ESCROW AGREEMENT
Exhibit
10.3
This
Escrow Agreement
("Escrow
Agreement") is made and entered into as of April 30, 2007 (the "Closing Date")
by and among Xxxxx Analytical Group LLC, a Delaware limited liability company
("Depositor"), Accurel Systems International Corporation, a California
corporation, and Implant Sciences Corporation, a Massachusetts corporation
(collectively “Sellers”), and Zions
First National Bank
(the
"Escrow Agent").
WHEREAS,
Depositor and Sellers have entered into that certain Asset Purchase Agreement
dated as of the Closing Date (the "Purchase Agreement"); and
WHEREAS,
the Asset Purchase Agreement provides for the deposit of $1,000,000 cash into
an
Escrow Account as security for the indemnification obligations of Sellers under
the Purchase Agreement.
The
Depositor, Sellers and Escrow Agent agree as follows:
1.
Escrow
Agent Only a Depository.
On April
30, 2007, Depositor hereby delivers to the Escrow Agent the amount in cash
set
forth in Exhibit A attached hereto (once placed in the escrow fund, as increased
by earnings thereon or as reduced by any disbursements, amounts withdrawn or
losses on investments, the "Escrow Property"). The Escrow Agent acts hereunder
as a depository only and is not responsible or liable for the sufficiency,
correctness, genuineness or validity of any instrument deposited hereunder
or
with respect to the form or execution of the same or the identity, authority
or
rights of any person executing or depositing the same. The Escrow Agent is
not a
party to the Purchase Agreement and has no duty to review the Purchase Agreement
or to interpret in any manner the terms of the Purchase Agreement.
2. Claims.
Pursuant
to the terms of Section 6.3 of the Purchase Agreement, Sellers have agreed
to
indemnify the Depositor and related parties in the case of certain
circumstances. Depositor shall provide notice to the Sellers and to the Escrow
Agent of any claim by the Depositor or related parties for indemnification
pursuant to Section 6.3 of the Purchase Agreement (any such Notice, a “Claims
Notice”). The Claims Notice shall state a good faith, non-binding, preliminary
estimate of the claimed amount of Damages (the “Claimed Amount”), the sub-item
of Section 6.3 upon which the request is based, and a detailed description
of
the facts underlying the request. Within
20
calendar days after receipt by the Sellers and the Escrow Agent of a Claims
Notice, the Sellers may deliver to the Depositor and to the Escrow Agent a
written response (the “Response Notice”) in which the Sellers: (i) agree that
cash in an amount equal to the full claimed amount may be released from the
Escrow Fund to Depositor; (ii) agree that cash in an amount equal to part,
but
not all, of the claimed amount (the “Agreed Amount”) may be released from the
Escrow Fund to Depositor; or (iii) indicates that no part of the Escrow Fund
may
be released from the Escrow Fund to Depositor in respect of the claimed amount.
Any Response Notice delivered in accordance with clause “(ii)” or “(iii)” of the
preceding sentence shall also contain a brief non-binding description of the
facts and circumstances supporting the Seller’s claim that only a portion or no
part of the claimed amount is owed to Depositor or related parties. Any part
of
the claimed amount that is not agreed to be owing pursuant to the Response
Notice shall be the “Contested Amount.” If a Response Notice is not received by
the Escrow Agent within such 20 day period, then the Sellers shall be
conclusively deemed to have agreed that cash in an amount equal to the full
claimed amount may be released to the Depositor from the Escrow Fund. If the
Seller delivers a Response Notice agreeing that cash in an amount equal to
the
full Claimed Amount may be released from the Escrow Fund to the Depositor,
or if
the Seller does not deliver a Response Notice on a timely basis in accordance
with this Section 2, the Escrow Agent shall within five business days following
the receipt of such Response Notice (or, if the Escrow Agent has not received
a
Response Notice, within five business days following the expiration of the
20
day period referred to above), deliver to Depositor such cash; provided that
in
the case of the Escrow Agent not receiving any Response Notice, the Escrow
Agent
shall not disburse cash to the Depositor until Depositor provides the Escrow
Agent with written confirmation that the Claims Notice was delivered to the
Sellers in accordance with Section 3.
3.
Notice.
