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EXHIBIT D
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ESCROW AGREEMENT
This Escrow Agreement dated January 30, 1998 is among Galileo
Corporation (the "Buyer"), a Delaware corporation, Xxxx X. Xxxxx, Xx., as the
representative of the shareholders and the optionholders (the "Shareholder
Representative") of OFC Corporation (the "Seller"), a New Hampshire corporation,
and State Street Bank and Trust Company, as escrow agent (the "Escrow Agent").
PRELIMINARY STATEMENT
Pursuant to an Agreement and Plan of Merger dated as of December 30,
1997 (the "Merger Agreement") between the Buyer and the Seller, the Buyer is
acquiring the Seller through the merger of the Seller into a subsidiary of the
Buyer (the "Merger"). Capitalized terms used herein and not otherwise defined
have the meanings assigned to them in the Merger Agreement.
Pursuant to Section 1.10 of the Merger Agreement, 115,426 shares of
Buyer Common Stock (the "Escrow Shares") and cash in the amount of $300,000 (the
"Escrow Cash Deposit") are being deposited by the shareholders and optionholders
(the "Shareholders") of the Seller hereunder to provide indemnification of the
Buyer under Section 10 of the Merger Agreement. The Escrow Cash Deposit and all
investments thereof and earnings thereon and any distributions on the Escrow
Shares are referred to hereafter as the "Escrow Cash." The Escrow Shares and the
Escrow Cash are referred to hereafter as the "Escrow Fund." A list of all
Shareholders, their interests in the Escrow Shares and the Escrow Cash, and
their pro rata interests in the Escrow Shares, the Escrow Cash and the Escrow
Fund is attached hereto as Schedule I.
The parties hereto agree as follows:
1. ESTABLISHMENT OF ESCROW; PAYMENT.
(a) The Buyer has delivered to the Escrow Agent and the Escrow
Agent acknowledges receipt of the Escrow Shares in the form of a single stock
certificate and the Escrow Cash by wire transfer. The Escrow Fund shall be held
in escrow in the name of the Escrow Agent or its nominee, subject to the terms
and conditions set forth herein. Unless and until the Escrow Shares are returned
to the Buyer or distributed to the Shareholder Representative pursuant to the
terms of this Agreement, the Escrow Agent shall vote the Escrow Shares in
accordance with the written instructions of the Shareholder Representative.
(b) The payment of any amount from the Escrow Fund by the
Escrow Agent hereunder, including the allocation of a portion of the Escrow Fund
to a Set Aside Amount under Section 4(a), shall be made first from any Escrow
Cash then available and then by transfer of Escrow Shares valued at $12.129 per
share (the "Agreed Share Value"). Any distributions of Escrow Shares to the
Shareholders shall be in kind.
2. INVESTMENT; TAX MATTERS. Cash held in the Escrow Fund may be
invested at the written direction of the Shareholder Representative by the
Escrow Agent in money market
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mutual funds invested primarily in securities issued or guaranteed by the United
States or any agency of the United States or an interest bearing demand deposit
account at the Escrow Agent. Investments pursuant to such investment
instructions described above shall in all instances be subject to availability
(including any time-of-day requirements). In no instance shall the Escrow Agent
have any obligation to provide investment advice of any kind. The Escrow Agent
shall be authorized at all times and from time to time to liquidate any
investment of the Escrow Fund as may be necessary to provide available cash to
make any release, disbursement or payment called for under the terms of this
Agreement. The Escrow Agent shall have no responsibility or liability for any
losses resulting from liquidation of the Escrow Fund (such as liquidation prior
to maturity). All amounts earned on the Escrow Fund, including any distributions
on the Escrow Shares, shall be held as part of the Escrow Fund. The parties
agree that to the extent permitted by applicable law, all amounts earned on the
Escrow Fund shall be allocated to the Shareholders in accordance with their pro
rata interests as set forth on Schedule I, and the Shareholders will include
such amounts in their gross income for federal, state and local income tax
(collectively, "income tax") purposes and pay any income tax resulting
therefrom. The Shareholders shall furnish to the Escrow Agent all information
necessary to enable it to comply with the reporting and backup withholding
requirements of the Internal Revenue Code of 1986, as amended, including a
completed Form W-8 or W-9, as applicable.
