ESCROW AGREEMENT
EXHIBIT 10.11
THIS ESCROW AGREEMENT (this “Agreement”) is made and entered into this 12th day of
September, 2008 by and among American Claims Evaluation, Inc., a New York corporation
(“Purchaser”), Xxxx Xxxxxxx (“Xxxxxxx”), Xxxx Palin Xxxxxxx (“X. Xxxxxxx”),
Xxxxxxx Palin Xxxxxxx (“X. Xxxxxxx” and collectively with Torrens and X. Xxxxxxx the
“Sellers”) and Xxxxxx Xxxx LLP, a New York limited liability partnership, as escrow agent
(“Escrow Agent”).
RECITALS
WHEREAS, Purchaser and Sellers have entered into a Stock Purchase Agreement dated September
12, 2008 (the “Stock Purchase Agreement”) pursuant to which Sellers have agreed to sell to
Purchaser, and Purchaser has agreed to purchase from Sellers, all of the outstanding shares of
capital stock of Interactive Therapy Group Consultants, Inc., a New York corporation
(“ITG”), subject to the terms and conditions of the Stock Purchase Agreement; and
WHEREAS, pursuant to the Stock Purchase Agreement, Purchaser has agreed to deposit a portion
of the Base Purchase Price (as defined in the Stock Purchase Agreement) in escrow with Escrow Agent
to be held and distributed by Escrow Agent on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and agreements set forth in this
Agreement, the parties hereto hereby agree as follows (capitalized terms used and not otherwise
defined in this Agreement have the respective meanings assigned to them in the Stock Purchase
Agreement):
1. Appointment of Escrow Agent. Purchaser and Torrens hereby designate and appoint
Escrow Agent as escrow agent to receive, hold and disburse the Escrow Funds (as hereinafter
defined), and Escrow Agent hereby accepts such appointment and agrees to act in accordance with the
terms and conditions of this Agreement.
2. Purpose.
2.1 The purpose of the Escrow Funds is to assure that there are funds available to satisfy
Torrens’ indemnification obligations pursuant to Section 8.1(d) of the Stock Purchase Agreement in
respect of any amounts paid by ITG or Purchaser pursuant to a claim by the New York State Insurance
Fund for non-payment of workers’ compensation premiums in the amount of $81,354.00 which amounts
shall also include any penalties, fines and legal fees incurred by the Company or Purchaser in
connection with the payment or settlement of such claim for workers’ compensation premiums
(collectively, the “Workers’ Compensation Claim”) within 240 days of the Closing Date and
(ii) Section 8.1(e) of the Stock Purchase Agreement in respect of any A/R that is not collected in
full within 240 days of the Closing Date, as more fully set forth herein and in the Stock Purchase
Agreement.
2.2 Purchaser, Torrens and Escrow Agent recognize that the Escrow Funds is established as a
non-exclusive source for the satisfaction of Torrens’ indemnification obligations in respect of the
(i) Workers’ Compensation Claim and (ii) Reimbursement Claim and the availability of the Escrow
Funds is not intended, nor does it constitute any limitation on the liability of Torrens under the
Stock Purchase Agreement and the other agreements or documents executed and delivered in connection
therewith, and it is not intended nor does it constitute the sole remedy available to Purchaser in
the event any such indemnification liability in excess of the Escrow Funds is asserted against
Torrens.
3. Effective Date and Term. This Agreement will become effective on the date hereof
and shall remain in effect during the period set forth herein.
4. Deposits. On the date hereof, Purchaser will deliver to Escrow Agent an amount
equal to $105,000 of the Purchase Price as set forth in Section 1.3 of the Stock Purchase
Agreement, $80,000 of which shall be held in respect of the Worker’s Compensation Claim (the
“W/C Escrow Funds”) and $25,000 of which shall be held in respect of the collectability of
the A/R (the “A/R Escrow Funds”) and together with the W/C Escrow Funds, the “Escrow
Funds”) by authorized transfer of funds to be held in escrow and disposed of in accordance with
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provisions of this Agreement. Escrow Agent shall have no responsibility for enforcement of
deposit requirements hereunder.
5. Investments of Escrow Funds. Until the release of the Escrow Funds in accordance
with the terms of this Agreement, Escrow Agent shall invest the Escrow Funds in an interest bearing
XXXX escrow account at the Bank listed on Schedule 1 attached hereto.
