Exhibit 10.2
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ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made June 3,
2003, by and among ▇▇▇▇▇▇▇ ▇▇▇▇▇ School, Inc, a New York
corporation ("Seller"), Touchstone Applied Science Associates,
Inc., a Delaware corporation ("TASA"), TASA Educational
Services Corporation, a Delaware corporation ("TESC", with
Seller and TASA, the "Seller Parties") and Empire Education
Corporation, a Delaware corporation ("Purchaser") and ▇▇▇▇▇▇▇
▇▇▇▇ LLP, as escrow agent (the "Escrow Agent"). Capitalized
terms used and not otherwise defined herein shall have the
meanings accorded to such terms under the Asset Sale Agreement
referred to below.
WHEREAS, Seller Parties and Purchaser entered into an Asset
Sale Agreement, dated the date hereof (the "Sale Agreement") for
the purchase of substantially all of the Assets of a post-
secondary proprietary school in the State of New York and a
branch of such school in the Commonwealth of Massachusetts
operated by Seller.
WHEREAS, pursuant to the Sale Agreement, Purchaser and
Seller have agreed to establish an escrow relationship with
Escrow Agent for the purpose of delivering to the Escrow Agent
certain funds to be held in escrow and disposed of in accordance
with the terms and conditions hereof.
WHEREAS, pursuant to Paragraph "17" of the Sale Agreement,
Seller Parties have certain indemnification obligations to
Purchaser ("Seller Indemnification Obligations);
WHEREAS, pursuant to Paragraph "17" of the Sale Agreement,
Purchaser has certain indemnification obligations to Seller
("Purchaser Indemnification Obligations", with Seller
Indemnification Obligations, the "Indemnification
Obligations");
WHEREAS, pursuant to Paragraph "4" of the Sale Agreement,
Purchaser has certain payment obligations to Seller ("Purchaser
Payment Obligations").
WHEREAS, as the Purchaser Payment Obligations may precede
or extend beyond the expiration of the indemnification period of
the Indemnification Obligations, the parties desire to enter into
and establish this escrow arrangement to permit the Escrow Agent
to accept deposit of, manage and disburse Net Proceeds of Sale
(as defined in the Sale Agreement) for the period from the
Closing Date through the "Expiration of Indemnification
Obligations", as hereinafter defined; and
WHEREAS, the execution and delivery of this Agreement is a
condition to the consummation of the transactions contemplated by
the Sale Agreement.
NOW, THEREFORE, in consideration of the mutual warranties,
covenants and undertakings herein contained and, for other good
and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the undersigned parties agree as follows:
1. All capitalized terms used herein without
definition shall have the respective meanings ascribed thereto in
the Sale Agreement.
2. Purchaser and Seller hereby appoint the Escrow
Agent as their escrow agent for the purposes set forth herein,
and the Escrow Agent hereby accepts such appointment under the
terms and conditions set forth herein.
3. Upon the Sale Date, and thereafter if not paid
in full on the Sale Date, in accordance with the Sale Agreement,
Purchaser shall deposit with the Escrow Agent, Net Proceeds of
Sale (the "Escrow Deposit"). Purchaser shall simultaneously
with the deposit of the Escrow Deposit provide notice to Seller
Parties of such deposit accompanied by a written calculation of
the Seller's Portion of Net Proceeds of Sale with a copy to the
Escrow Agent ("Deposit Notice"). The Escrow Deposit together
with any interest and other income accrued thereon, shall be
hereinafter referred to as the "Escrow Fund." As soon thereafter
as available, but not later than fifty (50) days after the Sale
Date, Purchaser shall provide all parties with copies of its
audited balance sheet as of the Sale Date unless no balance sheet
is required by any party to the sale, then a management prepared
balance sheet certified by the chief financial officer of the
Corporation to be true and correct in all material respects as of
the Sale Date.
4. During the term of this Escrow Agreement, the cash
portion of the Escrow Fund shall be deposited by the Escrow Agent
in an interest bearing escrow account maintained by the Escrow
Agent with the Escrow Agent's financial institution or shall be
invested as Seller and Purchaser shall, in writing, jointly
instruct the Escrow Agent. The Escrow Agent shall not be under
any duty to give the Escrow Fund held by it hereunder any greater
degree of care than it gives other similar escrow property and
shall not be required to invest any funds held hereunder except
as directed in this Agreement.