3. CLAIMS AGAINST ESCROW FUND.
(a) At any time or times prior to the Expiration Date (as
defined below), the Buyer may make claims against the Escrow Fund for amounts
due for indemnification under Section 10 of the Merger Agreement. The Buyer
shall notify the Shareholder Representative and the Escrow Agent in writing of
each such claim, including a brief description of the amount and nature of such
claim. Each such notice delivered to the Escrow Agent by the Buyer shall contain
a representation of the Buyer to the effect that the Buyer has delivered a copy
of such notice to the Shareholder Representative prior to or simultaneously with
its delivery to the Escrow Agent. In the event that the amount subject to the
claim is unliquidated, the Buyer shall make a good faith estimate as to the
amount of the claim for purposes of determining the portion of the Escrow Fund
to be withheld by the Escrow Agent if such claim is not resolved or otherwise
adjudicated by the Expiration Date. If the Shareholder Representative disputes
such claim, the Shareholder Representative shall give written notice thereof to
the Buyer and to the Escrow Agent within thirty days after the date the Buyer's
notice of claim was delivered to the Shareholder Representative, in which case
the Escrow Agent shall continue to hold the Escrow Fund in accordance with the
terms of this Agreement; otherwise, such claim shall be deemed to have been
acknowledged to be payable from the Escrow Fund in the full amount thereof as
set forth in the claim and the Escrow Agent shall pay such claim to the Buyer as
soon as practicable after expiration of that thirty-day period. If the amount of
the claim exceeds the aggregate value of the Escrow Fund, the Escrow Agent shall
have no liability or responsibility for any deficiency. All claims paid out of
the Escrow Shares shall be rounded to the nearest whole share. Under no
circumstances shall the Shareholders or the Shareholder Representative have any
right to substitute other property for the Escrow Shares or to change the Agreed
Share Value.
(b) If the Shareholder Representative gives notice to the
Buyer and the Escrow Agent pursuant to Section 3(a) disputing a Buyer claim, no
payment from the Escrow Fund shall be made by the Escrow Agent to the Buyer or
to the Shareholders of the Set Aside Amount under Section 4(a) with respect to
such claim until either (i) such disputed claim has
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been resolved as evidenced by a written notice executed by the Buyer and the
Shareholder Representative instructing the Escrow Agent as to the distribution
of such Set Aside Amount or portion thereof or (ii) such dispute shall have been
adjudicated in accordance with the arbitration procedures described in Section
4(b).
4. DISPUTED CLAIMS.
(a) If the Shareholder Representative disputes an
indemnification claim of the Buyer as above provided and subject to Section 3,
the Escrow Agent shall allocate a portion of the Escrow Fund equal to the amount
of the claim as set forth in the notice of the claim (the "Set Aside Amount").
In the event the Buyer notifies the Escrow Agent in writing that it has made
out-of-pocket expenditures or anticipates that it will incur legal expenses in
connection with any such disputed claim with respect to which it is entitled to
be indemnified under the Merger Agreement, a portion of the Escrow Fund equal to
such incurred or anticipated expenditures shall also be added to and become a
part of the Set Aside Amount, provided that in the event that it shall be agreed
(as evidenced by a written notice executed by the Buyer and the Shareholder
Representative as described in Section 3(b)) or determined through an
arbitration proceeding described in Section 4(b) that the Buyer is not entitled
to indemnification with respect to such claim, the Buyer shall not be entitled
to such additional portion, and such additional portion shall be released from
the Set Aside Amount.
(b) If the Escrow Agent does not receive written notice
executed by the Buyer and the Shareholder Representative within sixty days after
the Shareholder Representative sends notice of such dispute to the effect that
the disputed indemnification claim has been resolved (or at such earlier time as
the Buyer and Shareholder Representative may agree), the indemnification claim
shall be referred by the Buyer and the Shareholder Representative to an
arbitrator chosen by agreement of the Shareholder Representative and the Buyer.
If no agreement is reached regarding selection of the arbitrator within thirty
days after written request from either party to the other, the Buyer or the
Shareholder Representative may submit the matter in dispute to the American
Arbitration Association, to be settled by arbitration in Boston, Massachusetts
in accordance with the commercial arbitration rules of the Association. The
Buyer and the Shareholder Representative agree to act in good faith to mutually
select an arbitrator. The fees and expenses of any arbitration shall be borne by
the Escrow Fund and the Buyer in such proportions as shall be determined by the
arbitrator, or if there is no such determination, then such fees and expenses
shall be borne equally by the Escrow Fund and the Buyer. The determination of
the arbitrator as to the amount, if any, of the indemnification claim that is
properly allowable shall be conclusive and binding upon the parties hereto and
judgment may be entered thereon in any court having jurisdiction. The Escrow
Agent shall make payment of such claim to the Buyer out of the Set Aside Amount
and make payment of the fees and expenses of the arbitration out of the Escrow
Fund, in each case as and to the extent allowed as soon as practicable following
its receipt of a copy of the arbitration award determination.
