EXHIBIT 2.2
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ESCROW AGREEMENT
This Escrow Agreement (this "Escrow Agreement") is made and entered into as
of September 30, 1999 by and among Parent Ltd., a Delaware corporation
("Parent"); Natchez, Inc., a Delaware corporation ("Natchez"); Ted R.
Dintersmith (the "Indemnification Representative"), as the representative of the
Holders (as defined below); and The Bank of New York, as custodian of the Escrow
Shares (as defined below) (the "Escrow Agent").
A. Parent, Parent Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of Parent ("Merger Sub"), and Natchez have entered into an
Agreement and Plan of Reorganization dated as of September 30, 1999 (the "Merger
Agreement") setting forth certain terms and conditions pursuant to which Merger
Sub is being merged into Natchez (the "Merger").
B. In accordance with Article II of the Merger Agreement, Parent Merger
Shares (as defined therein) are to be issued to the stockholders and
optionholders of Natchez receiving consideration pursuant to Section 2.1 of the
Merger Agreement (such stockholders being referred to herein collectively as the
"Holders").
C. The Merger Agreement provides that ten percent (10%) (the "Escrow
Percentage") of the Parent Merger Shares issued for outstanding shares of
Natchez Stock pursuant to the Merger (none of which shares shall be unvested,
subject to any right of repurchase, contractual risk of forfeiture or other
condition in favor of the Surviving Corporation or the Parent) will be placed in
an escrow account to secure certain indemnification obligations of the Holders
to Parent under Article IX of the Merger Agreement on the terms and conditions
set forth therein and herein.
D. Unless otherwise indicated herein, all terms used herein without
definition shall have the same meaning as set forth in the Merger Agreement.
NOW THEREFORE, for and in consideration of the foregoing and the mutual
covenants and agreements contained in the Merger Agreement and in this Escrow
Agreement, the parties agree as follows:
1. ESTABLISHMENT OF ESCROW ACCOUNT
1.1 Deposit of Shares. Parent shall deposit as soon as
practicable on the Holders' behalf with the Escrow Agent stock certificates
representing the Escrow Shares issued pursuant to the Merger registered in
respective names of the Holders and in the relative amounts set forth on
Schedule I hereto (the "Initial Escrow Shares"). Any shares of Parent capital
stock that result from any share dividend, reclassification, stock split,
subdivision or combination of shares, recapitalization, merger or other events
made with respect to any Escrow Shares held in escrow under this Escrow
Agreement (the "Additional Shares") shall be delivered to the Escrow Agent and
shall be held by the Escrow Agent in accordance with this Escrow Agreement.
Unless otherwise indicated, as used in this Escrow Agreement, the term "Escrow
Shares" includes the Initial Escrow Shares, any Additional Shares and
any additional Parent Merger Shares to be delivered to the Escrow Agent pursuant
to the last sentence of Section 2.3(a) of the Merger Agreement. The Escrow Agent
agrees to accept delivery of the Escrow Shares and to hold such Escrow Shares in
escrow in accordance with this Escrow Agreement and to release the Escrow Shares
out of escrow as provided in this Escrow Agreement.
1.2 Dividends; Voting and Rights of Ownership. Any cash
dividends, dividends payable in property or other distributions of any kind
(except for Additional Shares) made in respect of the Escrow Shares shall be
distributed currently by Parent to the Holders on a pro rata basis. Each Holder
shall have the right to vote the Escrow Shares held in escrow for the account of
such Holder so long as such Escrow Shares are held in escrow, and Parent and the
Escrow Agent, but only as directed in writing by Parent, shall take all steps
necessary to allow the exercise of such rights. While the Escrow Shares remain
in the Escrow Agent's possession pursuant to this Escrow Agreement, the Holders
shall retain and shall be able to exercise all other incidents of ownership of
the Escrow Shares that are not inconsistent with the terms and conditions
hereof.
1.3 Sale of Escrow Shares. At any time after April 1, 2000, and
subject to any restrictions on resale arising under federal or state securities
laws, the Indemnification Representative may effect a sale of any or all of the
Escrow Shares by written direction given to the Escrow Agent provided that (i)
the net proceeds per share are at least equal to the Parent Average Closing
Price (adjusted for any share dividend, reclassification, stock split,
subdivision or combination of shares, recapitalization, merger or other events)
and (ii) the net proceeds are retained by the Escrow Agent to be held at the
election of the Indemnification Representative in an interest bearing or non-
interest bearing account (with any interest thereon allocated among the Holders
in proportion to each of the Holder's interests in the Escrow Shares as of the
date such interest is paid). All net proceeds from such sale and any interest
thereon shall be deemed to be Escrow Shares for all purposes of this Escrow
Agreement and shall be available to satisfy any Escrow Adjustment (as defined
below) at the election of the Indemnification Representative to the extent that
sufficient Escrow Shares are otherwise available to satisfy such Escrow
Adjustment. Such sale of Escrow Shares will occur at the written direction of
the Indemnification Representative and such written direction shall: (A) specify
the number of Escrow Shares to be sold, (B) identify the brokerage firm the
Indemnification Representative requests the Escrow Agent to use (or shall
instruct the Escrow Agent to use its affiliated brokerage service), and (C) set
forth all necessary instructions (including stop loss or minimum price per share
instructions) as may be requested by the Indemnification Representative,
together with any other instruction as the Escrow Agent reasonably may require
in order to carry out the sale. The Escrow Agent may conclusively rely on the
direction of the Indemnification Representative, and shall have no duty or
obligation to determine whether the sale satisfies the requirements of this
Section 1.3. For tax reporting purposes, all gain from the sale of the Escrow
Shares pursuant to this Section 1.3 and any interest or other income earned from
the net proceeds of such sale in any tax year shall be reported as allocable to
the Holders in proportion to each of the Holder's interests in the Escrow
Shares.
