2.03
ESCROW AGREEMENT
THIS AGREEMENT dated as of the 22nd day of February, 1996,
BY AND AMONG
II-VI LIGHTNING OPTICAL INCORPORATED, a Pennsylvania corporation,
("II-VI Lightning"),
AND
XXXX X. XXXXXXX, XX., J. XXXXXXXXXXX XXXX, XXXXX X. XXXXXXX and
XXXXXXXXX X. XXXXXX, individuals and shareholders of the Lightning
Optical Corporation (collectively as the "Shareholders"),
AND
PNC BANK, NATIONAL ASSOCIATION, (the "Escrow Agent").
WHEREAS, II-VI Lightning and the Shareholders have entered into a Merger
Agreement and Plan of Reorganization dated February __, 1996 (the
"Merger Agreement") relating to the acquisition by II-VI Lightning of
all of the issued and outstanding common stock of Lightning Optical
Corporation ("Lightning Optical");
WHEREAS, Subsection 3.2(c) of the Merger Agreement provides for the
establishment of an escrow account ("Escrow Account") to be used to
reimburse II-VI Lightning for any adjustment in the Merger
Consideration, uncollected customer receivables, excess warranty returns
or any breaches of the representations and warranties contained in the
Merger Agreement; and
WHEREAS, II-VI Lightning and the Shareholders desire to appoint Escrow
Agent as escrow agent for the Escrow Account and the Escrow Agent is
willing to serve as the escrow agent in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, in accordance with the mutual covenants hereinafter
contained, the parties hereto, intending to be legally bound hereby,
agree as follows:
DESIGNATION OF ESCROW AGENT. II-VI Lightning and the Shareholders
hereby designate and appoint the Escrow Agent as escrow agent in
accordance with the provisions of this Agreement and the Escrow Agent
hereby accepts its appointment as escrow agent, and agrees to serve in
such capacity in accordance with the provisions of this Agreement.
ESTABLISHMENT OF ESCROW ACCOUNT. The shareholders have deposited into
the Escrow Account with the Escrow Agent the sum of Three Hundred Two
Thousand Seven Hundred Fifty Dollars ($302,750) in immediately available
funds. Escrow Agent hereby acknowledges receipt of such funds and
agrees to act as escrow agent and to hold, safeguard and disburse the
Escrow Account only in accordance with the terms and conditions of this
Escrow Agreement.
INVESTMENT OF FUNDS. The Escrow Agent shall invest the funds in the
Escrow Account, at the joint written direction of II-VI Lightning and
the Shareholders in accordance with the Investment Authorization and
Direction form attached hereto and made a part hereof as Exhibit "A".
Any earnings generated by the Escrow Account will be determined to be
part of the Escrow Account.
CLAIMS AGAINST THE ESCROW ACCOUNT. In accordance with the terms and
conditions of the Merger Agreement and this Agreement, II-VI Lightning
shall be entitled to a distribution in conformity with the terms hereof
from the Escrow Account for any amount due to them:
by reason of a decrease in the Merger Consideration in accordance with
Subsection 3.3(a) of the Merger Agreement;
as reimbursement for uncollected Accounts Receivable and excess Warranty
Returns in accordance with Subsections 11.1 and 11.2 of the Merger
Agreement;
for any breach of the Representations and Warranties of Shareholders
under and subject to the provisions of Section 10 of the Merger
Agreement; and
as compensation for any Loss or Losses (as defined in Subsection 10.2(b)
of the Merger Agreement) suffered by II-VI Lightning, its officers,
directors, employees or agents for which they are entitled to
indemnification in accordance with Subsection 10.2 of the Merger
Agreement.
CLAIMS AGAINST ESCROW ACCOUNT AND OBJECTIONS.
In the event that II-VI Lightning believes that it is entitled to a
distribution from the Escrow Account, then II-VI Lightning shall deliver
to the Escrow Agent, with a copy to each of the other parties hereto, by
Federal Express or facsimile, a written notice setting forth a demand
for payment of all or a specified dollar amount of the Escrow Account
and the basis for the demand ("Demand Notice").
