Document:

STOCK ESCROW AGREEMENT

 

STOCK ESCROW AGREEMENT, dated as of __________, 2005 (the “Agreement”), by and among ECHO HEALTHCARE ACQUISITION CORP., a Delaware corporation (the “Company”), the undersigned parties listed under Initial Stockholders on the signature page hereto (each, an “Initial Stockholder” and collectively, the “Initial Stockholders”) and Corporate Stock Transfer, Inc. a Colorado corporation (the “Escrow Agent”). 

 

WHEREAS, the Company has entered into an Underwriting Agreement, dated __________, 2005 (the “Underwriting Agreement”), with Roth Capital Partners, LLC (“Roth Capital”) acting as representative of the several underwriters (collectively, the “Underwriters”), pursuant to which, among other matters, the Underwriters have agreed to purchase 9,375,000 units (the “Units”) of the Company.  Each Unit consists of one share of the Company’s common stock, par value $.0001 per share (the “Common Stock”), and one warrant, to purchase one share of Common Stock, all as more fully described in the Company’s final Prospectus, dated ___________, 2005 (the “Prospectus”) comprising part of the Company’s Registration Statement on Form S-1 (File No. ______________) under the Securities Act of 1933, as amended (the “Registration
Statement”), declared effective on _________, 2005 (the “Effective Date”).

 

WHEREAS, the Initial Stockholders have agreed as a condition of the sale of the Units to deposit their respective shares of Common Stock, in an aggregate amount of 2,343,750 shares, as set forth opposite their respective names in Exhibit A attached hereto (collectively the “Escrow Shares”), in escrow as hereinafter provided.

 

WHEREAS, the Company and the Initial Stockholders desire that the Escrow Agent accept the Escrow Shares, in escrow, to be held and disbursed as hereinafter provided.

 

IT IS AGREED:

 

1.         Appointment of Escrow Agent.  The Company and the Initial Stockholders hereby appoint the Escrow Agent to act in accordance with and subject to the terms of this Agreement and the Escrow Agent hereby accepts such appointment and agrees to act in accordance with and subject to such terms.

 

2.         Deposit of Escrow Shares.  On or before the Effective Date, each of the Initial Stockholders shall deliver to the Escrow Agent certificates representing his respective Escrow Shares, to be held and disbursed subject to the terms and conditions of this Agreement. Each Initial Stockholder acknowledges that the certificate representing his Escrow Shares contains a legend which reflects the deposit of such Escrow Shares under this Agreement.  

 

3.          Disbursement of the Escrow Shares.  The Escrow Agent shall hold the Escrow Shares until the third anniversary of the Effective Date (the “Escrow Period”), on 

 

 

which date it shall, upon written instructions from each Initial Stockholder, disburse each of the Initial Stockholder’s Escrow Shares to such Initial Stockholder; provided, however, that if the Escrow Agent is notified by the Company pursuant to Section 6.7 hereof that the Company is being liquidated at any time during the Escrow Period, then the Escrow Agent shall promptly destroy the certificates representing the Escrow Shares; provided, further, that if, after the Company consummates a Business Combination (as such term is defined in the Registration Statement), it (or the surviving entity) subsequently consummates a liquidation, merger, stock exchange or other similar transaction which results in all of the
stockholders of such entity having the right to exchange their shares of Common Stock for cash, securities or other property, then the Escrow Agent will, upon receipt of a certificate, executed by the Chief Executive Officer or Chief Financial Officer of the Company, in form reasonably acceptable to the Escrow Agent, that such transaction is then being consummated, release the Escrow Shares to the Initial Stockholders upon consummation of such subsequent transaction so that they may similarly participate. The Escrow Agent shall have no further duties hereunder after the disbursement or destruction of the Escrow Shares in accordance with this Section 3.

 

	
            4.  
 	
            Rights of Initial Stockholders in Escrow Shares.
 

