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Title: |
Escrow Agreement |
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Entities: |
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Date: |
2003 |
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Size: |
26KB total |
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Price: |
$42 |
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ID: |
#1256360 |
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ESCROW AGREEMENT
This Escrow Agreement (the Agreement) is entered into as of October 14, 2003 (Effective Date), by and among Vital Living, Inc., a Nevada corporation (Acquiror), all the Shareholders (the Shareholders) of Doctors for Nutrition, Inc., a California corporation (DFN), Mercantile National Bank-California, (Mercantile National Bank) a California banking corporation, in its capacity as escrow agent hereunder (the Escrow Agent), and Bruce Howe, in his capacity as the representative of the Shareholders (the Shareholders Representative) in connection with the transaction set forth in that certain Stock Purchase Agreement (the Purchase Agreement), dated October 14, 2003, by and among Acquiror and the Shareholders.
RECITALS
This Agreement is being entered into in reference to the following facts:
A. Shareholders and Acquiror have entered into the Purchase Agreement pursuant to which Acquiror is acquiring all of the outstanding common stock of DFN (the Transaction), all as further specified in the Purchase Agreement. Capitalized terms used in this Agreement and not otherwise defined, shall have the meanings given them in the Purchase Agreement.
B. Pursuant to the Purchase Agreement, a portion of the Purchase Price payable to the Shareholders consisting of 825,000 shares of Acquiror stock is to be deposited into an escrow fund (i) 175,000 shares (Indemnification Shares) of which will secure certain of the indemnification obligations made by the Shareholders to Acquiror under the Purchase Agreement and (ii) 650,000 shares (Earnout Shares) of which are to be released to the Shareholders only if certain financial targets of DFN are met, all on the terms and conditions set forth therein and herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto hereby agree as follows:
AGREEMENT
1. Appointment; Escrow Account.
(a) Acquiror and Shareholders each hereby appoint the Escrow Agent to act as escrow holder for the Escrow Fund (as hereinafter defined) under the terms hereof. Escrow Agent hereby accepts such appointment and agrees to act as escrow holder for the Escrow Fund in accordance with the terms hereof.
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(b) Immediately following Escrow Agents execution of this Agreement, Escrow Agent shall establish an account at Mercantile National Bank (the Escrow Account) for the purpose of receiving and holding the Escrow Fund.
(c) The Shareholders hereby appoint Bruce Howe to act as representative for the Shareholders under the terms hereof and Bruce Howe hereby accepts such appointment.
2. Escrow Fund; Administration
(a) On the Effective Date, Acquiror shall deposit with the Escrow Agent 825,000 shares of the Acquirors Common Stock (the Escrow Fund). The Escrow Fund shall be held at all time in the Escrow Account as an escrow fund during the Escrow Period as defined in Section 5 below and shall not be subject to any lien, attachment, trustee process or any other judicial process of any creditor of any party hereto. Escrow Agent agrees to accept delivery of the Escrow Fund and to hold such Escrow Fund in the Escrow Account subject to the terms and conditions of this Agreement. Upon request from time to time, Escrow Agent shall notify Acquiror and Shareholders Representative of the amount of the Escrow Fund then held in the Escrow Account.
(b) Escrow Agent shall hold and safeguard the Escrow Fund during the Escrow Period, shall treat such fund as an escrow fund in accordance with the terms of this Agreement and not as the property of Acquiror and shall hold and dispose of the Escrow Fund only in accordance with the terms hereof.
3. Disbursement of Earnout Shares From Escrow Fund. Escrow Agent shall administer the Earnout Shares in the Escrow Fund as described in this Section 3. On or before December 30, 2004, Acquiror shall deliver to Escrow Agent Purchasers Earnout Statement together with its calculation of the number of Earnout Shares, if any, to be disbursed to the Shareholders and the number of Earnout Shares, if any, to be returned to Acquiror (Acquirors Earnout Notice). Acquiror will deliver a copy of Acquirors Earnout Notice to Shareholders Representative prior to or at the same time it provides such information to Escrow Agent. If Escrow Agent does not receive a Dispute Notice from Shareholders Representative within 60 days after Escrow Agent has received the Acquirors Earnout Notice, it shall disburse the Earnout Shares in the manner specified in the Acquirors Earnout Notice. If Escrow Agent does receive a Dispute Notice from Shareholders Representative within 60 days after Escrow Agent has received the Acquirors Earnout Notice, then Escrow Agent shall hold such Earnout Shares until it receives a jointly signed instruction from Acquiror and Shareholders Representative specifying the agreed upon disbursement or a copy of the Expert Calculations in which case it shall make the disbursement of the Earnout Shares based on the EBITDA Amount shown in the Expert Calculations as follows: if the EBITDA Amount is (i) less than $200,000, then the entire balance of the Earnout Shares being held by the Escrow Agent shall be released to the Acquiror; (ii) is at least $200,001 but less than $250,000, then (1) 125,000 shares of the Earnout Shares shall be released to the Shareholders, to be distributed among them in the percentages set forth on Exhibit A attached hereto and (2) any remaining Earnout Shares shall be released to the Acquiror; or (iii) is at least $250,000, then a number of Earnout Shares equal to the sum of (1) 250,000 shares of Earnout Shares plus (2) 10,000 additional shares of Earnout Shares for
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