EXHIBIT 10.16
EXECUTION COPY
EXHIBIT C
ESCROW AGREEMENT
This Escrow Agreement (together with all amendments and Appendices thereto being
hereinafter referred to as the ("Escrow Agreement" or "Agreement") made as of
this 8 day of October, 1999, by and among:
A. Mr. Xxxx Xxxxx ("Xxxxx") and Xxx. Xxxxxxxxx Xxxxx, their respective
heirs, legal representatives and assigns (collectively referred to herein as
"Shareholders");
X. Xxxxx Fargo Bank, as the Escrow Agent (the "Escrow Agent"); and
C. Omni Nutraceuticals, Inc., a Utah corporation, its successors in interest
and assigns (collectively referred to herein as the "Company").
W I T N E S S E T H:
WHEREAS, subject to the terms and conditions hereinafter set forth, and
consistent with the terms and conditions set forth in that certain Settlement
Agreement of even date herewith by and between the Company and Xxxxx and
consented to by Xxx. Xxxxxxxxx Xxxxx (the "Settlement Agreement"), the
Shareholders and the Company desire to appoint the Escrow Agent to act as escrow
agent and to accept and hold certificates evidencing (i) one million, twenty two
thousand two hundred twenty-two (1,022,222) shares (the "Spin-Off Guarantee
Shares") and (ii) one million (1,000,000) shares (the "Indemnification Shares"
and together with the Spin-Off Guarantee Shares, the "Escrow Shares") of the
common stock, par value $.01 per share ("Common Stock") of the Company together
with one or more stock powers executed by Shareholders in blank with medallion
signature guarantees affixed thereto (such stock powers and certificates and all
distributions thereon or in respect thereof being collectively referred to
herein as the "Escrow Property"); and
WHEREAS, subject to the terms and conditions hereinafter set forth, the Escrow
Agent is willing to accept such appointment.
NOW, THEREFORE, in consideration of the mutual agreements herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and confirmed, the parties hereto agree as follows:
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Section 1. DEFINITIONS; CONSTRUCTION. (a) For the purposes of this agreement,
the terms, "Escrow Agreement", "Agreement," "Xxxxx", "Shareholders", "Escrow
Agent", "Company", "Spin-Off Guarantee Shares", "Indemnification Shares",
"Escrow Shares", "Common Stock", "Escrow Property", and "Settlement Agreement"
shall have the respective meanings ascribed to them hereinabove and the terms
listed below shall have the meanings ascribed to them herein:
"Business Day": Any day except a Saturday, Sunday, a legal holiday in the City
in which the Escrow Agent is located or a day on which banking institutions in
such City are authorized to be closed.
"Claim": Shall have the meaning ascribed to such term in subsection 3(b) hereof.
"Counternotice": Shall have the meaning ascribed to such term in subsection
3(b) hereof.
"Deposit Date": Shall have the meaning ascribed to such term in subsection 3(a)
hereof.
"Escrow Agent's Authorization": Shall have the meaning ascribed to such term in
subsection 3(d) hereof.
"Escrow Agent's Receipt": Shall have the meaning ascribed to such term in
subsection 3(a) hereof.
"Losses": Shall have the meaning ascribed to such term in subsection 6(g)
hereof.
"Notice": Shall have the meaning ascribed to such term in subsection 3(b)
hereof.
"Termination Date": Shall have the meaning ascribed to such term in Section 8
hereof.
"Voting Agreement": Shall have the meaning ascribed to such term in Section 7(e)
hereof.
(b) References herein to Sections and subsections are to Sections and
subsections of this Escrow Agreement, unless otherwise indicated. The words
"hereof", "herein", "hereunder" and comparable terms refer to the entirety of
this Escrow Agreement and not to any particular Section or other subdivision
hereof. Words in the singular include the plural and in the plural include the
singular. Words in the neuter gender shall include the masculine and feminine
and vice versa. The word "or" is not exclusive. The word "including" shall be
deemed to mean "including, without limitation". The Section headings set forth
in this Escrow Agreement are for reference purposes only and shall not affect in
any way the meaning, interpretation or enforcement of this Escrow Agreement. In
the event of any conflict between the terms or provisions of this Escrow
Agreement and the terms or provisions of the Settlement Agreement, the
Settlement Agreement shall govern; provided that if any such conflict relates
directly or indirectly to the duties, rights, liabilities, privileges, or
immunities of the Escrow Agent, then this Escrow Agreement shall govern.
