ESCROW AGREEMENT
Exhibit 10.2
THIS ESCROW AGREEMENT (this “Agreement”), is made and entered into as of this 21st day
of May, 2008, by and among Merge Healthcare Incorporated, a Wisconsin corporation
(“Merge”), SunTrust Bank, a Georgia banking corporation, as escrow agent hereunder (the
“Escrow Agent”), and Xxxxxxx RIS, LLC, a Delaware limited liability company
(“Xxxxxxx”).
BACKGROUND
A. Merge, Xxxxxxx and certain subsidiaries of Merge have entered into that certain Securities
Purchase Agreement, dated May 21, 2008 (the “Purchase Agreement”), pursuant to which Buyer
will purchase newly issued shares of Common Stock of Merge and a new series of senior secured term
notes of Merge.
B. Under the Purchase Agreement, Xxxxxxx may have certain obligations to pay amounts to Merge
upon (i) consummation of the transactions contemplated by the Purchase Agreement of (ii) a
termination of the Purchase Agreement in accordance with Section 8 of the Purchase Agreement and
Article III hereof.
C. To secure these payment obligations, Xxxxxxx will deposit a the sum of $1,000,000 (such
amount, as reduced from time to time by the payments provided for hereunder, the “Escrow Deposit”)
with the Escrow Agent hereunder.
D. Merge and Xxxxxxx desire to secure the services of the Escrow Agent, and the Escrow Agent
is willing to provide such services pursuant to the terms and subject to the conditions of this
Agreement.
E. Capitalized terms used but not otherwise defined herein shall have the respective meanings
given to them in the Purchase Agreement.
NOW, THEREFORE, in consideration of these promises and the mutual and dependent promises
hereinafter set forth, the parties hereto, intending to be legally bound, agree as follows:
ARTICLE I. APPOINTMENT OF ESCROW AGENT;
RESIGNATION AND SUCCESSOR
Section 1.1 Appointment of Escrow Agent. Merge and Xxxxxxx each hereby appoints the
Escrow Agent to serve as escrow agent under this Agreement. The Escrow Agent hereby accepts such
appointment and upon receipt by wire transfer of the Escrow Deposit agrees to hold, invest and
disburse the Escrow Deposit and any and all interest and income earned thereon in accordance with
the terms hereinafter set forth.
Section 1.2 Resignation and Removal of Escrow Agent; Appointment of Successor. The
Escrow Agent acting at any time hereunder may resign at any time by giving at
least thirty (30) days’ prior written notice of resignation to Merge and Xxxxxxx, such
resignation to be effective on the date specified in such notice. Merge and Xxxxxxx may at any
time jointly remove the Escrow Agent, with or without cause, by giving at least thirty (30) days’
prior written notice of removal, signed by both Merge and Xxxxxxx, to the Escrow Agent. Upon the
resignation or removal of the Escrow Agent, Merge and Xxxxxxx will jointly appoint a bank or trust
company with a combined capital and surplus of at least One Hundred Million Dollars ($100,000,000)
as successor Escrow Agent, by a written instrument delivered to such Escrow Agent whereupon such
successor Escrow Agent will succeed to all the rights and obligations of the retiring Escrow Agent
as of the effective date of resignation as if originally named herein. Upon such assignment of
this Agreement, the retiring Escrow Agent will duly transfer and deliver the Escrow Deposit at the
time held by the retiring Escrow Agent to the newly appointed escrow agent. If Merge and Xxxxxxx
have failed to appoint a successor prior to the expiration of thirty (30) days following receipt of
the notice of resignation or removal, the Escrow Agent may deposit the Escrow Deposit into the
registry or custody of any court of competent jurisdiction and notify the other parties hereto of
such deposit, and thereupon the Escrow Agent shall be discharged from all further duties as escrow
agent hereunder. The Escrow Agent shall have no duty with respect to the designation or appointment
of any successor escrow agent hereunder.
ARTICLE II. ESCROW ARRANGEMENTS
Section 2.1 Liability Secured by the Escrow Deposit. Merge and Xxxxxxx hereby agree,
and the Escrow Agent acknowledges, that this Agreement has been executed and delivered and the
Escrow Account (as defined in Section 2.2(b) hereof) is hereby established to facilitate the
payment of Xxxxxxx’x obligations under the Purchase Agreement. The Escrow Deposit will be
disbursed only in accordance with Article III hereof.
