Company or to any other party for any actions or
omissions except for actions or omissions resulting from the willful
misconduct or gross negligence of the Escrow Agent.
The Escrow Agent may act in reliance upon any instrument or signature believed
to be genuine and may assume that any person purporting to give any writing,
notice, advice or instruction in connection with the provisions hereof has
been duly authorized to do so.
The Company shall indemnify the Escrow Agent against any losses, liabilities or
expenses incurred by the Escrow Agent arising out of or in connection with
this Agreement (including the costs incurred to defend itself against any
claims or liabilities) except for such losses, liabilities or expenses
arising from the gross negligence or willful misconduct of the Escrow Agent.
This provision shall remain in effect despite any termination of this Escrow
Agreement or the resignation or removal of the Escrow Agent.
The Escrow Agent shall have no duties or responsibilities except as expressly
provided in this Agreement and shall neither be obligated to recognize nor
have any liability or responsibility arising under any other agreement to
which the Escrow Agent is not a party, even though reference thereto may be
made herein.
In case any property held by the Escrow Agent hereunder shall be attached,
garnished or levied upon (unless such attachment, garnishment or levy shall
be initiated by or at the direction of the Company) under any order of
court, or the delivery thereof shall be stayed or enjoined by any order of
court, or any other judgment or decree
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shall be made or entered by any court affecting such property, or any part
thereof, or any act of the Escrow Agent, the Escrow Agent is hereby
expressly authorized in its sole discretion to obey and comply with all
writs, orders, judgments or decrees so entered or issued, whether with or
without jurisdiction, and in case the Escrow Agent obeys and complies with
any such writ, order, judgment or decree it shall not be liable to the
Company or any Buyer, their successors, heirs or personal representatives or
to any other person, firm or corporation, by reason of such compliance
notwithstanding such writ, order, judgment or decree be subsequently
reversed, modified, annulled, set aside or vacated.
The Escrow Agent shall not be under any duty to give the property held hereunder
any greater degree of care than it gives its own similar property.
The Escrow Agent makes no representation as to the validity, value, genuineness
or the collectibility of any security or other document or instrument held
by or delivered to it under this Escrow Agreement.
8. Withdrawal or Removal of Escrow Agent. The Company may remove the Escrow
Agent at any time upon prior written notice, provided that the Company has
appointed a national or Illinois state bank with assets of at least
$100,000,000 to serve as successor Escrow Agent. The Escrow Agent may resign
upon thirty (30) days' written notice to the parties. After any such removal
or withdrawal, the Escrow Agent shall be required to take no action with
respect hereto except to deliver the Escrowed Items to a successor agent or
to return the Escrowed Items to the respective Investors from whom they
originated.
9. Termination. This Escrow Agreement shall terminate upon delivery of the
Escrow Amount pursuant hereto. All persons shall be conclusively bound as
against the Escrow Agent by any delivery pursuant to the terms of this
Escrow Agreement.
10. Indemnity. In consideration of the Company's execution and delivery of the
documents related to the Transaction, including but not limited to the
Warrants, Purchase Agreement and the Certificate (collectively, the
"Transaction Documents"), in addition to all of the Buyers' other
obligations under the Transaction Documents, the Buyers shall defend,
protect, indemnify and hold harmless the Company and all of its
stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing persons' agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any breach of any warranty or covenant
made by any Buyer in Section 5 hereof or (b) the failure by any Buyer to
deliver (or cause to be delivered) to the Company all of the Preferred Stock
Certificates or the Warrants to the Company within three (3) days of the
Buyer's receipt of the Escrow Amount (as described in Section 4 hereof).
11. Notices. Notices hereunder shall be deemed properly delivered when and if
either (i) personally delivered; or (ii) one (1) business day after deposit
with Federal Express or other commercial overnight courier; or (iii) the
same day if delivered by facsimile (provided confirmation of transmission
is mechanically or electronically generated and kept on file by the sending
party; or (iv) two (2) business days after deposit in the U.S. Mail, by
registered certified mail, return receipt requested, postage prepaid to the
parties as set forth below:
The Company: Medcare Technologies, Inc.
0000 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxx
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With a copy to
its attorneys: Barack Xxxxxxxxxx Xxxxxxxxxx Xxxxxxx & Xxxxxxxxx
000 X. Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
Buyers: (See Schedule A attached hereto)
----------
The Escrow Agent: American National Bank and Trust
000 00xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X'Xxxxxxxx
12. Miscellaneous.
-------------
(a) Amendments. This Escrow Agreement or any provision hereof may be
amended, waived, discharged or terminated only by the written
agreement of the parties.