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Section 2. APPOINTMENT, RESIGNATION OR REMOVAL OF ESCROW AGENT. The Escrow
Agent is hereby appointed as an escrow agent to hold and dispose of the Escrow
Property, as provided and subject to the terms and conditions of the Settlement
Agreement and this Escrow Agreement; provided, however, that the Escrow Agent is
not a party to nor is it bound by the provisions of the Settlement Agreement.
The Escrow Agent agrees to hold the Escrow Property in escrow until distribution
thereof is directed as provided in subsection 3(b) hereof or this Escrow
Agreement is terminated as provided in this Section 2, or in subsection 3(e) or
Section 8 hereof. The undersigned hereby agree that the Escrow Agent may resign
at any time upon five (5) Business Days written notice given to each of the
undersigned, with such resignation being effective on the earlier to occur of
(i) the appointment of a successor Escrow Agent mutually acceptable to the
parties hereto or (ii) or the deposit of the Escrow Property with a court of
competent jurisdiction as provided in Section 6(h) hereof. Shareholders and the
Company further reserve the right, acting jointly, to remove the Escrow Agent as
escrow agent at any time upon five (5) Business Days written notice to the
Escrow Agent. In the event of any such resignation or removal, the Escrow
Agent's fees and expenses hereunder shall be paid in full prior to the
effectiveness of any such resignation or removal and all fees and expenses
received by the Escrow Agent shall be nonrefundable, and, upon all the Escrow
Property being disbursed by the Escrow Agent in accordance with subsection 3(b)
hereof, or the termination of this Escrow Agreement as provided in Section 8
hereof, the duties of the Escrow Agent hereunder shall terminate.
Section 3. RECEIPT AND DISTRIBUTION OF ESCROW PROPERTY.
(a) The Shareholders are delivering to the Escrow Agent one or more certificates
evidencing the Indemnification Shares (concurrently with the execution of this
Agreement) and the Spin-Off Guarantee Shares (when required by the Settlement
Agreement), owned of record by them, free and clear of all liens, charges,
encumbrances or any rights of third parties (as increased by any dividends or
other distributions thereon (other than any distributions of XxxxxxXxxx.xxx
securities) and as reduced by any amounts withdrawn under subsection 3(b)),
together with stock powers therefor duly executed in blank with medallion
signature guarantees affixed thereto. The date of each such delivery to the
Escrow Agent is herein referred to as the "Deposit Date". Against receipt of
any of the Escrow Property, Escrow Agent shall deliver an acknowledgment in
writing to the Company and Shareholders or their representatives designated in
writing (the "Escrow Agent's Receipt") of the Escrow Agent's receipt of the
Escrow Property. Thereafter, the Escrow Property, or any portion thereof, shall
be released from escrow by the Escrow Agent solely in accordance with the terms
and conditions of the Settlement Agreement and pursuant to the provisions of
subsection 3(b) hereof.
(b) From time to time on or before the Termination Date the Company may give
notice in substantially the form of Appendix A attached hereto (a "Notice") to
Xxxxx on behalf of the Shareholders and to the Escrow Agent specifying the
nature and amount of any claim (a "Claim") it may have under the Settlement
Agreement, the amount of Escrow Shares necessary to satisfy the Claim and the
basis for the Company's determination of such
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amount of Shares. The Company may make more than one Claim with respect to
any underlying circumstance or series of events. Within fifteen (15) days
following receipt by the Escrow Agent of proof of delivery (in accordance
with the provisions of Section 4 hereof) to Xxxxx of the Notice regarding a
Claim, Xxxxx, acting on behalf of the Shareholders, shall give notice to the
Company and to the Escrow Agent specifying whether Xxxxx (i) agrees to the
delivery out of the Escrow Property of the number of Escrow Shares specified
in the Notice or (ii) disputes such Claim (a "Counternotice"), specifying the
basis for his objection. In the event that Xxxxx disputes such Claim in his
Counternotice, such Claim shall be resolved as provided in subsection 3(c).
If no such Counternotice is received by Escrow Agent within such fifteen-day
period or the Counternotice fails to specify a reason for Xxxxx'x objection,
then the amount claimed by the Company as set forth in its Notice shall be
deemed fixed for purposes of this Escrow Agreement and the Settlement
Agreement and, within three (3) days after the expiration of such fifteen-day
period, the Escrow Agent shall, in payment thereof, deliver to the Company,
out of the Escrow Property, that number of shares of Common Stock, in a form
transferable by delivery, as shall be specified in the Notice. Escrow Agent
shall not inquire into or consider whether a Claim complies with the
requirements of the Settlement Agreement. All payments of Claims made
hereunder from the Escrow Property shall be deducted from the Escrow Shares
then comprising the Escrow Property.