1.4 No Encumbrance. None of the Escrow Shares or any beneficial
interest therein may be pledged, sold (except as provided in Section 1.3),
assigned or transferred, including by operation of law or by a Holder, or may be
taken or reached by any legal or equitable process in satisfaction of any debt
or other liability of a Holder, prior to the delivery of the Escrow Shares by
the Escrow Agent or Parent to such Holder pursuant to this Escrow Agreement.
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1.5 Power to Transfer Escrow Shares. The Escrow Agent is hereby
granted the power to effect any transfer of the Escrow Shares provided for in
this Escrow Agreement.
2. RESOLUTION OF CLAIMS
2.1 Indemnification Obligations. The Escrow Shares shall serve
as the first source, but not the sole source, of payment for the indemnity
obligations of the Holders under Article IX of the Merger Agreement. For the
purposes of this Escrow Agreement, those obligations shall continue in
accordance with Article IX of the Merger Agreement, notwithstanding the merger
of Merger Sub into Natchez pursuant to the Merger Agreement. Payment for any
amount determined as provided below to be owing to Parent under such indemnity
obligations under the Merger Agreement ("Damages") and any award of attorneys'
fees and charges owing to Parent pursuant to Section 2.3(c)(iv) or 11.2 of this
Escrow Agreement (a "Prevailing Party Award") shall be made by the release of
Escrow Shares to Parent (each such payment, an "Escrow Adjustment"). By virtue
of their approval of the Merger Agreement or through the execution of the
Investment Agreement or some other instrument to such effect, each of the
Holders agrees to be bound by the indemnification provisions set forth in
Article IX of the Merger Agreement and confirms that the Escrow Shares are
subject to this Escrow Agreement. Notwithstanding anything to the contrary
herein, Parent shall not be entitled to receive payment of any portion of a
Prevailing Party Award which is already a part of Damages (i.e., there shall be
no double payment of legal fees). Each Escrow Adjustment and corresponding
release to Parent of Escrow Shares shall be made in proportion to each of the
Holders' interest in the Escrow Shares as of the date or dates specified and the
manner provided for in this Escrow Agreement. Each Escrow Adjustment to the
Escrow Shares shall be made by the release to Parent of Escrow Shares having an
aggregate value equal to the Damages and any Prevailing Party Award (as the same
may be determined under this Escrow Agreement), with the per share value of such
shares being based, for all purposes under this Escrow Agreement on the Parent
Average Closing Price (adjusted for any share dividend, reclassification, stock
split, subdivision or combination of shares, recapitalization, merger or other
events) notwithstanding any changes in market value of Parent Common Shares. In
lieu of releasing any fractional Escrow Shares upon an Escrow Adjustment, any
fraction of a released Escrow Share that would otherwise be released shall be
rounded down to the nearest whole Escrow Share. Notwithstanding anything
contained herein to the contrary, any Escrow Adjustment or other release of
Escrow Shares hereunder shall only be made by the Escrow Agent in accordance
with written instructions given by Parent and/or the Indemnification
Representative pursuant to the terms and conditions of this Escrow Agreement.
Parent and the Indemnification Agent hereby agree that all such written
instructions and any other notices given to the Escrow Agent shall comply with
the limitations set forth in Sections 9.4 and 9.6 of the Merger Agreement.
2.2 Notice of Claims. Promptly after the receipt by Parent of
notice or discovery of any claim, damage, or legal action or proceeding giving
rise to indemnification rights under the Merger Agreement, without regard to the
Threshold Amount (as defined in the Merger Agreement) (a "Claim") Parent shall
give the Indemnification Representative written notice of such Claim and shall
provide a copy of such notice to the Escrow Agent. Each notice of a Claim by
Parent (a "Notice of Claim") shall be in writing and shall be delivered on or
before the Release Date (as defined in Section 3.1 below).
