1
EXHIBIT 99.1
ESCROW AGREEMENT
This Escrow Agreement is entered into as of February 5, 1999, by and
among Eclipsys Corporation, a Delaware corporation (the "Buyer"), Matthew
Ehrlich and Steven Reidy (the "Indemnification Representatives") and State
Street Bank and Trust Company (the "Escrow Agent"). The Buyer and the
Indemnification Representative are sometimes referred to herein collectively as
the "Interested Parties."
WHEREAS, the Buyer, Power Acquisition Corp., a wholly owned subsidiary
of the Buyer ("Sub") and PowerCenter Systems, Inc. (the "Company") have entered
into an Agreement and Plan of Merger dated February 5, 1999 (the "Merger
Agreement") pursuant to which the Sub will be merged into the Company and the
Company, as the surviving corporation (the "Surviving Corporation"), will become
a wholly owned subsidiary of the Buyer.
WHEREAS, the Merger Agreement provides that an escrow account will be
established to secure the Company Stockholders' and Noteholders' indemnification
obligations to the Company and the Surviving Corporation (hereinafter referred
to as the "Indemnified Persons") under the Merger Agreement on the terms and
conditions set forth herein.
WHEREAS, the parties hereto desire to establish the terms and
conditions pursuant to which such escrow account will be established and
maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Agreement and not
otherwise defined shall have the meanings given to them in the Merger Agreement,
a copy of which is attached hereto.
2. Consent of Company Stockholders. By virtue of the Company
Stockholders' approval of the Merger Agreement and the Noteholders' execution of
the Merger Agreement, the Company Stockholders and the Noteholders receiving
shares of Buyer Common Stock pursuant to the Merger (the "Indemnifying
Stockholders") have, without any further act of any Company Stockholder or
Noteholder, consented to: (a) the establishment of this escrow to secure the
Company Stockholders' and Noteholders' indemnification obligations under Article
VI of the Merger Agreement in the manner set forth herein, (b) the appointment
of the Indemnification Representatives as their representatives for purposes of
this Agreement and as attorneys-in-fact and agents for and on behalf of each
Indemnifying Stockholder, and the taking by the Indemnification Representatives
of any and all actions and the making of any
-1-
2
decisions required or permitted to be taken or made by them under this Agreement
and (c) all of the other terms, conditions and limitations in this Agreement.
3. Escrow and Indemnification.
a. Escrow of Shares. On the Closing Date, the Buyer shall deposit
with the Escrow Agent a certificate for the number of Escrow Shares specified in
Section 1.5(f) of the Merger Agreement, issued in the name of the Escrow Agent
or its nominee. The Buyer may from time to time deposit additional Escrow Shares
with the Escrow Agent pursuant to the final sentence of Section 1.6(a) of the
Merger Agreement accompanied by written notice to the Escrow Agent identifying
such deposit of additional Escrow Shares. The Escrow Shares shall be held as an
escrow fund and shall not be subject to any lien, attachment, trustee process or
any other judicial process of any creditor of any party hereto. The Escrow Agent
agrees to accept delivery of the Escrow Shares and to hold the Escrow Shares,
together with any investment income earned thereon pursuant to the terms hereof
(such Escrow Shares together with such income, if any collectively, the "Escrow
Account") in an escrow account, subject to the terms and conditions of this
Agreement. The Escrow Agent shall have no responsibility for the genuineness,
validity, market value, title or sufficiency for any intended purpose of the
Escrow Shares.
