ESCROW AGREEMENT
This Escrow Agreement, dated as of January 5, 1999 (the "Closing
Date"), among HydroChem Industrial Services, Inc., a Delaware corporation
("Buyer"), Valley Systems, Inc., a Delaware corporation, and Valley Systems of
Ohio, Inc., an Ohio corporation (collectively, "Seller"), and Bank One Texas,
N.A., a national banking association, as escrow agent ("Escrow Agent").
This is the Escrow Agreement referred to in the Second Amended
and Restated Asset Purchase Agreement, dated as of September 8, 1998, by and
among Buyer and Seller (the "Purchase Agreement"). Capitalized terms used in
this agreement without definition shall have the respective meanings given to
them in the Purchase Agreement.
The parties, intending to be legally bound, hereby agree as
follows:
1. ESTABLISHMENT OF ESCROW
(a) Buyer is depositing with Escrow Agent the amount of $4,000,000 in
immediately available funds (as increased by any earnings thereon and as
reduced by any disbursements, amounts withdrawn under Section 5(j)
hereof, or losses on investments, the "Escrow Fund"). Escrow Agent
acknowledges receipt thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard, and disburse the Escrow Fund pursuant to the terms and
conditions hereof.
2. INVESTMENT OF FUNDS
Except as Buyer and Seller may from time to time jointly
instruct Escrow Agent in writing, the Escrow Fund shall be invested from time to
time, to the extent possible, in United States Treasury Bills having a remaining
maturity of 90 days or less and repurchase obligations secured by such United
States Treasury Bills, with any remainder being deposited and maintained in
demand deposits with Escrow Agent, until disbursement of the entire Escrow Fund.
Escrow Agent is authorized to liquidate in accordance with its customary
procedures any portion of the Escrow Fund consisting of investments to provide
for payments required to be made under this Agreement.
3. CLAIMS
(a) From time to time on or before the third anniversary of the date of
this Agreement, Buyer may give notice (a "Notice") to Seller and Escrow
Agent specifying in reasonable detail the nature and dollar amount of
any Claim it may have under the terms of the Purchase Agreement; Buyer
may make more than one claim with respect to any underlying state of
facts. If Seller gives notice to Buyer and Escrow Agent disputing any
Claim (a "Counter Notice") within ten (10) business days following
receipt by Escrow Agent of the Notice regarding such Claim, such Claim
shall be resolved as provided in Section 3(b) hereof. If no Counter
Notice is received by Escrow Agent within such ten business day period,
then the dollar amount of damages claimed by Buyer as set forth in its
Notice shall be deemed
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established for purposes of this Agreement and the Purchase Agreement
and, at the end of such ten business day period, Escrow Agent shall pay
to Buyer the dollar amount claimed in the Notice from (and only to the
extent of) the Escrow Fund. Escrow Agent shall not inquire into or
consider whether a Claim complies with the requirements of the Purchase
Agreement.
(b) If a Counter Notice is given with respect to a claim, Escrow Agent
shall make payment with respect thereto only in accordance with (i)
joint written instructions of Buyer and Seller or (ii) a final
non-appealable order of a court of competent jurisdiction. Any court
order shall be accompanied by a legal opinion by counsel for the
presenting party satisfactory to the Escrow Agent to the effect that the
order is final and non-appealable. Escrow Agent shall act on such court
order without further question.
4. RELEASE OF ESCROW
(a)(i) Provided no dispute or disputes in excess of an aggregate of
$3,000,000 (or $2,000,000, if that part of the Escrow Fund subject to
Section 4(b) below has been released to Seller), less the amount of any
payments theretofore made in satisfaction of Seller's indemnification
and guaranty obligations, exist as to any Claim or Claims by any Buyer
Indemnitee against all or a portion of the Escrow Fund on the first
anniversary of the Closing Date, then $1,000,000, less the amount of any
payments in satisfaction of Seller's indemnification and guaranty
obligations, will be released to Seller on the first business day
following such first anniversary of the Closing Date. To the extent such
a dispute or disputes do exist as to a Claim or Claims on the first
anniversary of the Closing Date, an amount equal to the amount of such
Claim or Claims (or if the amount of said Claims cannot be quantified,
then Buyer's reasonable, good faith estimate of the amount of the
Claims) will be withheld from such partial release of the Escrow Fund
and will continue to be held in accordance with the provisions of the
Escrow Agreement until such claim or claims have been fully resolved and
the balance of the partial release will be paid to Seller.