2.3 Resolution of Claims. Any Notice of Claim received by the
Indemnification Representative and the Escrow Agent pursuant to Section 2.2
above shall be resolved as follows:
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(a) Uncontested Claims. In the event that the Indemnification
Representative does not contest a Notice of Claim (an "Uncontested Claim") in
writing within thirty (30) calendar days, as provided below in Section 2.3(b),
Parent may deliver to the Escrow Agent, with a copy to the Indemnification
Representative, a written demand by Parent (a "Parent Demand") stating that a
Notice of Claim has been given as required in this Escrow Agreement and that no
notice of contest has been received from the Indemnification Representative
during the period specified in this Escrow Agreement and further setting forth
the proposed Escrow Adjustments to be made in accordance with this Section
2.3(a). It is provided, however, that within thirty (30) calendar days after
receipt of the Parent Demand, the Indemnification Representative may object in a
written notice delivered to Parent and the Escrow Agent to the computations or
other administrative matters relating to the proposed Escrow Adjustments (but
may not object to the validity or amount of the Claim previously disclosed in
the Notice of Claim), whereupon neither the Escrow Agent nor Parent shall make
any of the Escrow Adjustments until either: (i) Parent and the Indemnification
Representative shall have given the Escrow Agent written notice setting forth
agreed Escrow Adjustments, or (ii) the matter is resolved as provided in
Sections 2.3(b) and 2.3(c). Upon satisfaction of the foregoing, the Escrow
Agent, as directed in writing by Parent, and Parent shall promptly take all
steps to implement the final Escrow Adjustments.
(b) Contested Claims. In the event that the Indemnification
Representative gives written notice to Parent and the Escrow Agent contesting
all or a portion of a Notice of Claim (a "Contested Claim") within the 30-day
period provided above, matters that are subject to third party claims against
Parent or Natchez in a litigation or arbitration shall await the final decision,
award or settlement of such litigation or arbitration, while matters that arise
between Parent on the one hand and Natchez and/or the Holders on the other hand,
including any disputes regarding performance or nonperformance of a party's
obligations under this Escrow Agreement ("Arbitrable Claims") shall be settled
in accordance with Section 2.3(c) below. Any portion of a Notice of Claim that
is not contested or is subsequently settled by Parent and the Indemnification
Representative shall be resolved as set forth above in Section 2.3(a), provided
that in any such case the value of Escrow Shares shall equal the Parent Average
Closing Price notwithstanding any change in the market value of Parent Common
Stock. If written notice is received by the Escrow Agent that a Notice of Claim
is contested by the Indemnification Representative, then the Escrow Agent shall
hold hereunder after what would otherwise be the Release Date (as defined in
Section 3.1 below), the number of Escrow Shares specified in the Release Notice
or as otherwise provided in Section 3.1, until the earlier of: (i) receipt of a
settlement agreement executed by Parent and the Indemnification Representative
setting forth a resolution of the Notice of Claim and the Escrow Adjustments;
(ii) receipt of a written notice from Parent (a "Parent Distribution Notice")
attaching a copy of the final award or decision of the arbitrator and setting
forth the Escrow Adjustments (Parent shall at the same time provide a copy of
the Parent Distribution Notice to the Indemnification Representative); or (iii)
receipt of a written notice from the Indemnification Representative (a
"Representative Distribution Notice") attaching a copy of the final award or
decision of the arbitrator that no Escrow Adjustments are to be made as a result
of such award (the Indemnification Representative shall at the same time provide
a copy of the Representative Distribution Notice to Parent). If the earliest of
the three events described in the preceding sentence is (i) or (ii), the Escrow
Agent shall, within twenty (20) calendar days of receipt of the settlement
agreement or the Parent Distribution Notice, as applicable, (a) release to
Parent the number of Escrow Shares specified in the Escrow Adjustments and (b)
if the Release Date has occurred, release to the Holders the balance of the
Escrow Shares less any Escrow Shares necessary to satisfy any remaining
unresolved Contested Claims for which sufficient Escrow Shares have not been
allocated. If the earliest of the three events described above is (iii) and the
Release Date has occurred, and there are no
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remaining unresolved Contested Claims, the Escrow Agent shall, within twenty
(20) calendar days of receipt of the Representative Distribution Notice, release
to the Holders the Retained Escrow (as defined in Section 3.1), in accordance
with the Holders' interests therein, provided that if the Release Date has not
occurred the Escrow Shares shall continue to be held pursuant to the terms of
this Escrow Agreement. If the award or decision of the arbitrator concludes that
Escrow Shares are to be released to Parent either in satisfaction of Damages or
as Prevailing Party Awards, the arbitrator shall specify the number of Escrow
Shares to be so released to Parent either in the arbitrator's final award or
decision or a supplementary report or finding. In the event that the Escrow
Agent institutes an action for interpleader in accordance with Section 4.6 of
this Escrow Agreement as a result of a dispute between the parties, the parties
hereby agree to jointly seek to stay such interpleader action pending the
resolution of any arbitration commenced by the parties or any dispute pursuant
to this Section 2.3(b) and Section 2.3(c).
(c) Arbitration.
(i) Arbitration Rules. Any Arbitrable Claim, and any dispute
between the Holders and Parent under this Escrow Agreement, shall be submitted
to final and binding arbitration before a single arbitrator in Boston,
Massachusetts in accordance with the commercial arbitration rules of the
American Arbitration Association.