6. Interest. All interest earned on the Escrow Funds shall be added to and considered
a part of the Escrow Funds and shall be proportionately allocated to the party or parties who
ultimately receive the Escrow Funds or portion thereof.
7. Disposition of W/C Escrow Funds. Escrow Agent shall hold and disburse the W/C
Escrow Funds in accordance with the following procedures:
7.1 In the event that following the date that is two hundred and forty (240) days following
the Closing Date (the “W/C Escrow Termination Date”), any amounts are claimed to be due
from the Company pursuant to the Worker’s Compensation Claim, Purchaser shall so notify Escrow
Agent and Torrens in writing (a “W/C Notice of Claim”), which written notice shall specify
the basis and amount of the W/C Escrow Funds (a “W/C Claim”) that is to be delivered to
Purchaser in satisfaction of Torrens’ indemnification obligations in Section 8.1(d) of the Stock
Purchase Agreement. Torrens shall give written notice of objection to such W/C Claim to Purchaser
and Escrow Agent within twenty (20) days after its receipt of a W/C Notice of Claim, provided that
any notice of objection shall identify the matters set forth in the W/C Notice of Claim which are
disputed and shall provide with reasonable specificity the amount of the W/C Claim which is in
dispute and the portion of the W/C Escrow Funds specified in the W/C Notice of Claim that Torrens
believes should not be delivered to Purchaser (the “Disputed W/C Escrow Funds”). Promptly
following delivery by Torrens of a notice of objection, or, in the absence of delivery of a notice
of objection within such 20-day period, then promptly following such 20-day period, Escrow Agent
shall, with respect to the undisputed amount of such W/C Claim or W/C Claims, deliver to Purchaser
out of the W/C Escrow Funds either (i) the amount of W/C Escrow Funds specified in the W/C Notice
of Claim if either (x) Torrens fails to deliver to Escrow Agent and Purchaser a notice of objection
during such 20-day period or (ii) all the W/C Escrow Funds specified in the W/C Notice of Claim
other than the Disputed W/C Escrow Funds, if any, in the case a notice of objection is delivered by
Torrens. Failure of Torrens to deliver a notice of objection within such 20-day period shall
constitute an irrevocable waiver on the part of Torrens of his right to object to the delivery to
Purchaser of the W/C Escrow Funds specified in the W/C Notice of Claim.
7.2 If Escrow Agent receives a written notice of objection within the 20-day period referred
to in Section 7.1, then, concurrently with the payment to Purchaser of the undisputed amount of a
W/C Claim, if any, in accordance with Section 7.1, Escrow Agent shall continue to hold that portion
of the W/C Escrow Funds in dispute (an “W/C Disputed Fund”). In the event that a notice of
objection is timely given and Torrens, on the one hand, and Purchaser on the other hand fail to
reach agreement as to the disposition of any W/C Claims within thirty (30) days after receipt by
Purchaser and Escrow Agent of the notice of objection, Torrens and Purchaser may proceed to enforce
their respective rights by arbitration as provided in the Stock Purchase Agreement. Escrow Agent
shall distribute the portion of the W/C Escrow Funds accounted for as a W/C Disputed Fund promptly
upon delivery of and in accordance with the terms of (i) a joint written notice of Purchaser and
Torrens providing instructions therein and certifying that the dispute with respect to such W/C
Disputed Fund has been finally resolved, or (ii) the issuance of an arbitration award, directing
Escrow Agent as to the proper distribution of any amount so held. Torrens or Purchaser shall
deliver to Escrow Agent a certified copy of any order or decree in any award in such arbitration.
Escrow Agent shall act upon such judgment, award, order or decree which has become final (and not
subject to appeal) in like manner as though it constituted the joint instructions of Torrens and
Purchaser.
7.3 If by the date that is five (5) days following the W/C Escrow Termination Date, Escrow
Agent has not received a W/C Notice of Claim from Purchaser, Escrow Agent shall release the W/C
Escrow Funds to Torrens.