 

4.1       Voting Rights as a Stockholder.  Subject to the terms of the Insider Letter described in Section 4.4 hereof and except as otherwise herein provided, the Initial Stockholders shall retain all of their rights as stockholders of the Company during the Escrow Period, including, without limitation, the right to vote such shares.

 

4.2       Dividends and Other Distributions in Respect of the Escrow Shares.  During the Escrow Period, all dividends payable in cash with respect to the Escrow Shares shall be paid to the Initial Stockholders, but all dividends payable in stock or other non-cash property (the “Non-Cash Dividends”) shall be delivered to the Escrow Agent to hold in accordance with the terms hereof. As used herein, the term “Escrow Shares” shall be deemed to include the Non-Cash Dividends distributed thereon, if any.

 

4.3       Restrictions on Transfer.  During the Escrow Period, no sale, transfer or other disposition may be made of any or all of the Escrow Shares except (i) by gift to a member of an Initial Stockholder’s immediate family or to a trust, the beneficiary of which is an Initial Stockholder or a member of an Initial Stockholder’s immediate family, (ii) by virtue of the laws of descent and distribution upon death of any Initial Stockholder, or (iii) pursuant to a qualified domestic relations order; provided, however, that such permissive transfers may be implemented only upon the respective transferee’s written agreement to be bound by the terms and conditions of this Agreement and of the Insider Letter (as defined below)
signed by the Initial Stockholder transferring the Escrow Shares. During the Escrow Period, the Initial Stockholders shall not pledge or grant a security interest in the Escrow Shares or grant a security interest in their rights under this Agreement.

 

 

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4.4       Insider Letters.  Each of the Initial Stockholders has executed a letter agreement with Roth Capital and the Company, dated as indicated on Exhibit A hereto, and which is filed as an exhibit to the Registration Statement (the “Insider Letter”), respecting the rights and obligations of such Initial Stockholder in certain events, including but not limited to the liquidation of the Company.

 

	
            5.  
 	
            Concerning the Escrow Agent.
 

 

5.1       Good Faith Reliance.  The Escrow Agent shall not be liable for any action taken or omitted by it in good faith and in the exercise of its own best judgment, and may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel (including counsel chosen by the Escrow Agent), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which is believed by the Escrow Agent to be genuine and to be signed or presented by the proper person or persons. The Escrow Agent shall not be bound by any notice or demand, or any waiver, modification, termination or rescission of this Agreement unless evidenced
by a writing delivered to the Escrow Agent signed by the proper party or parties and, if the duties or rights of the Escrow Agent are affected, unless it shall have given its prior written consent thereto.

 

5.2       Indemnification.  The Escrow Agent shall be indemnified and held harmless by the Company from and against any expenses, including counsel fees and disbursements, or loss suffered by the Escrow Agent in connection with any action, suit or other proceeding involving any claim which in any way, directly or indirectly, arises out of or relates to this Agreement, the services of the Escrow Agent hereunder, or the Escrow Shares held by it hereunder, other than expenses or losses arising from the gross negligence or willful misconduct of the Escrow Agent. Promptly after the receipt by the Escrow Agent of notice of any demand or claim or the commencement of any action, suit or proceeding, the Escrow Agent shall notify the other parties hereto in writing. In the event of the receipt of such notice, the Escrow Agent, in its sole
discretion, may commence an action in the nature of interpleader in an appropriate court to determine ownership or disposition of the Escrow Shares or it may deposit the Escrow Shares with the clerk of any appropriate court or it may retain the Escrow Shares pending receipt of a final, non-appealable order of a court having jurisdiction over all of the parties hereto directing to whom and under what circumstances the Escrow Shares are to be disbursed and delivered. The provisions of this Section 5.2 shall survive in the event the Escrow Agent resigns or is discharged pursuant to Sections 5.5 or 5.6 below.

 

5.3       Compensation.  The Escrow Agent shall be entitled to reasonable compensation from the Company for all services rendered by it hereunder. The Escrow Agent shall also be entitled to reimbursement from the Company for all expenses paid or incurred by it in the administration of its duties hereunder including, but not limited to, all counsel, advisors’ and agents’ fees and disbursements and all taxes or other governmental charges.