5. PARTIAL RELEASE; TERMINATION.
(a) On the date that is three months after the date of this
Agreement or as soon as practicable thereafter, the Escrow Agent shall
distribute to the Shareholder Representative for distribution to the
Shareholders all Escrow Cash then held in the Escrow Fund except to the
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extent that such Escrow Cash has been, or is then required to be, allocated to a
Set Aside Amount.
(b) This Agreement shall terminate six months after the date
hereof (the "Expiration Date"), provided that there are no outstanding
indemnification claims as to which the Escrow Agent has received notice pursuant
to Section 3 on or prior to the Expiration Date; otherwise this Agreement shall
continue in effect until the resolution of all such indemnification claims. On
the Expiration Date or as soon thereafter as is practicable, the Escrow Agent
shall distribute to the Shareholder Representative for distribution to the
Shareholders the Escrow Fund less (i) the amount of any then existing Set Aside
Amounts and (ii) the amount specified in any notice of a claim delivered to the
Escrow Agent on or prior to the Expiration Date with respect to which no Set
Aside Amount has yet been established and the Escrow Agent has not otherwise
been instructed by the Buyer and the Shareholder Representative. At such time
thereafter as any remaining indemnification claim hereunder has been resolved
and the Escrow Agent has received a written notice executed by the Buyer and the
Shareholder Representative to that effect (or a copy of an arbitration award
pursuant to Section 4(b) to that effect) and any amounts to be distributed to
the Buyer in connection therewith have been so distributed, the Escrow Agent
shall deliver the remaining Escrow Shares to the Buyer's transfer agent for
distribution to the Shareholders in accordance with instructions from the
Shareholder Representative and this Agreement shall terminate. The Buyer shall
not be required to issue certificates for fractional shares in any distribution
of Escrow Shares pursuant to this Agreement, but rather shall pay to the
Shareholder Representative for distribution to the Shareholders an amount in
cash (without interest) determined by multiplying each Shareholder's fractional
interest by the Agreed Share Value.
6. THE ESCROW AGENT.
(a) Notwithstanding anything herein to the contrary, the
Escrow Agent shall promptly dispose of all or any part of the Escrow Shares as
directed by a writing jointly signed by the Shareholder Representative and the
Buyer. The reasonable fees and expenses of the Escrow Agent in connection with
its execution and performance of this Agreement as set forth on Schedule II
hereto shall be borne by the Buyer. The Escrow Agent shall not be liable for any
act or failure to act under this Agreement, including any and all claims made
against the Escrow Agent as a result of its holding the Escrow Shares in its own
name, except for its own gross negligence or willful misconduct. The Escrow
Agent shall not be liable for, and the Buyer shall indemnify and hold harmless
the Escrow Agent and its directors, employees, officers, agents, successors and
assigns against, any losses or claims (including reasonable out-of-pocket
expenses) arising out of any action taken or omitted in good faith hereunder and
reasonable costs of investigation and counsel fees and expenses which may be
imposed on the Escrow Agent or reasonably incurred by it in connection with its
acceptance of this appointment or performance of its duties hereunder. The
Escrow Agent may decline to act and shall not be liable for failure to act if in
doubt as to its duties under this Agreement. The Escrow Agent may act upon any
instrument or signature believed by it to be genuine and may assume that any
person purporting to give any notice or instruction hereunder, reasonably
believed by it to be authorized, has been duly authorized to do so. The Escrow
Agent's duties shall be determined only with reference to this Agreement and
applicable law and the Escrow Agent is not charged with knowledge of or
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any duties or responsibilities in connection with any other document or
agreement, including without limitation, the Merger Agreement.
(b) The Escrow Agent shall have the right at any time to
resign hereunder by giving written notice of its resignation to the parties
hereto, at the addresses set forth herein or at such other address as the
parties shall provide, at least thirty days prior to the date specified for such
resignation to take effect. In such event the Buyer shall with the approval of
the Shareholder Representative, which approval shall not be unreasonably
withheld, appoint a successor escrow agent within that thirty-day period; if the
Buyer does not designate a successor escrow agent within such period, the Escrow
Agent may appoint a successor escrow agent. Upon the effective date of such
resignation, the Escrow Fund then held by the Escrow Agent hereunder shall be
delivered by it to such successor escrow agent or as otherwise shall be
designated in writing by the Buyer and the Shareholder Representative.
(c) In the event that the Escrow Agent should at any time be
confronted with inconsistent or conflicting claims or demands by the other
parties hereto, the Escrow Agent shall have the right to interplead the parties
in any court of competent jurisdiction and request that such court determine the
respective rights of the parties with respect to this Agreement and, upon doing
so, the Escrow Agent shall be released from any obligations or liability to the
other parties as a consequence of any such claims or demands.