Other
than as specifically set forth herein, the Escrow Agent shall not be required
to
take or be bound by any notice or to take any action unless the Escrow Agent
is
indemnified in a manner satisfactory to it against any expense or liability.
Any
notice required or desired to be given by the Depositor, Sellers or the Escrow
Agent to any other party to this Escrow Agreement may be given by delivery
in
person or by facsimile transmission or mailing the same, postage prepaid, to
such party at the address noted on the signature page and notice so mailed
shall
for all purposes hereof be as effective as though served upon such party in
person at the time of depositing such notice in the mail. It shall be the
responsibility of the Depositor, Sellers and the Escrow Agent to notify each
other in writing by appropriate documentation of any name, address or facsimile
number change.
4.
Reliance
upon Depositor.
The
Escrow Agent shall be protected in acting upon any notice, request, waiver,
consent, receipt or other paper or document received from the Depositor and
believed by the Escrow Agent to be genuine. The Escrow Agent shall be under
no
duty or obligation to ascertain the identity, authority and/or rights of any
person submitting instructions to the Escrow Agent in accordance with the Escrow
Agreement.
5.
Limitations
of Liability.
The
Escrow Agent shall not be liable for any error of judgment or for any act done
or step taken or omitted by it in good faith or for any mistake of fact or
law
or for anything which the Escrow Agent may do or refrain from doing in
connection herewith, including upon advice of counsel, except for its own
willful misconduct or gross negligence.
6. Adverse
claims.
In the
event of an adverse claim or demand affecting the Escrow Property, the Escrow
Agent may refuse to comply with such claim or demand and may refuse to deliver
or dispose of the Escrow Property until the rights of the adverse claimants
have
been finally adjudicated in a court of competent jurisdiction or pursuant to
binding arbitration or until all differences shall have been adjusted by
agreement and the Escrow Agent shall have been notified thereof in writing
signed by all parties to this Escrow Agreement.
7.
Authority
for Agreement.
Each
party represents and warrants that it has full power and authority to enter
into
this Escrow Agreement and has taken all action necessary, corporate or
otherwise, to carry out the transaction contemplated hereby so that when
executed this Escrow Agreement constitutes a valid and binding obligation
enforceable in accordance with its terms.
8.
Escrow
Property.
No
assignment, transfer, conveyance or hypothecation of any right, title or
interest in and to the Escrow Property shall be binding upon the Escrow Agent
unless written notice thereof shall be served upon the Escrow Agent and all
fees, cost and expenses incident to such transfer of interest shall have been
paid.
9.
Terms
of Agreement.
The
terms of this Escrow Agreement may be altered, amended, modified or revoked
by
writing only, signed by all of the parties hereto or their successors or
assigns, and approved by the Escrow Agent, upon payment of all fees, costs
and
expenses incident hereto.
10.
Compensation.
In
consideration of the Escrow Agent's agreement to perform the services set forth
in the Escrow Agreement, the Depositor and Sellers agree to pay the fees and
charges of the Escrow Agent in accordance with Exhibit C attached hereto. In
addition to the escrow fee agreed upon, Depositor and the Sellers agree to
pay
the Escrow Agent's costs and expenses including reasonable attorneys fees in
the
event of any dispute or litigation threatened or commenced which requires the
Escrow Agent in its opinion to refer such matter to its attorneys. Escrow Agent
will incur no liability for any delay reasonably required to obtain such advice
of counsel. The Escrow Agent shall have a first lien on the Escrow Property
held
by it hereunder for its compensation and any costs or expense incurred. With
respect to the proportion of compensation to be paid by the Depositor and the
Sellers to the Escrow Agent, compensation shall first be paid by the Depositor
to the extent of and recoverable against any interest earned on the Escrow
Property while held by the Escrow Agent. To the extent the total amount owed
to
the Escrow Agent exceeds the total amount of interest earned on the Escrow
Property, such excess shall be borne equally by the Depositor and the
Sellers.
11.
Integration.
This
instrument is the entire agreement of the parties hereto. The Escrow Agent
shall
have no duty to know or determine the performance or nonperformance of any
provision of any agreement between or with the other parties hereto, and the
original copy or a copy of any such agreement deposited with the Escrow Agent
shall not bind it in any manner. The Escrow Agent assumes no responsibility
for
the validity or sufficiency of any documents or papers or payments deposited
or
called for hereunder except as may be expressly and specifically set forth
in
this Escrow Agreement.
