EXHIBIT 2.3
================================================================================
ESCROW AGREEMENT
Dated as of February 14, 1997
================================================================================
ESCROW AGREEMENT
This Escrow Agreement (this "AGREEMENT") is entered into as of February 14,
1997, by and among HCC Industries Inc., a Delaware corporation ("HCC"), the
Sellers (the "SELLERS") listed on EXHIBIT C hereto, Windward Capital Associates,
L.P. ("WINDWARD") and U.S. Trust Company of California, N.A., as escrow agent
("ESCROW AGENT").
B A C K G R O U N D
- - - - - - - - - -
1. HCC, the Sellers, the Buyers and HCC Windward L.L.C. have entered
into a First Amendment and Restatement to the Stock Purchase and
Sale Agreement dated as of December 23, 1996 (the "Purchase
Agreement"). Capitalized terms not defined herein shall have
meaning given to such terms in the Purchase Agreement.
2. Pursuant to the Purchase Agreement, Sellers are entitled to be paid
an aggregate amount of $69,282,486, plus interest thereon as the
Installment Amount, subject only to the conditions set forth
herein.
3. HCC is depositing $69,282,486 of its funds in cash (such cash,
together with any securities or obligations in which it is
invested, being the "FUND") in this escrow arrangement as security
for its agreement to pay that amount to Sellers.
4. Pursuant to Section 4.4, Sellers have appointed ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(the "REPRESENTATIVE") as their representative and attorney in
fact to take any and all actions necessary or desirable by or on
behalf of the Sellers in this Agreement.
1. ESCROW.
------
1.1 APPOINTMENT OF ESCROW AGENT. Escrow Agent is appointed to act in
---------------------------
accordance with the terms hereof, and Escrow Agent accepts such
appointment.
1.2 ESTABLISHMENT OF THE ESCROW ACCOUNT.
-----------------------------------
1.2.1 DELIVERY. Concurrently herewith, HCC has delivered the
Fund to the Escrow Agent, to be held by Escrow Agent
hereunder. HCC hereby makes the Fund, and all of its
interest therein, part of the escrow created hereby.
1
1.2.2 SECURITY INTEREST. HCC hereby grants a security interest in
-----------------
the Fund and its proceeds in favor of the Sellers. Said
security interest is subordinate to the rights of any
creditors of HCC with respect to unpaid claims against HCC
existing as of the date hereof who have not consented to the
transactions contemplated by the Purchase Agreement, until the
Fund is delivered to the Sellers.
1.2.3 HOLDING OF FUNDS. Escrow Agent will hold the Fund and any
----------------
proceeds it receives with respect to the Fund in a separate
account to be held in accordance with this Agreement.
1.2.4 INVESTMENT OF AMOUNTS IN THE FUND.
---------------------------------
1.3 Investment. The Escrow Agent shall invest any or all
----------
amounts in the Fund, and any undistributed accretions thereto
or income with respect thereto, as directed in writing by the
Company (with the consent of the Representative), in any of
the following:
(a)interest-bearing savings accounts with the
Escrow Agent or with national banks or corporations endowed
with trust powers having capital and surplus in excess of
$1,000,000,000;
(b)securities or obligations issued or guaranteed by
the United States of America or any agency or instrumentality
thereof;
(c)certificates of deposit of or accounts with the
Escrow Agent or national banks or corporations endowed with
trust powers having capital and surplus in excess of
$1,000,000,000;
(d)tax exempt securities rated AAA or higher;
(e)commercial paper and other obligations and
securities with a term or less than three years, in each case,
at the time of investment rated A-1 or A, as the case may be,
by Standard & Poor's Corporation or Prime-1 or A-1, as the
case may be, by Moody's Investor's Service, Inc. (the Escrow
Agent having no liability to determine or inquire into the
rating of said investment); or
2
(f) mutual funds that the Company reasonably
determines primarily invests in securities or obligations of
the type referred to in clauses (a) through (e) above.
After April 1, 1997, interest shall be paid to the Sellers not less
frequently than monthly in accordance with the percentages set forth on Exhibit
C. In connection with any investment of the Fund, the Company shall provide the
Escrow Agent with its and Sellers' taxpayer identification numbers. Failure to
provide such information may cause the Escrow Agent to be required to withhold
tax on any interest payable hereunder.