The Escrow Agent shall invest the cash portion of the Escrow Account
(the "Escrow Funds") at, and pursuant to, the joint written direction of the
Indemnification Representatives only in Eligible Investments and shall not be
responsible or liable for any loss accruing from any investment made in
accordance herewith. "Eligible Investments" shall mean (i) obligations issued or
guaranteed by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is pledged
In support thereof); (ii) obligations (including certificates of deposit and
banker's acceptances) of any domestic commercial bank having capital and surplus
in excess of $500,000,000; (iii) repurchase obligations for underlying
securities of the type described in clause (i); (iv) shares of money market
finds at least 95% of the assets of which constitute obligations of the type
described in clause (i) above. No investment shall have a term of more than 360
days. If otherwise qualified, obligations of the Escrow Agent shall qualify as
Eligible Investments. Absent its timely receipt of such specific written
investment instruction from the Indemnification Representatives, the Escrow
Agent shall have no obligation or duty to invest (or otherwise pay interest on)
the Escrow Funds. All earnings received from the investment of the Escrow Funds
shall be credited to, and shall become a part of, the Escrow Fund (and any
losses on such investments shall be debited to the Escrow Account). The Escrow
Agent shall have no liability for any investment losses, including any losses on
any investment required to be liquidated prior to maturity in order to make a
payment required hereunder.
-2-
3
b. Indemnification. The Indemnifying Stockholders have agreed in
Article VI of the Merger Agreement to indemnify and hold harmless the
Indemnified Persons from and against specified Damages. The Escrow Shares shall
be security for such indemnity obligation of the Indemnifying Stockholders,
subject to the limitations, and in the manner provided, in this Agreement.
c. Dividends, Etc. Any securities distributable to the Indemnifying
Stockholders in respect of or in exchange for any of the Escrow Shares, whether
by way of stock dividends, stock splits or otherwise, shall be delivered to the
Escrow Agent, who shall hold such securities in the Escrow Account, accompanied
by written notice to the Escrow Agent identifying such deposit of additional
securities. Such securities shall be issued in the name of the Escrow Agent or
its nominee and shall be considered Escrow Shares for purposes hereof.
d. Voting of Shares. The Indemnification Representatives shall have
the right, in their sole discretion, on behalf of the Indemnifying Stockholders,
to direct the Escrow Agent in writing as to the exercise of any voting rights
pertaining to the Escrow Shares (at least three business days prior to the date
on which the Escrow Agent is requested therein to take action), and the Escrow
Agent shall comply with any such written instructions. In the absence of such
instructions, the Escrow Agent shall not vote any of the Escrow Shares. The
Indemnification Representatives shall have no obligation to solicit consents or
proxies from the Indemnifying Stockholders for purposes of any such vote. Except
as provided herein, the Escrow Agent shall be under no obligation to preserve,
protect or exercise rights in the Escrow Shares, and shall be responsible only
for customary and reasonable measures to maintain the physical safekeeping
thereof, and otherwise to perform and observe such duties on its part as are
expressly set forth in this Agreement. The Escrow Agent shall not be responsible
for forwarding to any Party, notifying any Party with respect to, or taking any
action with respect to, any notice, solicitation or other document or
information, written or otherwise, received from an issuer or other person,
except for the Indemnification Representatives as provided herein, with respect
to the Escrow Shares, including but not limited to, proxy material, tenders,
options, the pendency of calls and maturities and expiration of rights.
e. Transferability. The respective interests of the Indemnifying
Stockholders in the Escrow Shares shall not be assignable or transferable, other
than by operation of law. Notice of any such assignment or transfer by operation
of law shall be given to the Escrow Agent and the Buyer, and no such assignment
or transfer shall be valid until such notice is given.
-3-
4
4. Administration of Escrow Account. The Escrow Agent shall administer
the Escrow Account as follows:
a. If an Indemnified Person has incurred or suffered Damages for
which it is entitled to indemnification under Article VI of the Merger
Agreement, the Indemnified Person shall, prior to the expiration of the
representation, warranty, covenant or agreement to which such claim relates,
give written notice of such claim (a "Claim Notice") to the Indemnification
Representatives and the Escrow Agent. Each Claim Notice shall state the amount
of claimed Damages (the "Claimed Amount") the number of Escrow Shares which
equal the Claimed Amount determined in accordance with Section 6 herein and the
basis for such claim. The date on which all of the representations, warranties,
covenants and agreements of the Company expire in accordance with Section 6.3 of
the Merger Agreement shall be referred to herein as the "Termination Date."