 

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5.4       Further Assurances.  From time to time on and after the date hereof, the Company and the Initial Stockholders shall deliver or cause to be delivered to the Escrow Agent such further documents and instruments and shall do or cause to be done such further acts as the Escrow Agent shall reasonably request to carry out more effectively the provisions and purposes of this Agreement, to evidence compliance herewith or to assure itself that it is protected in acting hereunder.

 

5.5      Resignation.  The Escrow Agent may resign at any time and be discharged from its duties as escrow agent hereunder by its giving the other parties hereto written notice and such resignation shall become effective as hereinafter provided. Such resignation shall become effective at such time that the Escrow Agent shall turn over the Escrow Shares held hereunder to a successor escrow agent appointed by the Company. If no new escrow agent is so appointed within the 60 day period following the giving of such notice of resignation, the Escrow Agent may deposit the Escrow Shares with any court it reasonably deems appropriate.

 

5.6       Discharge of Escrow Agent.  The Escrow Agent shall resign and be discharged from its duties as escrow agent hereunder if so requested in writing at any time by the Company and a majority-in-interest of the Initial Stockholders, jointly; provided, however, that such resignation shall become effective only upon acceptance of appointment by a successor escrow agent as provided in Section 5.5.

 

5.7        Liability.  Notwithstanding anything herein to the contrary, the Escrow Agent shall not be relieved from liability hereunder for its own negligence or its own willful misconduct.

 

	
            6.  
 	
            Miscellaneous.
 

 

6.1       Governing Law.  This Agreement shall for all purposes be deemed to be made under and shall be construed in accordance with the laws of the State of Delaware, without regard to the conflicts of laws principles thereof.

 

6.2      Third Party Beneficiaries.  Each of the Initial Stockholders, the Company and the Escrow Agent hereby specifically acknowledge and agree that the Underwriters are third party beneficiaries of this Agreement and this Agreement may not be modified or changed without the prior written consent of Roth Capital.

 

6.3       Entire Agreement.  This Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof and, except as expressly provided herein, may not be changed or modified except by an instrument in writing signed by the party to be charged.

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6.4        Headings.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation thereof.

 

6.5        Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the respective parties hereto and their legal representatives, successors and assigns.

 

6.6      Notices.  Any notice or other communication required or which may be given hereunder shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five days after deposit of such notice, postage prepaid, or sent by facsimile transmission (with confirmation of receipt), addressed as follows:

 

If to the Company, to:

 

Echo Healthcare Acquisition Corp. 

8000 Towers Crescent Drive, Suite 1300

Vienna, Virginia  22182

Attention:  Joel Kanter

 

If to an Initial Stockholder, to his address set forth in Exhibit A,

 

If to the Escrow Agent, to:

 

Corporate Stock Transfer, Inc.

320 Cherry Creek Drive

Suite 430

Denver, Colorado  80209

Attention:  Carolyn Bell

 

A copy of any notice sent hereunder shall be sent to:

 

Powell Goldstein LLP

	
            One Atlantic Center, Fourteenth Floor
 

1201 W. Peachtree Street, NW

	
            Atlanta, Georgia  30309-3488
 

Attention:  Richard H. Miller, Esq.

and:

 

Roth Capital Partners, LLC

24 Corporate Place Drive

Newport Beach, California  92660

Attn:  Christopher Jennings

 

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and:

 

Ellenoff, Grossman & Schole LLP

370 Lexington Avenue

New York, New York  10017

Attn:  Douglass Ellenoff

 

The parties may change the persons and addresses to which the notices or other communications are to be sent by giving written notice to any such change in the manner provided herein for giving notice.

 

6.7      Liquidation of Company. The Company shall give the Escrow Agent written notification of the liquidation and dissolution of the Company in the event that the Company fails to consummate a Business Combination within the time period(s) specified in the Prospectus.

