ESCROW AND INDEMNITY AGREEMENT
This ESCROW AND INDEMNITY AGREEMENT (the "ESCROW
AGREEMENT"), dated as of April 5, 2000, is made by and among
Advanced Energy Industries, Inc., a Delaware corporation
("PARENT"), the holders of common stock of Noah Holdings, Inc.
listed on Exhibit A (the "COMPANY SHAREHOLDERS") and Commercial
Escrow Services, Inc. as indemnity and escrow agent (the "ESCROW
AGENT").
RECITALS
WHEREAS, Noah Holdings, Inc., a California corporation
(the "COMPANY"), AE Cal Merger Sub, Inc., a California
corporation ("MERGER SUB"), and Parent are parties to that
certain Agreement and Plan of Reorganization, dated as of the
date hereof (the "MERGER AGREEMENT"), pursuant to which Merger
Sub shall be merged with and into the Company (the "MERGER"),
with the Company surviving as a wholly-owned subsidiary of
Parent;
WHEREAS, it is a condition precedent to the Merger
Agreement that each Company Shareholder enter into this
Agreement;
WHEREAS, the Merger Agreement contains, among other
things, representations, warranties and covenants of the Company,
indemnities with respect to the breach of which are being
provided by the Company Shareholders in this Escrow Agreement;
WHEREAS, pursuant to the Merger Agreement, promptly after
the Effective Time each Company Shareholder has agreed to cause a
portion of the Parent Shares into which the Company Shares are to
be converted (such shares, "INDEMNITY SHARES" and, together with
any cash in lieu of fractional shares, the "INDEMNITY AMOUNT") to
be deposited with the Escrow Agent in an escrow account
established pursuant to this Escrow Agreement and held and
subsequently disbursed in accordance with the terms of this
Escrow Agreement (such Indemnity Amount, together with any
dividends or other distributions received thereon, the "INDEMNITY
FUND");
WHEREAS, the Merger Agreement provides for the
Shareholder Representatives (as defined below) to act on behalf
of all Company Shareholders in connection with this Escrow
Agreement and the indemnification obligations contained in the
Merger Agreement; and
WHEREAS, the Escrow Agent has agreed to hold and to
release the Indemnity Fund pursuant to the terms of this Escrow
Agreement.
NOW, THEREFORE, in consideration of the mutual promises
and covenants herein contained, the parties hereto agree as
follows:
1. DEFINITIONS. Capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement.
As used in this Escrow Agreement, (i) "EXPENSE" means any and all
expenses incurred in connection with investigating, defending or
asserting any claim, action, suit or proceeding incident to any
matter indemnified against hereunder (including, without
limitation, court filing fees, court costs, arbitration fees or
costs, witness fees and reasonable fees and disbursements of
legal counsel, investigators, expert witnesses, consultants,
accountants and other professionals), (ii) "LOSS" means any and
all losses, costs, obligations, liabilities, settlement payments,
awards, judgments, fines, penalties, damages, expenses,
deficiencies or other charges, and (iii) "PARENT GROUP MEMBERS"
means Parent and its affiliates and their respective successors
and assigns, including, after the Effective Time, the Surviving
Corporation.
2. INDEMNITY FUND.
a. Promptly after the Effective Time, Parent shall
deposit, or cause to be deposited, the Indemnity Shares in escrow
with the Escrow Agent. Such deposit shall constitute the initial
Indemnity Fund and shall be governed by the terms and conditions
of this Escrow Agreement. The Escrow Agent shall establish a
separate subaccount for each Company Shareholder ("SUBACCOUNT")
and credit to such Subaccount the number of Indemnity Shares and
cash in lieu of fractional shares set forth opposite the name of
such Company Shareholder on ANNEX A hereto.
b. Immediately after receipt from Parent of the
Indemnity Amount, the Escrow Agent shall confirm such receipt in
writing to Parent and the Shareholder Representatives.
c. All dividends and distributions in respect of the
Indemnity Shares, whether in cash, additional Parent Common Stock
or other property received by the Escrow Agent shall be
distributed currently to the Company Shareholders; provided that
stock dividends made to effect stock splits or similar events
shall be retained by the Escrow Agent as part of the Indemnity
Fund and credited proportionately to the Subaccounts to which the
Indemnity Shares are credited. In the event the Indemnity Shares
are reclassified or otherwise changed into or exchanged for other
securities, property or cash pursuant to any merger,
consolidation, sale of assets and liquidation or other
transaction, the securities, cash or other property received by
the Escrow Agent in respect of the Indemnity Shares shall be
retained by it as part of the Indemnity Fund and credited
proportionately to the Subaccounts to which the Indemnity Shares
are credited. All cash, property, Parent Common Stock and other
securities received and retained by the Escrow Agent as described
in this Subsection 2(d) are referred to herein as
"DISTRIBUTIONS". The provisions of this Section 2 shall apply to
successive Distributions.
d. Each Company Shareholder shall have the right to
vote all Indemnity Shares credited to such Company Shareholder's
Subaccount. The Escrow Agent will forward to each Company
Shareholder to whose Subaccount any Indemnity Shares are credited
all notices of shareholders' meetings, proxy statements and
reports to shareholders received by the Escrow Agent in respect
thereof and will either (i) vote the Indemnity Shares credited to
such Company Shareholder's Subaccount only in accordance with
written instructions received from such Company Shareholder, or
(ii) forward to such Company Shareholder a signed proxy enabling
the Company Shareholder to vote such Indemnity Shares. The
Escrow Agent shall be reimbursed for the cost of such forwarding
in accordance with Section 10(d).