Upon receipt of a Demand Notice, the Escrow Agent shall immediately
notify each other party in writing that it has received such notice,
attaching a copy thereof and specifying the date on which payment from
the Escrow Account will be made to II-VI Lightning ("Payment Date")
which Payment Date shall be the fifteenth (15th) business day after the
Escrow Agent's receipt of the Demand Notice.
If any party other than the Escrow Agent objects to a demand for
payment, such party shall, prior to the Payment Date, deliver to the
Escrow Agent, with a copy to each of the other parties hereto, a demand
that the Escrow Agent not make the payment as requested in the Demand
Notice and the basis for the objection ("Objection Notice").
Unless the Escrow Agent receives an Objection Notice prior to the
Payment Date, it shall pay all or a portion of the Escrow Account to II-
VI Lightning as set forth in the Demand Notice on the Payment Date. If
the Escrow Agent receives an Objection Notice prior to the Payment Date,
the Escrow Agent shall not make a payment from the Escrow Account until
it receives (i) joint written instructions to make payment from the
Escrow Account from II-VI Lightning and the Shareholders or (ii) a copy
of a final order of an arbitration panel adjudicating II-VI Lightning's
or the other parties' rights to receive payment from the Escrow Account,
and upon its receipt of such written instructions or final order, the
Escrow Agent shall make payment from the Escrow Account as set forth
therein.
ARBITRATION. All disputes arising under this Agreement or with respect
to its interpretation or enforcement not otherwise resolved by the
parties hereto shall be submitted to and decided by arbitration in the
City of Tampa, Florida, for determination by the American Arbitration
Association in accordance with its then existing rules pertaining
thereto using one arbitrator. Filing fees and other costs assessed by
the American Arbitration Association shall initially be shared between
and paid equally, one-half by II-VI Lightning and one-half by the
Shareholders, in proportion to their share ownership of Lightning
Optical as set forth on Exhibit "B" of the Merger Agreement, provided
that the non-prevailing party in such arbitration, within thirty (30)
days following a final determination of such arbitration, shall
reimburse the prevailing party for any such fees and costs previously
advanced by the prevailing party to the extent so awarded by the
arbitrator. The decision of the arbitration shall be final and binding
upon all parties and judgment upon the award may be entered in any Court
having jurisdiction thereof.
PAYMENT AND TERMINATION OF ESCROW ACCOUNT.
Except as set forth in Subsection 8(b) hereof, and unless such funds are
not available in the Escrow Account because of distribution pursuant to
Demand Notices the Escrow Account shall be distributed to the
Shareholders in proportion to their share ownership of Lightning Optical
as set forth on Exhibit "B" of the Merger Agreement attached hereto as
Exhibit "B" as follows:
Three (3) months after the date of this Agreement, twenty-five (25%) of
the funds originally deposited into the Escrow Account shall be
distributed to the Shareholders;
Six (6) months after the date of this Agreement, twenty-five (25 %) of
the funds originally deposited into the Escrow Account shall be
distributed to the Shareholders;
Nine (9) months after the date of this Agreement, twenty-five (25%) of
the funds originally deposited into the Escrow Account shall be
distributed to the Shareholders; and
Twelve (12) months after the date of this Agreement, the balance of the
Escrow Account plus any accrued interest reduced by any fees and costs
assessed by the Escrow Agent against the Escrow Account in accordance
with this Agreement shall be distributed to the Shareholders.
If any claims to a distribution from the Escrow Account, as evidenced by
a Demand Notice(s), are pending at the time a scheduled distribution
from the Escrow Account is to be made in accordance with Subsection 8(a)
above, an amount equal to the aggregate dollar amount of such claims
shall be retained by the Escrow Agent in the Escrow Account until it
receives (i) joint written instructions to make payment from the Escrow
Account from II-VI Lightning and the Shareholders or (ii) a copy of a
final order of an arbitration panel adjudicating II-VI Lightning's right
to receive payment from the Escrow Account.