12.
Arbitration.
The
parties expressly agree that, should any dispute involving Escrow Agent arise
relating to this agreement or its negotiation, executions, performance or
modification, it shall be resolved by binding Arbitrations Rules of the AAA.
Such arbitrations shall proceed in the County of Los Angeles, California and
shall be governed by the provisions of the Federal Arbitrations Act, and to
the
extent the foregoing are inapplicable, unenforceable or invalid, by the laws
of
the State of California. Any decision on the merits of any claim or portion
thereof rendered by arbitrators shall be made by way of a written opinion in
which the reasons for the decision are explained. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction.
Any
party who fails to submit to binding arbitration following a lawful demand
of
the opposing party shall bear all costs and expenses, .including reasonable
attorney fees, incurred by the opposing party in compelling arbitration.
Notwithstanding
the foregoing, any dispute between Depositor and Sellers relating to or arising
under the Purchase Agreement or otherwise governed by the arbitration and
dispute provisions of the Purchase Agreement shall be resolved pursuant to
the
provisions of the Purchase Agreement.
13.
Indemnification.
Depositor and Sellers hereby agree to indemnify and save Escrow Agent harmless
from and against any and all claims, demands, actions, proceedings, judgments,
losses, damages, counsel fees, court costs, payments, expenses, and all
liabilities whatsoever, which Escrow Agent at any time shall or may sustain
or
incur by reason of complying with the duties of this Escrow Agreement or any
requests made by Depositor or Sellers save for its own gross negligence or
willful misconduct.
14.
Tax
Reporting.
The
parties hereto agree that, for tax reporting purposes, all interest or other
income earned, if any, from the investment of the Escrow Funds shall be
allocable to the Depositor.
15.
Certification
of Tax Identification Number.
The
parties hereto agree to provide the Escrow Agent with a certified tax
identification number by signing and returning a Form W-9 (or Form W-8, in
the
case of non-U.S. persons) and other forms and documents that the Escrow Agent
may reasonably request (collectively, "Tax Reporting Documentation") to the
Escrow Agent within 30 days from the date hereof. The parties hereto understand
that, if such Tax Reporting Documentation is not so certified to the Escrow
Agent, the Escrow Agent may be required by the Internal Revenue Code, as amended
from time to time, to withhold a portion of any interest or other income earned
on the investment of moneys or other property held by the Escrow Agent pursuant
to this Escrow Agreement.
16.
Termination.
If the
Escrow Property has not been withdrawn before January 1, 2010, then this Escrow
Agreement shall automatically terminate and the Escrow Agent shall deliver
same
pursuant to the provisions of Exhibit B; provided, however, in the event that
the parties hereto shall have a pending arbitration or litigation relating
to or
effecting the Escrow Property, then this Agreement shall continue until such
arbitration or litigation (including applicable appeal periods) shall
conclude.
17.
Resignation
of Escrow Agent.
The
Escrow Agent may resign at any time by giving written notice by Overnight or
Certified Mail, return receipt requested, to all of the parties hereto and
to be
effective thirty days after such notice has been deposited into the U.S. Mail.
If a successor agent has not been appointed within thirty days after such notice
of resignation, the Escrow Agent may petition any court of competent
jurisdiction for the appointment of a successor Escrow Agent. Costs of such
petition, including reasonable attorneys' fees, shall be borne by the Depositor
or may be assessed by the resigning Escrow Agent against the Escrow Property.
18.
Applicable
Law.
This
agreement shall be constructed and construed in accordance with the laws of
the
State of California.
19.
Investments.
The
Escrow Agent shall not be responsible or liable for any diminution of principal,
interest, or penalty on any investments of the Escrow property made pursuant
to
the terms of this Escrow Agreement. Unless otherwise instructed by the
Depositor, the Escrow Property shall be invested in Dreyfus Treasury Cash
Management Fund (Participant Shares), a money market fund registered under
the
Investment Company Act of 1940, the principal of which is invested solely in
obligations issued or guaranteed by the United States Government and repurchase
agreements in respect of these obligations, or a similar money market fund
as
directed in writing by the Depositor. The Escrow Agent is authorized to
liquidate in accordance with its customary procedures any portion of the Escrow
Property to provide for payments required to be made under this Escrow
Agreement. The Depositor acknowledges that, pursuant to national banking
regulations, it is entitled to receive separate notification of every security
transaction and hereby waives receipt of such notification in view of the
inclusion of such information in the transaction statements to be provided
by
the Escrow Agent.