3. INDEMNIFICATION.
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a. From and after the Effective Time, each Parent
Group Member shall be indemnified, held harmless and reimbursed
from the Indemnity Fund from and against any and all Loss and
Expense incurred by such Parent Group Member in connection with
or arising from:
i. any breach or failure to perform by the
Company of any of its agreements, covenants or obligations in
this Agreement; or
ii. any breach of any warranty or the inaccuracy
of any representation of the Company contained in Article 4 of
the Merger Agreement or any certificate delivered by or on behalf
of the Company pursuant to Article 7 of the Merger Agreement;
Any payment pursuant to this Section 3 shall be made in the form
of a transfer from the Indemnity Fund to the applicable Parent
Group Member(s). No Parent Group Member shall have any right to
any of the Indemnity Fund until the aggregate of all Loss and
Expense incurred as a result of the matters described in
subsections 3.a.i. or ii. exceed $25,000.
b. In the event of any inaccuracy in the computation
of the Exchange Ratio, Parent will recalculate the Exchange Ratio
and receive a sufficient number of Parent Shares from the
Indemnity Fund in order that the total number of shares of Parent
Shares issued and outstanding by virtue of the Merger Agreement
would be as would have resulted if such computation of the
Exchange Ratio had been true and correct in all respects at the
Effective Time.
4. NOTICE AND DETERMINATION OF CLAIMS.
a. If any Parent Group Member wishes to make a claim
for indemnification to be satisfied from the Indemnity Fund, such
Parent Group Member (individually or collectively, the "CLAIMING
PARTY") shall notify the Escrow Agent in writing (the "CLAIM
NOTICE") of the facts giving rise to such claim for
indemnification hereunder. The Claim Notice shall be accompanied
by a certificate of the Claiming Party attesting to the Claiming
Party's contemporaneous delivery of a duplicate copy of the Claim
Notice to the Shareholder Representatives. Such Claim Notice
shall describe in reasonable detail (to the extent then known)
the Loss or Expense, the method of computation of such Loss or
Expense and contain a reference to the provisions of this
Agreement in respect of which such Loss or Expense shall have
occurred. If the Claiming Party is not Parent, the Claim Notice
must be accompanied by a certificate from Parent confirming that
the Claiming Party is a Parent Group Member. At the time of
delivery of any Claim Notice to the Escrow Agent, a duplicate
copy of such Claim Notice shall be delivered by the Claiming
Party to the Shareholder Representatives.
b. Unless the Shareholder Representatives shall have
delivered an Objection in accordance with Section 4(c), the
Escrow Agent shall, on the twentieth day (or such earlier day as
the Shareholder Representatives shall authorize in writing to the
Escrow Agent) after receipt of a Claim Notice with respect to
indemnification for a specified amount, deliver to Parent, for
its account or for the account of each Parent Group Member named
in the Claim Notice, such portion of the Indemnity Fund, valued
in accordance with this Escrow Agreement, with a value equal to
the specified amount.
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c. Until the twentieth day following delivery of a
Claim Notice, either of the Shareholder Representatives may
deliver to the Escrow Agent a written objection (an "OBJECTION")
to the claim made in such Claim Notice. At the time of delivery
of any Objection to the Escrow Agent, a duplicate copy of such
Objection shall be delivered to the Claiming Party.
d. Upon receipt of an Objection properly made, the
Escrow Agent shall (i) deliver to Parent, for its account or for
the account of each Parent Group Member named in the Claim
Notice, such portion of the Indemnity Fund, valued in accordance
with this Escrow Agreement, with a value equal to that portion of
the amount subject to the Claim Notice which is not disputed by
the Shareholder Representatives (if any) and (ii) designate and
segregate out of the Indemnity Fund a portion thereof, valued in
accordance with the Escrow Agreement, with a value equal to the
amount subject to the Claim Notice which is disputed by the
Shareholder Representatives. Thereafter, the Escrow Agent shall
not dispose of such segregated portion of the Indemnity Fund
until the Escrow Agent shall have received a certified copy of
the final decision of the arbitrators as contemplated by Section
5, or the Escrow Agent shall have received a copy of the written
agreement between the Claiming Party and the Shareholder
Representatives resolving such dispute and setting forth the
amount, if any, which such Claiming Party is entitled to receive.
The Escrow Agent will deliver to Parent, for its account or for
the account of each Parent Group Member entitled to payment, such
portion of the Indemnity Fund, valued in accordance with the
Escrow Agreement, with a value equal to the amount that the
Claiming Party is entitled to receive as set forth in the
arbitration decision after the expiration of ten (10) business
days from the receipt of such decision or, in the event that the
amount to which the Claiming Party is entitled is established
pursuant to an agreement between the Claiming Party and the
Shareholder Representatives, promptly after the Escrow Agent's
receipt of such agreement.