8. Disposition of A/R Escrow Funds. Escrow Agent shall hold and disburse the A/R
Escrow Funds in accordance with the following procedures:
8.1 In the event that following the date that is two hundred and forty (240) days following
the Closing Date (the “A/R Escrow Termination Date”), any A/R is not collected in full,
Purchaser shall so notify
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Escrow Agent and Torrens in writing (an “A/R Notice of Claim”), which written notice
shall specify the basis and amount of the A/R Escrow Funds (an “A/R Claim”) that is to be
delivered to Purchaser in satisfaction of Torrens’ indemnification obligations in Section 8.1(e) of
the Asset Purchase Agreement. Torrens shall give written notice of objection to such A/R Claim to
Purchaser and Escrow Agent within twenty (20) days after its receipt of an A/R Notice of Claim,
provided that any notice of objection shall identify the matters set forth in the A/R Notice of
Claim which are disputed and shall provide with reasonable specificity the amount of the A/R Claim
which is in dispute and the portion of the A/R Escrow Funds specified in the A/R Notice of Claim
that Torrens believes should not be delivered to Purchaser (the “Disputed A/R Escrow
Funds”). Promptly following delivery by Torrens of a notice of objection, or, in the absence
of delivery of a notice of objection within such 20-day period, then promptly following such 20-day
period, Escrow Agent shall, with respect to the undisputed amount of such A/R Claim or A/R Claims,
deliver to Purchaser out of the A/R Escrow Funds either (i) the amount of A/R Escrow Funds
specified in the A/R Notice of Claim if either (x) Torrens fails to deliver to Escrow Agent and
Purchaser a notice of objection during such 20-day period or (ii) all the A/R Escrow Funds
specified in the A/R Notice of Claim other than the Disputed A/R Escrow Funds, if any, in the case
a notice of objection is delivered by Torrens. Failure of Torrens to deliver a notice of objection
within such 20-day period shall constitute an irrevocable waiver on the part of Torrens of his
right to object to the delivery to Purchaser of the A/R Escrow Funds specified in the A/R Notice of
Claim.
8.2 If Escrow Agent receives a written notice of objection within the 20-day period referred
to in Section 8.1, then, concurrently with the payment to Purchaser of the undisputed amount of an
A/R Claim, if any, in accordance with Section 8.1, Escrow Agent shall continue to hold that portion
of the A/R Escrow Funds in dispute (a “A/R Disputed Fund”). In the event that a notice of
objection is timely given and Torrens, on the one hand, and Purchaser on the other hand fail to
reach agreement as to the disposition of any A/R Claims within thirty (30) days after receipt by
Purchaser and Escrow Agent of the notice of objection, Torrens and Purchaser may proceed to enforce
their respective rights by arbitration as provided in the Stock Purchase Agreement. Escrow Agent
shall distribute the portion of the A/R Escrow Funds accounted for as an A/R Disputed Fund promptly
upon delivery of and in accordance with the terms of (i) a joint written notice of Purchaser and
Torrens providing instructions therein and certifying that the dispute with respect to such A/R
Disputed Fund has been finally resolved, or (ii) the issuance of an arbitration award, directing
Escrow Agent as to the proper distribution of any amount so held. Torrens or Purchaser shall
deliver to Escrow Agent a certified copy of any order or decree in any award in such arbitration.
Escrow Agent shall act upon such judgment, award, order or decree which has become final (and not
subject to appeal) in like manner as though it constituted the joint instructions of Torrens and
Purchaser.
8.3 If by the date that is five (5) days following the A/R Escrow Termination Date, Escrow
Agent has not received an A/R Notice of Claim from Purchaser, Escrow Agent shall release the A/R
Escrow Funds to Torrens.
9. Disbursement Disputes. If a controversy arises between one or more of the parties
hereto, or between any of the parties hereto and any Person not a party hereto, as to whether or
not or to whom Escrow Agent shall deliver the Escrow Funds, or any portion thereof, or as to any
other matter arising out of or relating to the Escrow Funds or this Agreement, Escrow Agent shall
not determine the same and shall not make any delivery of any disputed portion of the Escrow Funds,
but shall retain the same until the rights of the parties to the dispute shall have finally been
determined by written agreement among the parties to the dispute in accordance with Section 9.4 of
the Stock Purchase Agreement. Escrow Agent shall be entitled to assume that no such controversy
has arisen unless it has received written notice that such a controversy has arisen which refers
specifically to this Agreement and identifies by name and address the adverse claimants to the
controversy. If a controversy of the type referred to in this Paragraph 9 arises, Escrow Agent may
(but shall not be obligated to), in its sole discretion, commence interpleader or similar actions
or proceedings for the determination of the controversy.