 

6.8        Counterparts.  This Agreement may be executed in several counterparts, each one of which shall constitute an original and may be delivered by facsimile transmission, and together shall constitute one instrument.  

 

[Remainder of Page Intentionally Left Blank]

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WITNESS the execution of this Agreement as of the date first above written.

	
             
 	
             
 	
             
 
	
             
 	
            ECHO HEALTHCARE ACQUISITION CORP.
 
	
             
 	
             
 	
             
 
	
             
 	
            By:  
 	
             
 
	
             
 	
            _______________________________

Name:  
 
	
             
 	
            Title:  
 

 

	
             
 	
             
 	
             
 
	
             
 	
            CORPORATE STOCK TRUST, INC.
 
	
              
 	
              
 	
              
 
	
             
 	
            By:  
 	
             
 
	
             
 	
            _______________________________

Name:  
 
	
             
 	
            Title:   
 

INITIAL STOCKHOLDERS:  

 

                                                        

Gene E. Burleson

 

                                                        

Joel Kanter

 

                                                        

Kevin Pendergest

 

                                                        

Eugene A. Bauer

 

                                                        

Gary A. Bruhardt

 

                                                        

Alastair Clemon

 

                                                        

Richard Martin

 

Windy City, Inc.

                                                        

	
            Name:                                            

Title:                                               

 

Chicago Investments, Inc.

                                                        

	
            Name:                                            

Title:                                               

 

	
            Stock Escrow Agreement
 	
            Execution Page
 

 

EXHIBIT A

 

Shares of Common Stock held by 

the Initial Stockholders

 

 

 

                                                        
                                          

 

 

 

	
            Stock Escrow Agreement
 	
            Exhibit AJuly 15, 2005

 

Echo Healthcare Acquisition Corp.

8000 Towers Crescent Drive

Suite 1300

Vienna, VA 22182

 

Roth Capital Partners, LLC

24 Corporate Plaza Drive

Newport Beach, CA 92660

 

	
            Re:
 	
            Initial Public Offering
 

 

Gentlemen:

 

The undersigned stockholder, officer and/or director of Echo Healthcare Acquisition Corp. (the “Company”), in consideration of Roth Capital Partners, LLC (“Roth Capital”) entering into a letter of intent (“Letter of Intent”) to underwrite an initial public offering of the securities of the Company (“IPO”) and embarking on the IPO process, hereby agrees as follows (certain capitalized terms used herein are defined in paragraph 11 hereof):

 

1.           If the Company solicits approval of its stockholders of a Business Combination, the undersigned will vote: (i) all Insider Shares owned by him in accordance with the majority of the votes cast by the holders of the IPO Shares, and (ii) all other shares of common stock then owned by him, whether purchased in or after the IPO, in favor of a Business Combination, as a result of which the undersigned acknowledges and agrees that he will not be entitled to exercise the conversion rights offered to the Company’s public stockholders as to any other shares of common stock owned by him.

 

2.           In the event that the Company fails to consummate a Business Combination within 18 months from the effective date (“Effective Date”) of the registration statement relating to the IPO (or 24 months under the circumstances described in the prospectus relating to the IPO), the undersigned will take all reasonable actions within his power to cause the Company to liquidate as soon as reasonably practicable. In such event, the undersigned hereby waives any and all right, title, interest or claim of any kind in or to any liquidating distributions by the Company, including, without limitation, any distribution of the Trust Fund (as defined in the Letter of Intent) as a result of such liquidation with respect to his Insider Shares acquired in or after the IPO (“Claim”) and hereby waives any Claim the undersigned may have in the
future as a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason whatsoever. The undersigned agrees to indemnify and hold harmless the Company, pro rata with the other directors of the Company based on the number of Insider Shares held by each such individual, against any and all loss, liability, claims, damage and expense whatsoever (including, but not limited to, any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, whether pending or threatened, or any claim whatsoever) to which the Company may become subject as a result of any claim by any vendor that is owed money by the Company for services rendered or products sold but only to the extent necessary to ensure that such loss, liability, claim, damage or expense does not reduce the amount in the Trust Fund (as defined in the Letter of Intent).