(c) If a Counternotice is given with respect to a Claim, Escrow Agent shall
thereafter make a distribution of Escrow Property with respect thereto only in
accordance with its receipt of joint written instructions of the Company and
Xxxxx, acting on behalf of the Shareholders, in the form of Appendix B hereto
("Escrow Agent's Authorization"), or a final non-appealable order of a court of
competent jurisdiction. Any such court order submitted to the Escrow Agent
(with a copy to Xxxxx) shall be accompanied by a legal opinion by counsel for
the presenting party satisfactory to Escrow Agent (and its counsel, if any) to
the effect that the order is final and non-appealable. Upon determination by
the Escrow Agent (and its counsel, if any) that such court order is final and
non-appeable, the Escrow Agent shall act on such Authorization, court order and
legal opinion without further question.
(d) Absent receipt of a Counternotice disputing a Claim, any such release and
delivery of any of the Escrow Property shall be effected in accordance with
the instructions contained in the Notice. Upon receipt of, and in accordance
with, the Notice, that portion of the Escrow Property specifically identified
in the Notice, free and clear of all liens, charges and encumbrances arising
by, through and under the Escrow Agent, shall be released and delivered as
set forth in such Notice. Any release of any of the Escrow Property shall
only be made pursuant to the terms of a duly completed and fully executed
Escrow Agent's Authorization delivered to the Escrow Agent or duly applicable
final and non-appealable court order.
(e) In the event of (i) the resignation or removal of the Escrow Agent as
provided in Section 2 hereof, Shareholders and the Company, shall execute and
deliver an Escrow Agent's Authorization instructing the Escrow Agent as to
the delivery of the Escrow Property; provided, however, that in the event
such resignation or removal occurs prior to
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the Termination Date, the Escrow Property shall be forwarded to a successor
Escrow Agent promptly selected by Shareholders and the Company to be held
pursuant to the terms of an escrow agreement substantially similar to this
Escrow Agreement, or (ii) on the Termination Date, the Company and the
Shareholders shall execute and deliver an Escrow Agent's Authorization
instructing the Escrow Agent as to the delivery of any Escrow Property then
held in escrow. Any such delivery shall relieve the Escrow Agent of any
further obligations hereunder or with respect to the Escrow Property, except
as set forth in Sections 6(a), (f) and (m)(6) hereof, which shall survive the
termination of the Escrow Agreement.
(f) Absent the prior receipt of a Notice of a pending or threatened Claim
which has not been resolved in accordance with the provisions of this Section
3, on December 31, 1999, the Escrow Agent shall deliver to the Shareholders
one or more certificates evidencing 500,000 Indemnification Shares and,
again, absent the prior receipt of a Notice of a pending or threatened Claim
which has not been resolved in accordance with the provisions of this Section
3, on March 30, 2000, the Escrow Agent will deliver to the Shareholders one
or more certificates evidencing the balance of the Indemnification Shares.
Section 4. NOTICES. All communications required or permitted to be given or
made hereunder shall be in writing and mailed (by first class registered or
certified mail, return receipt requested, postage prepaid), personally
delivered, delivered by courier, or by Federal Express or sent by facsimile
and confirmed, if to the Escrow Agent, to it at the address appearing by the
Escrow Agent's name on the signature page hereof; or if to the Company, to it
at the address appearing by the Company's name on the signature page hereof
with a copy to its counsel, to such counsel at the address appearing by such
counsel's name on the signature page hereof; or, if to Shareholders, to
Shareholder's address appearing by Shareholder's name on the signature page
hereof, with a copy to shareholders' counsel, to such counsel at the address
appearing by such counsel's name on the signature page hereof, or to such
other address as any party hereto shall notify the other parties hereto in
the manner herein provided.
Section 5. FEES AND EXPENSES. All fees and expenses, if any, of the Escrow
Agent for its services hereunder as set forth in Appendix C hereto shall be
jointly paid by the Company and by Xxxxx in equal shares. The Escrow Agent
shall also be reimbursed jointly by Xxxxx and by the Company in equal shares
for all reasonable legal fees, expenses and disbursements incurred or made by
the Escrow Agent in the performance of its services hereunder. In the event
the Escrow Agent resigns for any reason whatsoever or is terminated; it shall
have no obligation to return any of the Escrow Agent's expenses or fees paid
in connection with the reasonable performance of its services hereunder.