5. Seller Parties shall have sixty (60) days after
receipt of the Deposit Notice in which to review and audit the
calculation of Net Proceeds of Sale and Seller's Portion thereof
(the "Audit Period") and Purchaser shall cooperate in good
faith with Seller Parties during the Audit Period, promptly
providing such information and documents and access to agents of
Purchaser as Seller Parties may reasonably request in order to
permit Seller Parties to confirm and approve the calculation of
Net Proceeds of Sale. Each fiscal year, during the term of this
Agreement, Purchaser shall deliver to Seller and Escrow Agent a
copy of Purchaser's audited financial statements within ten (10)
days of the issuance of same by the certified public accountants
of Purchaser.
6. If on or before the expiration of the Audit
Period, Seller Parties, or any one of them, shall provide written
notice to Purchaser, with a copy to Escrow Agent, of a dispute
with the calculation of Net Proceeds of Sale (a "Proceeds
Dispute Notice"), Escrow Agent shall continue to hold the Escrow
Fund until the later of (i) receipt of a "Joint Instruction" or
"Final Determination" as defined in Paragraph "19" hereof; and
(ii) "Date of Expiration of Indemnification Obligations". For
purposes of this Agreement, "Date of Expiration of
Indemnification Obligations" shall mean that date which is the
later of (i) June 3, 2006 or (ii) such date after June 3, 2006 at
which Escrow Agent has received Joint Instruction or Final
Determination" as defined in Paragraph "19" hereof, with
respect to any and all Indemnification Obligations of any of
Seller Parties and Purchaser under and pursuant to Paragraph
"17" of the Sale Agreement of which the Escrow Agent shall have
received written notice in accordance with Paragraph "17" of
the Sale Agreement.
7. If, upon expiration of the Audit Period:
(a) Escrow Agent has not received a Proceeds
Dispute Notice which is unresolved, and Date of
Expiration of the Indemnification Obligations
has passed, the Escrow Agent shall make
disbursement from the Escrow Fund as soon as
reasonably practicable in accordance with
Paragraph "8" below; or
(b) Escrow Agent has not received a Proceeds
Dispute Notice which is unresolved, and Date of
Expiration of the Indemnification Obligations
has not passed, the Escrow Agent shall (i)
immediately disburse to Purchaser the amount of
the Escrow Deposit which exceeds Seller's
Portion of Net Proceeds of Sale and (ii)
continue to hold Seller's Portion of Net
Proceeds of Sale until the Date of Expiration
of the Indemnification Obligations, and shall
thereafter, as soon as reasonably practicable,
make disbursement from the Escrow Fund in
accordance with Paragraph "8" below.
Disbursement of the Escrow Fund shall first be
made from the "other consideration" held by
the Escrow Agent (e.g., stock) with cash and
other marketable securities, if any, being
disbursed last, it being intended that Seller,
to the extent of the Seller Portion of Net
Proceeds of Sale, shall receive cash and
thereafter marketable securities constituting
the Escrow Fund prior to receiving any "other
consideration".
8. At any time in which Escrow Agent is authorized by
the terms of this Agreement to make disbursement from the
Escrow Fund, Escrow Agent shall calculate the amount of
funds to be disbursed to each party as follows:
(a) to Seller Parties, such amount of the
Escrow Deposit as equals Seller's Portion
of Net Proceeds of Sale, less any sums due
to Purchaser for any and all Seller
Indemnification Obligations finally
resolved in favor of Purchaser in
accordance with the indemnification
provisions of Paragraph "17" of the Sale
Agreement.
(b) to Purchaser, the balance of the Escrow
Deposit not payable to Seller Parties
under subparagraph (a) above.
(c) The balance of the Escrow Fund, if any,
(constituting income on the Escrow
Deposit) shall be added pro rata to the
sums calculated to be disbursed to the
parties in subparagraphs (a) and (b)
above.
9. Escrow Agent shall send to each party written
notice of the calculation of proceeds to be disbursed under
Paragraph "8" hereof ("Disbursement Notice"), which shall be
final and binding on the parties hereto if no written notice of
dispute ("Disbursement Dispute Notice") is received within ten
(10) days of the receipt by each party of the Disbursement
Notice. If any party disputes the calculation of the Escrow
Agent as provided, such party shall send its Disbursement Dispute
Notice to the other parties along with its explanation of the
basis for the dispute, and the Escrow Agent and the Escrow Agent
shall continue to hold the Escrow Fund and not make disbursement
until receipt of a "Joint Instruction" or "Final
Determination" as provided in Paragraph "19" hereof. If no
Disbursement Dispute Notice is received by the Escrow Agent
within such ten (10) day period, the Escrow Agent shall disburse
and distribute the Escrow Fund in accordance with Paragraph "8"
hereof.