b. Within 20 days after delivery of a Claim Notice, the
Indemnification Representatives shall provide to the Indemnified Person, with a
copy to the Escrow Agent, a written response (the "Response Notice") in which
the Indemnification Representatives shall: (i) agree that the number of Escrow
Shares having a Fair Market Value (as computed pursuant to Section 6) equal to
the full Claimed Amount may be released from the Escrow Account to the
Indemnified Person, (ii) agree that the number of Escrow Shares having a Fair
Market Value equal to part, but not all, of the Claimed Amount (the "Agreed
Amount") may be released from the Escrow Account to the Indemnified Person or
(iii) contest that any of the Escrow Shares may be released from the Escrow
Account to the Indemnified Person. The Indemnification Representatives may
contest the release of Escrow Shares having a Fair Market Value equal to all or
a portion of the Claimed Amount only based upon a good faith belief that all or
such portion of the Claimed Amount does not constitute Damages for which the
Indemnified Person is entitled to indemnification under Article VI of the Merger
Agreement. If no Response Notice is delivered by the Indemnification
Representatives and received by the Escrow Agent within such 20-day period, the
Indemnification Representatives shall be deemed to have agreed that Escrow
Shares having a Fair Market Value equal to all of the Claimed Amount as set
forth in the Claim Notice may be released to the Indemnified Person from the
Escrow Account.
c. If the Indemnification Representatives in the Response Notice
agree (or are deemed to have agreed) that Escrow Shares having a Fair Market
Value equal to all of the Claimed Amount may be released from the Escrow Account
to the Indemnified Person, the Escrow Agent shall, promptly following the
earlier of the required delivery date for the Response Notice or the delivery of
the Response Notice, transfer, deliver and assign to the Indemnified Person such
number of Escrow Shares held in the Escrow Account, as specified in such
Response Notice or Claim Notice, as the case may be, which have a Fair Market
Value equal to the Claimed Amount (or such lesser number of Escrow Shares as is
then held
-4-
5
in the Escrow Account). The Escrow Agent shall not release or distribute the
Escrow Account or portion thereof sooner than two (2) business days after the
Escrow Agent has received the requisite notices or paperwork in good form, or
passage of the applicable claims period or release date, as the case may be.
d. If the Indemnification Representatives in the Response Notice
agree that a number of Escrow Shares having a Fair Market Value equal to part,
but not all, of the Claimed Amount may be released from the Escrow Account to
the Indemnified Person, the Escrow Agent shall promptly following the delivery
of the Response Notice transfer, deliver and assign to the Indemnified Person
such number of Escrow Shares held in the Escrow Account (or such lesser number
of Escrow Shares as is then held in the Escrow Account).
e. If the Indemnification Representatives in the Response Notice
contest the release of Escrow Shares having a Fair Market Value equal to all or
part of the Claimed Amount (the "Contested Amount"), the matter shall be settled
by binding arbitration in the State of Delaware. All claims shall be settled by
three arbitrators in accordance with the Commercial Arbitration Rules then in
effect of the American Arbitration Association (the "AAA Rules"). The
Indemnification Representatives and the Indemnified Person shall each designate
one arbitrator within 15 days of the delivery of the Indemnification
Representatives' Response Notice contesting the Claimed Amount. The
Indemnification Representatives and the Indemnified Person shall cause such
designated arbitrators mutually to agree upon and designate a third arbitrator;
provided, however, that (i) failing such agreement within 45 days of delivery of
the Indemnification Representatives' Response Notice, the third arbitrator shall
be appointed in accordance with the AAA Rules and (ii) if either the
Indemnification Representatives or the Indemnified Person fail to timely
designate an arbitrator, the dispute shall be resolved by the one arbitrator
timely designated. The Indemnifying Stockholders and the Indemnified Person
shall pay the fees and expenses of their respectively designated arbitrators and
shall bear equally the fees and expenses of the third arbitrator. The