(ii) Binding Effect. The final decision of the arbitrator
shall be furnished in writing to the Escrow Agent, the Indemnification
Representative, the Holders and Parent and will constitute a conclusive
determination of the issue in question, binding upon the Holders, the
Indemnification Representative and Parent. The arbitrator shall have the
authority to grant any equitable and legal remedies that would be available in
any judicial proceeding instituted to resolve an Arbitrable Claim. Any judgment
upon the award rendered by the arbitrator may be entered in any court having
jurisdiction over the subject matter thereof.
(iii) Compensation of Arbitrator. The arbitrator will be
compensated for his or her services, as provided below in Section 2.3(c)(iv), in
accordance with the commercial arbitration rules of the American Arbitration
Association.
(iv) Payment of Costs. The substantially prevailing party in
any arbitration shall be entitled to an award of attorneys' fees and costs, and
all costs of arbitration, including those provided for above, will be paid by
the losing party, subject in each case to a determination by the arbitrator as
to which party is the substantially prevailing party and the amount of such fees
and costs to be allocated to such party and subject to the terms of Section
2.3(c)(iii). Any amounts payable to Parent by or on account of the Holders under
this subsection will be reimbursed as if the amount of such awarded fees and
expenses were an Uncontested Claim.
(v) Terms of Arbitration. The arbitrator chosen in accordance
with these provisions shall not have the power to alter, amend or otherwise
affect the terms of these arbitration provisions or the provisions of this
Escrow Agreement, the Merger Agreement or any other documents that are executed
in connection therewith.
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(vi) Exclusive Remedy. Arbitration or mediation under this
Section 2.3(c) shall be the sole and exclusive remedy of the parties for any
Arbitrable Claim arising out of this Escrow Agreement.
3. RELEASE FROM ESCROW
3.1 Release of Escrow Shares. The Escrow Shares shall be released by
the Escrow Agent and Parent as soon as practicable, taking into account the
notices to be delivered under this Section 3.1, after the first anniversary of
the date of this Escrow Agreement (the "Release Date") less: (a) any Escrow
Shares delivered to or deliverable to Parent in satisfaction of Uncontested
Claims or Contested Claims which have been settled by the parties hereto, and
(b) any of the Escrow Shares subject to delivery to Parent in accordance with
Section 2.3(b) with respect to any then pending Contested Claims. Within ten
(10) of the Escrow Agent's business days ("Business Days") after the Release
Date, Parent and the Indemnification Representative shall deliver to the Escrow
Agent a written notice (a "Release Notice") setting forth the number of Escrow
Shares to be released by the Escrow Agent and Parent (the "Released Escrow")
including the number of Escrow Shares to be released to each Holder and the
number of Escrow Shares to be retained as provided in this Section 3.1 (the
"Retained Escrow"). Parent and the Indemnification Representative shall make a
good faith effort to agree on a reasonable portion of the Escrow Shares to
retain for pending Contested Claims (which shall not exceed the number of Escrow
Shares necessary to satisfy the amount set forth in the Notice of Claim) and
Prevailing Party Awards and related expenses. Until such agreement is reached,
or a determination is made in accordance with Section 2.3(c), the remaining
Escrow Shares shall be the Retained Escrow. The Released Escrow shall be
released to the Holders in proportion to their respective interests in the
Initial Escrow Shares. In lieu of releasing any fractional Escrow Shares, any
fraction of a released Escrow Share that would otherwise be released shall be
rounded to the nearest whole Escrow Share. Within ten (10) Business Days after
receipt of the Release Notice, Parent shall instruct the Escrow Agent to deliver
(by registered mail or overnight courier service) to each Holder evidence of
ownership of the number of Escrow Shares in the names of the appropriate
Holders. The Escrow Agent shall not be required to take such action until the
Escrow Agent has received the Release Notice executed by Parent and the
Indemnification Representative or, in the event Parent and the Indemnification
Representative fail to execute and deliver a jointly approved Release Notice, a
final award or decision which specifies the distribution of the Escrow Shares.
3.2 Release of Retained Escrow. Upon the resolution of Contested
Claims as provided for in Section 2.3(b), the Retained Escrow shall be subject
to release by the Escrow Agent to Parent and/or to the Holders in accordance
with Section 2.3(b), this Section and as otherwise provided for in this Escrow
Agreement. The Escrow Agent and Parent shall cause the transfer agent to
transfer to Parent the number of Escrow Shares to be released to Parent pursuant
to Section 2.3(b) and reissue certificates for Escrow Shares that are to be
either distributed to the Holders pursuant to Section 3.1 or further retained by
the Escrow Agent pending the resolution of Contested Claims and/or Prevailing
Party Awards. Any Escrow Shares released from escrow to Parent shall be subject
to cancellation by Parent without requiring Parent to pay any consideration
whatsoever in receipt thereof to Natchez or any of the Holders.
3.3 Expenses of Indemnification Representative. The Indemnification
Representative shall be entitled to be reimbursed his reasonable out-of-pocket
expenses and the reasonable fees and disbursements of counsel retained by him.