Upon the distribution of the full amount of the Escrow Account, this
Agreement shall terminate and the Escrow Agent shall be discharged of
any further liability.
EXCULPATION OF ESCROW AGENT. The Escrow Agent shall have no duties or
responsibilities except for those set forth herein (and required by
applicable law), which the parties agree are ministerial in nature. If
in doubt as to its duties and responsibilities hereunder, the Escrow
Agent may consult with counsel of its choice and shall be protected in
any action taken or omitted in connection with the advice or opinion of
such counsel. Except for the Escrow Agent's own willful misconduct or
gross negligence: (a) the Escrow Agent shall have no liability of any
kind whatsoever for the performance of any duties imposed upon the
Escrow Agent under this Agreement or for any action or failure to act by
the Escrow Agent hereunder; (b) the Escrow Agent shall not be
responsible for the acts or omissions of any other parties hereto; (c)
the Escrow Agent shall not be liable to anyone for damages, losses or
expenses arising out of this Agreement; (d) provided that the funds are
invested as directed, the Escrow Agent shall have no responsibility for
the rate or amount of interest, if any, earned on the Escrow Account or
for the preservation of the principal of the Escrow Account; and (e) the
Escrow Agent may rely and/or act upon any instrument or document
believed by the Escrow Agent in good faith to be genuine and to be
executed and delivered by the proper person or party, and may assume in
good faith the authenticity, validity and effectiveness thereof and
shall not be obligated to make any investigation or determination as to
the truth and accuracy of any information contained therein. In the
event of any dispute between II-VI Lightning and the Shareholders, II-VI
Lightning and the Shareholders shall pay, on demand, the reasonable
attorneys' fees and other reasonable costs and expenses incurred by the
Escrow Agent in respect thereof; II-VI Lightning and the Shareholders
shall be jointly and severally liable for such fees, costs and expenses
but, as between themselves, such fees, costs and expenses shall be paid
by the party losing such dispute.
INDEMNIFICATION. In consideration of its acceptance of the appointment
as the Escrow Agent, the other parties hereto, jointly and severally,
agree to indemnify and hold the Escrow Agent harmless as to any
liability incurred by it to any person, firm or corporation by reason of
its having accepted the same or in carrying out any of the terms hereof,
and to reimburse the Escrow Agent for all its reasonable expenses,
including, among other things, counsel fees and court costs, incurred by
reason of its position hereunder or actions taken pursuant hereto or
actions taken hereto. This indemnity shall survive the termination of
this Agreement and the resignation or removal of the Escrow Agreement.
NO ADDITIONAL DUTIES. The Escrow Agent shall have no duties except
those which are expressly set forth herein, and it shall not be bound by
any notice of a claim for payment, or demand with respect thereto, or
any waiver, modification, amendment, termination or rescission of this
Agreement, unless received by it in writing.
MODIFICATION. No modification of this Agreement shall be valid unless
the same is in writing and is signed by II-VI Lightning, the
Shareholders and the Escrow Agent.
RESIGNATION OF ESCROW AGENT. The Escrow Agent, and any successor Escrow
Agent, may resign at any time as Escrow Agent hereunder by giving at
least fifteen (15) business days written notice to the Shareholders and
II-VI Lightning. Upon such resignation and the appointment of a
successor Escrow Agent, the resigning Escrow Agent shall be absolved
from any and all liability in connection with the exercise of its powers
and duties as Escrow Agent hereunder. Upon their receipt of notice of
resignation from the Escrow Agent, II-VI Lightning and the Shareholders
shall use their best efforts jointly to designate a successor Escrow
Agent. In the event II-VI Lightning and the Shareholders do not agree
upon a successor Escrow Agent within fifteen (15) business days after
the receipt by II-VI Lightning and the Shareholders of such notice, the
Escrow Agent so resigning may petition any court of competent
jurisdiction for the appointment of a successors Escrow Agent or other
appropriate relief and any such resulting appointment shall be binding
upon all parties hereto. By mutual agreement, II-VI Lightning and the
Shareholders shall have the right at any time upon not less than seven
(7) days written notice to terminate their appointment of the Escrow
Agent, or successor Escrow Agent, as Escrow Agent. The Escrow Agent, or
successors Escrow Agent shall continue to act as Escrow Agent until a
successor is appointed and qualified to act as Escrow Agent.