Section 6. ESCROW AGENT DUTIES, EXCULPATION AND INDEMNIFICATION. The
undersigned parties agree that the following provisions shall control with
respect to the rights, duties, liabilities, privileges and immunities of the
Escrow Agent.
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(a) The Escrow Agent acts as depository only and not as a fiduciary or
agent in any respect, and is not responsible, or liable in any manner
whatsoever, for the sufficiency, correctness, genuiness or validity of the
subject matter of the escrow, or any part thereof. The Escrow Agent shall
take reasonable steps necessary or appropriate to safeguard the Escrow
Property and to protect it from theft, fire, flood or other disasters.
(b) It shall not be the duty of the Escrow Agent to see that any duties or
obligations herein or elsewhere imposed on any other parties are performed or
honored.
(c) The Escrow Agent shall not be responsible (other than for its own
recitals and/or statements) for any recital herein or any other statements in
any other instrument described in this Escrow Agreement (other than for the
Escrow Agent's Receipt), including the Settlement Agreement, or for the
validity of execution by any party to any such instruments (other than for
the execution and delivery of the Escrow Agent's Receipt and the Escrow
Agreement by the Escrow Agent), or for the validity of any representations or
other statements set forth in any such instruments.
(d) As to the existence or non-existence of any fact or as to the
sufficiency or validity of any instrument or proceeding, or as to its
authorization to perform any act described herein, the Escrow Agent shall be
entitled to rely upon any written notice signed by the duly authorized party
to this Escrow Agreement, but nothing herein shall prevent the Escrow Agent
from requiring such further evidence that it deems reasonably necessary or
advisable.
(e) The Escrow Agent shall not be required to give any bond or surety in
respect to the execution of this Escrow Agreement or to the exercise of its
powers hereunder.
(f) The Escrow Agent shall not be liable for anything which it may do or
refrain from doing in connection herewith, except for its own gross
negligence or willful misconduct and the Company and Shareholders agree not
to commence any action, suit or proceeding against the Escrow Agent except
for willful violations or gross negligence with respect to the performance or
failure to perform any express duty by the Escrow Agent as set forth in this
Escrow Agreement.
(g) The Company and the Shareholders, jointly and severally, agree to
defend, indemnify and save the Escrow Agent harmless from all liability,
loss, cost, claims, damages and expenses, including reasonable attorney's
fees (collectively, "Losses"), suffered or incurred by the Escrow Agent as a
result of any matter relating directly or indirectly to this Escrow
Agreement, except for Losses determined to have been caused by acts or
omissions of the Escrow Agent in the performance of its duties under this
Escrow Agreement. As between the Company and the Shareholders such
indemnification obligation shall be shared equally. These indemnities shall
survive the resignation or removal of the Escrow Agent and any termination of
this Escrow Agreement. Either the Company, on the one hand, or the
Shareholders, on the other hand, shall be entitled to seek reimbursement from
the other party for all Losses suffered or incurred by the Company or the
Shareholders, as the case may be, in respect of the
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failure by the other party to satisfy its or their share of such obligation
to indemnify the Escrow Agent hereunder.
(h) If any controversy arises among the parties to the Agreement, or with
any other party, concerning the subject matter of this Agreement, its terms
or conditions, the Escrow Agent may, at its option, file an action in
interpleader requiring the parties to answer and litigate any claims and
rights among themselves. The Escrow Agent is authorized to deposit with the
Clerk of the Court all Escrow Property held in Escrow, except all costs,
expenses, charges and attorneys fees incurred by the Escrow Agent due to the
interpleader action, or otherwise appropriately incurred, shall first be paid
to the Escrow Agent and the parties jointly and severally agree to payment
from any funds on deposit in the Escrow account. Upon initiating such
action the Escrow Agent shall be fully released and discharged from all
obligations and liabilities imposed by the terms of this Agreement.
(i) The Escrow Agent may consult with legal counsel reasonably acceptable
to the Company and the Shareholders in the event of any dispute or question
as to the construction of any of the provisions hereof or its duties
hereunder or other matters relating hereto, and it shall incur no liability.