Such reimbursements shall be treated
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as an Uncontested Claim on a pro rata basis among the contributors to the Escrow
Shares, for all services performed pursuant to the Merger Agreement and this
Escrow Agreement; provided, however, that payment of any Escrow Adjustment shall
take priority over payments to the Indemnification Representative, as provided
herein. The Escrow Agent shall follow the joint written instructions of the
Indemnification Representative and Parent concerning the release or sale of
Escrow Shares relating to the reimbursement of the Indemnification
Representative. If upon termination of this Escrow Agreement, the
Indemnification Representative shall not have received the reimbursements to
which he is entitled hereunder, then the Indemnification Representative shall be
entitled to reimbursement from the Holders on a joint and several basis.
4. ESCROW AGENT
4.1 Duties. The duties and responsibilities of the Escrow Agent
hereunder shall be entirely administrative and not discretionary and shall be
determined solely by the express provisions of this Escrow Agreement and no
duties shall be implied. The Escrow Agent shall be obligated to act only in
accordance with written instructions received by it as provided in this Escrow
Agreement and is authorized hereby to comply with any orders, judgments, or
decrees of any court with or without jurisdiction and shall not be liable as a
result of its compliance with the same.
4.2 Legal Opinions. As to any questions arising in connection with
the administration of this Escrow Agreement, the Escrow Agent may rely
absolutely upon the joint instruction of Parent and the Indemnification
Representative or the opinions given to the Escrow Agent by its outside counsel
and shall be free of liability for acting or refraining from acting in reliance
on such opinions.
4.3 Signatures. The Escrow Agent may rely absolutely upon the
genuineness and authorization of the signature and purported signature of any
party upon any instruction, notice, release, receipt or other document delivered
to it pursuant to this Escrow Agreement.
4.4 Receipts and Releases. The Escrow Agent may, as a condition to
the disbursement of monies or disposition of securities as provided herein,
require from the payee or recipient a receipt therefor and, upon final payment
or disposition, a release of the Escrow Agent from any liability arising out of
its execution or performance of this Escrow Agreement, such release to be in a
form reasonably satisfactory to the Escrow Agent.
4.5 Refrain from Action. The Escrow Agent shall be entitled to
refrain from taking any action contemplated by this Escrow Agreement in the
event it becomes aware of any dispute between Natchez, the Holders and Parent as
to any material facts or as to the happening of any event precedent to such
action.
4.6 Interpleader. If any controversy arises between the parties
hereto or with any third person, the Escrow Agent shall not be required to
determine the same or to take any action, but the Escrow Agent in its discretion
may institute such interpleader or other proceedings in connection therewith as
the Escrow Agent may deem proper, and in following either course, the Escrow
Agent shall not be liable.
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4.7 Other Provisions. The Escrow Agent may rely and shall be
protected in acting or refraining from acting upon any written notice,
instruction or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper party or parties.
The Escrow Agent shall be under no duty to inquire into or investigate the
validity, accuracy or content of any such document. The Escrow Agent shall be
not be liable for any action taken or omitted by it in good faith unless a court
of competent jurisdiction determines that the Escrow Agent's willful misconduct
was the primary cause of a loss to the Parent, the Indemnification
Representative, or the Holders. In the administration of this Escrow Agreement,
the Escrow Agent may execute any of its powers and perform its duties hereunder
directly or through agents or attorneys and may, consult with counsel,
accountants and other skilled persons to be selected and retained by it. The
Escrow Agent shall not be liable for anything done, suffered or omitted in good
faith by it in accordance with the advice or opinion of any such counsel,
accountants or other skilled persons.
5. INDEMNIFICATION
5.1 Waiver and Indemnification. Parent, Natchez, the Indemnification
Representative and, by virtue of their approval of the Merger Agreement, the
Holders agree to and hereby do waive any suit, claim, demand or cause of action
of any kind which they may have or may assert against the Escrow Agent arising
out of or relating to the execution or performance by the Escrow Agent of this
Escrow Agreement, unless such suit, claim, demand or cause of action is based
upon the gross negligence or willful misconduct of the Escrow Agent. Parent,
Natchez and, by virtue of their approval of the Merger Agreement, the Holders
further agree, jointly and severally, to indemnify and hold Escrow Agent and its
directors, officers, agents and employees (collectively, the "Indemnitees")
harmless from and against any and all claims, liabilities, losses, damages,
fines, penalties, and expenses, including out-of-pocket, incidental expenses,
legal fees and expenses, and the allocated costs and expenses of in-house
counsel and legal staff ("Losses") that may be imposed on, incurred by, or
asserted against, the Indemnitees or any of them for following any instructions
or other directions upon which the Escrow Agent is authorized to rely pursuant
to the terms of this Escrow Agreement. In addition, to and not in limitation of
the immediately preceding sentence, Parent, Natchez and, by virtue of their
approval of the Merger Agreement, the Holders also agree, jointly and severally,
to indemnify and hold the Indemnitees and each of them harmless from and against
any and all Losses that may be imposed on, incurred by, or asserted against the
Indemnitees or any of them in connection with or arising out of the Escrow
Agent's performance under this Escrow Agreement, provided the Escrow Agent has
not acted with gross negligence or willful misconduct. The provisions of this
Section 5.1 shall survive the termination of this Escrow Agreement and the
resignation or removal of the Escrow Agent for any reason. Anything in this
Escrow Agreement to the contrary notwithstanding, in no event shall the Escrow
Agent be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Escrow
Agent has been advised of such loss or damage and regardless of the form of
action.