1.3.1 NO LIABILITY. The Escrow Agent shall not have any liability
------------
for any loss sustained as a result of any investment made
pursuant to the instructions of the Company or as a result of
any liquidation of any such investment prior to its maturity
or for the failure of the Company to give the Escrow Agent any
instruction to invest or reinvest any amounts in the Deferred
Purchase Price Fund or any earnings thereon.
1.3.2 ESCROW FEES . HCC will be responsible for all other fees and
-----------
expenses of Escrow Agent.
2. TERMS OF ESCROW; DISBURSEMENT OF FUNDS AND DOCUMENTS.
----------------------------------------------------
2.1 DEPOSIT AND DISBURSEMENT OF FUNDS. Upon the delivery to Escrow
---------------------------------
Agent of a legal opinion from O'Melveny & ▇▇▇▇▇ (the "OPINION") the
form of EXHIBIT B, Escrow Agent will:
(a) Immediately deliver the Fund to Sellers (such delivery
to be made to each Seller in the percentage amount set forth by
such Seller's name on EXHIBIT C hereto by wire transfer in
immediately available funds to the account of such Seller set forth
on EXHIBIT C hereto).
(b) Immediately deliver the Opinion to Windward.
The delivery of the Fund to Sellers in accordance with clause (i) above
shall be deemed payment by HCC of the First Installment.
2.2 ESCROW AGENT ROLE. Escrow Agent shall have no responsibility or
------------------
obligation for investigating or determining the validity or
sufficiency of the statements made in the Opinion and shall
exercise no discretion in connection with the foregoing
disbursements.
3
3. ESCROW AGENT.
------------
3.1 ESCROW AGENT QUALIFICATIONS. Escrow Agent shall at all times be a
---------------------------
bank, savings and loan association or trust company in good
standing, organized and doing business under the laws of the United
States or a State of the United States, having combined capital and
surplus of not less than five million dollars ($5,000,000) and
shall be authorized under the laws governing its organization to
exercise corporate trust powers and shall be authorized under such
laws and the laws of the State of California to enter into and
perform this Agreement. If Escrow Agent at any time ceases to have
the foregoing qualifications, Escrow Agent will give notice of
resignation to HCC, the Representative, and Windward, and a
qualified successor escrow agent will be appointed in accordance
with Section 3.4.
3.2 RESIGNATION. Escrow Agent or any successor to it may resign and be
-----------
discharged of its duties and obligations hereunder by delivering
written notice to the parties hereto specifying the effective date
of such resignation, which date shall not be earlier than 30 days
following the delivery of the notice of resignation. Such
resignation will take effect on the date specified in the notice of
resignation, unless a successor escrow agent has been appointed in
accordance with the provisions of Section 3.4 and has accepted such
appointment, in which case such resignation shall take effect
immediately upon receipt by such successor escrow agent of the Fund
and any other funds and documents then held in escrow. Escrow Agent
may be removed by the joint action of HCC, the Representative, and
Windward by delivery of a termination notice, with or without
cause, at any time upon 30 days' prior written notice to Escrow
Agent, which notice may be waived by Escrow Agent.
3.3 CONTINUATION. Notwithstanding any resignation or removal of Escrow
------------
Agent, Escrow Agent will continue to serve in its capacity as
escrow agent until (a) a successor escrow agent has been appointed
in accordance with Section 3.4 and has accepted such appointment,
and (b) the Fund and any other funds and documents then held in
escrow have been transferred to and received by the successor
escrow agent. HCC, the Representative, and Windward will promptly
take the necessary action to appoint a successor escrow agent in
accordance with Section 3.4.