INCONSISTENT CLAIMS. In the event that the Escrow Agent should at any
time be confronted with inconsistent claims or demands by the parties
hereto, the Escrow Agent shall have the right to commence an arbitration
proceeding in the Tampa, Florida office of the American Arbitration
Association and request a determination of the respective rights of the
parties under this Agreement.
FEES OF THE ESCROW AGENT. The Escrow Agent shall be entitled to
compensation in accordance with the schedule set forth in Exhibit "B"
hereto, and it shall have a first lien upon any funds held by it for
payment of such compensation and reimbursement of any expenses. As
between the parties, the cost of such compensation and expenses shall be
paid one-half (1/2) by the Shareholders and one-half (1/2) by II-VI
Lightning.
MISCELLANEOUS. The Escrow Agent may execute any of its powers or
responsibilities hereunder and exercise any rights hereunder either
directly or by or through its agents or attorneys. The Escrow Agent
shall not be liable for the performance of such agents or attorneys
selected by it with due care. Nothing in this Agreement shall be deemed
to impose upon the Escrow Agent any duty to qualify to do business or to
act as fiduciary or otherwise in any jurisdiction. The Escrow Agent
shall not be responsible for and shall not be under a duty to examine or
pass upon he validity, binding effect, execution or sufficiency of this
Agreement or of any agreement amendatory or supplemental hereto.
COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
NOTICES. Any notices to be given hereunder shall be sufficiently given
if in writing and delivered personally, sent by U.S. mail, return
receipt requested, or by an overnight courier service which obtains a
signature upon delivery to the following addresses or to such other
address as the parties may from time to time designate in writing
delivered in accordance with this Section:
If to II-VI or II-VI Lightning at:
II-VI Incorporated
000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, President
With a copy to:
Xxxxxx X. German, Esquire
Xxxxxxxx, German and Xxxxx, P.C.
Xxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
If to Lightning or the Shareholders:
Xx. Xxxx X. Xxxxxxx, Xx.
Xx. Xxxx Xxxxxxxxxxx Xxxx
Xx. Xxxxx X. Xxxxxxx
Xx. Xxxxxxxxx X. Xxxxxx
c\o Lightning Optical Corporation
000 X. Xxxxxx Xxxxxx
Xxxxxx Xxxxxxx, Xxxxxxx 00000
With a copy to:
Xxxxxxx X. Xxxxxx, Esquire
Johnson, Blakely, Pope,
Bokor, Xxxxxx & Xxxxx, P.A.
000 Xxxxxxxx Xxxxxx
P. O. Xxx 0000
Xxxxxxxxxx, Xxxxxxx 00000-0000
If to the Escrow Agent:
PNC Bank, National Association
Corporate Trust Department
Xxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Any notice to be given hereunder shall be deemed received (a) on the
date delivered, if delivered personally, (b) on the date received (as
evidenced by the signature obtained upon delivery) if sent by U.S. Mail
Return Receipt Requested or overnight courier service. This provision
shall not affect the effectiveness of actual notice given by an other
means.
BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors and
assigns.
APPLICABLE LAW. This Agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of Pennsylvania.