Indemnification Representatives and the Indemnified Person shall cause the
arbitrators to decide the matter to be arbitrated pursuant hereto within 60 days
after the appointment of the last arbitrator. The arbitrators' decision shall
relate solely to whether the Indemnified Person is entitled to receive the
Contested Amount (or a portion thereof) pursuant to the applicable terms of the
Merger Agreement and this Agreement. The final decision of the majority of the
arbitrators shall be furnished to the Indemnification Representatives, the
Indemnified Person and the Escrow Agent in writing and shall constitute a
conclusive determination of the issue in question, binding upon the
Indemnification Representatives, the Indemnifying Stockholders, the Indemnified
Person and the Escrow Agent, and shall not be contested by any of them. Such
decision may be used in a court of law only for the purpose of seeking
enforcement of the arbitrators' award. After delivery of a Response Notice that
the Claimed Amount is contested by the Indemnification Representatives, the
Escrow Agent shall continue to hold in the Escrow Account a number of Escrow
Shares having a Fair Market Value sufficient to cover the Contested Amount (up
to the number of Escrow Shares then available in the
-5-
6
Escrow Account) as specified in the Response Notice, notwithstanding the
occurrence of the Termination Date, until (i) delivery of a copy of a settlement
agreement executed by the Indemnified Person and the Indemnification
Representatives setting forth instructions to the Escrow Agent as to the release
of a specific number of Escrow Shares, if any, that shall be made with respect
to the Contested Amount or (ii) delivery of a copy of the final award of the
majority of the arbitrators setting forth instructions to the Escrow Agent as to
the release of Escrow Shares, if any, that shall be made with respect to the
Contested Amount, with such instructions including, or accompanied by, joint
written instructions from the Indemnification Representatives and the
Indemnified Persons setting forth the number of shares to be released in
accordance with such final award. The Escrow Agent shall thereupon release
Escrow Shares from the Escrow Account (to the extent Escrow Shares are then held
in the Escrow Account) in accordance with such agreement or instructions.
5. Release of Escrow Shares.
a. Promptly after the Termination Date, the Escrow Agent shall
distribute to the Indemnifying Stockholders all of the Escrow Shares then held
in escrow pursuant to written instructions received from the Indemnification
Representatives. Notwithstanding the foregoing, if an Indemnified Person has
previously given a Claim Notice which has not then been resolved in accordance
with Section 4, the Escrow Agent shall retain in the Escrow Account after the
Termination Date the number of Escrow Shares set forth in any Claim Notice which
has not then been resolved (or the Contested Amount should Section 4(e) be
applicable to such claim). Any Escrow Shares so retained in escrow shall be
distributed in accordance with the terms of the resolution of such claims.
b. Any distribution of all or a portion of the Escrow Shares to the
Indemnifying Stockholders shall be made in accordance with the percentages set
forth opposite such holders' respective names on Attachment A attached hereto;
provided, however, that the Escrow Agent shall withhold the distribution of the
portion of the Escrow Shares otherwise distributable to Indemnifying
Stockholders who have not, according to written notice provided by the Buyer to
the Escrow Agent, prior to such distribution, surrendered their respective
Certificates pursuant to the terms and conditions of the Merger Agreement; and
provided further that such Attachment A shall be appropriately revised in the
event the Buyer deposits additional Escrow Shares with the Escrow Agent pursuant
to the final sentence of Section 1.6(a) of the Merger Agreement following the
date of this Agreement. Any such withheld shares shall be delivered to the Buyer
promptly after the Termination Date, and shall be delivered by the Buyer to the
Indemnifying Stockholders to whom such shares would have otherwise been
distributed upon surrender of their respective Certificates. Distributions to
the Indemnifying Stockholders shall be made by mailing stock certificates to
such holders at their respective addresses shown on Attachment A (or such other
address as may be provided in writing to the Escrow Agent by any such holder).