 

3.           In order to minimize potential conflicts of interest which may arise from multiple affiliations, the undersigned agrees to present to the Company for its consideration, prior to the undersigned’s exploitation of that opportunity in any way or the presentation to any other person or entity unless the opportunity is rejected by the Company, those opportunities to acquire an operating business or any real property or related assets the undersigned reasonably believes are suitable opportunities for the Company, until the earlier of the consummation by the Company of a Business Combination, the liquidation of the Company

 or until such time as the undersigned ceases to be an officer or director of the Company, but subject, in each case, to any pre-existing fiduciary obligations the undersigned might have.

 

4.            The undersigned acknowledges and agrees that the Company will not consummate any Business Combination that involves a company that is affiliated with any of the Insiders unless the Company obtains an opinion from an independent investment banking firm reasonably acceptable to Roth Capital that the business combination is fair to the Company’s stockholders from a financial perspective.

 

5.            Neither the undersigned, any member of the family of the undersigned, nor any Affiliate of the undersigned will be entitled to receive and will not accept any compensation for services rendered to the Company prior to the consummation of the Business Combination; provided that the undersigned shall be entitled to reimbursement from the Company for his out-of-pocket expenses incurred in connection with seeking and consummating a Business Combination and Windy City, Inc. (“Related Party”) shall be allowed to charge the Company $7,500 per month, representing an allocable share of Related Party’s overhead to compensate it for the Company’s use of Related Party’s offices, utilities and personnel.     

 

6.            Neither the undersigned, any member of the family of the undersigned, or any Affiliate of the undersigned will be entitled to receive or accept a finder’s fee or any other compensation in the event the undersigned, any member of the family of the undersigned or any Affiliate of the undersigned originates a Business Combination.

 

7.            The undersigned will escrow his Insider Shares for the three-year period commencing on the Effective Date subject to the terms of a Stock Escrow Agreement which the Company will enter into with the undersigned and an escrow agent acceptable to the Company.

 

8.            The undersigned agrees to be the Director of the Company until the earlier of the consummation by the Company of a Business Combination or the liquidation of the Company. The undersigned’s biographical information furnished to the Company and Roth Capital and attached hereto as Exhibit A is true and accurate in all respects, does not omit any material information with respect to the undersigned’s background and contains all of the information required to be disclosed pursuant to Section 401 of Regulation S-K, promulgated under the Securities Act of 1933.  The undersigned’s Questionnaire furnished to the Company and Roth Capital and annexed as Exhibit B hereto is true and accurate in all respects.  The undersigne

sents and warrants that:

 

(a) he is not subject to or a respondent in any legal action for, any injunction, cease-and-desist order or order or stipulation to desist or refrain from any act or practice relating to the offering of securities in any jurisdiction;

 

(b) he has never been convicted of or pleaded guilty to any crime (i) involving any fraud or (ii) relating to any financial transaction or handling of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and

 

(c) he has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities license or registration denied, suspended or revoked.

 

9.            The undersigned has full right and power, without violating any agreement by which he is bound, to enter into this letter agreement and to serve as the Director of the Company.

 

10.            The undersigned authorizes any employer, financial institution, or consumer credit reporting agency to release to Roth Capital and its legal representatives or agents (including any investigative search firm retained by Roth Capital) any information they may have about the undersigned’s background and finances (“Information”).  Neither Roth Capital nor its agents shall be violating the undersigned’s right of

 privacy in any manner in requesting and obtaining the Information and the undersigned hereby releases them from liability for any damage whatsoever in that connection.