10. Escrow Agent’s Responsibilities. Escrow Agent’s sole responsibilities shall be
for the acceptance and safekeeping, the investment and disbursement and the disposition of the
Escrow Funds, all in accordance with the terms of this Agreement. Escrow Agent shall not be
required to take any other actions with reference to any matters which might arise in connection
with the Escrow Funds or this Escrow Agreement. Escrow Agent shall be entitled to rely upon the
authorizations of Purchaser and/or Torrens (as required herein) and may act upon any such written
instruction or other instruments which Escrow Agent in good faith believes to be genuine and what
they purport to be.
Escrow Agent shall not be liable for any actions taken by it in good faith and believed to be
authorized or within the rights or powers conferred upon it by this Escrow Agreement or for any
actions which Escrow Agent may
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take or refrain from taking in connection herewith, unless Escrow Agent is guilty of gross
negligence or willful misconduct. Escrow Agent may consult with legal counsel of its choice, and
shall have full and complete authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel, except actions
constituting gross negligence or willful misconduct. Escrow Agent has no duty to determine or
inquire into any happening or occurrence or performance or failure of performance by Purchaser or
Torrens or any other Person with respect to agreements or arrangements with each other or with any
other Person.
11. Indemnification. Purchaser and Torrens each indemnify, defend and hold harmless
Escrow Agent against and from any and all Losses) that may arise out of or in connection with its
acting as Escrow Agent under this Agreement, except any Losses resulting from Escrow Agent’s
willful misconduct. The provisions of this Paragraph will survive the termination of this
Agreement.
12. Waiver of Conflict; Reimbursement of Expenses.
12.1 Purchaser and Torrens acknowledge that Escrow Agent is acting solely as escrow agent
hereunder without compensation and solely as an accommodation to Purchaser and Torrens. Escrow
Agent has performed and shall continue to perform legal services for Purchaser. Purchaser and
Torrens each waive any conflict with respect to the performance of such services and the
performance of the duties of the Escrow Agent pursuant to this Agreement.
12.2 Escrow Agent shall be reimbursed for any reasonable expenses incurred, including any
legal fees and expenses arising out or in connection with its duties under this Agreement or that
may be incurred in the event that any disputes require the engagement of legal counsel to protect
the interests of Escrow Agent. Such reasonable expenses charged and/or incurred by Escrow Agent
will be shared equally by Purchaser and Torrens.
13. Resignation of Escrow Agent. Escrow Agent may resign as escrow agent upon ten
(10) days prior written notice to Purchaser and Torrens, specifying the date upon which such
resignation shall become effective. Upon the effective date of such resignation, Escrow Agent
shall be discharged from any further obligation under this Agreement and the Stock Purchase
Agreement. In such event, Escrow Agent will cooperate fully with Purchaser and Torrens in the
orderly transfer of all funds, reports and other documents applicable to the Escrow Funds.
14. Removal of Escrow Agent. Escrow Agent may be removed as escrow agent upon ten
(10) days prior written notice to Escrow Agent signed by Purchaser and Torrens, specifying the date
upon which such removal shall become effective. Upon the effective date of such removal, Escrow
Agent shall be discharged from any further obligations under this Agreement and the Stock Purchase
Agreement. In such event, Escrow Agent will cooperate fully with Purchaser and Torrens in the
orderly transfer of all funds, reports and other documents applicable to the Escrow Funds.
15. Termination. This Escrow Agreement shall terminate upon the happening of any one
of the following events:
15.1 Disposition of the entire Escrow Funds in accordance with the provisions of Paragraphs 7
and 8.
15.2 Resignation of Escrow Agent in accordance with Paragraph 13.
15.3 Removal of Escrow Agent in accordance with Paragraph 14.
16. Binding Effect; Assignment. This Agreement shall be binding upon and shall inure
to the benefit of, and be enforceable by, the parties and their successors and permitted assigns.
This Agreement may not be assigned by any party without the prior written consent of the other
parties; provided, however, that Purchaser may (i) assign any or all of its rights and interests
hereunder to one or more of its affiliates or subsidiaries or (ii) designate one or more of its
affiliates or subsidiaries to perform its obligations hereunder. Except as set forth in this
Agreement, nothing herein is intended to, nor shall it, create any rights in any Person other than
the parties and their respective successors and permitted assigns.