Section 2.2 Delivery of the Escrow Deposit.
(a) Simultaneously with the execution of this Agreement, Xxxxxxx will deliver or cause to be
delivered to the Escrow Agent the Escrow Deposit by wire transfer of immediately available funds.
(b) The Escrow Agent will hold the Escrow Deposit in an escrow account (the “Escrow
Account”) for the benefit of Xxxxxxx and Merge. The Escrow Deposit will not be subject to any
lien or attachment of any creditor or any party thereto and will be used solely for the purposes
and subject to the conditions set forth in this Agreement.
(c) Except for the release of the Escrow Deposit pursuant to Article III hereof, and any
transfer thereof pursuant to Section 1.2 hereof or payment of earnings thereon pursuant to Section
2.4 hereof, the Escrow Agent will not sell or transfer any of the Escrow Deposit.
Section 2.3 Investment of the Escrow Deposit. The Escrow Agent is hereby authorized
and directed to invest moneys held in the Escrow Account in savings accounts with, repurchase
agreements, or certificates of deposit issued by, federally chartered banks or trust companies, the
assets of which are at least $100,000,000 in excess of their liabilities, or a RidgeWorth Money
Market Fund (the “Permitted Investments”). Unless jointly instructed
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otherwise in writing by Xxxxxxx and Merge, the Escrow Agent shall invest all funds held
pursuant to this Agreement in a RidgeWorth Money Market Fund.
Except as provided in this Section 2.3, the Escrow Agent will have no power or duty to invest
the Escrow Deposit or to make substitutions therefor or to sell, transfer or otherwise dispose of
investments acquired hereunder, provided, however, the Escrow Agent shall have the right to
liquidate any investment held in order to provide funds necessary to make required payments under
this Agreement.
Merge and Xxxxxxx recognize and agree that the Escrow Agent will not provide supervision,
recommendations or advice relating to either the investment of moneys held in the Escrow Account or
the purchase, sale, retention or other disposition of any Permitted Investment. The Escrow Agent
shall have no liability for any loss resulting from investments made in accordance with the
provisions of this Agreement.
The Escrow Agent shall send statements to Merge and Xxxxxxx reflecting activity in the Escrow
Account upon the request of Merge or Xxxxxxx (but not more frequently than on a monthly basis).
Although each of Merge and Xxxxxxx recognizes that it may obtain a broker confirmation or written
statement containing comparable information at no additional cost, Merge and Xxxxxxx hereby agree
that confirmations of Permitted Investments are not required to be issued by the Escrow Agent for
each month in which a monthly statement is rendered. No statement need be rendered for the Escrow
Account if no activity occurred for such month.
Section 2.4 Earnings on Escrow Deposit; Tax Liabilities. Interest and other earnings
on the Escrow Deposit shall be paid to Xxxxxxx quarterly by the Escrow Agent and any remaining
amount promptly upon the final release of any balance of the Escrow Deposit pursuant to this
Agreement. Any tax liabilities arising from such interest or other earnings shall be for the
account of Xxxxxxx. On or before the execution and delivery of this Agreement, Xxxxxxx shall
provide to the Escrow Agent a completed Form W-9. Notwithstanding anything to the contrary herein
provided, the Escrow Agent shall have no duty to prepare or file any Federal or state tax report or
return with respect to any funds held pursuant to this Agreement or any income earned thereon.
ARTICLE III. RELEASE OF THE ESCROW DEPOSIT
Section 3.1 Release upon the Closing Date. Upon the receipt of joint written
instructions signed by an authorized officer of Merge and Xxxxxxx directing the Escrow Agent to
release the Escrow Deposit, the Escrow Agent will release to Merge the Escrow Deposit in accordance
with such instructions as partial satisfaction of the Purchase Price under the Purchase Agreement.
Section 3.2 Release upon the Termination of the Purchase Agreement.
(a) In the event that Merge terminates the Purchase Agreement in accordance with Section 8(a)
of the Purchase Agreement and (i) all of the conditions set forth in Section 7 of the Purchase
Agreement to have been satisfied by the Companies prior to the Closing have been so satisfied or
waived by the Buyer and (ii) Merge suffers damages as a result of Xxxxxxx’x breach of the Purchase
Agreement, Merge may deliver to the Escrow Agent (with a copy to
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Xxxxxxx) a written notice (a “Notice of Claim”) (i) setting forth a description of
damages relating to Xxxxxxx’x breach of the Purchase Agreement (a “Termination Claim”),
(ii) providing evidence satisfactory to the Escrow Agent that the Termination Claim has been
delivered to Xxxxxxx and (iii) containing wire transfer instructions.