5.2 Conditions to Indemnification. In case any litigation is brought
against the Escrow Agent in respect of which indemnification may be sought
hereunder, the Escrow Agent shall give prompt notice of that litigation to the
parties hereto, and the parties upon receipt of that notice shall have the
obligation and the right to assume the defense of such litigation with counsel
reasonably satisfactory to the Escrow Agent; provided that failure of the Escrow
Agent to give that notice shall not relieve the parties hereto from any of their
obligations under this Section 5 unless that failure prejudices the defense of
such litigation by said parties. The Escrow Agent may employ separate
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counsel and participate in the defense; provided that Parent, Natchez and the
Holders, jointly and severally, shall be liable for and shall reimburse and
indemnify the Escrow Agent and hold the Escrow Agent harmless for the reasonable
legal fees and expenses of such counsel. The parties hereto shall not be liable
for any settlement without their respective consents.
6. ACKNOWLEDGMENT BY THE ESCROW AGENT
By execution and delivery of this Escrow Agreement, the Escrow Agent
acknowledges that the terms and provisions of this Escrow Agreement are
acceptable and it agrees to carry out the provisions of this Escrow Agreement on
its part.
7. RESIGNATION OR REMOVAL OF ESCROW AGENT; SUCCESSOR
7.1 Resignation and Removal.
7.1.1 Notice. The Escrow Agent may resign as such following the
giving of thirty (30) days' prior written notice to the other parties hereto.
Similarly, the Escrow Agent may be removed and replaced following the giving of
thirty (30) days' prior written notice to be given to the Escrow Agent jointly
by the Indemnification Representative and Parent. In either event, the duties
of the Escrow Agent shall terminate thirty (30) days after the date of such
notice (or as of such earlier date as may be mutually agreeable), and the Escrow
Agent shall then deliver the balance of the Escrow Shares then in its possession
to a successor Escrow Agent as shall be appointed by the other parties hereto as
evidenced by a written notice filed with the Escrow Agent.
7.1.2 Court Appointment. If the parties hereto are unable to
agree upon a successor or shall have failed to appoint a successor prior to the
expiration of thirty (30) days following the date of the notice of resignation
or removal, then the acting Escrow Agent, at the expense of the Indemnification
Representative and Parent, may petition any court of competent jurisdiction for
the appointment of a successor Escrow Agent or other appropriate relief, and any
such resulting appointment shall be binding upon all of the parties hereto.
7.2 Successors. Every successor appointed hereunder shall execute,
acknowledge and deliver to its predecessor, and also to the Indemnification
Representative and Parent, an instrument in writing accepting such appointment
hereunder, and thereupon such successor, without any further act, shall become
fully vested with all the duties, responsibilities and obligations of its
predecessor; but such predecessor shall, nevertheless, on the written request of
its successor or any of the parties hereto, execute and deliver an instrument or
instruments transferring to such successor all the rights of such predecessor
hereunder, and shall duly assign, transfer and deliver all property, securities
and monies held by it pursuant to this Escrow Agreement to its successor.
Should any instrument be required by any successor for more fully vesting in
such successor the duties, responsibilities, and obligations hereby vested or
intended to be vested in the predecessor, any and all such instruments in
writing shall, on the request of any of the other parties hereto, be executed,
acknowledged, and delivered by the predecessor.
7.3 New Escrow Agent. In the event of an appointment of a successor,
the predecessor shall cease to be custodian of any funds, securities or other
assets and records it may hold pursuant to this Escrow Agreement, and the
successor shall become such custodian.
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7.4 Release. Upon acknowledgment by any successor Escrow Agent of
the receipt of the then remaining balance of the Escrow Shares, the then acting
Escrow Agent shall be fully released and relieved of all duties,
responsibilities and obligations under this Escrow Agreement that may arise and
accrue thereafter.
7.5 Successors. Any corporation or association into which the Escrow
Agent in its individual capacity may be merged or converted or with which it may
be consolidated, or any corporation or association resulting from any merger,
conversion or consolidation to which the Escrow Agent in its individual capacity
shall be a party, or any corporation or association to which all or
substantially all the corporate trust business of the Escrow Agent in its
individual capacity may be sold or otherwise transferred, shall be the Escrow
Agent hereunder without further act.
8. FEE
The Escrow Agent will be paid by Parent as billed for services and expenses
hereunder in accordance with the fee schedule attached hereto as Schedule II.
In the event that the Escrow Agent is made a party to litigation with respect to
the property held hereunder, or brings an action in interpleader, or in the
event that the conditions to this Escrow Agreement are not promptly fulfilled,
or the Escrow Agent is required to render any service not provided for in this
Escrow Agreement and fee schedule, or there is any assignment of the interests
of this Escrow Agreement or any modification hereof, the Escrow Agent shall be
entitled to reasonable compensation from Parent for such extraordinary services
and reimbursement for all fees, costs, liability, and expenses, including
attorneys fees and expenses.