(j) The Company shall at the execution of this Escrow Agreement and from
time to time thereafter upon reasonable request by the Escrow Agent furnish
the Escrow Agent with a certified copy of a resolution of the Company's Board
of Directors authorizing the person or persons to give written instructions
and other communications hereunder to the Escrow Agent for and on behalf of
the Company pursuant to this Escrow Agreement. Such resolutions shall
specify the class of instructions that may be given by each such person to
the Escrow Agent under this Escrow Agreement together with certified
signatures of such persons authorized to sign. This Escrow Agreement and any
such resolution shall constitute conclusive evidence of the authority of the
signatories designated therein to act. Any such resolution shall be
considered in full force and effect with the Escrow Agent being fully
protected in acting in reliance thereon unless and until the Escrow Agent
receives written notice to the contrary.
(k) The Escrow Agent shall have the right at any time it deems reasonably
appropriate to seek an adjudication in a court of competent jurisdiction as
to the respective rights of the parties hereto and shall not be held liable
by any party hereto for any delay or the consequences of any delay occasioned
by such resort to court, and the Company and the Shareholders agree to pay,
jointly and severally, all of the Escrow Agent's costs and expenses relating
to any such adjudication (including reasonable attorneys fees and expenses).
In the event that the Escrow Agent shall be reasonably uncertain as to its
duties or rights hereunder or shall receive instructions, claims or demands
from any party hereto which, in the Escrow Agent's opinion, conflict with any
of the provisions of this Escrow Agreement, the Escrow Agent shall be
entitled to refrain from taking any action and its sole obligation thereupon
shall be to keep safely all property held in escrow until it shall be
directed otherwise in writing by all of the other parties hereto or by a
final order or judgment of a court of competent jurisdiction.
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(l) The Company and Shareholders shall, jointly and severally, indemnify
and hold harmless the Escrow Agent against and in respect of any liability
for taxes and for any penalties or interest in respect of taxes, if any,
attributable to the Escrow Property.
(m) The parties to this Escrow Agreement hereby further agree that:
(1) The Escrow Agent shall not be required to invest any Escrowed Property
held hereunder, except pursuant to an Escrow Agent's Authorization signed by
both the Company and Xxxxx, acting on behalf of the Shareholders. In the
event that any interest or dividend payment in cash is earned on any Escrow
Property, Xxxxx, acting on behalf of the Shareholders, shall, upon request
made by the Escrow Agent, direct the Escrow Agent as to the investment,
allocation or payment of such interest or dividend and furnish the Escrow
Agent with appropriate taxpayer identification numbers and any other
appropriate information.
(2) The Escrow Agent may rely solely and conclusively upon any signature
believed to be genuine or to be the signature of an individual authorized
pursuant to Section 6(j) hereof.
(3) Anything in this Escrow Agreement to the contrary notwithstanding, in
no event shall the Escrow Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action,
except for any such loss or damage caused by the Escrow Agent's gross
negligence or willful misconduct. The Escrow Agent shall not be liable in
any respect for any diminution in value of the Escrow Property, except for
any such diminution in value caused by the Escrow Agent's gross negligence or
willful misconduct.
(4) Neither this Escrow Agreement nor any right or interest hereunder may
be assigned in whole or in part by any party without the prior written
consent of the other parties, which consent shall not be unreasonably
withheld.
(5) This Escrow Agreement sets forth exclusively the duties of the Escrow
Agent with respect to any and all matters pertinent hereto and no implied
duties or obligations shall be read into this Escrow Agreement against the
Escrow Agent. The Escrow Agent shall have no duties except those
specifically set forth in this Escrow Agreement and as imposed by applicable
law or court order.
(6) The parties agree and acknowledge that the Escrow Agent (i) has no
duty to disclose any matters with respect to the Company or the Shareholders
or Xxxxx that it becomes aware of in connection with acting as the Escrow
Agent, except as may be required by judicial or governmental process or
inquiry, in which case Escrow Agent shall promptly advise the Company and
Shareholders of the receipt of any such process or inquiry; and (ii) has no
duty to apprise any of the parties hereto of any decline in the value of the
Escrow Property.
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The Company and Shareholders specifically agree and acknowledge that they are
not being represented in any capacity as legal counsel by the Escrow Agent
nor have they received any legal advice whatsoever from the Escrow Agent
previously or currently.
