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Exhibit 2
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is made as of March 15, 2000 by
and among XxxxxxXxxxxxx.xxx, a Delaware corporation ("HCC"); Xxxxxx X. Xxxx (the
"Stockholder Representative"); and U.S. Bank Trust National Association, (the
"Escrow Holder").
RECITALS
1. Pursuant to an Agreement and Plan of Reorganization and Merger (the
"Agreement"), dated as of March 15, 2000, among HCC, HCC Acquisition Corp., a
wholly-owned subsidiary of HCC ("Acquisition Corp."), and Xxxxxxxx.xxx, Inc., a
Delaware corporation (the "Company"), Acquisition Corp. will be merged with and
into the Company and the Company will be the surviving corporation and become a
wholly-owned subsidiary of HCC (the "Merger").
2. This Escrow Agreement is being entered into pursuant to Section 2.4 and
Article IX of the Agreement. Execution and delivery of this Escrow Agreement is
a condition to the obligation of HCC to consummate the Merger.
3. As set forth in Section 2.4 of the Agreement, by their approval of the
Agreement and the Merger, those persons who immediately prior to the effective
time of the Merger (the "Effective Time") were the holders of shares of capital
stock of the Company (exclusive of dissenters, the "Holders") have authorized
the Stockholder Representative to act as their representative under this Escrow
Agreement with the powers and authority provided herein.
4. Pursuant to the Agreement, the shares of the capital stock of the
Company that are outstanding immediately prior to the Effective Time, other than
dissenting shares, will be converted into shares of the common stock of HCC.
5. Section 2.4 of the Agreement provides that at the Effective Time,
certain of the shares of the common stock of HCC issued in the Merger shall be
delivered on behalf of the Holders to the Escrow Holder in order to secure the
indemnification obligations of the Holders set forth in Article IX of the
Agreement.
NOW, THEREFORE, the parties agree as follows:
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Article I
DEFINITIONS
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings set forth in the Agreement. In addition, for the purposes of this
Escrow Agreement, the following terms shall have the following meanings:
1.1 Claim Certificate. "Claim Certificate" shall mean a certificate signed
by an officer of HCC stating (i) that HCC has incurred or reasonably believes it
will in the future incur the amount of Losses specified in such Claim
Certificate, (ii) in reasonable detail, the facts alleged as the basis for such
claim and the section or sections of the Agreement alleged to have been
violated, and (iii) the number of Escrowed Shares to which HCC believes it is
entitled with respect to such Losses.
1.2 Escrow Fund. "Escrow Fund" shall mean the Escrowed Shares then held by
the Escrow Holder, plus any cash received pursuant to Section 3.4 hereof, but
shall not include any normal, regular cash dividends paid with respect to the
Escrowed Shares which dividends shall be for the benefit of, and distributed to,
the Holders with respect to such Escrowed Shares.
1.3 Escrowed Share. An "Escrowed Share" shall mean a share of HCC common
stock delivered to the Escrow Holder by the Exchange Agent on behalf of the
Holders in accordance with Sections 2.4 and Section 2.6 of the Agreement,
together with any and all other shares of HCC common stock, or other securities
of HCC received or receivable in respect of such escrowed share of HCC common
stock, including, without limitation, any and all securities, to be issued or
distributed in connection with any recapitalization, reclassification, split-up,
merger, consolidation, exchange, stock dividend, stock split or similar event
declared or effected with respect to shares of HCC common stock.
1.4 Value. "Value," when used with respect to an Escrowed Share, shall have
the meaning set forth in Section 9.2(b) of the Agreement.
Article II
CREATION OF ESCROW
2.1 Purpose. This Escrow Agreement is being executed and delivered, and the
deposit of the Escrow Fund hereunder is being made in accordance with Section
2.4 of the Agreement, for the purpose of securing the
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indemnification obligations of the Holders set forth in Article IX of the
Agreement.
2.2 Creation of Escrow Fund. At or promptly after the Effective Time, the
Stockholder Representative shall instruct the Exchange Agent to deposit with the
Escrow Holder certificates representing those shares of HCC common stock
required to be so deposited under Section 2.4 of the Agreement. HCC and the
Holders agree that any other securities, which thereafter are to become part of
the Escrow Fund as provided in Section 1.4 of this Escrow Agreement, shall be
promptly deposited with the Escrow Holder upon receipt by or on behalf of the
Holders, and receipt by the Escrow Holder on behalf of the Holders shall be
deemed receipt by the Holders. Certificates representing securities deposited in
the Escrow Fund shall be accompanied by separate stock powers endorsed in blank
by the Stockholder Representative on behalf of the Holders.