3.4 APPOINTMENT OF SUCCESSOR ESCROW AGENT. If at any time Escrow Agent
-------------------------------------
resigns, is removed or otherwise becomes incapable of acting as
escrow agent pursuant to this Agreement, or if at any time a
vacancy occurs in the office of Escrow Agent for any other cause, a
successor escrow agent located in Los Angeles County that meets the
qualifications set forth in
4
Section 3.1 will be appointed by HCC with the written consent of
the Representative and Windward, which consent may not be
unreasonably withheld, by written instrument delivered to the
successor escrow agent. If no successor escrow agent has been
appointed at the effective date of resignation or removal of Escrow
Agent or within 30 days after the time Escrow Agent became
incapable of acting or a vacancy occurred in the office of Escrow
Agent, any party hereto may petition a court of competent
jurisdiction for an appointment of a successor escrow agent and
Escrow Agent will have the right to refuse to make any
disbursements from the escrow until a successor escrow agent is
appointed and has accepted such appointment. Upon the appointment
and acceptance of any successor escrow agent hereunder, Escrow
Agent shall transfer the Fund and any other funds and documents
then held in escrow to its successor. Upon receipt of such items by
the successor escrow agent, Escrow Agent shall be discharged from
any continuing duties or obligations under this Agreement, but such
discharge shall not relieve Escrow Agent from any liability
incurred prior to such event, and the successor escrow agent shall
be vested with all rights, powers, duties and obligations of Escrow
Agent under this Agreement.
3.5 LIMITATIONS ON LIABILITY OF ESCROW AGENT.
----------------------------------------
3.5.1 RELIANCE. Escrow Agent may act upon any written notice,
--------
certificate, instrument, request, waiver, consent, paper, or
other document that Escrow Agent in good faith reasonably
believes to be genuine and to have been made, sent, signed,
prescribed, or presented by the proper person or persons.
Escrow Agent will not be liable for the sufficiency,
correctness or genuineness as to form, manner of execution
or validity of any instrument presented, nor as to identity,
authority, or rights of any person executing the same,
except as provided herein. Escrow Agent will otherwise not
be liable for any mistakes of fact or errors of judgment, or
for any acts or omissions of any kind unless the same was
caused by the willful misconduct or negligence of Escrow
Agent. HCC will indemnify and hold Escrow Agent harmless
from any claims, demands, causes of action, liabilities,
damages or judgments, including the cost of defending any
such action, together with any reasonable attorneys' fees of
any nature (including appeal from an adverse judgment
related to the same) incurred by Escrow Agent in connection
with Escrow Agent's undertakings pursuant to the terms and
conditions of this Agreement, unless such act or omission is
a result of the willful misconduct or negligence of Escrow
Agent.
3.5.2 LITIGATION. If Escrow Agent during or after the term of the
escrow is made aware of any litigation with respect to the
rights of any of
5
the parties hereto, or any money or documents deposited
herein or affected hereby, Escrow Agent will have the right
to discontinue any or all further acts on its part until
such conflict is resolved, and Escrow Agent will have the
further right to commence or defend any action or proceeding
for the resolution of such conflict. If Escrow Agent files
suit in interpleader, it will be fully released and
discharged from all further obligations under this
Agreement.
3.5.3 CONSULTATION WITH COUNSEL. Escrow Agent's sole
responsibility will be as provided in this Agreement or as
required by law. Escrow Agent may consult with legal counsel
satisfactory to it in connection with any dispute, the
construction of any provision of this Agreement or the
duties and obligations of Escrow Agent under this Agreement,
and will have full and complete authorization and protection
for any action taken or suffered by it hereunder in good
faith and in accordance with the opinion of such counsel.
3.6 RELEASE OF ESCROW AGENT. The retention and distribution of the Fund
-----------------------
and other funds and documents held in escrow in accordance with
this Agreement will fully and completely release Escrow Agent from
any obligations or liabilities assumed under this Agreement with
respect thereto.
3.7 COMPENSATION OF ESCROW AGENT. Escrow Agent will be entitled to
----------------------------
compensation pursuant to the schedule of fees attached as EXHIBIT
A, and to reimbursement of fees, costs and expenses, including
reasonable attorneys' fees suffered or incurred by Escrow Agent in
connection with the performance of its duties and obligations
hereunder, including but not limited to, any suit in interpleader
brought by Escrow Agent. HCC will be responsible for such
compensation, fees, costs and expenses, and will promptly, upon
demand by Escrow Agent, pay or reimburse Escrow Agent for all such
amounts. Escrow Agent is not entitled to withhold any amounts from
the Fund for such purposes.
4. AGREEMENTS BETWEEN HCC, SELLERS AND BUYER'S REPRESENTATIVE.
The following agreements are matters for which Escrow Agent has no
responsibility and with which it is not to be concerned.