(b) If Xxxxxxx objects to the Termination Claim, Xxxxxxx will, within five (5) business days
after Xxxxxxx’x receipt of the Notice of Claim (the “Reply Period”), deliver to the Escrow
Agent (with a copy to Merge) a certificate (a “Reply Certificate”) specifying (i) its
objection to the payment of the Escrow Deposit and (ii) in reasonable detail the nature and basis
for such objection. Merge and Xxxxxxx will negotiate in good faith for a period of five (5)
business days after delivery of such Reply Certificate to Merge to reach a written resolution of
any objections raised in any such Reply Certificate.
(c) If no Reply Certificate is received by the Escrow Agent with respect to any Notice of
Claim within the Reply Period, then Xxxxxxx will be deemed to have delivered a Payment
Authorization (as defined in Section 3.1(d)) acknowledging Merge’s right to receive the Escrow
Deposit and the Escrow Agent will (without further action by Merge or Xxxxxxx) release the Escrow
Deposit to Merge in accordance with the instructions set forth in the Notice of Claim.
(d) If the Escrow Agent receives a Reply Certificate with respect to any Notice of Claim
within the Reply Period, the Escrow Deposit will be held by the Escrow Agent and will not be
released to Merge or Xxxxxxx except upon delivery to the Escrow Agent of either (i) joint written
instructions signed by an authorized officer of Merge and Xxxxxxx directing the Escrow Agent to
release the Escrow Deposit (or any other amount mutually agreed upon by such parties) or (ii) a
final, non-appealable judgment, order, directive or ruling of a federal or state court of competent
jurisdiction (either of (i) or (ii) being a “Payment Authorization,”) at which date the
Escrow Agent will release the Escrow Deposit in accordance with the Payment Authorization.
(e) Notwithstanding anything contained herein to the contrary, at any time the parties shall
have the right to deliver a Payment Authorization to the Escrow Agent and upon receipt of such
Payment Authorization the Escrow Agent will release the Escrow Deposit in accordance with the
Payment Authorization.
Section 3.3 Release on the Final Release Date. In the event that the Escrow Agent has
not received a Notice of Claim pursuant to Section 3.2 hereof within twenty-seven (27) calendar
days from the date hereof, the Escrow Agent will distribute to Xxxxxxx all amounts then on deposit
in the Escrow Account.
ARTICLE IV. ESCROW AGENT
Section 4.1 Fees. For its services hereunder, the Escrow Agent will receive the fees
set forth on Schedule 1 attached hereto. The Escrow Agent will be reimbursed for all
reasonable out-of-pocket expenses incurred by the Escrow Agent necessary to perform such services
(other than taxes imposed in respect of the receipt of the fees referred to in the preceding
sentence). The fees and the out-of-pocket expenses of the Escrow Agent will be paid to the Escrow
Agent from the Escrow Deposit; provided, however, that if insufficient funds remain in
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the Escrow Account to pay such fees and expenses, the payment thereof shall be a joint and
several obligation of Xxxxxxx and Merge.
Section 4.2 Responsibilities of Escrow Agent. The Escrow Agent’s acceptance of its
duties under this Agreement is subject to the following terms and conditions, which the parties
hereto agree will govern and control with respect to its rights, duties, liabilities and
immunities:
(a) The Escrow Agent will 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 it
may do or refrain from doing in connection with this Agreement, except its own gross negligence or
willful misconduct. In no event shall the Escrow Agent be liable for incidental, indirect,
special, consequential or punitive damages.
(b) The Escrow Agent may consult with legal counsel selected by it, and it will not be liable
for any action taken or omitted by it in good faith in accordance with the advice of such counsel.
(c) The Escrow Agent will have no discretion whatsoever with respect to the management,
disposition or investment of the Escrow Deposit and is not a trustee or fiduciary to Merge or
Xxxxxxx.