10. Upon distribution of the Escrow Fund as provided
in Paragraphs "8" and "9" above, this Escrow Agreement shall
terminate. In addition, this Escrow Agreement shall terminate on
June 3, 2006, (the "Escrow Period"), if no claim for
indemnification has been made and is unresolved as at such date
pursuant to Paragraph "17" of the Sale Agreement.
11. The duties and obligations of the Escrow Agent are
those specifically provided in this Escrow Agreement and no
other. The Escrow Agent shall not be liable, except for its own
gross negligence or willful misconduct and, except with respect
to claims based upon such gross negligence or willful misconduct
that are successfully asserted against the Escrow Agent, the
other parties hereto shall jointly and severally indemnify and
hold harmless the Escrow Agent (and any successor Escrow Agent)
from and against any and all losses, liabilities, claims,
actions, damages and expenses, including reasonable attorneys'
fees and disbursements, arising out of and in connection with
this Agreement. Without limiting the foregoing, the Escrow Agent
shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in
accordance with the terms hereof, including, without limitation,
any liability for any delays (not resulting from its gross
negligence or willful misconduct) in the investment or
reinvestment of the Escrow Fund, or any loss of interest incident
to any such delays. The obligations of the other parties hereto
to the Escrow Agent under this paragraph shall survive the
termination of this Agreement and the resignation or removal of
the Escrow Agent.
12. The Escrow Agent shall be entitled to rely upon
any order, judgment, certification, demand, notice, instrument or
other writing delivered to it hereunder without being required to
determine the authenticity or the correctness of any fact stated
therein or the propriety or validity of the service thereof. The
Escrow Agent may act in reliance upon any instrument or signature
believed by it to be genuine and may assume that the person
purporting to give receipt or advice or make any statement or
execute any document in connection with the provisions hereof has
been duly authorized to do so. The Escrow Agent may conclusively
presume that the undersigned representative of any party hereto
which is an entity other than a natural person has full power and
authority to instruct the Escrow Agent on behalf of that party
unless written notice to the contrary is delivered to the Escrow
Agent.
13. The Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Agreement and
shall not be liable for any action taken or omitted by it in good
faith in accordance with such advice. If the Escrow Agent
becomes involved in litigation on account of this Agreement, it
shall have the right to retain counsel and shall have a first
lien on the property deposited hereunder for any and all costs,
attorneys' fees, charges, disbursements, and expenses in
connection with such litigation; and shall be entitled to
reimburse itself therefore out of the property deposited
hereunder, and if it shall be unable to reimburse itself from the
property deposited hereunder, the Purchaser and Seller Parties,
severally, and not jointly, agree to pay to the Escrow Agent on
demand one-half of its reasonable charges, counsel and
attorneys' fees, disbursements, and expenses in connection with
such litigation.
14. The Escrow Agent does not have any interest in the
Escrow Fund deposited hereunder but is serving as escrow holder
only and having only possession thereof. Any payments of income
from this Escrow Fund shall be subject to withholding regulations
then in force with respect to United States taxes. The parties
hereto will provide Escrow Agent with appropriate Internal
Revenue Service Forms W-9 for tax identification number
certification, or non-resident alien certifications. Seller
Parties and Purchaser hereby acknowledge that, for federal and
state income tax purposes, any income earned on, or derived from,
the Escrow Fund shall be income of the parties in the ratio of
twenty-five (25%) percent attributable to Seller, or if
dissolved, TASA, and seventy-five (75%) percent attributable to
Purchaser except in the year of disbursement in which case it
shall be attributed as provide in Paragraph "8(c)" hereof. The
Escrow Agent shall be responsible for reporting any such income
earned to the Internal Revenue Service, but shall not be
responsible for the preparation or filing of any tax returns
related to the Escrow Fund.
15. The Escrow Agent makes no representation as to the
validity, value, genuineness or the collectibility of any
security or other document or instrument held by or delivered to
it.