(b) Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Illinois.
(c) Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.
(d) Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the
subjects hereof.
(e) Severability. In case any provision of this Agreement shall be
deemed invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions of this Escrow
Agreement shall not in any way be affected or impaired thereby.
(f) Expenses. The Company shall pay reasonable costs and expenses of
the Escrow Agent hereunder.
(g) Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to
be considered in construing the Escrow Agreement.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
THE COMPANY:
MEDCARE TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Its: President & CEO
THE BUYERS:
HFTP INVESTMENT L.L.C.
By: Promethean Asset Management L.L.C.
Its: Investment Manager
By:/s/ E. Xxxx Xxx
---------------
Name: E. Xxxx Xxx
Its: Authorized Signatory
XXXXXXXX, L.P.
By: Xxxxxx, Xxxxxx & Co., L.P.
Its: General Partner
By:/s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Its: Chief Operating Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Xxxxxx, Xxxxxx & Co., L.P.
Its: General Partner
By:/s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Its: Chief Operating Officer
AG SUPER FUND INTERNATIONAL PARTNERS, L.P.
By: Xxxxxx, Xxxxxx & Co., L.P.
Its: General Partner
By:/s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Its: Chief Operating Officer
RAPHAEL, L.P.
By:/s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Its: Chief Operating Officer
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C., its Investment
Advisor
By:/s/ Xxxxxxx X. Xxxxxx
---------------------
Name: Xxxxxxx X. Xxxxxx
Its: Managing Officer
THE ESCROW AGENT:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By: /s/ Xxxx X'Xxxxxxxx
-------------------
Name: Xxxx X'Xxxxxxxx
Its: Vice President
SCHEDULE A
SCHEDULE OF BUYERS
Investor Address
Investor Name and Facsimile Number
HFTP Investment L.L.C. c/o Promethean Asset Management L.L.C.
00 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: E. Xxxx Xxx and Xxxxx X. X'Xxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
Residence: New York
With a copy to:
Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxx
Xxxxxxxx, L.P. c/o Xxxxxx, Xxxxxx & Co., L.P.
000 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx or Xxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
GAM Arbitrage Investments, Inc. c/o Xxxxxx, Xxxxxx & Co., L.P.
000 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx or Xxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: British Virgin Islands
AG Super Fund International c/o Xxxxxx, Xxxxxx & Co., L.P.
Partners, L.P. 000 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx or Xxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
Raphael, L.P. c/o Xxxxxx, Xxxxxx & Co., L.P.
000 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx or Xxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Cayman Islands
Ramius Fund, Ltd. c/o Xxxxxx, Xxxxxx & Co., L.P.
000 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx or Xxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Residence: Bermuda
PROPOSAL NO. 4:
To adopt the Company's 2000 Stock Option Plan and reserve 2,000,000 shares
of Common Stock for issuance thereunder.
The Board of Directors views the issuance of stock options to
directors, consultants and employees as necessary in order to attract and
maintain the services of individuals essential to the Company's long-term
success. The purpose of the Plan is to encourage and enable the officers,
employees, directors, consultants and advisors of the Company and its
affiliates, upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business, to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a
direct stake in the Company's welfare will assure a closer identification of
their interests with those of the Company, thereby stimulating their efforts on
the Company's behalf and strengthening their desire to remain with the Company.
A copy of the Company's 2000 Stock Option Plan (the "Plan") is included with
this Proxy Statement as Exhibit F.
The Plan will be administered by the Board of Directors and is
designed to provide the Board of Directors with flexibility in the type of
compensation awards that can be issued. The Plan allows for the Board of
Directors to issue stock options, restricted share awards, performance share
awards and share appreciation rights, to select the persons to whom awards may
be granted, to determine the terms of each award, to interpret the provisions of
the Plan and to make all other determinations necessary or advisable for the
administration of the Plan. Please refer to Exhibit F for additional details.
The reservation of 2,000,000 shares for issuance under the plan is
expected to provide the Board of Directors with enough shares to adequately
administer the Plan for a number of years. By issuing a large enough number of
shares to extend over several years, the Company will save time and money by not
having to go through the process of creating a new plan every year. The benefits
or amounts, if any, that will be received by the executives and directors under
this Plan have not been determined at this time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE COMPANY'S 2000
STOCK OPTION PLAN AND RESERVATION OF 2,000,000 SHARES OF COMMON STOCK FOR
ISSUANCE THEREUNDER.