(ii) Provided no dispute or disputes in excess of an aggregate of
$2,000,000 (or $1,000,000, if that part of the Escrow Fund subject to
Section 4(b) below has been released to Seller), less the amount of any
payments theretofore made in satisfaction of Seller's indemnification
and guaranty obligations, exist as to any Claim or Claims by any Buyer
Indemnitee against all or a portion of the Escrow Fund on the second
anniversary of the Closing Date, then an additional $1,000,000, less the
amount of any payments theretofore made in satisfaction of Seller's
indemnification and guaranty obligations, will be released to Seller on
the first business day following such second anniversary of the Closing
Date. To the extent such a dispute or disputes do exist as to a Claim or
Claims on the second anniversary of the Closing Date, an amount equal to
the amount of such Claim or Claims (or if the precise amount of said
Claims cannot be quantified, then Buyer's reasonable, good faith
estimate of the amount of the Claims) will be withheld from such partial
release of the Escrow Fund and will continue to be held in accordance
with the provisions of the Escrow Agreement until such claim or claims
have been fully resolved and the balance of the partial release will be
paid to Seller.
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(iii) Provided no dispute or disputes exist as to any Claim or Claims
by any Buyer Indemnitee against all or a portion of the Escrow Fund on
the third anniversary of the Closing Date, then the remainder of the
Escrow Fund will be released to Seller on the first business day
following such third anniversary of the Closing Date and the Escrow
Agreement shall thereupon terminate. To the extent a dispute or disputes
do exist as to a Claim or Claims on the third anniversary of the Closing
Date, an amount equal to the amount of such Claim or Claims (or if the
amount of said Claims cannot be quantified, then Buyer's reasonable,
good faith estimate of the amount of the Claims) will be withheld from
such partial release of the Escrow Fund and will continue to be held in
accordance with the provisions of the Escrow Agreement until such claim
or claims have been fully resolved and the balance of the partial
release will be paid to Seller.
(b) Upon delivery to Escrow Agent and to Buyer of Seller's certificate
pursuant to the terms of Section 5.3.6 of the Purchase Agreement
certifying that the Environmental Remediation has been completed, an
amount equal to $1,000,000, less the sum of (i) the aggregate cost of
such Environmental Remediation (including the Estimated Additional
Remediation Cost) and (ii) the aggregate amount of other Losses of all
other Buyer Indemnitees subject to indemnification pursuant to Section
4.1 of the Purchase Agreement in excess of $3,000,000, shall forthwith
be released to Seller out of the Escrow Fund. In the event that such
Environmental Remediation was not completed at the first anniversary of
the Closing Date, Seller shall deliver to Buyer a certificate of
completion thereof upon such completion containing a statement of the
aggregate cost of the Environmental Remediation effected following such
first anniversary, and Buyer shall immediately release to Seller out of
the Escrow Fund the amount, if any, which would have been released to
Seller under Section 5.3.6 of the Purchase Agreement following such
first anniversary had such actual cost, rather than the Estimated
Additional Remediation Cost, been used in such calculation.
5. DUTIES OF ESCROW AGENT
(a) Escrow Agent shall not be under any duty to give the Escrow Fund
held by it hereunder any greater degree of care than it gives its own
similar property and shall not be required to invest any funds held
hereunder except as directed in this Agreement. Uninvested funds held
hereunder shall not earn or accrue interest.