5. PAYMENT AND VALUATION.
a. Payments, deliveries or designations from the
Indemnity Fund made pursuant to any Claim Notice shall be made,
on a Subaccount by Subaccount basis, first from any cash and
second from any Indemnity Shares. For purposes of such payment,
delivery or designation, Indemnity Shares shall be valued at the
Market Value of such Indemnity Shares as determined in accordance
with Section 5(b) hereof. To the extent that any payment,
delivery or designation is made pursuant to this Escrow Agreement
in the form of securities, such payment, delivery or designation
shall be rounded to the nearest whole number of such securities,
and no fractional securities shall be paid, delivered or
designated.
b. The "MARKET VALUE" of each Parent Share in the
Indemnity Fund as of any date shall be the Closing Price. In the
event of any reclassification, stock split or stock dividend with
respect to Parent Common Stock or any change or conversion of
Parent Common Stock into other securities, appropriate and
proportionate adjustments, if any, shall be made to the Market
Value.
c. Payments and deliveries pursuant to a Claim Notice
shall be charged to and withdrawn from each Subaccount in
proportion to the respective balances in each, unless the Escrow
Agent is restrained, enjoined or stayed by law or court order
from withdrawing assets from a Subaccount, in which case the
amount which would have been drawn from such
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Subaccount shall be allocated pro rata among and withdrawn from
the remaining Subaccounts as to which the Escrow Agent is not so
restrained, enjoined or stayed. If the Escrow Agent ceases to be
so restrained, enjoined or stayed, then, to the extent
practicable, such remaining Subaccounts from which such amount
was withdrawn shall be credited, pro rata, with the amount of
such withdrawal through a deduction from the Subaccount that was
the subject of such restraint, injunction or stay.
6. RESOLUTION OF CONFLICTS; ARBITRATION.
a. The Claiming Party shall deliver a written
response to the Shareholder Representatives in respect of any
Objection properly delivered by the Shareholder Representatives.
If after twenty (20) days following delivery of such response
there remains a dispute as to any claims, the Shareholder
Representatives and the Claiming Party shall attempt in good
faith for sixty (60) days to agree upon the rights of the
respective parties with respect to each of such claims. If the
Shareholder Representatives and the Claiming Party should so
agree, a memorandum setting forth such agreement shall be
prepared and signed by both and shall be furnished to the Escrow
Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and shall distribute the Parent Common Stock or other
property, if any, from the Indemnity Fund in accordance with the
terms thereof.
b. If no such agreement can be reached after good
faith negotiation, either the Claiming Party or the Shareholder
Representatives may, by written notice to the other, demand
arbitration of the matter unless the amount of the Loss or
Expense is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such amount
is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration
conducted by three arbitrators. Within fifteen (15) days after
such written notice is sent, Parent and the Shareholder
Representatives shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The
decision of the arbitrators as to the validity and amount of any
claim in the related Claim Notice shall be binding, and
conclusive, and notwithstanding anything in this Section 6, the
Escrow Agent shall be entitled to act in accordance with such
decision and make or withhold payments out of the Indemnity Fund
in accordance therewith.
c. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any
such arbitration shall be held in San Francisco, California under
the commercial rules then in effect of the American Arbitration
Association. The non-prevailing party to an arbitration shall
pay its own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration Association, and
the expenses, including without limitation, attorneys' fees and
costs, reasonably incurred by the other party to the arbitration.
7. SHAREHOLDER REPRESENTATIVES.
a. Each Company Shareholder hereby knowingly and
voluntarily appoints and selects Xxxxxx Xxxxxxx and Xxxxx Xxxxx
as the "SHAREHOLDER REPRESENTATIVES" hereunder. Each Company
Shareholder acknowledges that each of the Shareholder
Representatives shall have the power to bind such Company
Shareholder in accordance herewith, and fully consents to such
power. Each of the Shareholder Representatives shall be
constituted and appointed as agent
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for and on behalf of the Company Shareholders to give and receive
notices and communications, to authorize delivery to Parent Group
Members of the Parent Common Stock or other property from the
Indemnity Fund in satisfaction of claims by Parent Group Members,
to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply
with orders of courts and awards of arbitrators with respect to
such claims, and to take all actions necessary or appropriate in
the judgment of the Shareholder Representatives for the
accomplishment of the foregoing. The persons designated to serve
as the Shareholder Representatives may be changed by the holders
of a majority in interest of the Indemnity Fund from time to time
upon not less than 10 days prior written notice to Parent and the
Escrow Agent. No bond shall be required of the Shareholder
Representatives, and the Shareholder Representatives shall
receive no compensation for their services. Any expenses
incurred by the Shareholder Representatives in connection with
their services hereunder shall be reimbursed from the Indemnity
Fund upon presentation of appropriate expense documentation as
and to the extent provided in Section 7(b).
b. At least five (5) days prior to the Distribution
Date or any earlier date on which any Shareholder Representative
ceases to be a Shareholder Representative hereunder, the
Shareholder Representatives shall deliver written notice to the
Escrow Agent and Parent setting forth the amount of the
reasonable expenses incurred by the Shareholder Representatives
in connection with their duties under the Merger Agreement and
hereunder (the "SHAREHOLDER REPRESENTATIVES' EXPENSES"), which
expenses shall be reimbursed from the Indemnity Fund in
accordance with the provision of Section 9(d) hereof.
c. Neither Parent, any Parent Group Member nor the
Escrow Agent shall be responsible or liable for any acts or
omissions of any Shareholder Representative in such Shareholder
Representative's capacity as such, and each of them may rely on
any action or writing of all the then Shareholder Representatives
as being binding on all Shareholder Representatives for all
purposes.
d. A decision, act, consent or instruction of the
Shareholder Representatives shall constitute a decision of all
Company Shareholders for whom shares of Parent Common Stock
otherwise issuable to them are deposited in the Indemnity Fund
and shall be final, binding and conclusive upon each such Company
Shareholder, and the Escrow Agent and Parent may rely upon any
decision, act, consent or instruction of the Shareholder
Representatives as being the decision, act, consent or
instruction of each and every such Company Shareholder. The
Escrow Agent and each Parent Group Member are hereby relieved
from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the
Shareholder Representatives. For purposes of this Escrow
Agreement and the Merger Agreement, any action by any of the then
Shareholder Representatives shall be deemed to be the action of
and binding upon all of the Shareholder Representatives.
e. The Shareholder Representatives shall not be
liable to the Company Shareholders for any act done or omitted
hereunder while acting in good faith as Shareholder
Representatives and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the written advice of counsel
shall be conclusive evidence of such good faith. The Company
Shareholders shall severally indemnify the Shareholder
Representatives and hold them harmless from and against any loss,
liability or expense incurred without gross negligence or bad
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faith on the part of the Shareholder Representatives and arising
out of or in connection with the acceptance and administration of
their duties hereunder.
f. The Shareholder Representatives shall treat
confidentially and not disclose any nonpublic information from or
about the Company to any third party (except on a need-to-know
basis to individuals who agree to treat such information
confidentially).