(8) The parties hereto acknowledge that the Escrow Agent may enter into a
custody account agreement in substantially the form of Appendix D attached
hereto and made a part hereof with such non-material changes thereto as
Escrow Agent may deem advisable to conform to the provisions hereof (the
"Custody Agreement") the form of which Custody Agreement is acceptable to the
parties hereto. None of the parties hereto shall take any action or omit to
take any action that would cause the Escrow Agent to violate the Custody
Agreement. The parties hereto agree that any and all indemnification
provided in favor of the Escrow Agent in this Escrow Agreement shall also
cover any reasonable action taken by the Escrow Agent with respect to the
Custody Agreement including the payment of any fees and expenses incurred by
the Escrow Agent. The Escrow Agent hereby agrees not to amend, modify,
supplement or waive any provision of the Custody Agreement or assign its
interests thereunder without the prior receipt of the written consent of the
other parties hereto. The Escrow Agent hereby further agrees to use its best
efforts to comply in all material respects with the terms and provisions of
the Custody Agreement. Copies of any notices or other communication from the
custodian of the Escrow Property received by the Escrow Agent shall be
promptly forwarded to the other parties hereto by the Escrow Agent.
Section 7. MISCELLANEOUS.
(a) Notwithstanding anything to the contrary contained in this Escrow
Agreement, the Escrow Agent shall have the right, but shall not be required,
to demand, in respect of any action whatsoever within the purview of this
Escrow Agreement, any showings, certificates, opinions, or other information
or corporation action or evidence thereof, in addition to that by the terms
hereof required as a condition of such action by the Escrow Agent deemed
desirable for the purpose of establishing the right of any party to the
taking of action by the Escrow Agent.
(b) The parties agree that this Escrow Agreement shall be governed by,
construed and interpreted under the laws of the State of California, without
regard to its principles of conflicts of law, and, if any party shall
institute suit to enforce any part of this Escrow Agreement, the sole proper
venue for such suit shall be in a State or Federal court of competent
jurisdiction located in the County of Los Angeles, State of California.
(c) This Escrow Agreement, the Settlement Agreement and the Voting
Agreement contain the entire agreement of the parties hereto with respect to
the subject matter hereof; provided, however, that the Escrow Agent is not a
party to nor is it bound by either the Settlement Agreement or the Voting
Agreement, and this Escrow Agreement may not be amended except by an
instrument in writing signed by all of the parties hereto.
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(d) This Escrow Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
(e) The Shareholders agree that, for purposes of federal and other taxes
based on income, each Shareholder will be treated as the owner of his or her
respective share of the Escrow Property, and that each Shareholder will
report all income, if any, that is earned on, or derived from, the Escrow
Property as his or her income, in the taxable year or years in which such
income is properly included and pay any taxes attributable thereto. For so
long as the Escrow Agent (or its successor) holds the Escrow Property, and
for so long as no uncontested claims are made by the Company hereunder,
Shareholders shall continue to be deemed to be the registered owner of the
Escrow Shares; provided, however, the Shareholders have each entered into a
Voting Agreement dated of even date herewith (the "Voting Agreement") with
Mr. R. Xxxxxxx Xxxxxx ("Xxxxxx") pursuant to which they have each granted
Xxxxxx, with full power of substitution, a limited irrevocable proxy to
exercise all of their voting and consensual rights with respect to all of the
shares of Common Stock they beneficially own, including, without limitation,
the Escrow Shares (and any voting securities distributed or exchanged for
such Shares or into which such Shares may be converted) in their name and
xxxxx as if they were present at any meeting of stockholders of the Company
and in connection with any solicitation of consents, in accordance with the
provisions of the Voting Agreement (a copy of which is attached hereto as
Appendix D). If requested by the Company, Escrow Agent shall execute and
deliver all such proxies, consents or other documents as Xxxxxx or his
designee may direct in writing in order for Xxxxxx or his designee to
exercise such specific and limited voting and consensual rights. Escrow
Agent agrees to xxxxxxx Xxxxx, acting or behalf of the Shareholders, with
copies of all requests for proxies, documents, proxy statements or other
shareholder communications, which Escrow Agent may receive from the issuer of
any of the securities comprising the Escrow Property, Xxxxxx or his designee.
(f) The Escrow Agent shall not be deemed the owner of the Escrow Property
(record, beneficial, or otherwise) for any purpose, and except as provided in
subsection 7(e) above, shall have no responsibility for the voting of the
Escrow Property.