No fractional Escrow Shares shall be distributed to Indemnifying Stockholders
pursuant to this Agreement. Instead, the number of
-6-
7
shares that each Indemnifying Stockholder shall receive shall be rounded up or
down to the nearest whole number (provided that the Indemnification
Representatives shall have the authority to effect such rounding in such a
manner that the total number of whole Escrow Shares to be distributed equals the
number of Escrow Shares then held in the Escrow Account).
6. Valuation of Escrow Shares. For purposes of this Agreement, the Fair
Market Value of the Escrow Shares shall be determined by the Indemnification
Representative or the Indemnified Person, as the case may be, based upon the
average of the closing prices of the Buyer Common Stock reported on the Nasdaq
National Market for the 30 trading days immediately preceding either the date on
which the Escrow Shares are delivered to the Indemnified Person in satisfaction
of a claim or such other date as of which such determination is to be made.
7. Fees and Expenses of Escrow Agent. (a) Each of the Interested
Parties agree, jointly and severally (i) to pay or reimburse the Escrow Agent
for its attorney's fees and expenses incurred in connection with the preparation
of this Agreement and (ii) to pay the Escrow Agent's compensation for its normal
services hereunder in accordance with the attached fee schedule, which may be
subject to change hereafter on an annual basis.
(b) Each of the Interested Parties agree, jointly and severally, to
reimburse the Escrow Agent on demand for all costs and expenses incurred in
connection with the administration of this Agreement or the escrow created
hereby or the performance or observance of its duties hereunder which are in
excess of its compensation for normal services hereunder, including without
limitation, payment of any reasonable legal fees and expenses incurred by the
Escrow Agent in connection with resolution of any claim by any party hereunder.
(c) Each of the Interested Parties covenant and agree, jointly and
severally, to indemnify the Escrow Agent (and its directors, officers and
employees) and hold it (and such directors, officers and employees) harmless
from and against any loss, liability, damage, cost and expense of any nature
incurred by the Escrow Agent arising out of or in connection with this Agreement
or with the administration of its duties hereunder, including but not limited to
reasonable attorney's fees and other costs and expenses of defending or
preparing to defend against any claim of liability unless and except to the
extent such loss, liability, damage, cost and expense shall be caused by the
Escrow Agent's gross negligence, bad faith, or willful misconduct. The foregoing
indemnification and agreement to hold harmless shall survive the termination of
this Agreement.
-7-
8
(d) Without altering or limiting the joint and several liability of any
of the Interested Parties to the Escrow Agent hereunder, the Buyer, on the one
hand, and the Indemnifying Stockholders, on the other hand, shall each pay
one-half of the fees of the Escrow Agent for the services to be rendered by the
Escrow Agent hereunder and the expenses covered by this Section.
8. Limitation of Escrow Agent's Liability.
a. The Escrow Agent shall incur no liability with respect to any
action taken or omitted to be taken by it in reliance upon any notice,
direction, instruction, (including without limitation, wire transfer
instructions, whether incorporated herein or provided in a separate written
instruction) consent, statement or other documents believed by it to be genuine
and duly authorized, nor for other action or inaction except its own willful
misconduct or gross negligence. In no event shall the Escrow Agent be liable for
indirect, punitive, special or consequential damage or loss (including but not
limited to lost profits) whatsoever, even if the Escrow Agent has been informed
of the likelihood of such loss or damage and regardless of the form of action.
The Escrow Agent shall not be responsible for the validity or sufficiency of
this Agreement. In all questions arising under the Escrow Agreement, the Escrow
Agent may rely on the advice of counsel, including in-house counsel, and for
anything done, omitted or suffered in good faith by the Escrow Agent based on
such advice the Escrow Agent shall not be liable to anyone. The Escrow Agent
shall not be required to take any action hereunder involving any expense unless
the payment of such expense is made or provided for in a manner reasonably
satisfactory to it.