8. THIRD-PARTY CLAIMS. In the event Parent becomes aware
of a third-party claim which Parent believes may result in a
demand against the Indemnity Fund, Parent shall notify the
Shareholder Representatives of such claim, and the Shareholder
Representatives shall be entitled, at their expense, to
participate in any defense of such claim. Parent shall have the
right in its sole discretion to settle any such claim; provided,
however, that if Parent effects the settlement of any such claims
without the consent of the Shareholder Representatives, the
Shareholder Representatives shall have the power or authority to
object under Section 4 or any other provision to the amount paid
in such settlement. In the event that the Shareholder
Representatives have consented to any such settlement, the
Shareholder Representatives shall have no power or authority to
object under Section 4 or any other provision to the amount paid
in such settlement.
9. TERM, TERMINATION AND DELIVERY OF INDEMNITY AMOUNT.
a. This Escrow Agreement shall be effective as of,
but not before, the Effective Time.
b. The indemnification provisions of Section 3 shall
terminate one year after the Effective Time or earlier, in whole
or in part, if Parent determines that such earlier termination is
required to comply with the requirements for accounting for the
Merger as a pooling of interests and gives the Escrow Agent and
the Shareholder Representatives notice to such effect (and no
claims shall be made by any Parent Group Member under Section 2
thereafter), except that such indemnification shall continue as
to any Loss or Expense in connection with which a Claim Notice is
given in accordance with the requirements of Section 4 on or
prior to the date such indemnification obligation would otherwise
terminate in accordance with Section 2, as to which the
indemnification obligation hereunder shall continue until the
liability to be satisfied from the Indemnity Fund, and all Parent
Group Members shall have been reimbursed out of the Indemnity
Fund for such Loss or Expense.
c. Upon termination of the indemnification
obligations under this Escrow Agreement and reimbursement of the
Parent Group Members of Losses and Expenses payable in respect
thereof hereunder, the Indemnity Fund shall terminate and shall
be distributed in accordance with this Section 9.
d. On the first anniversary of the Effective Time, or
earlier, if Parent so elects, in whole or in part, in a written
notice delivered to the Escrow Agent and the Shareholder
Representatives (the "DISTRIBUTION DATE"), the Escrow Agent
shall deliver to the Exchange Agent (or, if the agreement
appointing the Exchange Agent shall then have terminated, to
Parent) an amount (the "DISTRIBUTION AMOUNT") equal to (A) the
amount remaining in the Indemnity Fund, less (B) any amount
designated as subject to a claim pursuant to such Claim Notice to
the
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extent such claim has not been resolved prior to such date, and
less (C) any amount previously designated in writing by the
Shareholder Representatives to the Escrow Agent (with a copy
delivered to Parent) as amounts that should be withheld to cover
their expenses incurred in connection with their activities
hereunder (to the extent the Escrow Agent shall then have
received written notice from the Shareholder Representatives to
such effect in accordance with Section 7(b)). Upon its receipt of
such Distribution Amount, the Exchange Agent or Parent, as the
case may be, shall disburse the Distribution Amount from each
Subaccount to the Company Shareholder for which such Subaccount
was established. No certificates or scrip representing fractional
shares of Parent Common Stock or any other security shall be
issued upon the fractional share; each Company Shareholder who
would otherwise have been entitled to a fractional share of
Parent Common Stock upon disbursement of the Distribution Amount
will be paid an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying (i) the Market Value of
such Parent Common Stock or such other securities (in the case of
such other securities, as of the Distribution Date) by (ii) the
fractional interest to which such holder would otherwise be
entitled.
e. Any amounts retained in escrow after the
Distribution Date shall be held by the Escrow Agent and shall
first be used to indemnify the Parent Group Members, subject to
the terms and conditions of this Escrow Agreement, and upon
resolution and payment out of the Indemnity Fund of all pending
claims, any remaining amounts in escrow shall be transferred to
the Shareholder Representatives with respect to out of pocket
expenses incurred by them in connection with their activities
hereunder (to the extent the Escrow Agent shall then have
received written notice from the Shareholder Representatives to
such effect in accordance with Section 7(b)), and any remaining
shares shall be distributed to the Exchange Agent (or, if the
agreement appointing the Exchange Agent shall then have
terminated, to Parent), who shall disburse such portion in the
manner set forth in Section 4(a).
f. Upon distribution of the entire amount of the
Indemnity Fund, the Escrow Agent shall give the Exchange Agent or
Parent (in accordance with Section 14), as the case may be,
notice to such effect.
g. At any time prior to the termination of this
Escrow Agreement, the Escrow Agent shall, if so instructed in a
writing signed by Parent and the Shareholder Representatives,
release from the Indemnity Fund to Parent or the Exchange Agent,
as directed, the portion of the Indemnity Fund specified in such
writing.