(b) Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to claims
based upon such gross negligence or willful misconduct that are
successfully asserted against the Escrow Agent, the other parties hereto
shall jointly and severally indemnify and hold harmless the Escrow Agent
(and any successor to the Escrow Agent) from and against any and all
losses, liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of and in
connection with this Agreement. Without limiting the foregoing, Escrow
Agent shall in no event be liable in connection with its investment or
reinvestment of any cash held by it hereunder in good faith, in
accordance with the terms hereof, including, without limitation, any
liability for any delays (not resulting from its gross negligence or
willful misconduct) in
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the investment or reinvestment of the Escrow Fund, or any loss of
interest incident to any such delays.
(c) Escrow Agent shall be entitled to rely upon any order, judgment,
certification, demand, notice, instrument or other writing delivered to
it hereunder without being required to determine the authenticity or the
correctness of any fact stated therein or the propriety or validity of
the service thereof. Escrow Agent may act in reliance upon any
instrument or signature believed by it to be genuine and may assume that
the person purporting to give receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been
duly authorized to do so. Escrow Agent may conclusively presume that the
undersigned representative of any party hereto which is an entity other
than a natural person has full power and authority to instruct Escrow
Agent on behalf of that party unless written notice to the contrary is
delivered to Escrow Agent.
(d) Escrow Agent may act pursuant to the advice of counsel with respect
to any matter relating to this Agreement and shall not be liable for any
action taken or omitted by it in good faith in accordance with such
advice.
(e) Escrow Agent does not have any interest in the Escrow Fund
deposited hereunder but is serving as escrow holder only and having only
possession thereof. Any payments of income from this Escrow Fund shall
be subject to withholding regulations then in force with respect to
United States taxes. The parties hereto will provide Escrow Agent with
appropriate Internal Revenue Service Forms W-9 for tax identification
number certification, or non-resident alien certifications. This Section
5(e) and Section 5(b) hereof shall survive notwithstanding any
termination of this Agreement or the resignation of Escrow Agent.
(f) Escrow Agent makes no representation as to the validity, value,
genuineness, or the collectability of any security or other document or
instrument held by or delivered to it.
(g) Escrow Agent shall not be called upon to advise any party as to the
wisdom in selling or retaining or taking or refraining from any action
with respect to any securities or other property deposited hereunder.
(h) Escrow Agent (and any successor to the Escrow Agent) may at any
time resign as such by delivering the Escrow Fund to any successor
Escrow Agent jointly designated by the other parties hereto in writing,
or to any court of competent jurisdiction, whereupon Escrow Agent shall
be discharged of and from any and all further obligations arising in
connection with this Agreement. The resignation of Escrow Agent will
take effect on the earlier of (a) the appointment of a successor escrow
agent (including a court of competent jurisdiction) or (b) the day which
is 30 days after the date of delivery of its written notice of
resignation to the other parties hereto. If at that time Escrow Agent
has not received a designation of a successor Escrow Agent, Escrow
Agent's sole responsibility after that time shall be to retain and
safeguard the Escrow Fund until receipt of a designation of successor
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Escrow Agent or a joint written disposition instruction by the other
parties hereto or a final non-appealable order of a court of competent
jurisdiction.
(i) In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with the
Escrow Fund or in the event that Escrow Agent is in doubt as to what
action it should take hereunder, Escrow Agent shall be entitled to
retain the Escrow Fund until Escrow Agent shall have received (i) a
final non-appealable order of a court of competent jurisdiction
directing delivery of the Escrow Fund or (ii) a written agreement
executed by the other parties hereto directing delivery of the Escrow
Fund, in which event Escrow Agent shall disburse the Escrow Fund in
accordance with such order or agreement. Any court order shall be
accompanied by a legal opinion by counsel for the presenting party
satisfactory to Escrow Agent to the effect that the order is final and
non-appealable. Escrow Agent shall act on such court order and legal
opinion without further question.