9. INDEMNIFICATION REPRESENTATIVE
9.1 Appointment and Authority. For purposes of this Escrow
Agreement, the Holders have, by virtue of their approval of the Merger
Agreement, irrevocably consented to the establishment of the escrow provided for
by this Escrow Agreement to secure the Holders' indemnification obligations
under Article IX of the Merger Agreement in the manner set forth in this Escrow
Agreement and to the appointment of the Indemnification Representative as
representative of the Holders and as the attorney-in-fact for and on behalf of
each Holder, and, subject to the express limitations set forth below, the taking
by the Indemnification Representative of any and all actions and the making of
any decisions required or permitted to be taken by him under this Escrow
Agreement, including but not limited to the exercise of the power to: (i)
authorize delivery to Parent of the Escrow Shares, or any portion thereof, in
satisfaction of Claims otherwise in connection with an Escrow Adjustment, (ii)
effect a sale of any Escrow Shares pursuant to Section 1.3, (iii) 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, (iv) resolve any Claims, and (v) take all actions necessary in the
judgment of the Indemnification Representative for the accomplishment of the
foregoing and all of the other terms, conditions, and limitations of this Escrow
Agreement. Any notice given to the Indemnification Representative will
constitute notice to each and all of the Holders at the time notice is given to
the Indemnification Representative. Any action taken by, or notice or
instruction received from, the Indemnification Representative will be deemed to
be an action by, or notice or instruction from, each and all of the Holders.
Parent and the Escrow Agent will disregard any notice or instruction received
from any Holder other than the Indemnification Representative with
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regard to this Escrow Agreement. The Indemnification Representative shall have
unlimited authority and power to act on behalf of each Holder with respect to
this Escrow Agreement and the disposition, settlement, or other handling of all
Claims, notices, rights, or obligations arising under this Escrow Agreement so
long as all Holders are treated in the same manner (in respect of their
proportional interests in the Escrow Shares).
9.2 Indemnification. The Indemnification Representative shall not
suffer any liability or loss for any act performed or omitted to be performed by
him under this Escrow Agreement in the absence of adjudicated gross negligence
or willful misconduct. The Indemnification Representative may consult with
counsel and other experts as may be reasonably necessary to advise him with
respect to his rights and obligations hereunder and shall be fully protected by
any act taken, suffered, permitted, or omitted in good faith in accordance with
the advice of such counsel and experts except for notices and other documents
delivered by the Indemnification Representative pursuant to this Escrow
Agreement. The Indemnification Representative shall not be responsible for the
sufficiency or accuracy of the form, execution, validity, or genuineness of
documents or securities now or hereafter deposited hereunder, or of any
endorsement thereof or for any lack of endorsement thereon, or for any
description therein, nor shall he be responsible or liable in any respect on
account of the identity, authority or rights of the persons executing or
delivering or purporting to execute or deliver any such document, security or
endorsement, and the Indemnification Representative shall be fully protected in
relying upon any written notice, demand, certificate or document which he in
good faith believes to be genuine.
9.3 Death or Disability; Successors. In the event of the death or
permanent disability of the Indemnification Representative, or his resignation
as the Indemnification Representative, a successor Indemnification
Representative shall be elected by a majority vote of the Holders, with each
Holder to be given a vote equal to his proportionate share of the Escrow Shares.
The Holders shall cause to be delivered to Parent and the Escrow Agent prompt
written notice of such election of a successor Indemnification Representative.
Each successor Indemnification Representative shall have all of the power,
authority, rights, and privileges conferred by this Escrow Agreement upon the
original Indemnification Representative, and the term, "Indemnification
Representative" as used herein shall be deemed to include any successor
Indemnification Representative.
10. TERMINATION; DEFICIENCY CLAIMS
This Escrow Agreement and the escrow created hereby shall terminate
following Escrow Agent's delivery, and Parent's release of all remaining Escrow
Shares to the Holders and/or Parent pursuant to Section 2 or 3. In the event
that upon the termination of this Escrow Agreement, the value of the Escrow
Shares released to Parent pursuant to the provisions of this Escrow Agreement is
insufficient to pay in full to Parent the total amount of the Damages and
Prevailing Party Awards to which it is entitled, then Parent shall be entitled
to pursue its remedies for any such deficiency under the Merger Agreement,
subject to the limitations set forth in Sections 9.4 and 9.6 of the Merger
Agreement; provided, however, that any action with respect thereto must be
commenced by Parent within ninety (90) days after the termination of this Escrow
Agreement, and provided, further, that no party hereto in connection with any
such action may contest any Uncontested Claim or any Contested Claim that has
been resolved in accordance with the provisions of this Escrow Agreement.
Nothing in this Section 10 shall be construed as extending any period for making
an indemnification claim under Section 9.4 or Section 9.6 of the Merger
Agreement.