10. LIABILITY AND COMPENSATION OF ESCROW AGENT.
a. The duties and obligations of the Escrow Agent
hereunder shall be determined solely by the express provisions of
this Escrow Agreement, and no implied duties or obligations shall
be read into this Escrow Agreement against the Escrow Agent. The
Escrow Agent shall, in determining its duties hereunder, be under
no obligation to refer to any other documents between or among
the parties related in any way to this Escrow Agreement (except
to the extent that this Escrow Agreement specifically refers to
or incorporates by reference provisions of any other document),
it being specifically understood that the following provisions
are accepted by all of the parties hereto. Parent shall
indemnify and hold the Escrow Agent harmless from and against any
and all liability and expense which may arise out of any action
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taken or omitted by the Escrow Agent, except such liability and
expense as may result from the gross negligence or willful
misconduct of the Escrow Agent. The reasonable costs and
expenses of the Escrow Agent to enforce its indemnification
rights under this Section 10(a) shall also be paid by Parent.
This right to indemnification shall survive the termination of
this Escrow Agreement and removal or resignation of the Escrow
Agent. With respect to any claims or actions against the Escrow
Agent which are indemnified by Parent under this Section 10,
Parent shall have the right to retain sole control over the
defense, settlement, investigation and preparation related to
such claims or actions; provided that (i) the Escrow Agent may
employ its own counsel to defend such a claim or action if it
reasonably concludes, based on the advice of counsel, that there
are defenses available to it which are different from or
additional to those available to Parent and (ii) neither Parent
nor the Escrow Agent shall settle or compromise any such claim or
action without the consent of the other, which consent shall not
be unreasonably withheld or delayed.
b. The Escrow Agent shall not be liable to any person
by reason of any error of judgment or for any act done or step
taken or omitted by it, or for any mistake of fact or law or
anything which it may do or refrain from doing in connection
herewith unless caused by or arising out of its own gross
negligence or willful misconduct.
c. The Escrow Agent shall be entitled to rely on, and
shall be protected in acting in reliance upon, any instructions
or directions furnished to it in writing signed by both Parent
and the Shareholder Representatives and shall be entitled to
treat as genuine, and as the document it purports to be, any
letter, paper or other document furnished to it by any Parent
Group Member or the Shareholder Representatives, and believed by
the Escrow Agent to be genuine and to have been signed and
presented by the proper party or parties. In performing its
obligations hereunder, the Escrow Agent may consult with counsel
to the Escrow Agent and shall be entitled to rely on, and shall
be protected in acting in reliance upon, the advice or opinion of
such counsel.
d. The Escrow Agent shall be entitled to its
customary fee for the performance of services by the Escrow Agent
hereunder for each year or portion thereof that any portion of
the Indemnity Fund remains in escrow and shall be reimbursed for
reasonable costs and expenses incurred by it in connection with
the performance of such services (such fees, costs and expenses
are hereinafter referred to as the "ESCROW AGENT'S
COMPENSATION"). The Escrow Agent shall render statements to
Parent setting forth in detail the Escrow Agent's Compensation
and the basis upon which the Escrow Agent's Compensation was
computed. The Escrow Agent's Compensation shall be paid by
Parent. Parent shall be entitled, upon submitting a written
request to the Escrow Agent, to be reimbursed out of the
Indemnity Fund for one hundred percent (100%) of any amount that
Parent is required to pay to the Escrow Agent pursuant to such
reimbursement obligation, payable in the same manner set forth in
Section 5 hereof for payment of claims.
e. The Escrow Agent may resign at any time by giving
sixty (60) days written notice to Parent and the Shareholder
Representatives; provided that such resignation shall not be
effective unless and until a successor Escrow Agent has been
appointed and accepts such position pursuant to the terms of this
Section 10. In such event, Parent and the Shareholder
Representatives shall appoint a successor Escrow Agent or, if
Parent and the Shareholder
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Representatives are unable to agree upon a successor Escrow Agent
within sixty (60) days after such notice, the Escrow Agent shall
be entitled to (i) appoint its own successor, provided that such
successor is reasonably acceptable to Parent and the Shareholder
Representatives or (ii) at the equal expense of Parent and the
Shareholder Representatives, petition any court of competent
jurisdiction for the appointment of a successor Escrow Agent.
Such appointment, whether by Parent and the Shareholder
Representatives, on the one hand, or the Escrow Agent, on the
other hand, shall be effective on the effective date of the
aforesaid resignation (the "INDEMNITY TRANSFER DATE"). On the
Indemnity Transfer Date, all right title and interest to the
Indemnity Fund, including interest thereon, shall be transferred
to the successor Escrow Agent and this Escrow Agreement shall be
assigned by the Escrow Agent to such successor Escrow Agent, and
thereafter, the resigning Escrow Agent shall be released from any
further obligations hereunder. The Escrow Agent shall continue
to serve until its successor is appointed, accepts the Escrow
Agreement and receives the transferred Indemnity Fund.
f. The Escrow Agent shall not have any right, claim
or interest in any portion of the Indemnity Fund except in its
capacity as Escrow Agent hereunder.
g. It is understood and agreed that in the event any
disagreement among Parent and the Shareholder Representatives
results in adverse claims or demands being made in connection
with the Indemnity Fund, or in the event the Escrow Agent in good
faith is in doubt as to what action it should take hereunder, the
Escrow Agent shall retain the Indemnity Fund until the Escrow
Agent shall have received (i) an enforceable final order of a
court of competent jurisdiction which is not subject to further
appeal directing delivery of the Indemnity Fund or (ii) a written
agreement executed by Parent and the Shareholder Representatives
directing delivery of the Indemnity Fund, in which event Escrow
Agent shall disburse the Indemnity Fund in accordance with such
order or agreement. Any court order referred to in clause (i)
immediately above shall be accompanied by a legal opinion of
counsel for the presenting party satisfactory to the Escrow Agent
to the effect that said court order or judgment is final and
enforceable and is not subject to further appeal. The Escrow
Agent shall act on such court order and legal opinion without
further question.
