ESCROW AGREEMENT
dated as of
August 10, 2023
among
HALCYON SEMICONDUCTOR AKTIENGESELLSCHAFT
VECTRIS PHOTONICS, INC.
and
IRONCLAD NATIONAL BANK, N.A., as Escrow Agent
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is made and entered into as of August 10, 2023, by and among:
(1) Halcyon Semiconductor Aktiengesellschaft, a German stock corporation (Aktiengesellschaft) registered in the Munich commercial register (Handelsregister) of the Local Court (Amtsgericht) of Munich under HRB 178254, with its registered seat at Halcyon-Platz 1, 81739 München, Germany ("Halcyon" or the "Buyer");
(2) Vectris Photonics, Inc., a Delaware corporation, File No. 5918437, with its principal office at 4750 Ridgepoint Drive, Suite 300, San Jose, California 95134 ("Vectris," the "Company," or the "Seller Representative," as applicable); and
(3) Ironclad National Bank, National Association, a national banking association organized under the laws of the United States, with its principal office at One Liberty Plaza, 165 Broadway, New York, New York 10006 (the "Escrow Agent").
Each of Halcyon, Vectris, and the Escrow Agent is sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Halcyon Semiconductor Aktiengesellschaft, Halcyon Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of Halcyon, File No. 7634291 ("Merger Sub"), and Vectris Photonics, Inc. have entered into that certain Agreement and Plan of Merger, dated as of August 10, 2023 (as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms, the "Merger Agreement"), pursuant to which Merger Sub will merge with and into Vectris in a reverse triangular merger under the General Corporation Law of the State of Delaware, with Vectris surviving as a wholly owned subsidiary of Halcyon (the "Merger");
WHEREAS, the Merger Agreement provides for aggregate all-cash consideration of Eight Hundred Million Dollars ($800,000,000) (the "Aggregate Merger Consideration"), payable to the stockholders of Vectris at a per-share price of approximately Thirteen Dollars and Seventy Cents ($13.70) per share (calculated on the basis of 58,394,160 fully diluted shares of Vectris common stock, consisting of 51,200,000 shares of common stock outstanding as of the date hereof and 7,194,160 shares issuable upon exercise or settlement of in-the-money stock options and restricted stock units);
WHEREAS, Section 2.6(c) of the Merger Agreement requires that, at the Closing, a portion of the Aggregate Merger Consideration in the amount of Forty Million Dollars ($40,000,000) (the "Escrow Amount"), representing five percent (5%) of the aggregate deal value, be deposited into an escrow account (the "Escrow Fund") to secure the indemnification obligations of the stockholders of Vectris under Article IX of the Merger Agreement, subject to an overall indemnification cap of One Hundred Twenty Million Dollars ($120,000,000) (representing fifteen percent (15%) of the aggregate deal value);
WHEREAS, the Parties desire to establish the terms and conditions under which the Escrow Agent will hold, invest, and distribute the Escrow Fund in accordance with this Agreement and the Merger Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and in the Merger Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below:
"Business Day" means any day other than a Saturday, a Sunday, or any other day on which commercial banks in the City of New York, New York are authorized or required by applicable law or regulation to close.
"Closing" has the meaning ascribed to such term in the Merger Agreement and refers to the closing of the Merger and the other transactions contemplated by the Merger Agreement.
"Closing Date" means the date on which the Closing actually occurs in accordance with the terms of the Merger Agreement.
"Disputed Amount" means any portion of the Escrow Fund that is the subject of an unresolved Escrow Claim with respect to which a Dispute Notice has been timely delivered by the Seller Representative pursuant to Section 3.2 and that has not been finally resolved in accordance with Section 3.4.
"Escrow Account" means the segregated escrow account established and maintained by the Escrow Agent at Ironclad National Bank, N.A. for the deposit and administration of the Escrow Fund in accordance with this Agreement.
"Escrow Amount" means Forty Million Dollars ($40,000,000).
"Escrow Claim" means a written claim for indemnification submitted by the Buyer pursuant to Article III of this Agreement and in accordance with the indemnification provisions of Article IX of the Merger Agreement.
"Escrow Claim Notice" has the meaning ascribed to such term in Section 3.1.
"Escrow Fund" means the Escrow Amount, together with all interest, dividends, and other income earned thereon, less any distributions or disbursements made in accordance with the terms of this Agreement.
"Escrow Period" means the period beginning on the Closing Date and ending on the Escrow Termination Date, subject to extension for Pending Claims as provided in Section 4.2.
"Escrow Termination Date" means the date that is eighteen (18) months after the Closing Date.
"Indemnification Cap" means One Hundred Twenty Million Dollars ($120,000,000), as set forth in Section 9.4(b) of the Merger Agreement, being fifteen percent (15%) of the aggregate deal value.
"Joint Written Instruction" means a written instruction substantially in the form attached hereto as Exhibit C, duly executed by both the Buyer Representative and the Seller Representative and delivered to the Escrow Agent in accordance with the notice provisions of Section 7.1.
"Losses" has the meaning ascribed to such term in the Merger Agreement.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of August 10, 2023, by and among Halcyon, Merger Sub, and Vectris, as the same may be amended, supplemented, or otherwise modified from time to time in accordance with its terms.
"Pending Claim" means any Escrow Claim that has been duly submitted by the Buyer in accordance with Section 3.1 but that has not been finally resolved (whether by agreement of the Buyer and the Seller Representative, by deemed acceptance under Section 3.2, or by a final, non-appealable order of a court of competent jurisdiction) as of the Escrow Termination Date.
"Pending Claims Reserve" has the meaning ascribed to such term in Section 4.2.
"Permitted Investments" has the meaning ascribed to such term in Section 2.4.
"Buyer Representative" means Dr. Luisa Hartmann, General Counsel of Halcyon Semiconductor Aktiengesellschaft, or such successor or replacement as the Buyer may from time to time designate by written notice delivered to the Seller Representative and the Escrow Agent in accordance with Section 7.1.
"Response Period" has the meaning ascribed to such term in Section 3.2.
"Seller Representative" means Rebecca Lau, General Counsel and Corporate Secretary of Vectris Photonics, Inc., acting on behalf of the former stockholders of Vectris, or such successor or replacement as the Seller Representative may from time to time designate by written notice delivered to the Buyer and the Escrow Agent in accordance with Section 7.1. The Seller Representative is authorized to act on behalf of the former stockholders of Vectris for all purposes under this Agreement as set forth in Section 10.12 of the Merger Agreement.
Section 1.2 Incorporation of Merger Agreement Definitions
Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings ascribed to such terms in the Merger Agreement. To the extent that a term is defined both in this Agreement and in the Merger Agreement, the definition set forth in this Agreement shall control for purposes of this Agreement.
Section 1.3 Construction
Unless the context otherwise requires: (a) references to "Articles," "Sections," "Exhibits," and "Schedules" are to Articles, Sections, Exhibits, and Schedules of and to this Agreement; (b) words in the singular include the plural, and words in the plural include the singular; (c) the terms "hereof," "herein," "hereby," "hereto," and derivative or similar words refer to this entire Agreement; (d) the term "including" means "including, without limitation"; (e) references to "$" or "Dollars" are to United States dollars; (f) the word "or" is disjunctive but not necessarily exclusive; (g) the word "extent" in the phrase "to the extent" means the degree to which a subject or other thing extends and such phrase shall not mean simply "if"; and (h) references to a "person" include any individual, corporation, partnership, limited liability company, association, trust, unincorporated organization, governmental authority, or any other entity. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.
ARTICLE II — ESTABLISHMENT OF ESCROW
Section 2.1 Appointment of Escrow Agent
The Buyer and the Seller Representative hereby appoint Ironclad National Bank, N.A. as escrow agent under this Agreement, and the Escrow Agent hereby accepts such appointment and agrees to hold, invest, and distribute the Escrow Fund upon the terms and conditions set forth herein. The Escrow Agent undertakes to perform only those duties as are specifically set forth in this Agreement. The Escrow Agent's principal office for all purposes of this Agreement shall be located at:
Ironclad National Bank, N.A. One Liberty Plaza 165 Broadway New York, New York 10006
Attention: Thomas Hargreaves, Escrow Officer
Telephone: (212) 555-4100
Email: t.hargreaves@ironcladnational.com
All communications, instructions, and notices to the Escrow Agent under this Agreement shall be directed to the attention of the individual identified above, or such other individual as the Escrow Agent may designate in writing from time to time to the Buyer and the Seller Representative.
Section 2.2 Deposit of Escrow Amount
(a) On the Closing Date, the Buyer shall cause to be deposited with the Escrow Agent, by wire transfer of immediately available funds in United States dollars, the Escrow Amount of Forty Million Dollars ($40,000,000) into the Escrow Account in accordance with the wire transfer instructions set forth in Exhibit D attached hereto.
(b) The Escrow Amount shall be funded from the Aggregate Merger Consideration of Eight Hundred Million Dollars ($800,000,000). The funding sources for the Aggregate Merger Consideration consist of (i) the proceeds of the Five Hundred Million Dollar ($500,000,000) senior secured term loan facility provided pursuant to the commitment letter, dated as of July 15, 2023, issued by Meridian Atlantic Bank, N.A. (the "Debt Financing"), and (ii) Three Hundred Million Dollars ($300,000,000) in cash on hand from Halcyon and its subsidiaries (the "Equity Financing" and, together with the Debt Financing, the "Financing").
(c) The Escrow Agent shall acknowledge receipt of the Escrow Amount in writing (which may be by email) to each of the Buyer Representative and the Seller Representative within one (1) Business Day following the Escrow Agent's receipt of the wire transfer of the Escrow Amount.
(d) The Buyer's obligation to deposit the Escrow Amount with the Escrow Agent is an obligation under the Merger Agreement as well as under this Agreement, and the failure to make such deposit on the Closing Date shall constitute a breach of both the Merger Agreement and this Agreement.
Section 2.3 Escrow Account
(a) The Escrow Agent shall hold the Escrow Fund in a segregated escrow account maintained at Ironclad National Bank, N.A., which shall be separate and distinct from the Escrow Agent's own funds and from the funds of any other person or entity. The Escrow Account shall be titled as follows:
"Ironclad National Bank, N.A., as Escrow Agent for Halcyon Semiconductor AG / Vectris Photonics, Inc. Merger Escrow"
(b) The Escrow Agent shall not commingle the Escrow Fund with any other funds held by the Escrow Agent in any capacity, whether as fiduciary, agent, or otherwise. The Escrow Agent shall maintain accurate and complete records of all deposits to, investments of, earnings on, and distributions from the Escrow Account and shall make such records available for inspection by the Buyer Representative and the Seller Representative upon reasonable request.
(c) The Escrow Agent shall provide monthly account statements to the Buyer Representative and the Seller Representative reflecting the balance of the Escrow Fund, all transactions during the applicable period, and the investment composition of the Escrow Fund as of the last day of such period. Such statements shall be delivered within ten (10) Business Days following the end of each calendar month.
Section 2.4 Investment of Escrow Fund
(a) Unless otherwise directed by Joint Written Instruction delivered to the Escrow Agent, the Escrow Agent shall invest and reinvest the Escrow Fund in one or more of the following investments (collectively, "Permitted Investments"):
(i) Direct obligations of the United States of America, or obligations the principal of and interest on which are unconditionally guaranteed by the full faith and credit of the United States of America, in each case with stated maturities not exceeding ninety (90) days from the date of acquisition;
(ii) Money market funds that are registered under the Investment Company Act of 1940, as amended, and that invest solely in direct obligations of the United States of America or repurchase agreements collateralized by such obligations, and that are rated at least "AAAm" (or equivalent) by Standard & Pelvoran Financial Services LLC or another nationally recognized statistical rating organization;
(iii) Certificates of deposit, time deposits, or banker's acceptances issued by Ironclad National Bank, N.A. or by any other nationally chartered commercial bank having total assets exceeding Fifty Billion Dollars ($50,000,000,000), in each case with stated maturities not exceeding ninety (90) days from the date of acquisition; and
(iv) Such other investments as may be directed by Joint Written Instruction delivered to the Escrow Agent by the Buyer Representative and the Seller Representative.
(b) All interest, dividends, and other income earned on the Escrow Fund shall become part of the Escrow Fund and shall be distributed in the same manner and at the same times as the principal of the Escrow Fund, as provided in this Agreement.
(c) The Escrow Agent shall have no liability for any loss of principal or income on any Permitted Investment, including any loss resulting from the default of the issuer thereof, the depreciation in value thereof, or the liquidity thereof, other than losses directly resulting from the Escrow Agent's own gross negligence or willful misconduct. The Buyer and the Seller Representative acknowledge that the Escrow Agent is not acting as an investment advisor and has not provided, and shall not be required to provide, any investment advice regarding the selection of Permitted Investments.
(d) The Escrow Agent is hereby authorized to liquidate any Permitted Investment held in the Escrow Account as may be necessary to make any distribution or payment required under this Agreement without regard to any loss, penalty, or premium that may be incurred as a result of any such liquidation.
Section 2.5 Tax Matters
(a) The Buyer and the Seller Representative agree that, for U.S. federal (and, to the extent applicable, state and local) income tax purposes, the former stockholders of Vectris shall be treated as the owners of the Escrow Fund from and after the Closing Date, and all interest, dividends, and other income earned on the Escrow Fund shall be allocated to, and reported as income of, the former stockholders of Vectris (pro rata based on each such former stockholder's proportionate share of the Escrow Fund). The Parties shall not take any position on any tax return or in any proceeding that is inconsistent with such treatment unless required by a final determination (within the meaning of Section 1313 of the Internal Revenue Code of 1986, as amended).
(b) The Escrow Agent shall report all interest and other income earned on the Escrow Fund to the Internal Revenue Service on IRS Forms 1099 (or such other forms as may be required by applicable law), in the name and taxpayer identification number of the former stockholders of Vectris, as directed by the Seller Representative. The Escrow Agent shall have no responsibility to determine the tax consequences of any payment or distribution made pursuant to this Agreement.
(c) The Seller Representative shall provide (or cause to be provided) to the Escrow Agent a duly completed and executed IRS Form W-9, Request for Taxpayer Identification Number and Certification, or the applicable IRS Form W-8, for each payee entitled to receive distributions from the Escrow Fund, prior to any such distribution. The Escrow Agent shall be entitled to withhold any taxes required by applicable law with respect to any payment made from the Escrow Fund and shall not be liable for any such withholding.
(d) To the extent that any amount in respect of imputed interest or investment income is includable in the taxable income of the former stockholders of Vectris and is not distributed to them during the taxable year in which it is earned, the Buyer and the Seller Representative acknowledge that the former stockholders of Vectris shall bear the economic burden of any tax liability attributable to such income.
ARTICLE III — ESCROW CLAIMS AND DISTRIBUTIONS
Section 3.1 Escrow Claims by Buyer
(a) At any time during the Escrow Period (and, with respect to Pending Claims, until the final resolution thereof), the Buyer may submit an Escrow Claim to the Escrow Agent and the Seller Representative by delivering a written notice in substantially the form attached hereto as Exhibit B (an "Escrow Claim Notice"), which Escrow Claim Notice shall:
(i) describe in reasonable detail the nature and factual basis of the Losses for which the Buyer seeks indemnification from the Escrow Fund;
(ii) state the aggregate amount of Losses claimed by the Buyer (or, if the amount of such Losses is not then determinable with certainty, a reasonable good faith estimate of the anticipated amount of such Losses, which estimate shall not be binding on the Buyer and may be revised upward or downward in a subsequent Escrow Claim Notice);
(iii) reference the specific representations, warranties, covenants, or agreements in the Merger Agreement that form the basis for the Escrow Claim, together with a reasonably detailed description of the manner in which such representations, warranties, covenants, or agreements have been breached or violated; and
(iv) include any supporting documentation then in the Buyer's possession that is reasonably necessary to evaluate the Escrow Claim.
(b) All Escrow Claims must arise under the indemnification provisions of Article IX of the Merger Agreement. The Escrow Agent shall have no responsibility to determine whether any Escrow Claim is valid or proper, and the Escrow Agent shall be entitled to rely solely on the terms of this Agreement in determining whether and how to distribute any portion of the Escrow Fund.
(c) The Escrow Fund shall constitute the first source of recovery for the Buyer's indemnification claims under the Merger Agreement, but shall not be the exclusive source of recovery. Nothing in this Agreement shall limit the Buyer's indemnification rights under the Merger Agreement up to the Indemnification Cap of One Hundred Twenty Million Dollars ($120,000,000). The Parties acknowledge that Halcyon has obtained a separate representations and warranties insurance policy (Policy No. RWI-2023-0847) maintained by Atlas Transactional Insurance Group, Inc. with Pinnacle Specialty Underwriters, Ltd. as insurer, which provides a policy limit of One Hundred Twenty Million Dollars ($120,000,000) in addition to the Escrow Fund; provided, however, that the terms and conditions of such insurance policy are governed by the policy itself and do not modify or amend the rights and obligations of the Parties under this Agreement.
Section 3.2 Response Period
(a) The Seller Representative shall have thirty (30) days after receipt of an Escrow Claim Notice (the "Response Period") to deliver a written response (a "Response") to the Buyer and the Escrow Agent, which Response shall either:
(i) accept the Escrow Claim in its entirety, in which case the Response shall constitute authorization for the Escrow Agent to make the distribution contemplated by Section 3.3;
(ii) accept the Escrow Claim in part, specifying the amount accepted and the amount disputed, together with a reasonably detailed explanation of the basis for the partial acceptance and partial dispute; or
(iii) dispute the Escrow Claim in its entirety, setting forth in reasonable detail the factual and legal basis for such dispute (a "Dispute Notice").
(b) If the Seller Representative fails to deliver a Response within the Response Period, the Escrow Claim set forth in the applicable Escrow Claim Notice shall be deemed accepted in full by the Seller Representative, and the Escrow Agent shall thereupon distribute the claimed amount in accordance with Section 3.3.
(c) If the Seller Representative delivers a Response accepting the Escrow Claim in part, the accepted portion shall be treated as an accepted Escrow Claim for purposes of Section 3.3, and the disputed portion shall be treated as a Disputed Amount for purposes of Section 3.4.
Section 3.3 Payment of Undisputed Claims
(a) Upon receipt by the Escrow Agent of (i) a Joint Written Instruction directing the Escrow Agent to make a payment from the Escrow Fund to the Buyer, or (ii) evidence satisfactory to the Escrow Agent that an Escrow Claim has been accepted (whether by an express Response pursuant to Section 3.2(a)(i) or Section 3.2(a)(ii), or by deemed acceptance pursuant to Section 3.2(b)):
the Escrow Agent shall, within five (5) Business Days following receipt of such Joint Written Instruction or evidence of acceptance (as applicable), distribute to the Buyer from the Escrow Fund the amount of the accepted Escrow Claim (or the accepted portion thereof), by wire transfer of immediately available funds to the bank account designated by the Buyer in Exhibit D hereto or as otherwise specified in writing by the Buyer Representative.
(b) In no event shall the Escrow Agent be required to make any distribution from the Escrow Fund in excess of the then-current balance of the Escrow Fund.
(c) The Escrow Agent shall promptly notify both the Buyer Representative and the Seller Representative of any distribution made pursuant to this Section 3.3, including the date and amount of such distribution and the remaining balance of the Escrow Fund following such distribution.
Section 3.4 Resolution of Disputed Claims
In the event that the Seller Representative delivers a Dispute Notice with respect to all or any portion of an Escrow Claim, the following procedures shall apply:
(a) Good Faith Negotiations. The Buyer and the Seller Representative shall attempt in good faith to resolve the dispute within thirty (30) days following the date on which the Escrow Agent receives the Dispute Notice (the "Negotiation Period"). During the Negotiation Period, each of the Buyer and the Seller Representative shall make available to the other such information and documentation as may be reasonably requested in connection with the resolution of the disputed Escrow Claim.
(b) Judicial Resolution. If the Buyer and the Seller Representative are unable to resolve the dispute within the Negotiation Period, either the Buyer or the Seller Representative may submit the dispute to a court of competent jurisdiction in the State of Delaware in accordance with Section 7.9 of this Agreement.
(c) Retention of Disputed Amount. The Escrow Agent shall retain the Disputed Amount in the Escrow Fund and shall not distribute any portion of the Disputed Amount until the Escrow Agent's receipt of either (i) a Joint Written Instruction executed by both the Buyer Representative and the Seller Representative directing the distribution of the Disputed Amount or any portion thereof, or (ii) a certified copy of a final, non-appealable order, judgment, or decree of a court of competent jurisdiction directing the distribution of the Disputed Amount or any portion thereof.
(d) Distribution of Disputed Amount. Promptly (and in any event within five (5) Business Days) following the Escrow Agent's receipt of a Joint Written Instruction or a final, non-appealable court order as described in Section 3.4(c), the Escrow Agent shall distribute the Disputed Amount (or the applicable portion thereof) in accordance with such Joint Written Instruction or court order, by wire transfer of immediately available funds to the accounts designated therein.
(e) No Obligation to Investigate. The Escrow Agent shall have no duty or obligation to investigate, adjudicate, or determine the merits of any Escrow Claim or any Dispute Notice and shall be entitled to act solely in accordance with the terms of this Agreement.
Section 3.5 Limitation on Escrow Claims
(a) The aggregate amount of all Escrow Claims paid from the Escrow Fund shall not exceed the balance of the Escrow Fund at the time of distribution (i.e., the Escrow Amount as adjusted for earnings thereon and prior distributions therefrom).
(b) For the avoidance of doubt, the Escrow Fund does not constitute the maximum limit of the Buyer's indemnification rights under the Merger Agreement. The Buyer's indemnification rights under Article IX of the Merger Agreement are subject to the overall Indemnification Cap of One Hundred Twenty Million Dollars ($120,000,000), and the Buyer may seek indemnification for Losses in excess of the Escrow Fund (up to the Indemnification Cap) in accordance with, and subject to the terms and conditions of, the Merger Agreement.
(c) The Escrow Agent shall not be required to make any distribution from the Escrow Fund other than in accordance with the express terms of this Agreement. The Escrow Agent shall have no duty to monitor compliance with the Indemnification Cap or any other limitation set forth in the Merger Agreement.
ARTICLE IV — TERMINATION AND FINAL DISTRIBUTION
Section 4.1 Escrow Termination Date
The Escrow Period shall expire on the date that is eighteen (18) months after the Closing Date (the "Escrow Termination Date"). The Buyer shall notify the Escrow Agent and the Seller Representative in writing of the Closing Date within two (2) Business Days following the Closing. The Escrow Agent shall calculate the Escrow Termination Date based on such notification and shall confirm the Escrow Termination Date in writing to the Buyer Representative and the Seller Representative.
Section 4.2 Extension for Pending Claims
(a) If, as of the Escrow Termination Date, there are one or more Pending Claims that have not been finally resolved, the Escrow Agent shall retain in the Escrow Fund an amount equal to the aggregate amount of all such Pending Claims (or, to the extent the amount of any such Pending Claim is based on a good faith estimate, the aggregate of such estimates) (the "Pending Claims Reserve").
(b) All remaining amounts in the Escrow Fund (i.e., the Escrow Fund less the Pending Claims Reserve) shall be released by the Escrow Agent to the Seller Representative (for distribution pro rata to the former stockholders of Vectris in accordance with the terms of the Merger Agreement) within ten (10) Business Days after the Escrow Termination Date, by wire transfer of immediately available funds to the account designated by the Seller Representative in Exhibit D hereto or as otherwise specified in writing by the Seller Representative.
(c) The Escrow Agent shall provide a written accounting to the Buyer Representative and the Seller Representative, concurrently with the release described in Section 4.2(b), setting forth the balance of the Escrow Fund, the amount of each Pending Claim, the amount of the Pending Claims Reserve, and the amount distributed to the Seller Representative.
Section 4.3 Final Distribution
(a) Promptly (and in any event within five (5) Business Days) following the final resolution of all Pending Claims (whether by Joint Written Instruction, deemed acceptance, or final, non-appealable court order), the Escrow Agent shall:
(i) distribute to the Buyer the portion of the Pending Claims Reserve attributable to Pending Claims that have been resolved in favor of the Buyer (whether by acceptance, deemed acceptance, or court order); and
(ii) distribute to the Seller Representative (for distribution pro rata to the former stockholders of Vectris) the remainder of the Pending Claims Reserve, if any.
(b) Upon the distribution of all amounts held in the Pending Claims Reserve in accordance with this Section 4.3, the Escrow Agent shall provide a final written accounting to the Buyer Representative and the Seller Representative reflecting all deposits, investments, earnings, distributions, and fees during the term of this Agreement.
Section 4.4 Termination of Agreement
This Agreement shall terminate and be of no further force or effect upon the distribution of the entire Escrow Fund in accordance with the terms of this Agreement; provided, however, that Article V (Escrow Agent), Article VI (Indemnification of Escrow Agent), and Article VII (Miscellaneous) shall survive the termination of this Agreement and shall continue in full force and effect until all obligations of the Parties thereunder have been satisfied. Upon termination, the Escrow Agent shall close the Escrow Account and provide written confirmation of such closure to the Buyer Representative and the Seller Representative.
ARTICLE V — ESCROW AGENT
Section 5.1 Duties and Responsibilities
(a) The Escrow Agent's duties and obligations under this Agreement are limited solely to those expressly set forth in this Agreement, and the Escrow Agent shall not be subject to, or bound by, any other agreement between or among any of the other Parties, including the Merger Agreement, whether or not the Escrow Agent has knowledge thereof. The Escrow Agent acts as a stakeholder only and has no duty or obligation to enforce any obligation of any other Party to this Agreement or of any third party.
(b) The Escrow Agent shall not be required to take any action that, in its sole and reasonable judgment, could involve it in expense, liability, or risk unless the Escrow Agent shall have been furnished with security and indemnity satisfactory to it against any and all losses, costs, liabilities, and expenses (including reasonable attorneys' fees) that might be incurred in connection therewith.
(c) The Escrow Agent shall not be obligated to take any legal or other action in connection with this Agreement that might, in its sole judgment, involve any expense, liability, or risk to it unless it has received satisfactory indemnification in accordance with Section 6.1.
(d) The Escrow Agent shall not be responsible for, and shall not be required to verify, the identity, authority, or rights of any person claiming to be a beneficiary of this Agreement or of the Escrow Fund.
Section 5.2 Reliance
(a) The Escrow Agent may rely, and shall be fully protected in acting or refraining from acting, upon any notice, instruction, certificate, statement, request, consent, agreement, or other document or instrument believed by it in good faith to be genuine and to have been signed, executed, or presented by the proper person or persons. The Escrow Agent shall have no duty to make any inquiry or investigation into the facts or circumstances of any matter.
(b) The Escrow Agent may consult with legal counsel of its own choosing (including in-house counsel), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Escrow Agent in respect of any action taken, suffered, or omitted by the Escrow Agent in good faith and in accordance with the advice or opinion of such counsel.
(c) The Escrow Agent may perform any and all of its duties and exercise its rights and powers under this Agreement by or through agents, attorneys-in-fact, custodians, or nominees and shall not be responsible for any misconduct or negligence on the part of, or any loss occasioned by, any such agent, attorney-in-fact, custodian, or nominee appointed with due care.
Section 5.3 Limitation of Liability
(a) The Escrow Agent shall not be liable for any loss, liability, cost, or expense, including attorneys' fees, arising from or in connection with the performance or non-performance of its duties under this Agreement, except to the extent that such loss, liability, cost, or expense is directly caused by the Escrow Agent's own gross negligence, willful misconduct, or bad faith, in each case as finally determined by a court of competent jurisdiction.
(b) In no event shall the Escrow Agent be liable for any indirect, incidental, special, consequential, exemplary, or punitive damages of any kind whatsoever (including lost profits), regardless of the form of action, whether in contract, tort, or otherwise, and regardless of whether such damages were foreseeable or whether the Escrow Agent has been advised of the possibility thereof.
(c) The Escrow Agent shall not be responsible for the validity, sufficiency, accuracy, or genuineness of any documents, instruments, or notices submitted to it, or for the identity, authority, or right of any person signing, executing, or delivering such documents, instruments, or notices.
(d) The Escrow Agent shall not be responsible for any failure or delay in the performance of its obligations under this Agreement arising out of or caused by, directly or indirectly, forces beyond its reasonable control, including strikes, work stoppages, acts of war, terrorism, civil or military disturbances, nuclear or natural catastrophes, epidemics, pandemics, earthquakes, fire, flood, storm, interruption of power or communications, failure of computer hardware or software, or any act of God.
(e) The Escrow Agent shall not be liable for any action taken or omitted by it in good faith and reasonably believed by it to be authorized or within the rights or powers conferred upon it by this Agreement.
Section 5.4 Resignation and Removal
(a) The Escrow Agent may resign and be discharged from its duties and obligations under this Agreement at any time by giving not less than thirty (30) days' prior written notice of such resignation to the Buyer and the Seller Representative. Such resignation shall take effect on the date specified in such notice or, if no date is specified, on the thirtieth (30th) day following receipt of such notice by the Buyer and the Seller Representative.
(b) The Buyer and the Seller Representative, acting jointly by Joint Written Instruction, may remove the Escrow Agent at any time upon not less than thirty (30) days' prior written notice to the Escrow Agent, with or without cause.
(c) In the event of any resignation or removal of the Escrow Agent pursuant to this Section 5.4, a successor escrow agent shall be appointed by Joint Written Instruction of the Buyer Representative and the Seller Representative. If no successor escrow agent shall have been so appointed and shall have accepted such appointment within thirty (30) days after the Escrow Agent's delivery of its notice of resignation or receipt of the notice of removal, the Escrow Agent may petition any court of competent jurisdiction in the State of Delaware for the appointment of a successor escrow agent, and the costs and expenses of any such proceeding shall be borne equally by the Buyer and the former Vectris stockholders (through the Seller Representative).
(d) Upon the appointment of a successor escrow agent and the acceptance of such appointment by the successor, the Escrow Agent shall promptly transfer and deliver the Escrow Fund and all records relating thereto to the successor escrow agent, and thereupon the Escrow Agent shall be relieved and discharged from all further duties, obligations, and liabilities under this Agreement (other than those that have accrued prior to such transfer and those that expressly survive termination of this Agreement).
Section 5.5 Compensation of Escrow Agent
(a) The Buyer shall pay the Escrow Agent's fees for its services under this Agreement in accordance with the fee schedule attached hereto as Exhibit A, which fees shall be paid by the Buyer promptly upon invoice. In addition, the Buyer shall reimburse the Escrow Agent for all reasonable and documented out-of-pocket expenses incurred by the Escrow Agent in the performance of its duties under this Agreement, including, without limitation, reasonable attorneys' fees and expenses, postage, courier charges, and other costs of communication.
(b) The fees and expenses of the Escrow Agent shall not be payable from the Escrow Fund. The Escrow Agent shall not have any lien on, or right of set-off against, the Escrow Fund for any fees or expenses due to it under this Agreement.
(c) The obligations of the Buyer under this Section 5.5 shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent.
Section 5.6 Interpleader
In the event of any disagreement or dispute between the Buyer and the Seller Representative (or any other person) resulting in adverse claims to or demands upon the Escrow Fund, or in the event that the Escrow Agent is uncertain as to how to proceed under this Agreement, the Escrow Agent shall be entitled, at its sole option, to (a) refuse to comply with any claims or demands on it and continue to hold the Escrow Fund until the Escrow Agent receives either (i) a Joint Written Instruction or (ii) a final, non-appealable order of a court of competent jurisdiction directing the disposition of the Escrow Fund, or (b) interplead the Escrow Fund, or any portion thereof, into a court of competent jurisdiction in the State of Delaware and, upon so doing, the Escrow Agent shall be relieved and discharged from all further obligations and liabilities under this Agreement with respect to the Escrow Fund so interpled. The costs and expenses of any interpleader action, including the Escrow Agent's reasonable attorneys' fees, shall be borne equally by the Buyer and the former Vectris stockholders (through the Seller Representative), except as otherwise ordered by such court.
ARTICLE VI — INDEMNIFICATION OF ESCROW AGENT
Section 6.1 Indemnification
(a) The Buyer, on the one hand, and the Seller Representative (acting on behalf of the former stockholders of Vectris), on the other hand (collectively, the "Indemnifying Parties"), jointly and severally, shall indemnify, defend, and hold harmless the Escrow Agent and its officers, directors, employees, agents, successors, and assigns (each, an "Escrow Agent Indemnified Party") from and against any and all losses, liabilities, damages, claims, actions, suits, proceedings, costs, and expenses (including reasonable and documented attorneys' fees and expenses) (collectively, "Escrow Agent Losses") arising out of or in connection with the Escrow Agent's acceptance of or performance under this Agreement, except to the extent that such Escrow Agent Losses are directly caused by the Escrow Agent's gross negligence, willful misconduct, or bad faith, in each case as finally determined by a court of competent jurisdiction.
(b) As between the Indemnifying Parties, the allocation of the indemnification obligations set forth in this Section 6.1 shall be borne fifty percent (50%) by the Buyer and fifty percent (50%) by the former stockholders of Vectris (through the Seller Representative). For the avoidance of doubt, each Indemnifying Party's obligation to the Escrow Agent Indemnified Parties hereunder is joint and several with the other Indemnifying Party, and the foregoing allocation is solely as between the Indemnifying Parties and does not limit the rights of any Escrow Agent Indemnified Party.
(c) The obligations of the Indemnifying Parties under this Section 6.1 shall survive the termination of this Agreement, the resignation or removal of the Escrow Agent, and the distribution of the entire Escrow Fund.
ARTICLE VII — MISCELLANEOUS
Section 7.1 Notices
(a) All notices, requests, demands, consents, instructions, and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (i) delivered in person, (ii) sent by a nationally recognized overnight courier service (with proof of delivery), or (iii) sent by email (with confirmation of receipt and with an original copy sent concurrently by nationally recognized overnight courier), in each case addressed as follows:
If to the Buyer:
Halcyon Semiconductor Aktiengesellschaft Halcyon-Platz 1 81739 München, Germany
Attention: Dr. Luisa Hartmann, General Counsel
Email: l.hartmann@halcyon-semi.de
with a copy (which shall not constitute notice) to:
Calderwood & Harkness LLP 599 Lexington Avenue, 38th Floor New York, New York 10022
Attention: Oliver Mackenzie, Esq.
Email: o.mackenzie@calderwoodharkness.com
If to the Seller Representative:
Vectris Photonics, Inc. 4750 Ridgepoint Drive, Suite 300 San Jose, California 95134
Attention: Rebecca Lau, General Counsel & Corporate Secretary
Email: r.lau@vectrisphotonics.com
with a copy (which shall not constitute notice) to:
Whitfield, Prager & Loomis LLP 51 West 52nd Street New York, New York 10019
Attention: Catherine Whitfield, Esq.
Email: c.whitfield@wpllaw.com
If to the Escrow Agent:
Ironclad National Bank, N.A. One Liberty Plaza 165 Broadway New York, New York 10006
Attention: Thomas Hargreaves, Escrow Officer
Email: t.hargreaves@ironcladnational.com
(b) Any Party may change its address for notices by giving written notice of such change to the other Parties in the manner set forth in this Section 7.1. Any such notice shall be deemed given (i) when delivered, if delivered in person, (ii) on the next Business Day after being sent, if sent by nationally recognized overnight courier, or (iii) when received, if sent by email in accordance with this Section 7.1.
Section 7.2 Amendments
This Agreement may not be amended, modified, supplemented, or otherwise changed except by a written instrument duly executed and delivered by the Buyer, the Seller Representative, and the Escrow Agent. No oral modification or waiver of any provision of this Agreement shall be effective for any purpose.
Section 7.3 Assignment
No Party may assign, transfer, or delegate its rights or obligations under this Agreement without the prior written consent of the other Parties, and any attempted assignment without such consent shall be null and void; provided, however, that the Buyer may assign its rights (but not its obligations) under this Agreement to any wholly owned subsidiary of Halcyon without the consent of the Seller Representative or the Escrow Agent, so long as (a) such assignment does not relieve the Buyer of its obligations hereunder, (b) the Buyer provides prompt written notice of such assignment to the Seller Representative and the Escrow Agent, and (c) the assignee agrees in writing to be bound by the terms of this Agreement. Subject to the foregoing, this Agreement shall be binding upon, and shall inure to the benefit of, the Parties and their respective successors and permitted assigns.
Section 7.4 Entire Agreement
This Agreement, together with the Merger Agreement and the exhibits and schedules hereto and thereto, constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, representations, and warranties, whether written or oral, with respect to such subject matter. For the avoidance of doubt, the Escrow Agent is not a party to, and shall not be bound by or have any obligations under, the Merger Agreement.
Section 7.5 Severability
If any provision of this Agreement is held to be invalid, illegal, or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision hereof, and the remaining provisions of this Agreement shall continue in full force and effect. To the extent permitted by applicable law, the Parties hereby waive any provision of law that renders any provision of this Agreement invalid, illegal, or unenforceable. The Parties shall endeavor in good faith to replace any invalid, illegal, or unenforceable provision with a valid, legal, and enforceable provision that achieves, to the greatest extent possible, the economic, business, and other purposes of the invalid, illegal, or unenforceable provision.
Section 7.6 Waiver
No waiver of any provision of this Agreement shall be effective unless set forth in a written instrument duly executed and delivered by the Party granting such waiver. No failure or delay by any Party in exercising any right, power, or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power, or remedy preclude any other or further exercise thereof or the exercise of any other right, power, or remedy. All rights and remedies hereunder are cumulative and are not exclusive of any rights or remedies provided by law.
Section 7.7 Counterparts; Electronic Execution
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. Execution and delivery of this Agreement by exchange of facsimile or electronic copies bearing the facsimile or electronic signature of a Party shall constitute a valid and binding execution and delivery of this Agreement by such Party. Signatures transmitted by portable document format (PDF) or other electronic means (including DocuSign or similar electronic signature platforms) shall be deemed original signatures and shall be binding on all Parties.
Section 7.8 Governing Law
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 7.9 Jurisdiction and Venue
Each Party hereby irrevocably and unconditionally submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware (and, to the extent such court declines to accept jurisdiction, the Superior Court of the State of Delaware and the United States District Court for the District of Delaware) for the purpose of any action, suit, or proceeding arising out of or relating to this Agreement, and each Party hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion, as a defense, counterclaim, or otherwise, in any such action, suit, or proceeding: (a) any claim that it is not personally subject to the jurisdiction of the aforesaid courts; (b) any claim that it or its property is exempt or immune from the jurisdiction of any such court or from any legal process commenced in any such court; and (c) any claim that the venue of any such action, suit, or proceeding is improper or that this Agreement may not be enforced in or by any of the aforesaid courts. Each Party agrees that a final, non-appealable judgment in any such action, suit, or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law.
Section 7.10 Waiver of Jury Trial
EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THIS WAIVER APPLIES TO ANY ACTION, SUIT, OR PROCEEDING, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF ANY SUCH ACTION, SUIT, OR PROCEEDING, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 7.10.