4.1 COVENANT NOT TO ▇▇▇. HCC and Windward each agree not to institute
-------------------
or participate in any legal or other proceeding that seeks directly
or indirectly to set aside or void this escrow and security
arrangement or to prevent the delivery of the Fund to Sellers, or
to take any action that is intended to or would be reasonably
likely to cause the Opinion not to be delivered.
6
4.2 SPECIFIC PERFORMANCE. HCC and Windward agree that the payment of
--------------------
the Fund as contemplated hereby, and the rights and privileges
granted to Sellers pursuant to this Agreement, represents a unique,
extraordinary and special event that has peculiar value to Sellers,
the loss of which cannot be reasonably or adequately compensated in
damages in any action at law, and that a breach by failure to
deliver the Fund as contemplated hereby will cause great and
irreparable injury and damage. HCC and Windward agree that Sellers
are entitled to the remedies of injunction, specific performance
and other equitable relief to prevent a breach of this Agreement or
a failure of delivery of the Fund. This subsection shall not be
construed as a waiver of any other rights or remedies that Sellers
may have for damages or otherwise.
4.3 REPRESENTATIONS OF HCC. HCC represents and warrants to Sellers that
----------------------
this Agreement has been validly executed and delivered and is its
valid and binding obligation, enforceable against it in accordance
with its terms, and that it is not subject to any agreement,
restriction, understanding, court order, or other burden that is or
would be violated by the provisions of this Agreement or the
consummation of the transactions contemplated hereby.
4.4 POWER OF SELLERS' REPRESENTATIVE. Each Seller hereby
--------------------------------
unconditionally and irrevocably appoints ▇▇▇▇ ▇▇▇▇▇▇▇▇, as
attorney-in-fact, without power of substitution, with power and
authority to execute any and all written consents and approvals of
the Sellers, or other demands, notices, consents and approvals
required or permitted hereunder, with the same effect as if the
Seller had personally performed such act. If ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ dies
or becomes legally incompetent before the distribution of the Fund,
the other Sellers must act together in such matters.
4.5 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. HCC, Sellers and
-------------------------------------------
Windward each agree to sign all necessary documents and to take all
other actions reasonably necessary to carry out the provisions of
this Agreement and to further evidence their agreements hereunder.
5. ADMINISTRATIVE PROVISIONS.
-------------------------
5.1 NOTICES. All notices, demands, consents, requests, approvals, and
-------
other communications required or permitted hereunder shall be in
writing and shall be deemed to have been properly given (a) if hand
delivered, or (b) effective upon receipt or, if refused, upon date
of refusal if mailed by United States registered or certified mail,
with postage prepaid, return receipt requested, or (c) if sent by a
recognized private courier or overnight express company, return
receipt requested (effective upon receipt or, if refused, upon the
date of refusal), or (d) effective upon receipt if sent by
7
facsimile to each of the parties at the following addresses (or at
such other addresses as shall be given in writing by any party to
the others in accordance with this Section 5.1):
IF TO WINDWARD:
Windward Capital Partners, L.P.
Eleven Madison Avenue
26th Floor
New York, New York 10010
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO HCC OR SELLER REPRESENTATIVE:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
O'Melveny & ▇▇▇▇▇
1999 Avenue of the Stars, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO ESCROW AGENT:
U.S. Trust Company of California, N.A.
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Corporate Trust Division
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
8
Courtesy copies shall be forwarded to the persons whose names are
hereinabove preceded with the words "with copy to," but the delivery of
copies to such persons shall not be necessary for the effectiveness of
notice hereunder.
5.2 GOVERNING LAW. This Agreement shall be governed by the laws of
-------------
the State of New York.
5.3 AMENDMENTS; SURVIVAL. No amendment, modification or alteration of
--------------------
the terms hereof shall be effective or binding unless the same be
in writing and signed by the parties hereto affected thereby.
5.4 SUCCESSORS AND ASSIGNS. Neither this Agreement nor any rights or
----------------------
obligations under it are assignable, and this Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns.