11. TAXES. All dividends, distributions, interest and
gains earned or realized on the Indemnity Fund ("EARNINGS") and
credited to a Subaccount shall be accounted for by the Escrow
Agent separately from the Indemnity Fund and, notwithstanding any
provisions of this Agreement, shall be treated as having been
received by the Company Shareholders to whose Subaccount the
Earning are credited for tax purposes. EXHIBIT A hereto sets
forth a list of each Company Shareholder's address and Taxpayer
Identification Number. The Escrow Agent annually shall file
information returns with the United States Internal Revenue
Service and payee statements with the Company Shareholders,
documenting such Earnings. The Company Shareholders shall
provide to the Escrow Agent all forms and information necessary
to complete such information returns and payee statements. In
the event the Escrow Agent becomes liable for the payment of
taxes, including withholding taxes, relating to Earnings or any
payment made hereunder, the Escrow Agent may deduct such taxes
from each applicable Subaccount.
12. REPRESENTATIONS AND WARRANTIES.
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a. PARENT AND ESCROW AGENT. Each of Parent and the
Escrow Agent represents and warrants to each of the other parties
hereto that it is duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation; that it
has the power and authority to execute and deliver this Escrow
Agreement and to perform its obligations hereunder; that the
execution, delivery and performance of this Escrow Agreement has
been duly authorized and approved by all necessary action; that
this Escrow Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms;
and that the execution, delivery and performance of this Escrow
Agreement will not result in a breach of or loss of rights under
or constitute a default under or a violation of any trust
(constructive or other), agreement, judgment, decree, order or
other instrument to which it is a party or it or its properties
or assets may be bound.
b. COMPANY SHAREHOLDER.
i. AUTHORIZATION. Each Company Shareholder
represents to each of the other parties hereto that such Company
Shareholder has the power and authority to execute and deliver
this Escrow Agreement and to perform its obligations hereunder;
that this Escrow Agreement constitutes such Company Shareholder's
legal, valid and binding obligation, enforceable against it in
accordance with its terms subject to the Enforceability
Exceptions; and that the execution, delivery and performance of
this Escrow Agreement by such Company Shareholder will not result
in a breach of or loss of rights under or constitute a default
under or a violation of any trust (constructive or other),
agreement, judgment, decree, order or other instrument to which
such Company Shareholder is a party or by which such Company
Shareholder's properties or assets may be bound.
ii. PURCHASE ENTIRELY FOR OWN ACCOUNT. Each
Company Shareholder represents that the Parent Shares will be
acquired for investment for such Company Shareholder's own
account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof and that such Company
Shareholder has no present intention of selling, granting any
participation in, or otherwise distributing the same. By
executing this Escrow Agreement, each Company Shareholder further
represents that such Company Shareholder does not have any
contract, undertaking, agreement or arrangement with any person
to sell, transfer or grant participation to such person or to any
third person, with respect to any of the Parent Shares.
iii. RELIANCE UPON COMPANY SHAREHOLDERS'
REPRESENTATIONS. Each Company Shareholder understands that the
Parent Shares are not registered under the Securities Act on the
ground that the issuance of shares under the Merger Agreement is
exempt from registration under the Securities Act pursuant to
Section 4(2) and/or Regulation D thereof, and that Parent's
reliance on such exemption is predicated on the Company
Shareholders' representations set forth herein. Each Company
Shareholder realizes that the basis for the exemption may not be
present if, not withstanding such representations, the Company
Shareholders have in mind merely acquiring the Parent Shares for
a fixed or determinable period in the future, or for a market
rise, or for sale if the market does not rise. No Company
Shareholder has any such intention.
11
iv. RECEIPT OF INFORMATION. Each Company
Shareholder believes that such Company Shareholder has received
all the information necessary or appropriate for deciding whether
to purchase the Parent Shares. Each Company Shareholder further
represents that such Company Shareholder has had an opportunity
to ask questions and receive answers from Parent regarding the
terms and conditions of this Escrow Agreement and the Merger
Agreement and the issuance of the Parent Shares pursuant to the
Merger Agreement. Any and all of such questions have been
answered to the satisfaction of each Company Shareholder. The
foregoing, however, does not limit or modify the representations
and warranties of any Company Shareholder or the Company in
either this Escrow Agreement or the Merger Agreement.
v. INVESTMENT EXPERIENCE. Each Company
Shareholder represents that such Company Shareholder is
experienced in evaluating and investing in securities of
companies in a similar stage of development as Parent and
acknowledges that such Company Shareholder is able to fend for
himself, herself, or itself, can bear the economic risk of the
investment, and has such knowledge and experience in financial
and business matters that such Company Shareholder is capable of
evaluating the merits and risks of the investment. Each Company
Shareholder has been advised of and has had the opportunity to
employ the services of legal, accounting, financial and/or
investment advisors who are qualified by training and experience
in business and financial matters to assist such Company
Shareholder in evaluating the merits and risks of acquiring the
Parent Shares.