(d) 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. 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 other than The Commonwealth of
Massachusetts. The Escrow Agent shall not be responsible for and shall not be
under a duty to examine, inquire into or pass upon the validity, binding effect,
execution or sufficiency of this Agreement or of any amendment or supplement
hereto.
(e) Neither the Escrow Agent nor any of its directors,
officers or employees shall be liable to anyone for any error of judgment, or
for any act done or step taken or omitted to be taken by it or any of its
directors, officers or employees, or for any mistake of fact or law, or for
anything which it, or any of its directors, officers or employees, may do or
refrain from doing in connection with or in the administration of this
Agreement, unless and except to the extent the same constitutes gross negligence
or willful misconduct on the part of the Escrow Agent. In no event shall the
Escrow Agent be liable for any indirect, punitive, special or consequential
damages, or any amount of in excess of the value of the Escrow Fund (as of the
date of the action or omission giving rise to liability).
(f) The Escrow Agent may consult with, and obtain advice from,
legal counsel (including, without limitation, in-house counsel) with respect to
any question as to any of the provisions hereof or its duties hereunder, or any
matter relating hereto, and the opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by the Escrow Agent in good faith in accordance with the opinion and
directions of such counsel.
(g) The Escrow Agent shall not be deemed to have notice of any
fact, claim or demand with respect hereto unless actually known by an officer
charged with responsibility for
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administering this Agreement or unless in writing received by the Escrow Agent
and making specific reference to this Agreement.
(h) No provision of this Agreement shall require the Escrow
Agent to expend or risk its own funds, or to take any legal or other action
hereunder which might in its judgment involve it in, or require it to incur in
connection with the performance of its duties hereunder, any expense or any
financial liability unless it shall be furnished with indemnification acceptable
to it.
(i) Any permissive right of the Escrow Agent to take any
action hereunder shall not be construed as duty.
(j) All indemnifications contained in this Agreement shall
survive the resignation or removal of the Escrow Agent, and shall survive the
termination of this Agreement.
(k) The Escrow Agent is not responsible for the recitals
appearing in this Agreement. The recitals shall be deemed to be statements of
the Buyer and the Shareholders.
(l) The Escrow Agent has no responsibility for the sufficiency
of this Agreement for any purpose. Without limiting the foregoing, if any
security interest is referred to herein, the Escrow Agent shall have no
responsibility for, and makes no representation or warranty as to, the creation,
attachment or perfection of any such security interest or the sufficiency of
this Agreement therefor.
(m) Nothing in this Agreement shall obligate the Escrow Agent
to qualify to do business or act in any jurisdiction in which it is not
presently qualified to do business, or be deemed to impose upon the Escrow Agent
the duties of a trustee. The duties of the Escrow Agent under this Agreement are
strictly ministerial in nature.
(n) In no event shall the Escrow Agent have any liability for
any failure or inability of any of other party to perform or observe its duties
under the Agreement, or by reason of a breach of this Agreement by any other
party. In no event shall the Escrow Agent be obligated to take any action
against any other party to compel performance hereunder.
(o) The Escrow Agent shall in no instance be obligated to
commence, prosecute or defend any legal proceedings in connection herewith.
(p) Whenever the terms hereof call for any notice, payment or
other action on a day which is not a business day, such payment or action may be
taken, or such notice given, as the case may be, on the next succeeding business
day. As used herein, "business day" shall mean any day other than a Saturday or
Sunday, or any other day on which the Escrow Agent is closed for business.
(q) In the event of any ambiguity or uncertainty under this
Agreement, or in any notice, instruction, or other communication received by the
Escrow Agent hereunder, the Escrow Agent may, in its discretion, refrain from
taking action, and may retain the Escrow Fund,
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until and unless it receives written instruction signed by all Interested
Parties which eliminates such uncertainty or ambiguity.
(r) If at any time Escrow Agent is served with any judicial or
administrative order, judgment, decree, writ or other form of judicial
administrative process which in any way relates to or affects the Escrow Fund
(including but not limited to orders of attachment or garnishment or other forms
of levies or injunctions or stays relating to the Escrow Fund), Escrow Agent is
authorized to comply therewith in any manner as it or its legal counsel deems
appropriate; and if the Escrow Agent complies with any such judicial or
administrative order, judgment, decree, writ or other form of judicial or
administrative process, Escrow Agent shall not be liable to any of the parties
hereto or to any other person or entity notwithstanding that though such order,
judgment, decree, writ or process may be subsequently modified, annulled, set
aside, vacated, found to have been without proper jurisdiction, or otherwise
determined to have been without legal force or effect.