b. The Buyer and the Indemnifying Stockholders hereby, jointly and
severally, agree to indemnify the Escrow Agent for, and hold it harmless
against, any loss, liability or expense incurred without gross negligence or
willful misconduct on the part of Escrow Agent, arising out of or in connection
with its carrying out of its duties hereunder. The Buyer, on the one hand, and
the Indemnifying Stockholders, on the other hand, shall each be liable for
one-half of such amounts.
c. Each Interested Party acknowledges and agrees that the Escrow
Agent (i) shall not be responsible for any of the agreements referred to or
described herein. (including without limitation the Merger Agreement), or for
determining or compelling compliance therewith, and shall not otherwise be bound
thereby, (ii) shall be obligated only for the performance of such duties as are
expressly and specifically set forth in this Escrow Agreement on its part to be
performed, each of which are ministerial (and shall not be construed to be
fiduciary) in nature, and no implied duties or obligations of any kind shall be
read into this Agreement against or on the part of the Escrow Agent, (iii) shall
not be obligated to take any legal or other action hereunder which might in its
judgment involve or
-8-
9
cause it to incur any expense or liability unless it shall have been furnished
with acceptable indemnification.
The Escrow Agent shall have no more or less responsibility or liability
on account of any action or omission of any book-entry depository, securities
intermediary or other subescrow agent employed by the Escrow Agent than any such
book-entry depository, Securities intermediary or other subescrow agent has to
the Escrow Agent, except to the extent that such action or omission of any book
entry depository, securities intermediary or other subescrow agent was caused by
the Escrow Agent's own gross negligence, bad faith or wilful misconduct in
breach of this Agreement. The use of any such depository, intermediary or other
subescrow agent shall be subject to the prior written approval of Buyer and the
Indemnification Representatives which shall not be unreasonably withheld.
9. Liability and Authority of Indemnification Representatives;
Successors and Assignees.
a. The Indemnification Representatives shall incur no liability to
the Indemnifying Stockholders with respect to any action taken or suffered by
them in reliance upon any note, direction, instruction, consent, statement or
other documents believed by them to be genuinely and duly authorized, nor for
other action or inaction except their own willful misconduct or gross
negligence. The Indemnification Representatives may, in all questions arising
under the Escrow Agreement, rely on the advice of counsel and for anything done,
omitted or suffered in good faith by the Indemnification Representatives based
on such advice, the Indemnification Representatives shall not be liable to the
Indemnifying Stockholders.
b. In the event of the death or permanent disability of either
Indemnification Representative, or his resignation as an Indemnification
Representative, a successor Indemnification Representative shall be appointed by
the other Indemnification Representative or, absent its appointment, a successor
Indemnification Representative shall be elected by a majority vote of the
Indemnifying Stockholders, with each such Indemnifying Stockholder (or his or
her successors or assigns) to be given a vote consistent with the percentages
set forth on Attachment A hereto. Each successor Indemnification Representative
shall have all of the power, authority, rights and privileges conferred by this
Agreement upon the original Indemnification Representatives, and the term
"Indemnification Representatives" as used herein shall be deemed to include
successor Indemnification Representatives. Until notified in writing by an
Indemnification Representative that he has resigned, the Escrow Agent may act
upon the directions, instructions and notices of the Stockholders
Representatives named above and, thereafter, upon the directions, instructions
and notices of any successor named in a writing executed by both of the
then-acting Indemnification Representatives.
-9-
10
c. The Indemnification Representatives, acting jointly but not
singly, shall have full power and authority to represent the Indemnifying
Stockholders, and their successors, with respect to all matters arising under
this Agreement and all actions taken by any Indemnification Representative
hereunder shall be binding upon the Indemnifying Stockholders, and their
successors, as if expressly confirmed and ratified in writing by each of them.
Without limiting the generality of the foregoing, the Indemnification
Representatives, acting jointly but not singly, shall have full power and
authority to interpret all of the terms and provisions of this Agreement, to
compromise any claims asserted hereunder and to authorize payments to be made
with respect thereto, on behalf of the Indemnifying Stockholders and their
successors. All actions to be taken by the Indemnification Representatives
hereunder shall be evidenced by, and taken upon, the written direction of a
majority thereof.