vi. ACCREDITED INVESTOR. Each Company
Shareholder has delivered to Parent prior to the Closing a
letter, in form and substance satisfactory to Parent, confirming
that such Company Shareholder is (a) an "Accredited Investor" as
defined in Rule 501 of the Securities Act, or (b) has such
knowledge and experience in financial and business matters that
he is capable of evaluating the merits and risks of the
prospective investment.
vii. RESTRICTED SECURITIES. Each Company
Shareholder understands that the Parent Shares are characterized
as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a
transaction not involving a public offering, and such securities
may be resold without registration under the Securities Act only
in certain limited circumstances. Each Company Shareholder
understands that resale or other transfer of the Parent Shares
will be subject to significant restrictions imposed by federal
and state securities laws, and by foreign securities laws, and,
as a result, such Company Shareholder may be required to hold the
Parent Shares indefinitely.
viii. LEGENDS. To the extent applicable, each
certificate or other document evidencing any of Parent Shares
issued to any Company Shareholder shall be endorsed with the
legends set forth below:
(1) The following legend under the
Securities Act:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THESE SECURITIES ARE
SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE APPLICABLE
12
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH
ANY APPLICABLE SECURITIES LAWS."
(2) Any legend imposed or required by
Parent's Bylaws or applicable state securities laws.
13. BENEFIT; SUCCESSOR AND ASSIGNS. This Escrow Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns but
shall not be assignable by any party hereto without the written
consent of all of the other parties hereto; provided, however,
that Parent may assign its rights and delegate its obligations
hereunder to any successor corporation in the event of a merger,
consolidation or transfer or sale of all or substantially all of
Parent's stock or assets and that the Escrow Agent may assign its
rights hereunder to a successor Escrow Agent appointed hereunder.
Except for the persons specified in the preceding sentence, this
Escrow Agreement is not intended to confer on any person not a
party hereto any rights or remedies hereunder.
14. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given when
actually received and shall be given by a nationally recognized
overnight courier delivery service, certified first class mail or
by facsimile (with a confirmatory copy sent by overnight courier)
to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to the Escrow Agent:
Commercial Escrow Services, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to Parent or any Parent Group Member, to it at:
Advanced Energy Industries, Inc.
0000 Xxxxx Xxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
With copy to:
13
Xxxxxx Xxxx & Priest LLP
000 Xxxx Xxx Xxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to any Company Shareholder, at the address set forth
on EXHIBIT A.
Any party may designate such other address in writing to all the
other parties hereto; provided that the Company Shareholders may
not specify more than one address at any time.
15. GOVERNING LAW. This Escrow Agreement shall be governed
by and construed in accordance with the laws of the State of
California without reference to conflict of laws principles.
16. COUNTERPARTS. This Escrow Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
17. HEADINGS. The section headings contained in this
Escrow Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Escrow
Agreement.
18. PARTIAL INVALIDITY. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and
valid under applicable law, but in case any one or more of the
provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such provision
shall be ineffective in the jurisdiction involved to the extent,
but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such
invalid, illegal or unenforceable provision or provisions or any
other provisions hereof, unless such a construction would be
unreasonable.
19. ENTIRE AGREEMENT; MODIFICATION AND WAIVER. This Escrow
Agreement and the Merger Agreement embody the entire agreement
and understanding among the parties hereto with respect to the
subject matter hereof and supersede any and all prior agreements
and understandings relating to the subject matter hereof.
Notwithstanding the preceding sentence, the parties hereto
acknowledge that the Escrow Agent is not a party to nor is it
bound by the Merger Agreement. No amendment, modification or
waiver of this Escrow Agreement shall be binding or effective for
any purpose unless it is made in a writing signed by the party
against whom enforcement of such amendment, modification or
waiver is sought. No course of dealing between the parties to
this Escrow Agreement shall be deemed to affect or to modify,
amend or discharge any provision or term of this Escrow
Agreement. No delay by any party to or any beneficiary of this
Escrow Agreement in the exercise of any of its rights or remedies
shall operate as a waiver thereof, and no single or partial
exercise by any party to or any beneficiary of this Escrow
Agreement of any such right or remedy shall preclude any other or
further exercise thereof. A waiver of any right or remedy on any
one occasion shall not be construed as a bar to or waiver of any
such right or remedy on any other occasion.
14
20. INDEMNIFICATION. Without affecting, and separate and
apart from, each indemnity obligation contained in this Escrow
Agreement, Parent and each Company Shareholder hereby agree to
the following provisions in connection with the registration of
Parent Common Stock with the Commission as provided for in the
Merger Agreement:
a. Parent will indemnify each Company Shareholder in
respect of its Parent Shares to be subject to the Registration
Statement against all claims, losses, expenses, damages and
liabilities (or actions in respect thereto) arising out of or
based on any untrue statement by Parent (or alleged untrue
statement) of a material fact contained in the Registration
Statement or other document incident to the registration of such
shares, or based on any omission by Parent (or alleged omission)
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any
violation by the Parent of any rule or regulation promulgated
under the Securities Act or any state securities law applicable
to Parent and relating to action or inaction required of Parent
in connection with any such registration, and will reimburse each
such Company Shareholder for any reasonable legal and any other
expenses incurred in connection with investigating, defending or
settling any such claim, loss, damage, liability or action,
provided that the indemnity agreement contained in the provisions
of Section 20(a) shall not apply to amounts paid in settlement of
any such claim, loss, damage or liability if such settlement is
effected without the consent of Parent (which consent shall not
be unreasonably withheld) nor shall Parent be liable in any such
case to the extent that any such claim, loss, damage or liability
arises out of or is based on any untrue statement or omission
based upon written information furnished to Parent expressly for
use in connection with such registration by such Company
Shareholder.