(d) Merge and Xxxxxxx agree jointly and severally to indemnify and hold the Escrow Agent and
its directors, employees, officers, agents, successors and assigns (collectively, the
“Indemnified Parties”) harmless from and against any and all losses, claims, damages,
liabilities and expenses (collectively, “Damages”), including, without limitation,
reasonable costs of investigation and counsel fees and expenses which may be imposed on the Escrow
Agent or such persons, or incurred by them, directly or indirectly, in connection with this
Agreement or the Escrow Agent’s acceptance of this appointment as the Escrow Agent hereunder or the
performance of its duties hereunder. Such indemnity includes, without limitation, Damages incurred
in connection with any litigation (whether at the trial or appellate levels) arising from this
Agreement or involving the subject matter hereof. The indemnification provisions contained in this
paragraph are in addition to any other rights any of the Indemnified Parties may have by law or
otherwise and will survive the termination of this Agreement or the resignation or removal of the
Escrow Agent. Notwithstanding any provision to the contrary in this Agreement, Merge and Xxxxxxx
will have no liability to the Indemnified Parties with respect to any Damages that result, directly
or indirectly, from the gross negligence or willful misconduct of the Escrow Agent or such
Indemnified Party.
(e) The Escrow Agent’s duties and obligations hereunder shall be determined solely by the
express provisions of this Agreement. The Escrow Agent shall have no implied duties or obligations
and shall not be charged with knowledge or notice of any fact or circumstance not specifically set
forth herein. The Escrow Agent is not charged with any duties or responsibilities with respect to
the Purchase Agreement and shall not be required to take notice of the Purchase Agreement, except
to the extent that capitalized terms used but not defined herein are defined in the Purchase
Agreement. The Escrow Agent shall not be required
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to notify or obtain the consent, approval, authorization or order of any court or governmental
body to perform its obligations under this Agreement, except as expressly provided herein.
(f) The Escrow Agent will have no responsibility in respect of the validity or sufficiency of
this Agreement or of the terms hereof. The recitals of facts in this Agreement will be taken as
the statements of Merge and Xxxxxxx, and the Escrow Agent assumes no responsibility for the
correctness of the same.
(g) The Escrow Agent will be protected in acting upon any notice, instruction, direction,
resolution, request, consent, order, certificate, report, opinion, bond or other paper or document
which it in good faith believes to be genuine and to have been signed and presented by the proper
party or parties. Whenever the Escrow Agent will deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action under this Agreement, such matter may
be deemed conclusively proved and established by a certificate signed by Merge and Xxxxxxx, and
such certificate will be full warranty for any action taken or suffered in good faith under the
provisions of this Agreement.
(h) In the event of a dispute between the parties hereto sufficient in the sole discretion of
the Escrow Agent to justify its doing so, the Escrow Agent will be entitled at the expense of the
Escrow Deposit to tender the Escrow Deposit into the registry or custody of any court of competent
jurisdiction, to initiate such legal proceedings at the expense of the Escrow Deposit as it deems
appropriate, and thereupon to be discharged from all further duties and liabilities under this
Agreement. Any such legal action may be brought in any such court as the Escrow Agent determines
to have jurisdiction over the Escrow Deposit. The filing of any such legal proceedings will not
deprive the Escrow Agent of its compensation hereunder earned prior to such filing.
(i) Except as specifically set forth above, the Escrow Agent does not have any interest in the
Escrow Deposit but is serving as escrow agent only and having only possession thereof. This
Section 4.2(i) will survive notwithstanding any termination of this Agreement or the resignation of
the Escrow Agent.
(j) Any banking association or corporation into which the Escrow Agent may be merged,
converted or with which the Escrow Agent may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Escrow Agent shall be a party, or any banking
association or corporation to which all or substantially all of the corporate trust business of the
Escrow Agent shall be transferred, shall succeed to all the Escrow Agent’s rights, obligations and
immunities hereunder without the execution or filing of any paper or any further act on the part of
the parties hereto, anything herein to the contrary notwithstanding.
ARTICLE V. MISCELLANEOUS
Section 5.1 Amendment and Termination. This Agreement may be amended or terminated by
the written agreement of the parties hereto, or will terminate automatically at such time as all
securities and funds from the Escrow Deposit have been paid or distributed in accordance with the
terms of this Agreement and the Escrow Agent has received all fees as described in Section 4.1
hereto. Notwithstanding the foregoing, all provisions concerning the
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indemnification of the Escrow Agent and the other Indemnified Parties will survive any
termination of this Agreement and the resignation or removal of the Escrow Agent.