2.3 Tax Reporting With Respect to Escrow Fund. All parties hereto agree
that for all income tax purposes (including any tax reporting obligations) the
Holders shall be treated as the owners of the Escrowed Shares transferred by
such Holder to the Escrow Fund until distributed from the Escrow Fund pursuant
to the terms of this Escrow Agreement. The Holders agree to report on their own
tax returns any income, gain or loss with respect to the Escrowed Shares held in
the Escrow Fund.
Article III
CLAIMS
3.1 Payment After Delivery of Claim Certificate. If HCC gives the Escrow
Holder and the Stockholder Representative a Claim Certificate, then, as soon as
practicable after the expiration of the period ending thirty (30) days after the
Escrow Holder's receipt of such Claim Certificate, the Escrow Holder, subject to
the provisions of Section 3.2 hereof (including, without limitation, issuance by
the Stockholder Representative of a Dispute Notice), shall deliver to HCC, from
the Escrow Fund, on behalf of HCC or other parties indemnified under the
provisions of Section 9.2(a) of the Agreement that number of Escrowed Shares
having a Value (to the extent the Escrow Fund is sufficient for such purpose)
equal to the Losses specified in such Claim Certificate. Any Escrowed Shares to
be delivered by the Escrow Holder under this Section 3.1 shall be allocated
among the Holders, pro rata, in accordance with the number of shares of Company
capital stock held by the Holders immediately prior to the Effective Time. The
Escrow Holder will promptly provide notice to the Stockholder Representative of
the Escrow Holder's receipt of the Claim Certificate, which such notice shall
specify
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the date of the Escrow Holder's receipt thereof and shall attach a complete copy
of the Claim Certificate.
3.2 Disputes Respecting Claims. Unless, within 30 days after the Escrow
Holder's receipt of any Claim Certificate the Escrow Holder receives a written
notice ("Dispute Notice") from the Stockholder Representative stating that the
Stockholder Representative questions the accuracy of or otherwise disputes a
matter asserted in such Claim Certificate, such Claim Certificate shall
constitute full authority to the Escrow Holder to take the action provided for
in Section 3.1 and shall be conclusive and binding on all parties hereto and on
the Holders. If, however, the Stockholder Representative timely gives such a
notice, the Escrow Holder shall not make any distribution to HCC of that portion
of the Escrow Fund which the Stockholder Representative asserts in his notice
should not be so distributed until the Escrow Holder receives (i) the written
instructions of the Stockholder Representative and HCC or (ii) a final decision
of a court of competent jurisdiction in the case of third party claims or of an
arbitrator in the case of a dispute between HCC and the Stockholder
Representative with respect to the Claim Certificate; in each case specifying
the manner in which such distribution shall be made. For this purpose, a final
decision shall mean the final judgment of any court of competent jurisdiction
from which no appeal is then allowed or a final decision of an arbitrator
pursuant to Article IX of the Agreement.
3.3 Notice and Defense of Third Party Claims. Notice and defense of third
party claims shall be handled in the manner provided in Article IX of the
Agreement.
3.4 Right to Substitute Cash Payment. The Stockholder Representative may,
if any Holder so requests, elect to have such Holder's pro rata share of any
Loss that is claimed in a Claim Certification satisfied by a cash payment by
such Holder to the Escrow Holder. In such case, the Escrow Holder shall, upon
receipt of such payment, release to the Stockholder Representative on behalf of
such Holder an amount of Escrow Shares having a Value equal to the amount of
such payment and transfer the cash received from such Holder to the person or
persons entitled to receive such indemnity payment.
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Article IV
DISTRIBUTION OF ESCROW FUND
4.1 Distribution of Undisputed Amounts. Subject to Section 4.2 hereof, on
the date that is the earlier of the date that is twelve (12) months after the
Effective Time or within two business days after the Escrow Holder receives
written notification that HCC has issued its first independent audit report
showing the combined results of operations of HCC and VCI (the "Escrow
Termination Date"), the Escrow Holder shall promptly distribute the entire
remaining Escrow Fund to the Stockholder Representative for the benefit of the
Holders, or to the Holders if and as the Stockholder Representative shall
direct, pro rata according to the number of shares of Company capital stock held
by the Holders immediately prior to the Effective Time.