USE OF CAPITALIZED TERMS. The undefined capitalized terms used in this
Escrow Agreement shall have the same meanings given to them in the
Merger Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
ATTEST: II-VI LIGHTNING OPTICAL INCORPORATED
/s/Xxxxx Xxxxxxxxxx By: /s/ Xxxxxxx X. Xxxxxx
--------------------------- ---------------------------
XXXXX XXXXXXXXXX, SECRETARY XXXXXXX X. XXXXXX,
VICE PRESIDENT
(Corporate Seal)
WITNESS: SHAREHOLDERS
/s/ Xxxx X. Xxxxxxx, Xx.
--------------------------- ---------------------------
XXXX X. XXXXXXX, XX.
/s/ J. Xxxxxxxxxxx Xxxx
--------------------------- ---------------------------
J. XXXXXXXXXXX XXXX
/s/ Xxxxx X. Xxxxxxx
--------------------------- ---------------------------
XXXXX X. XXXXXXX
/s/ Xxxxxxxxx X. Xxxxxx
--------------------------- ---------------------------
XXXXXXXXX X. XXXXXX
PNC BANK, N.A.
By: /s/ Xxxx Xxxxx
-----------------
XXXX XXXXX
Title:
INVESTMENT AUTHORIZATION AND DIRECTION/
DISCLOSURE STATEMENT OF CHARGES
To: PNC Bank, National Association
Investment Management and Trust Division
Corporate and Municipal Bond Trust Department
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Gentlemen:
PNC Bank, National Association, acting in its capacity (or capacities)
as indicated on the attached Schedule A, with respect to the account(s)
denoted thereon, is hereby expressly authorized and directed to invest,
from time to time, the cash in said account(s) in: (i) the shares of
the registered money market mutual fund or in the repurchase agreement,
if any, marked on the attached Schedule A, as the same may be amended
from time to time; or (ii) if, and only if, Schedule A is not so marked,
the shares of one or more registered money market mutual funds selected
by it in its sole discretion from those listed on the attached Schedule
A, provided that such type of investment is authorized under the
account's governing instrument. The undersigned acknowledges that PNC
Bank, National Association or its affiliate(s) may provide investment
advisory, custodial, transfer agency, service organization or other
services to a money market mutual fund listed on the attached Schedule A
and may be separately and additionally compensated for such services.
This authorization and direction shall extend to the automatic
investment and reinvestment of any interest or income earned by such
investments in the authorized investment, and to the retention of such
investment for so long as may be necessary.
Further, in addition to any other charges or compensation to which it
may be entitled with respect to the above-referenced account(s), it is
hereby expressly acknowledged and agreed that PNC Bank, National
Association shall be entitled to make such charges or to receive such
compensation as set forth on the attached Schedule B, as the same may be
amended from time to time.
The authorization and direction contained herein shall remain in effect
until amended or revoked by written notice to PNC Bank, National
Association, signed by a duly authorized representative of the
undersigned entity.
Very truly yours,
, 19
------------------- ------- ---------------------------
By:
Its:
EXHIBIT "A"
Date:
-----------------------
SCHEDULE A
Investment Direction
Accounts(s): (A) (D)
------------------- ------------------------
(B) (E)
------------------- ------------------------
(C) (F)
------------------- ------------------------
(List account(s) or indicate All)
Capacity(s):
Money Market Mutual Funds Available Rating
(96) Provident Institutional Funds - T-Fund Dollar AAAm Aaa
(75) Provident Institutional Funds - Federal Trust Fund AAAm
(09) PNC Fund - Government Money Market Service Class AAAm
(55) Provident Institutional Funds - Treasury Trust Dollar AAAm-g
Other
-------------------------------------
Repurchase Agreement Available
(89) Xxxxxxx Sachs Repurchase Agreement for
Wireable U.S. Treasury Obligations
Where multiple related accounts are involved, insert the appropriate
letter by which the account is identified at the top of this schedule
next to the authorized investment for that account.
FEES AND CHARGES
An initial one time charge of Five Hundred Dollars ($500.00) and annual
One Thousand Dollar ($1,000) charge.
EXHIBIT "B"