Section 5.2 Notices. All notices, requests, demands, letters, waivers and other
communications required or permitted to be given under this Agreement will be in writing and will
be deemed to have been duly given if (a) delivered personally, (b) mailed, certified or registered
mail with postage prepaid, (c) sent by next-day or overnight mail or delivery, or (d) sent by fax
or portable document format (pdf), as follows:
To Merge:
Merge Healthcare Incorporated
0000 Xxxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
0000 Xxxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
With a copy (for informational purposes only) to:
Xxxxxx & Bird LLP
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
To the Escrow Agent:
SunTrust Bank
Corporate Agency Services
The Hurt Building
00 Xxxx Xxxxx
Xxxxx 0000 Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Group Vice President
Telephone: x0 (000) 000-0000
Facsimile: x0 (000) 000-0000
Email: Xxxx.Xxxxxx@XxxXxxxx.xxx
Corporate Agency Services
The Hurt Building
00 Xxxx Xxxxx
Xxxxx 0000 Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Group Vice President
Telephone: x0 (000) 000-0000
Facsimile: x0 (000) 000-0000
Email: Xxxx.Xxxxxx@XxxXxxxx.xxx
If to Xxxxxxx:
Xxxxxxx Ventures
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx Xxxxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx Xxxxxxxx
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With a copy (for informational purposes only) to:
XxXxxxxxx Will & Xxxxx LLP
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx
or to such other person or address as any party will specify by notice in writing to the party
entitled to notice. All such notices, requests, demands, letters, waivers and other communications
will be deemed to have been received (w) if by personal delivery on the day after such delivery,
(x) if by certified or registered mail, on the fifth (5th) business day after the
mailing thereof, (y) if by next-day or overnight mail or delivery, on the day delivered, or (z) if
by fax, on the day following the day on which such fax was sent, provided that a copy is also sent
by certified, registered or overnight mail; provided, however, that notwithstanding anything to the
contrary herein provided, the Escrow Agent shall not be deemed to have received any notice
hereunder prior to its actual receipt thereof.
Section 5.3 Governing Law. This Agreement will be construed, performed and enforced
in accordance with the laws of the State of Delaware without regard to principles of conflicts of
laws.
Section 5.4 Identifying Information. Merge and Xxxxxxx acknowledge that a portion of
the identifying information set forth on Schedule 2 is being requested by the Escrow Agent in
connection with the USA Patriot Act, Pub.L. 107-56 (the “Act”), and Merge and Xxxxxxx agree
to provide any additional information requested by the Escrow Agent in connection with the Act or
any similar legislation or regulation to which the Escrow Agent is subject, in a timely manner.
Merge and Xxxxxxx each represents, with respect to itself, that all identifying information set
forth on Schedule 2, including, without limitation, its Taxpayer Identification Number assigned by
the Internal Revenue Service or any other taxing authority, is true and complete on the date hereof
and will be true and complete at the time of any disbursement from the Escrow Account.
Section 5.5 Miscellaneous. This Agreement will be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. Neither this Agreement nor any
rights or obligations hereunder may be assigned without the express written consent of each of the
parties hereto, other than an assignment by Xxxxxxx to the holder of a majority of the shares of
its then outstanding capital stock, provided, that, such assignee agrees in a written instrument
reasonably acceptable to Merge and the Escrow Agent to be subject to the same terms and conditions
of this Agreement as Xxxxxxx is then subject. The headings in this Agreement are for convenience
of reference only and will not define or limit the provisions hereof. This Agreement may be
executed in several counterparts, each of which is an original but all of which together will
constitute one instrument.
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IN WITNESS WHEREOF, the undersigned have signed this Agreement as of the date first written
above.
| MERGE HEALTHCARE INCORPORATED | ||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||
| Name: Xxxxxxx X. Xxxxxx | ||||
| Title: Chief Executive Officer | ||||
| Federal Tax I.D.: 00-0000000 | ||||
| XXXXXXX RIS, LLC | ||||
| By: | /s/ Xxxxxx Xxxxxxxx | |||
| Name: Xxxxxx Xxxxxxxx | ||||
| Title: Director | ||||
| Federal Tax I.D.: 00-0000000 | ||||
| SUNTRUST BANK, as Escrow Agent | ||||
| By: | /s/ Xxxx X. Xxxxxx | |||
| Name: Xxxx X. Xxxxxx | ||||
| Title: Group Vice President | ||||
[Signature Page to Escrow Agreement]