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11. MISCELLANEOUS PROVISIONS
11.1 Parties in Interest. This Escrow Agreement is not intended, nor
shall it be construed, to confer any enforceable rights on any Person, other
than Parent, Natchez, the Escrow Agent, the Indemnification Representative or
the Holders. All of the terms and provisions of this Escrow Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of Parent, Natchez, the Escrow Agent, the Indemnification
Representative and the Holders.
11.2 Attorneys' Fees. In the event of any action to enforce any
provision of this Escrow Agreement, or on account of any default under or breach
of this Escrow Agreement, the substantially prevailing party in such action
shall be entitled to recover, in addition to all other relief, from the other
party all attorneys' fees incurred by the substantially prevailing party in
connection with such action (including, but not limited to, any appeal thereof).
11.3 Entire Agreement. This Escrow Agreement constitutes the final
and entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior arrangements or understandings.
11.4 Notices. All notices, requests, demands or other communications
which are required or may be given pursuant to the terms of this Escrow
Agreement shall be in writing and shall be deemed to have been duly given: (i)
on the date of delivery if personally delivered by hand, (ii) upon the third day
after such notice is deposited in the United States mail, if mailed by
registered or certified mail, postage prepaid, return receipt requested, (iii)
upon the date scheduled for delivery after such notice is sent by a nationally
recognized overnight express courier or (iv) by fax upon written confirmation
(including the automatic confirmation that is received from the recipient's fax
machine) of receipt by the recipient of such notice:
If to Parent: TSI International Software Ltd.
45 Danbury Road
Wilton, CT 06897
Attention: Ira A. Gerard, Chief Financial Officer
Telephone No.: (203) 761-8600
Fax No.: (203) 762-9677
With copies to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attention: Lawrence S. Wittenberg
Telephone No.: (617) 248-7000
Fax No.: (617) 248-7100
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If to Parent's
Transfer Agent: The Bank of New York
101 Barclay Street
New York, NY 10286
Attention:
Telephone No.:
Fax No.:
If to the Indemnification
Representative: Ted R. Dintersmith
c/o Charles River Ventures
Bay Colony Corporate Center
1000 Winter Street
Suite 3300
Waltham, MA 02451
Telephone No.: (781) 487-7060
Fax No: (781) 487-7065
With copies to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Jay E. Bothwick
Telephone No.: (617) 526-6526
Fax No: (617) 526-5000
If to the Escrow Agent: The Bank of New York
101 Barclay Street
21st Floor
New York, NY 10286
Attention: Carlos Luciano
Telephone No.: (212) 815-5712
Fax No.: (212) 815-7181
Such addresses may be changed, from time to time, by means of a notice
given in the manner provided in this Section 11.4.
11.5 Changes. The terms of this Escrow Agreement may not be modified
or amended, or any provisions hereof waived, temporarily or permanently, except
pursuant to the written agreement of Parent, the Indemnification Representative
and the Escrow Agent.
11.6 Severability. If any term or provision of this Escrow Agreement
or the application thereof as to any Person or circumstance shall to any extent
be invalid or unenforceable, the remaining terms and provisions of this Escrow
Agreement or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
shall not be affected thereby and each term and provision of this Escrow
Agreement shall be valid and enforceable to the fullest extent permitted by law.
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11.7 Counterparts. This Escrow Agreement may be executed in two or
more partially or fully executed counterparts, each of which shall be deemed an
original and shall bind the signatory, but all of which together shall
constitute but one and the same instrument. The execution and delivery of a
Signature Page to Escrow Agreement in the form annexed to this Escrow Agreement
by any party hereto who shall have been furnished the final form of this Escrow
Agreement shall constitute the execution and delivery of this Escrow Agreement
by such party.
11.8 Headings. The headings of the various sections of this Escrow
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Escrow Agreement.
11.9 Governing Law. This Escrow Agreement shall be construed and
controlled by the laws of the Commonwealth of Massachusetts without regard to
the principles of conflicts of laws. Natchez, the Holders (by virtue of their
approval of the Merger Agreement) and the Indemnification Representative consent
to jurisdiction and venue in the state and federal courts in Boston,
Massachusetts.
11.10 Binding Effect. This Escrow Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
affiliates, successors and assigns.
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IN WITNESS WHEREOF, the parties have duly executed this Escrow Agreement as of
the day and year first above written.
TSI INTERNATIONAL SOFTWARE LTD.
By: /s/ Constance F. Galley
-------------------------------------
Name: Constance F. Galley
Title: President and Chief Executive
Officer
NOVERA SOFTWARE, INC.
By: /s/ W. David Power
-------------------------------------
Name: W. David Power
Title: President
INDEMNIFICATION REPRESENTATIVE:
/s/ Ted R. Dintersmith
-------------------------------------------
Signature of Indemnification Representative
/s/ Ted R. Dintersmith
-------------------------------------------
Printed Name of Indemnification
Representative
THE BANK OF NEW YORK, as Custodian
By: /s/ Matthew G. Louis
--------------------------------------
Authorized Signatory
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