16. The Escrow Agent (and any successor Escrow Agent)
may at any time resign as such by delivering the Escrow Fund to
any successor Escrow Agent jointly designated by the other
parties hereto in writing, or to any court of competent
jurisdiction, whereupon the Escrow Agent shall be discharged of
and from any and all further obligations arising in connection
with this Agreement. The resignation of the Escrow Agent will
take effect on the earlier of (i) the appointment of a successor
(including a court of competent jurisdiction) or (ii) the day
which is thirty (30) days after the date of delivery of its
written notice of resignation to the other parties hereto. If at
that time the Escrow Agent has not received a designation of a
successor Escrow Agent, the Escrow Agent's sole responsibility
after that time shall be to retain and safeguard the Escrow Fund
until receipt of a designation of successor Escrow Agent or a
Joint Instruction or a Final Determination directing delivery of
the Escrow Fund.
17. In the event that any portion or all of the Escrow
Fund shall be attached, garnished, or levied upon by any court
order, or the delivery thereof shall be stayed or enjoined by an
order of a court, or any order, judgment or decree shall be made
or entered by any court order affecting the property deposited
under this Agreement, or any part thereof, the Escrow Agent is
hereby expressly authorized, in its sole discretion, to obey and
comply with all writs, orders or decrees so entered or issued,
which it is advised by legal counsel of its own choosing is
binding upon it, whether with or without jurisdiction, and in the
event that the Escrow Agent obeys or complies with any such writ,
order or decree it shall not be liable to any of the parties
hereto or to any other person, firm or corporation, by reason of
such compliance notwithstanding such writ, order or decree be
subsequently reversed, modified, annulled, set aside or vacated.
18. Any corporation or association into which the
Escrow Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its corporate
trust business and assets as a whole or in part, or any
corporation or association resulting from any such conversion,
sale, merger, consolidation or transfer to which it is a party,
shall be and become the successor Escrow Agent hereunder and
vested with all of the title to the whole property or trust
estate and all of the trusts, powers, immunities, privileges,
protections and all other matters as was its predecessor, without
the execution or filing of any instrument or any further act,
deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.
19. In the event of any disagreement between the other
parties hereto resulting in adverse claims or demands being made
in connection with the Escrow Fund or in the event that the
Escrow Agent is in doubt as to what action it should take
hereunder, the Escrow Agent shall be entitled to retain the
Escrow Fund until the Escrow Period has expired and no claims for
indemnification or otherwise against the Escrow Fund remain
outstanding, or until the Escrow Agent shall have received (i) a
joint written instruction by the Purchaser and the Seller Parties
(a "Joint Instruction") or (ii) a final non-appealable order of
a court of competent jurisdiction (a "Final Determination").
Any court order shall be accompanied by a legal opinion by
counsel for the presenting party satisfactory to Escrow Agent to
the effect that the order is final and non-appealable and from a
court of competent jurisdiction. Escrow Agent shall act on such
court order and legal opinion without further question.
20. The parties hereto acknowledge that the Escrow
Agent will be acting hereunder in both its own capacity as an
escrow agent and may separately act as counsel for the Purchaser.
Each of the parties hereto hereby waives any and all claims that
it may now or hereafter have against the Escrow Agent for or in
respect of any conflict of interest (and/or similar claim) or
with respect to the Escrow Agent's actions as escrow agent
hereunder. Neither the execution of this Escrow Agreement nor
any actions that the Escrow Agent may take pursuant to this
Escrow Agreement will, under any circumstances, or for any
reason, prevent the Escrow Agent from continuing to act as
attorneys for the Purchaser. Notwithstanding anything to the
contrary herein contained, the provisions of this Section 20
shall be deemed to be continuous and shall survive the
termination or other expiration of this Agreement. When acting
in its capacity as Escrow Agent, and not as counsel for the
Purchaser, even if there is then occurring any dispute under the
Escrow Agreement, the Escrow Agent shall be entitled to be paid
for all costs, charges, disbursements and expenses incurred by it
in the performance of its duties, including, without limitation,
for any time spent by any of its attorneys or employees, which
time shall be charged at their then customary hourly billing
rate. The Escrow Agent shall ▇▇▇▇ the Purchaser and Seller
Parties (one half each) for its services. If any such bills are
not paid within thirty (30) days, and (i) Net Proceeds of the
Sale have not been disbursed, the Escrow Agent may reimburse
itself from the Escrow Fund for bills of either party, or (ii)
Purchaser's portion, but not Seller's Portion, of Net Proceeds of
Sale have been disbursed, the Escrow Agent may reimburse itself
for Seller's unpaid bills from the Escrow Fund; but in neither
case shall this relieve the Purchaser and Seller Parties for each
being responsible to pay any of their portion which remains
unpaid.