4.2 Distribution of Disputed Amounts. Notwithstanding the provisions of
Section 4.1 hereof, if, prior to the Escrow Termination Date, HCC shall have
given a Claim Certificate to the Stockholder Representative and the Escrow
Holder and a dispute, in accordance with Section 3.2 hereof, respecting that
Claim Certificate or the subject matter of such Claim Certificate has not yet
been resolved in accordance with Section 3.2, then the Escrow Holder shall
continue to hold that portion of the Escrow Fund which is the subject of such
dispute. Any portion of the Escrow Fund so withheld shall continue to be held by
the Escrow Holder until it receives authorization to distribute the portion of
the Escrow Fund so withheld in accordance with the second sentence of Section
3.2.
Article V
ESCROW HOLDER
5.1 The Escrow Holder shall have no duties or responsibilities whatsoever
with respect to the Escrow Fund except as are specifically set forth herein. The
Escrow Holder shall neither be responsible for or under, nor chargeable with
knowledge of the terms and conditions of, any other agreement, instrument or
document in connection herewith other than Section 2.4 and Article IX of the
Agreement. The Escrow Holder may conclusively rely upon, and shall be fully
protected from all liability, loss, cost, damage or expense in acting or
omitting to act pursuant to any written notice, instrument, request, consent,
certificate, document, letter, telegram, opinion, order, resolution or other
writing hereunder without being required to determine the authenticity of such
document, the correctness of any fact stated therein, the propriety of the
service thereof or the capacity, identity or authority of any party purporting
to sign or deliver such
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document. The Escrow Holder shall have no responsibility for the contents of any
such writing contemplated herein and may rely without any liability upon the
contents thereof.
5.2 The Escrow Holder shall not be liable for any action taken or omitted
by it in good faith and reasonably believed by it to be authorized hereby or
with the rights or powers conferred upon it hereunder, nor for action taken or
omitted by it in good faith, and in accordance with advice of counsel (which
counsel may be of the Escrow Holder's own choosing), and shall not be liable for
any mistake of fact or error of judgment or for any acts or omissions of any
kind except for its own willful misconduct or gross negligence.
5.3 HCC and each of the Holders jointly and severally agrees to indemnify
the Escrow Holder and its employees, directors, officers and agents and hold
each harmless against any and all liabilities incurred by it hereunder as a
consequence of such party's action, and the parties agree to indemnify the
Escrow Holder and hold it harmless against any losses, costs, payments, and
expenses (including the fees and expenses of counsel) and all liabilities
incurred by it in connection with the performance of its duties hereunder,
except in either case for losses, costs, payments and expenses (including the
fees and expenses of counsel) and liabilities incurred by the Escrow Holder
resulting from its own willful misconduct or gross negligence.
5.4 The Escrow Holder may resign as such following the giving of 60 days'
prior written notice to HCC and the Stockholder Representative. Similarly, the
Escrow Holder may be removed and replaced following the giving of 60 days' prior
written notice to the Escrow Holder jointly by HCC and the Stockholder
Representative. In either event, the duties of the Escrow Holder shall terminate
60 days after the date of such notice (or at such earlier date as may be
mutually agreeable), except for its obligations to hold and deliver the Escrow
Fund to the successor Escrow Holder; and the Escrow Holder shall then deliver
the balance of the Escrow Fund then in its possession to such a successor Escrow
Holder as shall be appointed by HCC and the Stockholder Representative as
evidenced by a written notice filed with the Escrow Holder. If HCC and the
Stockholder Representative are unable to agree upon a successor Escrow Holder by
the effective date of such resignation or removal, the then acting Escrow Holder
may petition any court of competent jurisdiction for the appointment of a
successor Escrow Holder or other appropriate relief, and any such resulting
appointment shall be binding upon all of the parties hereto. Upon acknowledgment
by any successor Escrow Holder of the receipt of the then remaining balance of
the Escrow Fund, the then acting Escrow Holder shall be fully released and
relieved of
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all duties, responsibilities and obligations under this Escrow Agreement.
5.5 The Escrow Holder shall not be bound in any way by any agreement, other
than this Escrow Agreement. A copy of the Agreement has been provided to the
Escrow Holder in connection with the execution of this Escrow Agreement and the
Escrow Holder understands that the terms of the Holders' indemnification
obligations are set forth in Article IX of the Agreement. The Agreement forms an
integral part of this Escrow Agreement and, therefore, Article IX thereof is
hereby incorporated by reference herein.
5.6 The Escrow Holder shall be under no duty to institute or defend any
arbitration or legal proceeding with respect to the Escrow Fund or under this
Escrow Agreement and none of the costs or expenses or any such proceeding shall
be borne by the Escrow Holder. The costs and expenses of any such proceeding
shall be borne as decided by the arbitrators or court and shall be direct
obligations of HCC or the Holders, as the case may be, and shall not be
satisfied in any way by the Escrow Fund.