7. SHAREHOLDER REPRESENTATIVE.
(a) In the event the Shareholder Representative shall die or
resign or otherwise terminate his status as such, his successor shall be Xxxxxxx
X. Xxxxxx or such other person as the Shareholder Representative may appoint. If
the successor Shareholder Representative shall die or resign or otherwise
terminate his status as such, his successor shall be any person appointed by
such successor Shareholder Representative or, in the case of his failure to
appoint a successor after a vacancy has been created, elected by the vote or
written consent of a majority in interest of the Shareholders. All decisions of
the Shareholder Representative shall be binding upon the Shareholders. The
Shareholder Representative shall keep the Shareholders reasonably informed of
his or her material decisions.
(b) The Shareholder Representative is authorized to take any
action deemed by him appropriate or necessary to carry out the provisions of,
and to determine the rights of the Shareholders under this Agreement. The
Shareholder Representative shall serve as the agent of the Shareholders for all
purposes related to this Agreement, including without limitation service of
process upon the Shareholders. By execution of this Agreement, the Shareholder
Representative accepts and agrees to diligently discharge the duties and
responsibilities of the Shareholder Representative set forth in this Agreement
without compensation for his services hereunder. The authorization and
designation of the Shareholder Representative under this Section 7(b) shall be
binding upon the successors and assigns of each Shareholder. The Buyer and the
Escrow Agent shall be entitled to rely upon such authorization and designation
and shall be fully protected in dealing with the Shareholder Representative, and
shall have no duty to inquire into the authority of any person reasonably
believed by any of them to be the Shareholder Representative.
(c) The Shareholder Representative (i) shall not be liable to
any of the Shareholders for any error of judgment, or action taken or omitted in
good faith, or mistake of fact or law unless caused by his own gross negligence
or willful misconduct, (ii) shall be entitled to treat as genuine any letter or
other document furnished to him by the Buyer, the Shareholders or the Escrow
Agent and believed by him to be genuine and to have been signed and presented by
the proper party or parties and (iii) shall be reimbursed from any portions of
the Escrow Fund
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otherwise immediately deliverable to the Shareholders under the this Agreement
for counsel fees and other out-of-pocket expenses incurred by the Shareholder
Representative in connection with this Agreement.
8. GOVERNING LAW. This Agreement is governed by the laws of
Massachusetts without regard to its conflict of law provisions, and shall inure
to the benefit of and be binding upon the successors, assigns, heirs and
personal representatives of the parties hereto.
9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which documents shall be considered one and the same
document.
10. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given when delivered in
person, by overnight courier, by facsimile transmission (with receipt confirmed
by telephone or by automatic transmission report) or two business days after
being sent by registered or certified mail (postage prepaid, return receipt
requested), as follows:
TO THE BUYER:
Galileo Corporation
Galileo Park, X.X. Xxx 000
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx, President
With copies to:
Xxxxx X. Xxxxxxx, Xx., Esq.
Xxxxxx & Dodge LLP
Xxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
TO THE SHAREHOLDER REPRESENTATIVE:
Xxxx X. Xxxxx, Xx.
OFC Corporation
0 Xxxxxx Xxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
With copies to:
Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx, Xxxx & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
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Xxxxxx, XX 00000
Fax: (000) 000-0000
TO ESCROW AGENT:
State Street Bank and Trust Company
Corporate Trust Department - 0xx Xxxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Galileo - OFC Acquisition Escrow
Tel. (000) 000-0000
Fax: (000) 000-0000
Any party may by notice given in accordance with this section to the other
parties designate another address or person for receipt of notices hereunder.
11. FORCE MAJEURE.
The Escrow Agent shall not be responsible or liable for delays
or failures in performance resulting from acts beyond its control. Such acts
shall include but not be limited to acts of God, strikes, lockouts, riots, acts
of war, epidemics, laws or governmental regulations changed or superimposed
after the fact, fire, communication line failures, power failures, computer
viruses, earthquakes or other disasters, or to unavailability of Federal Reserve
Bank wire or telex facilities.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first stated above.
GALILEO CORPORATION
By /s/ Xxxxxxx X. Xxxxxx, President
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Xxxxxxx X. Xxxxxx, President
SHAREHOLDER REPRESENTATIVE
/s/ Xxxx X. Xxxxx, Xx.
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Xxxx X. Xxxxx, Xx.
STATE STREET BANK AND TRUST COMPANY,
as Escrow Agent
By
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Title:
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