COURT OF CHANCERY
OF THE
SAM GLASSCOCK III STATE OF DELAWARE COURT OF CHANCERY COURTHOUSE
VICE CHANCELLOR 34 THE CIRCLE
GEORGETOWN, DELAWARE 19947
Date Submitted: February 24, 2017
Date Decided: March 3, 2017
Andrew S. Dupre, Esquire Robert A. Penza, Esquire
Michael P. Kelly, Esquire Christopher M. Coggins, Esquire
Benjamin A. Smyth, Esquire Polsinelli PC
McCarter & English, LLP 222 Delaware Avenue, Suite 1101
405 North King Street, 8th Floor Wilmington, DE 19801
Wilmington, DE 19801
Re: Brace Industrial Contracting, Inc. v. Peterson Enterprises, Inc.,
Civil Action No. 11189-VCG
Dear Counsel:
The following Letter Order addresses issues raised at the office conference
held on February 24, 2017.
On October 31, 2016, I issued a Memorandum Opinion (“Brace I”)1 and found
that the Plaintiffs are entitled to an indemnification award of $725,059 from funds
in escrow.2 Two issues remain with respect to that award: when it should be released
and when, or whether, it begins to carry interest. I address the latter issue first.
1
Brace Indus. Contracting, Inc. v. Peterson Enterprises, Inc., 2016 WL 6426398 (Del. Ch. Oct.
31, 2016) (“Brace I”).
2
Id. at *15. To consummate the acquisition underlying this litigation, the parties entered into an
escrow agreement (the “Escrow Agreement”) in which $1.87 million of the purchase price was
placed into escrow and scheduled to be released to the Defendants in equal halves at two different
points in time absent outstanding indemnification claims (the “Escrowed Amount”). See Pretrial
Stip. at 10; JX 69 (the “Escrow Agreement”) §§ 1.3(c), 1.4(a), 1.5(a).
The parties dispute the proper interest amount, if any, that should accompany
the Plaintiffs’ indemnification award of $725,059. In Brace I, and in my recent
Interim Order, I awarded the Plaintiffs an indemnification award of “$725,059,
together with interest.”3 The Defendants point out that, pursuant to Section 6.6 of
the stock purchase agreement (the “SPA”),4 the parties agreed that if Defendants’
indemnification obligation is satisfied out of the amount in escrow, then interest does
not accrue on that obligation (unless otherwise provided in the Escrow Agreement,
which contains no such interest provision).
By stating, in Brace I and in the Interim Order, “together with interest” I meant
to convey “with that amount of interest appropriate.” After a careful examination
of the SPA, it is clear to me that the parties have provided by contract that the
appropriate amount of interest for the $725,059 indemnification award is $0, so long
as it is satisfied from escrow. To the extent this contradicts any statement in Brace
I, such statement is withdrawn. My reasoning follows.
Section 6.6 of the SPA states, in full:
Once a Loss is agreed to by the Indemnifying Party or finally
adjudicated to be payable pursuant to this ARTICLE VI, the
Indemnifying Party shall satisfy its obligations within ten (10) Business
Days of such final, non-appealable adjudication by wire transfer of
immediately available funds; provided, however, that the Buyer
Indemnitees shall be required to take payment first out of the Escrow
3
Brace I, 2016 WL 6426398, at *15 (emphasis added); Interim Order (February 24, 2017) (Dkt.
No. 193).
4
JX 70 (the “SPA”).
2
Amount, to the extent is has sufficient funds. The Parties agree that
should an Indemnifying Party not make full payment of any such
obligations within such ten (10) Business Day period, or to the extent
the Escrow Amount is insufficient, any amount payable shall accrue
interest from and including the date of agreement of the Indemnifying
Party or final, non-appealable adjudication to and including the date
such payment has been made at a rate per annum equal to the prime rate
set forth in The Wall Street Journal’s Table of Interest Rates and Bonds
on the day immediately prior to the date that payment is to be made;
provided, however, if such obligations will be satisfied from the Escrow
Amount, then such amounts will be released in accordance with the
terms and conditions of the Escrow Agreement and such amounts shall
not accrue interest unless otherwise provided in the Escrow Agreement.
Such interest shall be calculated daily on the basis of a three hundred
sixty-five (365) day year and the actual number of days elapsed.5
Accordingly, I agree with the Defendants that, under Section 6.6 of the SPA,
any indemnification owed should first come out of the Escrow Amount and only
accrue interest to the extent required by the Escrow Agreement. The escrow amount
of $1.87 million is more than sufficient to satisfy the $725,059 owed to the Plaintiffs
and, accordingly, the Escrow Agreement does not provide for the accrual of interest.
In light of the foregoing, I find that no interest has accrued on the $725,059 award.
As to the timing of the award’s release, in light of the fact that interest is not
accruing, it would be inequitable to delay the release of the amount the Plaintiffs are
due from escrow, pending resolution of additional issues unrelated to
indemnification that are still under consideration in this matter. Accordingly, the
5
SPA § 6.6 (emphasis added).
3
Plaintiffs should provide a form of order directing the release of $725,059 from
escrow, to be effective when issued.
To the extent the foregoing requires an Order to take effect, IT IS SO
ORDERED.
Sincerely,
/s/ Sam Glasscock III
Sam Glasscock III
4