5.7 The Escrow Holder shall be entitled to payment from HCC for customary
fees and expenses for all services rendered by it hereunder in accordance with
Exhibit A attached hereto (as such schedule may be amended from time to time).
Article VI
STOCKHOLDER REPRESENTATIVE
6.1 The Stockholder Representative shall have full power and authority to
represent all Holders with respect to all matters arising under this Escrow
Agreement (except that the Holders shall retain the right to vote the Escrowed
Shares). All action taken by the Stockholder Representative hereunder shall be
conclusive and binding upon the Holders as if expressly confirmed and ratified
in writing by each of them. Without limiting the generality of the foregoing,
the Stockholder Representative shall have full power and authority on behalf of
all of the Holders to interpret all the terms and provisions of this Escrow
Agreement, to give all approvals and take any other actions with respect to the
Holders in connection with the subject matter of this Agreement and to consent
to any amendment hereof. HCC may deal solely with and rely solely upon the
Stockholder Representative as the representative of all the Holders. The
Stockholder Representative shall incur no liability to the Holders except by
reason of his willful misconduct or gross negligence. The Stockholder
Representative
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may resign at any time and be relieved of his duties as Stockholder
Representative, in which case, the Stockholder Representative shall designate in
writing another Holder to serve as successor Stockholder Representative. The
Stockholder Representative's appointment and authority will survive the death,
incapacity or incompetence of any Holder. The Stockholder Representative shall
not be liable to any party hereto for any act which he may do or omit to do
hereunder in good faith.
Article VII
MISCELLANEOUS
7.1 Notices. Except as expressly provided in this Escrow Agreement, all
notices (including any Claim Certificate) given in connection with this Escrow
Agreement shall be deemed to have been duly given on the date of delivery if
delivered by hand delivery or by nationally-recognized overnight courier with
receipt therefor, addressed as follows:
If to HCC:
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XxxxxxXxxxxxx.xxx
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: C. Xxxx Xxxxx
With a copy to:
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Howard, Rice, Nemerovski, Canady,
Xxxx & Rabkin
A Professional Corporation
Three Xxxxxxxxxxx Xxxxxx, Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
If to the Stockholder Representative:
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Xxxxxx X. Xxxx
0000 Xxxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
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With a copy to:
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Venable, Baetjer, Xxxxxx & Xxxxxxxxx, LLP
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxxxx
If to the Escrow Holder:
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U.S. Bank Trust National Association
Xxx Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxx Xxxxxx
Such addresses may be changed from time to time by means of a notice given
in the manner provided in this Section 7.1.
7.2 Successors and Assigns. The Escrow Holder, the Stockholder
Representative (except as provided in Article VI hereof) and HCC may not assign,
by operation of law or otherwise, all or any portion of its or their rights,
obligations or liabilities under this Escrow Agreement without the prior written
consent of the other parties hereto, which consent may be withheld in the
absolute discretion of the party being asked for the Consent. Any attempted
assignment in violation of this Section 7.2 shall be voidable. This Escrow
Agreement and all action taken hereunder in accordance with its terms shall be
binding upon and inure to the benefit of HCC and the other indemnified parties
and their respective successors, assigns, heirs, executors, administrators and
legal representatives, the Holders and their respective successors, assigns,
heirs, executors, administrators and legal representatives, the Escrow Holder
and its successors and the Stockholder Representatives and their successors,
assigns, heirs, executors, administrators and legal representatives.
7.3 Headings. The headings contained in this Escrow Agreement are intended
principally for convenience and shall not, by themselves, determine the rights
of the parties to this Escrow Agreement.
7.4 Waiver. Waiver of any term or condition of this Escrow Agreement by any
party shall not be construed as a waiver of a subsequent breach or failure of
the same term or condition, or a waiver of any other term or condition of this
Escrow Agreement.
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7.5 Governing Law. This Escrow Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware as applied to
agreements entered into and entirely to be performed within the state.
7.6 Arbitration. The parties hereto agree that if any Claim for Losses is
made and not resolved, such Claim shall be submitted to arbitration under
Article IX of the Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be signed the day and year first above written.
XXXXXXXXXXXXX.XXX
By:____________________________________________
Title:_________________________________________
STOCKHOLDER REPRESENTATIVE:
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By: Xxxxxx X. Xxxx
U.S. BANK TRUST NATIONAL
By:____________________________________________
Title:_________________________________________
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