(g) The Company and Shareholders agree to execute and deliver to the
Escrow Agent all such further documents and other instruments, including
stock powers with medallion signature guarantees affixed thereto, as may be
necessary to implement this Escrow Agreement and the Settlement Agreement and
to deliver any of the Escrow Property, including the Escrow Shares, in a form
transferable by delivery.
Section 8. TERMINATION OF ESCROW
On the earlier of (A) the sale of the Company (whether by merger,
consolidation, sale of stock or sale of all or substantially all of the
assets of the Company), after delivery of
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notice thereof to the Escrow Agent, or (B) the later of (x) the first
anniversary of the Spin-Off (as defined in the Settlement Agreement) or (y)
the second anniversary of the initial Deposit Date (the "Termination Date"),
after delivery of notice thereof to the Escrow Agent, Escrow Agent shall
distribute the remaining Escrow Property to the Shareholders pro rata to the
amounts of their respective shares of Common Stock then comprising the Escrow
Property unless (i) any disputed Claims are then pending, in which case a
number of shares of Common Stock (determined as provided in subsection 3(b))
reflecting the aggregate dollar amount of such Claims (as shown in the
Notices of such Claims) shall be retained by Escrow Agent as Escrow Property,
and the balance of each Shareholder's respective Escrow Property shall be
distributed to them; or (ii) the Company has given notice to Xxxxx, on behalf
of the Shareholders, and to the Escrow Agent, specifying in reasonable detail
the nature of any other Claim it may have under the Settlement Agreement with
respect to which it is unable to specify the amount of damages; or (iii) the
transfer to the Company of ownership of any shares of Common Stock comprising
Escrow Property pursuant to the liquidation of a finally determined Claim
(as described in Section 3(c)) remains subject to the receipt of any
governmental authorization which has not been received, notice of which has
been given to the Escrow Agent, in which case the specific number of shares
of Common Stock so at issue or so involved (or in the case of (ii) above, all
the Escrow Property) shall be retained by Escrow Agent, until it receives
joint written instructions of the Company and Xxxxx, acting on behalf of the
Shareholders, or a final non-appealable order of a court of competent
jurisdiction as contemplated by subsection 3(c).
Section 9. GRANT OF SECURITY INTERESTS; FURTHER ASSURANCES
Without otherwise limiting in any way the rights of the Company hereunder in
and to the Escrow Property, each of the Shareholders hereby grants to the
Company a continuing security interest in and to the Escrow Property owned by
such Shareholder as collateral security for the obligations of Xxxxx to the
Company under the Settlement Agreement. Escrow Agent shall, upon receipt of
the Escrow Property, be deemed to hold the same for the Company to the extent
required for attachment of such security interests in favor of the Company
under applicable provisions of Sections 8-313(1)(e) and 8-321(1) of the
Uniform Commercial Code of the State of California. Shareholders will, at
their own expense as from time to time requested by the Company, promptly
execute and deliver all further stock powers, financing statements,
instruments and other documents as the Company may reasonably deem necessary
or appropriate to perfect and protect the security interests and other rights
of the Company in and to the Escrow Property hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as
of the date first written above.
WITNESS: COMPANY:
OMNI NUTRACEUTICALS, INC.
/s/ Xxxxxxxxx Xxx
----------------------------------
Name: Xxxxxxxxx Xxx By: /s/ R. Xxxxxxx Xxxxxx
---------------------------- ---------------------------------
Name: R. Xxxxxxx Xxxxxx
-------------------------------
Title: Chairman
------------------------------
Address: 00000 Xxxx Xxxxxxxxx Xxxx.
Xxxxxx Xxxx, XX 00000
Attn: Chairman of the Board
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
With a copy to:
Xxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, X.X. 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
THE ESCROW AGENT:
WITNESS: XXXXX FARGO BANK
_______________________________ By:___________________________
Name:__________________________ Name:_________________________
Title:________________________
Address: 000 Xxxx Xxxxx Xxxxxxxxx
Xxxxx 000
Xxxx Xxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
12
WITNESS: SHAREHOLDERS:
/s/ Xxxxxxxxx Xxx /s/ Xxxx Xxxxx
---------------------------------- -----------------------------------
Name: Xxxxxxxxx Xxx Xxxx Xxxxx
-----------------------------
/s/ Xxxxxxxxx Xxxxx
-----------------------------------
/s/ Xxxxxxxxx Xxx Xxxxxxxxx Xxxxx
----------------------------------
Name: Xxxxxxxxx Xxx
-----------------------------
Address: 0000 Xxxxxxx Xxxxx
Xxxxx xxx Xxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxx, Esq.