21. All notices and other communications hereunder
shall be in writing and shall be either: (a) delivered via
express overnight courier; or (b) mailed by registered or
certified mail, return receipt requested, postage prepaid, to the
addresses of the parties as indicated below in this Paragraph
"21" (or to such other address as a party shall designate to
the other parties by notice in accordance with the foregoing).
All notices and communications given in accordance with the
foregoing may be given by the parties' respective counsel and
shall be deemed given if delivered by overnight courier, upon
delivery with evidence thereof, and if mailed, three (3) business
days after deposit in the U.S. mails, properly addressed and with
proper postage affixed. Such notices shall be addressed as
follows:
If to the Purchaser:
Empire Education Corporation
▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att: Faith A. Takes, President
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇, LLP
▇▇▇ ▇ & ▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att: ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
If to the Seller Parties:
Touchstone Applied Science Associates, Inc.
▇.▇. ▇▇▇ ▇▇▇
▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att: President
With a copy to:
Rider, Weiner, ▇▇▇▇▇▇▇ & Calhelha, P.C.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Att: ▇▇▇▇▇▇▇ Crush, Esq.
If to Escrow Agent:
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇ & ▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att: ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
A copy of all notices and communications to the Escrow Agent
shall also be given to all other parties.
22. This Agreement and any rights or obligations
hereunder shall be binding upon and inure to the benefit of the
parties and their respective successors, legal representatives
and permitted assigns, but, except as otherwise set forth in
Paragraph "17(c)" of the Sale Agreement, neither this Escrow
Agreement nor any rights or obligations hereunder may be assigned
by any party hereto without the prior written consent of the
other parties hereto.
23. This Agreement embodies the entire agreement and
understanding among the parties hereto with respect to the
subject matter hereof. This Agreement may not be modified,
amended, terminated, or canceled or any term or provision hereof
waived or discharged, except by a writing signed by all the
parties hereto. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York applicable
to contracts made and to be performed entirely therein. If any
term of this Agreement or application thereof shall be invalid or
unenforceable, the remainder of this Agreement shall remain in
full force and effect.
24. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Except as
expressly provided otherwise in this Agreement, neither the
failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of
any such right, power, or privilege will preclude any other or
further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege.
25. This Agreement may not be amended except by a
written agreement executed by the Purchaser, the Seller Parties
and the Escrow Agent.
26. This Agreement will be governed by and construed
in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict provision
or rule (whether of the State of New York or any other
jurisdiction) that would cause the laws of any jurisdiction other
than the State of New York to be applied. Subject to the
arbitration provisions contained in the Sale Agreement, the
parties hereto agree that (i) any state or federal court within
Dutchess County, New York shall have exclusive jurisdiction of
any action or proceeding relating to, or arising under or in
connection with this Agreement and the parties hereto consent to
personal jurisdiction of such courts and waive any objection to
such courts' jurisdiction, (ii) that service of any summons and
complaint or other process in any such action or proceeding upon
any party hereto may be made by registered or certified mail
directed to such party as set forth in Paragraph "21" above,
and service so made shall be deemed to be completed upon the
earlier of actual receipt or three (3) days after the same shall
have been posted as aforesaid, the parties hereto hereby waiving
personal service thereof and (iii) any claim or suit between or
among any of the parties hereto relating to or arising under or
in connection with this Agreement may only be brought in and
decided by the state or federal courts located in Dutchess
County, New York, such courts being a proper forum in which to
adjudicate such claim or suit, and each party hereby waives any
objection to each such venue and waives any claim that such claim
or suit has been brought in an inconvenient forum.
27. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
28. The execution and delivery of this Agreement
by the Escrow Agent shall constitute a receipt for the Escrow
Fund.
29. This Agreement may be executed in several
counterparts, each of which is an original, but all of which
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first written above.
▇▇▇▇▇▇▇ ▇▇▇▇▇ SCHOOL, INC.
By:____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Treasurer
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By:____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
TASA EDUCATIONAL SERVICES
CORPORATION
By:____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
EMPIRE EDUCATION CORPORATION
By:_____________________________
Name: Faith A. Takes
Title: President
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
By:______________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: