Escrow And Indemnity Agreement

ESCROW AND INDEMNITY AGREEMENT


This ESCROW AND INDEMNITY AGREEMENT (the "ESCROW AGREEMENT"), dated as of April 5, 2000, is made by and among Advanced Energy Industries, Inc., a Delaware corporation ("PARENT"), the holders of common stock of Noah Holdings, Inc. listed on Exhibit A (the "COMPANY SHAREHOLDERS") and Commercial Escrow Services, Inc. as indemnity and escrow agent (the "ESCROW AGENT").


RECITALS


WHEREAS, Noah Holdings, Inc., a California corporation (the "COMPANY"), AE Cal Merger Sub, Inc., a California corporation ("MERGER SUB"), and Parent are parties to that certain Agreement and Plan of Reorganization, dated as of the date hereof (the "MERGER AGREEMENT"), pursuant to which Merger Sub shall be merged with and into the Company (the "MERGER"), with the Company surviving as a wholly-owned subsidiary of Parent;


WHEREAS, it is a condition precedent to the Merger Agreement that each Company Shareholder enter into this Agreement;


WHEREAS, the Merger Agreement contains, among other things, representations, warranties and covenants of the Company, indemnities with respect to the breach of which are being provided by the Company Shareholders in this Escrow Agreement;


WHEREAS, pursuant to the Merger Agreement, promptly after the Effective Time each Company Shareholder has agreed to cause a portion of the Parent Shares into which the Company Shares are to be converted (such shares, "INDEMNITY SHARES" and, together with any cash in lieu of fractional shares, the "INDEMNITY AMOUNT") to be deposited with the Escrow Agent in an escrow account established pursuant to this Escrow Agreement and held and subsequently disbursed in accordance with the terms of this Escrow Agreement (such Indemnity Amount, together with any dividends or other distributions received thereon, the "INDEMNITY FUND");


WHEREAS, the Merger Agreement provides for the Shareholder Representatives (as defined below) to act on behalf of all Company Shareholders in connection with this Escrow Agreement and the indemnification obligations contained in the Merger Agreement; and


WHEREAS, the Escrow Agent has agreed to hold and to release the Indemnity Fund pursuant to the terms of this Escrow Agreement.


NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows:


1. DEFINITIONS. Capitalized terms used but not defined herein shall have the meanings set forth in the Merger Agreement. As used in this Escrow Agreement, (i) "EXPENSE" means any and all expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including, without limitation, court filing fees, court costs, arbitration fees or costs, witness fees and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants,


accountants and other professionals), (ii) "LOSS" means any and all losses, costs, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, damages, expenses, deficiencies or other charges, and (iii) "PARENT GROUP MEMBERS" means Parent and its affiliates and their respective successors and assigns, including, after the Effective Time, the Surviving Corporation.


2. INDEMNITY FUND.


a. Promptly after the Effective Time, Parent shall deposit, or cause to be deposited, the Indemnity Shares in escrow with the Escrow Agent. Such deposit shall constitute the initial Indemnity Fund and shall be governed by the terms and conditions of this Escrow Agreement. The Escrow Agent shall establish a separate subaccount for each Company Shareholder ("SUBACCOUNT") and credit to such Subaccount the number of Indemnity Shares and cash in lieu of fractional shares set forth opposite the name of such Company Shareholder on ANNEX A hereto.


b. Immediately after receipt from Parent of the Indemnity Amount, the Escrow Agent shall confirm such receipt in writing to Parent and the Shareholder Representatives.


c. All dividends and distributions in respect of the Indemnity Shares, whether in cash, additional Parent Common Stock or other property received by the Escrow Agent shall be distributed currently to the Company Shareholders; provided that stock dividends made to effect stock splits or similar events shall be retained by the Escrow Agent as part of the Indemnity Fund and credited proportionately to the Subaccounts to which the Indemnity Shares are credited. In the event the Indemnity Shares are reclassified or otherwise changed into or exchanged for other securities, property or cash pursuant to any merger, consolidation, sale of assets and liquidation or other transaction, the securities, cash or other property received by the Escrow Agent in respect of the Indemnity Shares shall be retained by it as part of the Indemnity Fund and credited proportionately to the Subaccounts to which the Indemnity Shares are credited. All cash, property, Parent Common Stock and other securities received and retained by the Escrow Agent as described in this Subsection 2(d) are referred to herein as "DISTRIBUTIONS". The provisions of this Section 2 shall apply to successive Distributions.


d. Each Company Shareholder shall have the right to vote all Indemnity Shares credited to such Company Shareholder's Subaccount. The Escrow Agent will forward to each Company Shareholder to whose Subaccount any Indemnity Shares are credited all notices of shareholders' meetings, proxy statements and reports to shareholders received by the Escrow Agent in respect thereof and will either (i) vote the Indemnity Shares credited to such Company Shareholder's Subaccount only in accordance with written instructions received from such Company Shareholder, or (ii) forward to such Company Shareholder a signed proxy enabling the Company Shareholder to vote such Indemnity Shares. The Escrow Agent shall be reimbursed for the cost of such forwarding in accordance with Section 10(d).


3. INDEMNIFICATION.


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a. From and after the Effective Time, each Parent Group Member shall be indemnified, held harmless and reimbursed from the Indemnity Fund from and against any and all Loss and Expense incurred by such Parent Group Member in connection with or arising from:


i. any breach or failure to perform by the Company of any of its agreements, covenants or obligations in this Agreement; or


ii. any breach of any warranty or the inaccuracy of any representation of the Company contained in Article 4 of the Merger Agreement or any certificate delivered by or on behalf of the Company pursuant to Article 7 of the Merger Agreement;


Any payment pursuant to this Section 3 shall be made in the form of a transfer from the Indemnity Fund to the applicable Parent Group Member(s). No Parent Group Member shall have any right to any of the Indemnity Fund until the aggregate of all Loss and Expense incurred as a result of the matters described in subsections 3.a.i. or ii. exceed $25,000.


b. In the event of any inaccuracy in the computation of the Exchange Ratio, Parent will recalculate the Exchange Ratio and receive a sufficient number of Parent Shares from the Indemnity Fund in order that the total number of shares of Parent Shares issued and outstanding by virtue of the Merger Agreement would be as would have resulted if such computation of the Exchange Ratio had been true and correct in all respects at the Effective Time.


4. NOTICE AND DETERMINATION OF CLAIMS.


a. If any Parent Group Member wishes to make a claim for indemnification to be satisfied from the Indemnity Fund, such Parent Group Member (individually or collectively, the "CLAIMING PARTY") shall notify the Escrow Agent in writing (the "CLAIM NOTICE") of the facts giving rise to such claim for indemnification hereunder. The Claim Notice shall be accompanied by a certificate of the Claiming Party attesting to the Claiming Party's contemporaneous delivery of a duplicate copy of the Claim Notice to the Shareholder Representatives. Such Claim Notice shall describe in reasonable detail (to the extent then known) the Loss or Expense, the method of computation of such Loss or Expense and contain a reference to the provisions of this Agreement in respect of which such Loss or Expense shall have occurred. If the Claiming Party is not Parent, the Claim Notice must be accompanied by a certificate from Parent confirming that the Claiming Party is a Parent Group Member. At the time of delivery of any Claim Notice to the Escrow Agent, a duplicate copy of such Claim Notice shall be delivered by the Claiming Party to the Shareholder Representatives.


b. Unless the Shareholder Representatives shall have delivered an Objection in accordance with Section 4(c), the Escrow Agent shall, on the twentieth day (or such earlier day as the Shareholder Representatives shall authorize in writing to the Escrow Agent) after receipt of a Claim Notice with respect to indemnification for a specified amount, deliver to Parent, for its account or for the account of each Parent Group Member named in the Claim Notice, such portion of the Indemnity Fund, valued in accordance with this Escrow Agreement, with a value equal to the specified amount.


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c. Until the twentieth day following delivery of a Claim Notice, either of the Shareholder Representatives may deliver to the Escrow Agent a written objection (an "OBJECTION") to the claim made in such Claim Notice. At the time of delivery of any Objection to the Escrow Agent, a duplicate copy of such Objection shall be delivered to the Claiming Party.


d. Upon receipt of an Objection properly made, the Escrow Agent shall (i) deliver to Parent, for its account or for the account of each Parent Group Member named in the Claim Notice, such portion of the Indemnity Fund, valued in accordance with this Escrow Agreement, with a value equal to that portion of the amount subject to the Claim Notice which is not disputed by the Shareholder Representatives (if any) and (ii) designate and segregate out of the Indemnity Fund a portion thereof, valued in accordance with the Escrow Agreement, with a value equal to the amount subject to the Claim Notice which is disputed by the Shareholder Representatives. Thereafter, the Escrow Agent shall not dispose of such segregated portion of the Indemnity Fund until the Escrow Agent shall have received a certified copy of the final decision of the arbitrators as contemplated by Section 5, or the Escrow Agent shall have received a copy of the written agreement between the Claiming Party and the Shareholder Representatives resolving such dispute and setting forth the amount, if any, which such Claiming Party is entitled to receive. The Escrow Agent will deliver to Parent, for its account or for the account of each Parent Group Member entitled to payment, such portion of the Indemnity Fund, valued in accordance with the Escrow Agreement, with a value equal to the amount that the Claiming Party is entitled to receive as set forth in the arbitration decision after the expiration of ten (10) business days from the receipt of such decision or, in the event that the amount to which the Claiming Party is entitled is established pursuant to an agreement between the Claiming Party and the Shareholder Representatives, promptly after the Escrow Agent's receipt of such agreement.


5. PAYMENT AND VALUATION.


a. Payments, deliveries or designations from the Indemnity Fund made pursuant to any Claim Notice shall be made, on a Subaccount by Subaccount basis, first from any cash and second from any Indemnity Shares. For purposes of such payment, delivery or designation, Indemnity Shares shall be valued at the Market Value of such Indemnity Shares as determined in accordance with Section 5(b) hereof. To the extent that any payment, delivery or designation is made pursuant to this Escrow Agreement in the form of securities, such payment, delivery or designation shall be rounded to the nearest whole number of such securities, and no fractional securities shall be paid, delivered or designated.


b. The "MARKET VALUE" of each Parent Share in the Indemnity Fund as of any date shall be the Closing Price. In the event of any reclassification, stock split or stock dividend with respect to Parent Common Stock or any change or conversion of Parent Common Stock into other securities, appropriate and proportionate adjustments, if any, shall be made to the Market Value.


c. Payments and deliveries pursuant to a Claim Notice shall be charged to and withdrawn from each Subaccount in proportion to the respective balances in each, unless the Escrow Agent is restrained, enjoined or stayed by law or court order from withdrawing assets from a Subaccount, in which case the amount which would have been drawn from such


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Subaccount shall be allocated pro rata among and withdrawn from the remaining Subaccounts as to which the Escrow Agent is not so restrained, enjoined or stayed. If the Escrow Agent ceases to be so restrained, enjoined or stayed, then, to the extent practicable, such remaining Subaccounts from which such amount was withdrawn shall be credited, pro rata, with the amount of such withdrawal through a deduction from the Subaccount that was the subject of such restraint, injunction or stay.


6. RESOLUTION OF CONFLICTS; ARBITRATION.


a. The Claiming Party shall deliver a written response to the Shareholder Representatives in respect of any Objection properly delivered by the Shareholder Representatives. If after twenty (20) days following delivery of such response there remains a dispute as to any claims, the Shareholder Representatives and the Claiming Party shall attempt in good faith for sixty (60) days to agree upon the rights of the respective parties with respect to each of such claims. If the Shareholder Representatives and the Claiming Party should so agree, a memorandum setting forth such agreement shall be prepared and signed by both and shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum and shall distribute the Parent Common Stock or other property, if any, from the Indemnity Fund in accordance with the terms thereof.


b. If no such agreement can be reached after good faith negotiation, either the Claiming Party or the Shareholder Representatives may, by written notice to the other, demand arbitration of the matter unless the amount of the Loss or Expense is at issue in pending litigation with a third party, in which event arbitration shall not be commenced until such amount is ascertained or both parties agree to arbitration; and in either such event the matter shall be settled by arbitration conducted by three arbitrators. Within fifteen (15) days after such written notice is sent, Parent and the Shareholder Representatives shall each select one arbitrator, and the two arbitrators so selected shall select a third arbitrator. The decision of the arbitrators as to the validity and amount of any claim in the related Claim Notice shall be binding, and conclusive, and notwithstanding anything in this Section 6, the Escrow Agent shall be entitled to act in accordance with such decision and make or withhold payments out of the Indemnity Fund in accordance therewith.


c. Judgment upon any award rendered by the arbitrators may be entered in any court having jurisdiction. Any such arbitration shall be held in San Francisco, California under the commercial rules then in effect of the American Arbitration Association. The non-prevailing party to an arbitration shall pay its own expenses, the fees of each arbitrator, the administrative fee of the American Arbitration Association, and the expenses, including without limitation, attorneys' fees and costs, reasonably incurred by the other party to the arbitration.


7. SHAREHOLDER REPRESENTATIVES.


a. Each Company Shareholder hereby knowingly and voluntarily appoints and selects Robert Higgins and Peter Adams as the "SHAREHOLDER REPRESENTATIVES" hereunder. Each Company Shareholder acknowledges that each of the Shareholder Representatives shall have the power to bind such Company Shareholder in accordance herewith, and fully consents to such power. Each of the Shareholder Representatives shall be constituted and appointed as agent


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for and on behalf of the Company Shareholders to give and receive notices and communications, to authorize delivery to Parent Group Members of the Parent Common Stock or other property from the Indemnity Fund in satisfaction of claims by Parent Group Members, to object to such deliveries, to agree to, negotiate, enter into settlements and compromises of, and demand arbitration and comply with orders of courts and awards of arbitrators with respect to such claims, and to take all actions necessary or appropriate in the judgment of the Shareholder Representatives for the accomplishment of the foregoing. The persons designated to serve as the Shareholder Representatives may be changed by the holders of a majority in interest of the Indemnity Fund from time to time upon not less than 10 days prior written notice to Parent and the Escrow Agent. No bond shall be required of the Shareholder Representatives, and the Shareholder Representatives shall receive no compensation for their services. Any expenses incurred by the Shareholder Representatives in connection with their services hereunder shall be reimbursed from the Indemnity Fund upon presentation of appropriate expense documentation as and to the extent provided in Section 7(b).


b. At least five (5) days prior to the Distribution Date or any earlier date on which any Shareholder Representative ceases to be a Shareholder Representative hereunder, the Shareholder Representatives shall deliver written notice to the Escrow Agent and Parent setting forth the amount of the reasonable expenses incurred by the Shareholder Representatives in connection with their duties under the Merger Agreement and hereunder (the "SHAREHOLDER REPRESENTATIVES' EXPENSES"), which expenses shall be reimbursed from the Indemnity Fund in accordance with the provision of Section 9(d) hereof.


c. Neither Parent, any Parent Group Member nor the Escrow Agent shall be responsible or liable for any acts or omissions of any Shareholder Representative in such Shareholder Representative's capacity as such, and each of them may rely on any action or writing of all the then Shareholder Representatives as being binding on all Shareholder Representatives for all purposes.


d. A decision, act, consent or instruction of the Shareholder Representatives shall constitute a decision of all Company Shareholders for whom shares of Parent Common Stock otherwise issuable to them are deposited in the Indemnity Fund and shall be final, binding and conclusive upon each such Company Shareholder, and the Escrow Agent and Parent may rely upon any decision, act, consent or instruction of the Shareholder Representatives as being the decision, act, consent or instr ...