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
13
APPENDIX A
NOTICE
TO: Xxxxx Fargo Bank, as Escrow Agent
Xxxx Xxxxx
DATE:
---------------------------------
RE: Escrow Agreement dated as of October , 1999 by and among Mr. &
Mrs. Xxxx Xxxxx, Xxxxx Fargo Bank ("Escrow Agent"), and Omni
Nutraceuticals, Inc. ("Company")
================================================================================
Pursuant to the above-referenced agreement ("Escrow Agreement"), please
be advised that the Company is hereby making a Claim against Xxxxx in the amount
of ______________________ shares of Common Stock ("Shares"). Accordingly, we
direct you to deliver a certificate evidencing the Shares as hereinafter
instructed.
Nature of Claim: The Claim is being made pursuant to Section (s)
_____________ of the Settlement Agreement by way of [guarantee]
[indemnification] for the [HealthZone Market Value][the following Losses
incurred by the Company]:
[LIST MATTERS FOR WHICH GUARANTEE AND/OR INDEMNIFICIATION IS CLAIMED]
Calculation of Amount of Shares: The shares to be delivered to the
Company have been calculated as follows:
[INSERT METHOD OF CALCULATION]
Delivery Instructions: Kindly deliver one or more certificates to the
Company's Registrar and Transfer Agent [INSERT NAME AND ADDRESS OF THE REGISTRAR
AND TRANSFER AGENT] with instructions that it issue a new certificate evidencing
the Shares and deliver such certificate to [INSERT NAME AND ADDRESS OF
RECEIPENT] By air courier, with a certificate evidencing the remaining balance
of the Common Stock, if any, to you by air courier for redeposit in escrow.
Very truly yours,
OMNI NUTRACEUTICALS, INC.
WITNESS:
_______________________________ By:___________________________
Name:__________________________ Name:_________________________
Title:________________________
00
XXXXXXXX X
ESCROW AGENT'S AUTHORIZATION
TO: Xxxxx Fargo Bank as Escrow Agent
DATE:
---------------------------------
RE: Escrow Agreement dated as of October , 1999 by and among Mr. &
Mrs. Xxxx Xxxxx ("Shareholders"), Xxxxx Fargo Bank ("Escrow
Agent"), and Omni Nutraceuticals, Inc. ("Company")
===============================================================================
Pursuant to the above-referenced agreement ("Escrow Agreement"), you
are hereby authorized and directed to deliver the following Escrow Property
at a closing to be held on [SPECIFY DATE] at your offices, or such other
place as the undersigned and you may agree in writing:
[IDENTIFY CERTIFICATES AND NO. OF SHARES
AND OTHER ESCROW PROPERTY TO BE DELIVERED]
To the following parties (y):
[IDENTIFY THE PARTIES (Y) TO RECEIVE SUCH ESCROW PROPERTY]
Subject to the following terms and conditions:
[INSERT CONDITIONS, IF ANY, OTHERWISE STATE "NONE"]
The Company and the Shareholders hereby acknowledge satisfaction of all terms
and conditions, if any, set forth above.
WITNESS: COMPANY:
____________________________ By:________________________________
Name:_______________________ Name:______________________________
Title:_____________________________
WITNESS: SHAREHOLDERS:
____________________________ _____________________________
Name:_______________________ Xxxx Xxxxx
WITNESS:
____________________________ ____________________________________
Name:_______________________ Xxxxxxxxx Xxxxx
15
APPENDIX C
FEES OF XXXXX FARGO BANK AS ESCROW AGENT
TO BE PAID JOINTLY IN EQUAL SHARES BY XXXXX
AND THE COMPANY
BASIC ANNUAL FEE:
(BASED ON PERIODIC MARKET VALUE OF THE ESCROW PROPERTY)
ACCOUNT SIZE:
FIRST $2 MILLION .25%
NEXT $3 MILLION .15%
ON BALANCE .10%
MINIMUM ANNUAL FEE $5,000 COLLECTED IN ADVANCE
TRANSACTION CHARGES:
FREE RECEIPTS/DELIVERIES $25
DOMESTIC TRADES (BOOK ENTRY) $25
DOMESTIC TRADES (PHYSICAL) $50
MUTUAL FUND PURCHASE/SALE $35
GLOBAL TRADES $25 PLUS ACTUAL COST.
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