 

11.            As used herein, (i) a “Business Combination” shall mean an acquisition by the Company by merger, capital stock exchange, asset or stock acquisition, reorganization or otherwise and as otherwise described in the registration statement relating to the IPO, of an operating business or real property assets, one or more domestic or international assets or an operating business in the healthcare industry; (ii) “Insiders” shall mean all officers, directors and stockholders of the Company immediately prior to the IPO; (iii) “Insider Shares” shall mean all of the shares of Common Stock of the Company owned by an Insider prior to the IPO; and (iv) “IPO Shares” shall mean the shares of Common Stock issued in the Company’s IPO.

 

12.            The undersigned hereby agrees that any action, proceeding or claim against the undersigned arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of Delaware or the United States District Court for the District of Delaware, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The undersigned hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenience forum.

 

 

	
            By: /s/ Eugene A. Bauer, M.D._____
 
	
            Name:  Eugene A. Bauer, M.D.
Title:  Director
 	
             

                

Exhibit A

 

Eugene A. Bauer, M.D., Director

	
            •
 	
            Over 18 years experience in the healthcare industry;
 

	
            •
 	
            Chief Executive Officer and member of the board of directors of Neosil, Inc., an early stage dermatology pharmaceutical company, since 2004; 
 
	
            •
 	
            Dean of the School of Medicine and Vice President for Medical Affairs at Stanford University, from 1995 to 2001and 1997 to 2001, respectively, and Professor-Emeritus of the School of Medicine since 2002;
 
	
            •
 	
            Founder and member of the board of directors of Connetics Corporation (Nasdaq:CNCT), a company focused on pharmaceuticals for skin diseases, from 1993 to 1995 and since 1996;
 
	
            •
 	
            Senior Client Partner for the North American Health Care Division of Korn/Ferry International (NYSE:KFY), a company that provides executive human capital solutions, with services ranging from corporate governance and chief executive recruitment to executive search, middle management recruitment, strategic management assessment and executive coaching and development, from 2003 to 2005; and
 
	
            •
 	
            Member of the board of directors of Protalex, Inc. (OTCBB:PRTX), a company engaged in the development of biopharmaceutical drugs for treating autoimmune and inflammatory diseases, since February 2005.
 

Dr. Bauer, a director of our Company, is Chief Executive Officer of Neosil, Inc., an early stage dermatology pharmaceutical company, and Professor-Emeritus in the School of Medicine at Stanford University.  Dr. Bauer is one of three co-founders and a member of the Board of Directors of Connetics Corporation (Nasdaq:CNCT), a company focused on pharmaceuticals for skin diseases.  He is also a member of the Board of Directors of Neosil, Inc., an early stage dermatology pharmaceutical company, Protalex, Inc. (OTCBB:PRTX), a company engaged in the development of biopharmaceutical drugs for treating autoimmune and inflammatory diseases, and the American Dermatological Association.  He has served on several not-for-profit boards of directors, including the boards of directors of Stanford Hospital and Clinics, the Lucile Salter Packard Children’s Hospital, and UCSF Stanford Health Care.  Since 2003, Dr. Bauer
has been a Senior Client Partner for the North American Health Care Division of Korn/Ferry International (NYSE:KFY), a company that provides executive human capital solutions, with services ranging from corporate governance and chief executive recruitment to executive search, middle management recruitment, strategic management assessment and executive coaching and development.  From 2002 to 2003, Dr. Bauer was a Senior Consultant for this same division.  Dr. Bauer served as Vice President for Medical Affairs of Stanford University from 1997 to 2000, as Vice President for the Medical Center from 2000 to 2001 and as dean of the School of Medicine from 1995 to 2001.  In these positions, Dr. Bauer was responsible on behalf of Stanford University for all financial and strategic activities of the School of Medicine, the Stanford University Hospital, the Faculty Practice and the Lucile Packard Children’s Hospital.  In the aggregate, the annual budgets of these four entities approximated
$1.5 billion.  Dr. Bauer has been a professor at Stanford University since 1988.  Dr. Bauer received his Bachelor of Science from Northwestern University in 1964 and his M.D. from Northwestern University Medical School in 1967.

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