5.5 PAYMENT OF FEES. In the event of litigation of any dispute or
---------------
controversy arising from, in, under or concerning this Agreement
and any amendments hereof, the prevailing party in such action
shall be entitled to recover from the other party in such action,
in addition to other relief, such sum as the court shall fix as
reasonable attorneys' fees and expenses incurred by such prevailing
party.
5.6 NO THIRD-PARTY RIGHTS. Nothing contained in this Agreement is
---------------------
intended to and nothing contained herein shall be interpreted to
confer on any party the rights of a third-party beneficiary, and
this Agreement is for the sole benefit of the parties hereto.
5.7 NO WAIVER OF DEFAULT. No consent or waiver, express or implied, by
--------------------
any party, to or of any breach or default by any other party in the
performance by the other of its obligations hereunder shall be
deemed or construed to be a consent or waiver to or of any other
breach or default in the performance by such other party of the
same or any other obligations of such party hereunder. Failure on
the part of any party to complain of any act or failure to act of
any other party, or to declare such other party in default,
irrespective of how long such failure continues, shall not
constitute a waiver by such party of its rights hereunder.
5.8 PARTICIPATION IN DRAFTING; INTERPRETATION. The provisions hereof
-----------------------------------------
have been thoroughly reviewed by all parties and have been the
subject of negotiations. Accordingly, no party (or its counsel)
shall be considered to have been the exclusive preparer or
draftsman of this Agreement, nor shall the provisions hereof be
construed strictly against any such party on that account. Without
limiting the generality of the foregoing, each party waives the
provisions of Section 1654 of the California Civil Code and any
9
legal decision that would require interpretation of any claimed
ambiguities against the party that drafted it. The provisions of
this Agreement are to be interpreted in a reasonable manner to give
effect to the intent of the parties reflected herein.
5.9 ENTIRE AGREEMENT. This Agreement, together with all other
----------------
agreements referenced herein, constitutes the entire agreement of
the parties relating to the subject matter hereof, and supersedes
any previous oral or written understandings concerning the same.
5.10 SEVERABILITY. If any clause or provision of this Agreement is
------------
illegal, invalid, or unenforceable under present or future laws
effective during the term hereof, it is the intention of the
parties hereto that the remainder of this Agreement shall not be
affected thereby.
5.11 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, all of which, when taken together, shall constitute
one and the same instrument.
5.12 HEADINGS. The descriptive headings of the Sections of this
--------
Agreement are for convenience only and do not constitute a part of
this Agreement.
[The rest of the page has been left blank]
10
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on the day and year first above written.
HCC INDUSTRIES INC.
A DELAWARE CORPORATION
By:______________________________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
SELLERS
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Co Trustee for the
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Revocable
Trust of 1995
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Co Trustee for the ▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Revocable Trust of 1995
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Co Trustee for the ▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1996 Unitrust
Northern Trust Bank of California, N.A. Co
Trustee for the ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1996
Unitrust
By: _____________________
Its:_____________________
11
_________________________________
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_________________________________
▇▇▇▇▇▇▇ ▇. Ferraid
_________________________________
▇▇▇▇▇ ▇. Ferraid
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as Trustee of the ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ Irrevocable Trust
_________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, as Trustee of the ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Irrevocable Trust
WINDWARD CAPITAL ASSOCIATES, L.P.
By: Windward Capital Associates, Inc.
Its: General Partner
By:________________________________________________
Name:_________________________
Title:________________________
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
By:________________________________________________
Name:_________________________
Title:________________________
12
EXHIBIT A
SCHEDULE OF ESCROW FEES
-----------------------
A-1
EXHIBIT B
FORM OF LEGAL OPINION
B-1
EXHIBIT C
Stockholder Redemption Wire Instructions
Percentage
----------- ---------- -----------------
The ▇▇▇▇▇▇ and 57.650% See attached
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Revocable Trust of
1995
The ▇▇▇▇▇▇ and 5.915% See attached
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1996
Unitrust
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 6.699% See attached
and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. Ferraid and 2.487% See attached
▇▇▇▇▇ ▇. Ferraid
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 19.809% See attached
The ▇▇▇▇▇▇▇ ▇▇▇▇ 3.923% See attached
▇▇▇▇▇▇▇▇ Irrevocable
Trust
The ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 3.517% See attached
Irrevocable Trust
B-2