(j) Buyer and Seller shall pay Escrow Agent compensation (as payment in
full) for the services to be rendered by Escrow Agent hereunder in the
amount of $2,500 at the time of execution of this Agreement and $2,500
annually thereafter and agree to reimburse Escrow Agent for all
reasonable expenses, disbursements and advances incurred or made by
Escrow Agent in performance of its duties hereunder (including
reasonable fees, expenses and disbursements of its counsel). Any such
compensation and reimbursement to which Escrow Agent is entitled shall
be evenly split by Buyer and Seller.
(k) No printed or other matter in any language (including, without
limitation, prospectuses, notices, reports and promotional material)
that mentions Escrow Agent's name or the rights, powers, or duties of
Escrow Agent shall be issued by the other parties hereto or on such
parties' behalf unless Escrow Agent shall first have given its specific
written consent thereto.
(l) The other parties hereto authorize Escrow Agent, for any securities
held hereunder, to use the services of any United States central
securities depository it reasonably deems appropriate, including,
without limitation, the Depositary Trust Company and the Federal Reserve
Book Entry System.
6. LIMITED RESPONSIBILITY
This Agreement expressly sets forth all the duties of Escrow
Agent with respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this Agreement against Escrow Agent. Escrow Agent
shall not be bound by the provisions of any agreement among the other parties
hereto except this Agreement.
7. OWNERSHIP FOR TAX PURPOSES
Seller agrees that, for purposes of federal and other taxes
based on income, Seller will be treated as the owner of the Escrow Fund, and
that Seller will report all income, if any, that is
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earned on, or derived from, the Escrow Fund as its income in the taxable year or
years in which such income is properly includible and pay any taxes attributable
thereto.
8. NOTICES
All notices, consents, waivers and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt), or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller:
Valley Systems, Inc.
Valley Systems of Ohio, Inc.
00000 Xxxxxxxxx Xxxxx, XX
Xxxxx Xxxxxx, Xxxx 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
with a copy to:
Arnall Golden & Xxxxxxx, LLP
2800 One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
Buyer:
HydroChem Industrial Services, Inc.
0000 Xxxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx and Xxxxx, LLP
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
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Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
Escrow Agent:
Bank One Texas, N.A.
000 Xxxxxx Xxxxxx
0xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxx
Facsimile No.: (000) 000-0000
9. JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or
based on any right arising out of, this Agreement may be brought against any of
the parties in the courts of the State of Texas, County of Dallas, or, if it has
or can acquire jurisdiction, in the United States District Court for the
Northern District of Texas, and each of the parties consents to the jurisdiction
of such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
10. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each
of which will be deemed to be an original and all of which, when taken together,
will be deemed to constitute one and the same.
11. SECTION HEADINGS
The headings of sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation.
12. WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed
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to be a waiver of any obligation of such party or of the right of the party
giving such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
13. EXCLUSIVE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements among the parties
with respect to its subject matter and constitutes (along with the documents
referred to in this Agreement) a complete and exclusive statement of the terms
of the agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the
Buyer, the Seller and the Escrow Agent.
14. GOVERNING LAW
This Agreement shall be governed by the laws of the State of
Texas, without regard to conflicts of law principles.
* * * * * *
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
HYDROCHEM INDUSTRIAL VALLEY SYSTEMS, INC.
SERVICES, INC.
By: /s/ B. Xxx Xxxxxx, Jr. By: /s/ Xx Xxxxxxxxxx
------------------------ ----------------------
B. Xxx Xxxxxx, Jr. Xx Xxxxxxxxxx
Chairman of the Board and President and
Chief Executive Officer Chief Executive Officer
BANK ONE TEXAS, N.A. VALLEY SYSTEMS OF OHIO, INC.
By: By: /s/ Xx Xxxxxxxxxx
------------------------ ----------------------
Name: Xx Xxxxxxxxxx
Title: President and
Chief Executive Officer
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