17. Notices. All notices, communications and deliveries hereunder shall be made in
writing signed by or on behalf of the party making the same and shall be delivered personally or by
facsimile or other electronic
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transmission or sent by registered or certified mail (return receipt requested) or by any
national overnight courier service (with postage and other fees prepaid) as follows:
If to Torrens to: |
||
| Xx. Xxxx Xxxxxxx | ||
| 0000 Xxxx Xxxxxx Xxxxxxxx | ||
| Xxxxxxxxxx, XX 00000 | ||
If to X. Xxxxxxx to: |
||
| Xxxx Palin Xxxxxxx | ||
| c/o Xxxx Xxxxxxx | ||
| 0000 Xxxx Xxxxxx Xxxxxxxx | ||
| Xxxxxxxxxx, XX 00000 | ||
If to X. Xxxxxxx to: |
||
| Xxxxxxx Palin Torrens | ||
| c/o Xxxx Xxxxxxx | ||
| 0000 Xxxx Xxxxxx Xxxxxxxx | ||
| Xxxxxxxxxx, XX 00000 | ||
| In each case with a copy (which shall not constitute notice) to: | ||
| Xxxxxxxx & Xxx, PLC | ||
| 000 Xxxxxx Xxxxxx, Xxxxx 0000 | ||
| Xxxxxxxxx, Xxxxxxxxx 00000-0000 | ||
| Attn: Xxxxxxxxx X. Xxxxx, Esq. | ||
| Facsimile: (000) 000-0000 | ||
If to Purchaser to: |
||
| American Claims Evaluation, Inc. | ||
| Xxx Xxxxxxx Xxxxx | ||
| Xxxxxxx, XX 00000 | ||
| Attn: Xxxx Xxxxxx | ||
| Facsimile: (000) 000-0000 | ||
| with a copy (which shall not constitute notice) to: | ||
| Xxxxxx Xxxx LLP | ||
| 000 Xxxxx Xxxxxx | ||
| Xxx Xxxx, XX 00000 | ||
| Attn: Xxxx X. Xxxxx, Esq. | ||
| Facsimile: (000) 000-0000 | ||
If to Escrow Agent to: |
||
| Xxxxxx Xxxx LLP | ||
| 000 Xxxxx Xxxxxx | ||
| Xxx Xxxx, XX 00000 | ||
| Attn: Xxxx X. Xxxxx, Esq. | ||
| Facsimile: (000) 000-0000 | ||
or to such other representative or at such other address of a party as such party may furnish to
the other party in writing. Any such notice, communication or delivery shall be deemed given or
made (a) on the date of delivery if delivered in person (by courier service or otherwise), (b) upon
transmission by facsimile or other electronic transmission if receipt is confirmed by telephone,
provided transmission is made during regular business hours, or if not, the next business day, or
(c) on the fifth (5th) business day after it is mailed by registered or certified mail.
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18. Governing Law. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York without regard to its provisions concerning
conflicts or choice of laws.
19. Entire Agreement; Amendments. This Agreement (including the schedule hereto) sets
forth the entire agreement of the parties with respect to the subject matter of this Agreement and
supersedes any and all prior discussions, agreements, terms sheets or understandings between them
with respect to such matters. This Agreement may be modified only in writing signed by all the
parties hereto.
20. Counterparts. This Agreement may be executed and delivered by facsimile or other
electronically-scanned signature pages and in one or more counterparts, each of which shall be
deemed an original, but all of which together will constitute one and the same instrument.
21. Headings. The Article and Section headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto intending to be legally bound, have read and executed
this Agreement the day and year first above stated.
AMERICAN CLAIMS EVALUATION, INC. |
||||
| By: | /s/ Xxxx Xxxxxx | |||
| Xxxx Xxxxxx | ||||
| President and Chief Executive Officer | ||||
| /s/ Xxxx Xxxxxxx | ||||
| Xxxx Xxxxxxx | ||||
| /s/ Xxxx Xxxxxxx | ||||
| Xxxx Xxxxxxx, as | ||||
| parent of Xxxx Palin Torrens | ||||
| /s/ Xxxx Xxxxxxx | ||||
| Xxxx Xxxxxxx, as | ||||
| parent of Xxxxxxx Palin Xxxxxxx | ||||
| XXXXXX XXXX LLP |
||||
| By: | /s/ Xxxx X. Xxxxx | |||
| Title: | Partner | |||
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