Escrow Agreement

by Practical Law Corporate & Securities

An escrow agreement designed for use in mergers and acquisitions, detailing the terms under which an escrow agent will hold and distribute a portion of the purchase price to satisfy post-closing obligations of the seller. This agreement is structured to favor the buyer while remaining reasonable, incorporating provisions typical of escrow agreements. It outlines the establishment of an escrow account, the investment of escrow funds, and the conditions for releasing funds. The document specifies the escrow agent's rights and liabilities, including indemnification and limitations on liability. It also addresses tax implications, including ownership for tax purposes and tax distributions. The agreement includes procedures for handling purchase price adjustments and indemnification claims, ensuring funds are available to cover potential liabilities. It emphasizes the importance of clear instructions for fund distribution and highlights the escrow agent's ministerial role. Additionally, the agreement covers conditions for resignation or removal of the escrow agent and the appointment of successors. This document is intended as an ancillary agreement to the purchase or merger agreement, typically negotiated prior to the closing of the transaction.