b. Each Company Shareholder will, if Parent Shares
issuable to such Company Shareholder are included in the
securities as to which the registration is being effected,
indemnify Parent, each of its directors and officers, securities
covered by such registration statement, each person who controls
Parent and each underwriter within the meaning of the Securities
Act, and each other Company Shareholder against all claims,
losses, expenses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement by the
Company (or alleged untrue statement) of a material fact
contained in the Registration Statement or other related
document, or any omission by the Company (or alleged omission) to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse Parent, such Company Shareholders, such directors,
officers, partners or persons for any reasonable legal or any
other expenses incurred in connection with investigating,
defending or settling any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon
and in conformity with written information furnished to Parent
expressly for use in connection with such registration by such
Company Shareholder specifically for use therein, provided,
however, that indemnity agreement contained in the provisions of
Section 20(b) shall not apply to amounts paid in settlement of
any such claim, loss, damage or liability if such settlement is
effected without the consent of such Company Shareholder (which
consent shall not be unreasonably withheld).
c. Each party entitled to indemnification under this
Section 20 (the "INDEMNIFIED PARTY") shall give notice to the
party required to provide indemnification (the
15
"INDEMNIFYING PARTY") promptly after such Indemnified Party has
actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate
in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
obligations hereunder, unless such failure resulted in actual
detriment to the Indemnifying Party. No Indemnifying Party, in
the defense of any such claim or litigation, shall, except with
the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party or a release from all
liability in respect of such claim or litigation.
21. INFORMATION BY HOLDER. Each Company Shareholder shall
promptly furnish to Parent such information regarding such
Company Shareholder as the Company may request in writing and as
shall be required in connection with any registration referred to
in the Merger Agreement.
22. COMPANY SHAREHOLDERS' UNDERTAKING. Each Company
Shareholder hereby agrees that it shall not trade or otherwise
reduce the economic risk relating to each Parent Share it
receives in connection with the Merger through short sales,
options or other similar transactions until financial results
covering at least thirty (30) days of combined operations of
Parent and the Surviving Corporations have been publicly
disclosed by Parent pursuant to a Parent Report. Parent is
obligated under the Exchange Act to publish such results in its
quarterly report on Form 10-Q for the second quarter of 2000 by
August 15, 2000.
(THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.)
16
IN WITNESS WHEREOF, the parties hereto have duly executed
this Escrow Agreement as of the date first above written.
COMMERCIAL ESCROW SERVICES, INC.
BY: /s/ A. HARDSTONE
NAME: A. Hardstone
TITLE: President and Manager
ADVANCED ENERGY INDUSTRIES, INC.
BY: /s/ XXXXXX XXXXXXXXX
NAME: Xxxxxx Xxxxxxxxx
TITLE: Senior Vice President
COMPANY SHAREHOLDERS:
/s/ XXXXXX X. XXXXXXX
NAME
GALEX RESEARCH
BY: /s/ B. ATLAS
NAME: B. Atlas
TITLE: General Partner
/s/ XXXXXXXX XXXXXX
NAME
/s/ XXXXX XXXXX XXXXXX
NAME
PACTECH/NOAH INVESTMENTS LLC
BY: /s/ XXXXXX X. XXXXXXXX
NAME: Xxxxxx X. Xxxxxxxx
TITLE: Managing Member
PACTECH PARTNERS LLC
BY: /s/ XXXXXX X. XXXXXXXX
NAME: Xxxxxx X. Xxxxxxxx
TITLE: President
/s/ XXXXXXX X. XXXXXX
NAME
/s/ XXXXX XXXXX
NAME
X. X. XXXXXXX & SONS, INC., AS
CUSTODIAN
BY: /s/ D. XXXXXXX XXXXXXX
NAME: D. Xxxxxxx Xxxxxxx
TITLE: Staff Assistant
/s/ XXXXXX XXXXXXX
NAME
/s/ XXXX XXXXXXXXX
NAME
17
ANNEX A
COMPANY SHAREHOLDER NUMBER OF AE SHARES
1. Xxxxxx X. Xxxxxxx 35,201
0000 Xxx Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile #(000) 000-0000
Tax ####-##-####
2. Galex Research 12,811
0000 Xxxxx Xxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile #(000)000-0000
Tax #00-000-0000
3. Xxxxxxxx Xxxxxx 8,541
00000 Xx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile #(000)000-0000
Tax ####-##-####
4. Xxxxx Xxxxx Xxxxxx 1,154
000 Xxxxx Xx.
Xxx Xxxx, XX 00000
Facsimile #(000)000-0000
Tax ####-##-####
5. PacTech/Noah Investments LLC 5,771
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX
Facsimile #(000)000-0000
Tax #00-000-0000
6. PacTech Partners LLC 3,037
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX
Facsimile #(000)000-0000
Tax #00-000-0000
7. Xxxxxxx X. Xxxxxx 866
Gasonics, Inc.
0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile #
Tax ####-##-####
8. Xxxxx Xxxxx 577
0000 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile # (000) 000-0000
Tax ####-##-####
9. X.X. Xxxxxxx & Sons (for Xxxxxx Xxxxxxx) 000
Xxx Xxxxx Xxxxxxxxx
Xx. Xxxxx, XX 00000
Facsimile #(000) 000-0000
Tax #00-0000000
10. Xxxxxx Xxxxxxx 000
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Facsimile #(000) 000-0000
Tax ####-##-####
11. Xxxx Xxxxxxxxx 000
Xxx Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Facsimile #(000) 000-0000
Tax ####-##-####
Total 68,650