20.
Conflicts.
If a
conflict arises between the instructions set forth in Exhibit B ("Specific
Instructions") and the terms set forth herein, then the terms set forth herein
shall rule.
[remainder
of this page intentionally blank; signature page
follows]
In
Witness Whereof
the
undersigned have hereto affixed their signatures, and hereby adopt Exhibits
A, B
and C attached hereto as part of this Escrow Agreement, as of the day and year
first above written.
|
DEPOSITOR
Xxxxx
Analytical Group LLC
By:
Name:
Title:
Xxxxx
Analytical Group LLC
000
Xxxxx Xxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxx
Phone:
000-000-0000
Facsimile:
000-000-0000
|
ESCROW
AGENT
Zions
First National Bank, as Escrow Agent
By:
Name:
Title:
Zions
First National Bank
Corporate
Trust Department
000
Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxx, XX 00000
Phone:
000-000-000
Facsimile:
000-000-0000
|
|
SELLERS
Accurel
Systems International Corporation
By:
Name:
Title:
Implant
Sciences Corporation
By:
Name:
Title:
|
Notice
to
both Accurel and Implant Sciences to be provided to:
Implant
Sciences Corporation
000
Xxxxxxx Xxxx, #0
Xxxxxxxxx,
XX 00000-0000
Attention:
Xxxxx Xxxx
Phone:
000-000-0000
Facsimile:
000-000-0000
EXHIBIT
A
("Escrow
Property")
One
Million Dollars ($1,000,000.00)
EXHIBIT
B
("Specific
Instructions")
All
capitalized terms used in this Exhibit B and not otherwise defined in this
Escrow Agreement shall have the meaning provided in that certain Asset Purchase
Agreement dated April 30, 2007, by and between Sellers and Depositor (the
"Purchase Agreement").
(1) On
the
earlier of March 31, 2008 or ten (10) days after the issuance of Depositor’s
audited financial statements for the fiscal year ending in 2007, the Escrow
Agent shall disburse to the Sellers out of the Escrow Account an amount equal
to
(i) Five Hundred Thousand Dollars ($500,000.00), less (ii) the amount of all
indemnification payments payable by the Sellers that have been deducted from
the
Escrow Account since the Closing Date, less (iii) the amount of all unresolved
claims against the Sellers for indemnification pursuant to the Purchase
Agreement for which the Escrow Agent has received a Claims Notice (the “First
Escrow Payment”) pursuant to the written direction of the Depositor delivered to
the Escrow Agent; and
(2) On
the
earlier of March 31, 2009 or ten (10) days after the issuance of the Depositor’s
audited financial statements for the fiscal year ending in 2008, the Escrow
Agent shall disburse to the Sellers out of the Escrow Account an amount equal
to
(i) One Million Dollars ($1,000,000.00) less (ii) the First Escrow Payment,
less
(iii) the amount of all indemnification payments payable by the Sellers that
have been deducted from the Escrow Account since the Closing Date, less (iv)
the
amount of all unresolved claims against the Sellers for indemnification pursuant
to this Agreement for which the Escrow Agent has received a Claims Notice (the
“Second Escrow Payment”) pursuant to the written direction of the Depositor
delivered to the Escrow Agent. The Sellers retain the right to dispute any
such
unresolved claims for indemnification in accordance with Section 6.2 of the
Purchase Agreement.
(3) Following
final resolution of any unresolved claims deducted from the Second Escrow
Payment, the Escrow Agent shall disburse to the Sellers out of the Escrow
Account an amount equal to the excess (if any) of the amounts deducted from
the
Second Escrow Payment for such claims over the amount actually used to satisfy
such claims.
(4)
Upon
termination of this Escrow Agreement pursuant to Section 16 of this Escrow
Agreement, any funds retained in the Escrow Account shall be disbursed to
Depositor.
EXHIBIT
C
("Fee
Schedule")