10. Amounts Payable by Indemnifying Stockholders. The amounts payable
by the Indemnifying Stockholders under this Agreement (i.e., the fees and
expenses of arbitrators payable pursuant to Section 4(e), the fees of the Escrow
Agent and the indemnification obligations payable pursuant to Section 7 and the
indemnification obligations pursuant to Sections 8(b)) shall be payable solely
as follows. The Indemnification Representatives shall notify the Escrow Agent of
any such amount payable by the Indemnifying Stockholders as soon as they become
aware that any such amount is payable, and the number of Escrow Shares having a
Fair Market Value equivalent to such amounts payable with a copy of such notice
to the Buyer. On the sixth business day after the delivery of such notice, the
Escrow Agent shall sell such number of Escrow Shares as specified in such
notification (up to the number of Escrow Shares then available in the Escrow
Account), subject to compliance with all applicable securities laws, as is
necessary to raise such amount, and shall disburse such proceeds to the party to
whom such amount is owed in accordance with the instructions of the
Indemnification Representatives; provided that if the Buyer delivers to the
Escrow Agent (with a copy to the Indemnification Representatives), within five
business days after delivery of such notice by the Indemnification
Representatives, a written notice contesting the legitimacy or reasonableness of
such amount, then the Escrow Agent shall not sell Escrow Shares to raise the
disputed portion of such claimed amount, and such dispute shall be resolved by
the Buyer and the Indemnification Representatives in accordance with the
procedures set forth in Section 4(e).
11. Termination. This Agreement shall terminate upon the later of the
Termination Date or the distribution by the Escrow Agent of all of the Escrow
Shares in accordance with this Agreement; provided that the provisions of
Sections 8 and 9 shall survive such termination.
12. (a) Notices. All notices, instructions and other communications
given hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested,
-10-
11
postage prepaid, or (ii) via a reputable nationwide overnight courier service,
in each case to the address set forth below. Any such notice, instruction or
communication shall be deemed to have been delivered two business days after it
is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service.
If to the Buyer:
Eclipsys Corporation
777 E. Atlantic Avenue
Suite 200
Delray Beach, Florida 33483
Attention: Chief Executive Officer
Fax: (561) 243-8850
If to the Indemnification Representatives:
Matthew Ehrlich
297 Harvard Avenue
Rockville Center, NY 11570
Fax: (516) 222-1212
Steven Reidy
c/o Euclid Partners IV, L.P.
50 Rockefeller Plaza
Suite 1022
New York, NY 10020
Fax: (516) 218-6877
If to the Escrow Agent:
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department, Fourth Floor
Attention: Eclipsys Escrow
Fax: (617) 664-5374
(b) Written Instructions. Any funds to be paid to or by the Escrow
Agent hereunder shall be sent by wire transfer pursuant to the following
instructions (or by such method of payment and pursuant to such instruction as
may have been given in
-11-
12
advance and in writing to or by the Escrow Agent, as the case may be, in
accordance with Section 3 (a) above):
If to Buyer:
Bank: ____________________
ABA #: ____________________
A/C #: ____________________
Attn: ____________________
Ref: ____________________
If to Company Shareholders and Noteholders:
Bank: ____________________
ABA #: ____________________
A/C #: ____________________
Attn: ____________________
Ref: ____________________
If to the Escrow Agent:
Bank: State Street Bank and Trust Company
ABA#: 0110 0002 8
A/C #: 9903-990-1
Attn: Corporate Trust Department
Ref: Eclipsys Escrow
Any party may give any notice, instruction or communication in
connection with this Agreement using any other means (including personal
delivery, telecopy or ordinary mail), but no such notice, instruction or
communication shall be deemed to have been delivered unless and until it is
actually received by the party to whom it was sent. Any party may change the
address to which notices, instructions or communications are to be delivered by
giving the other parties to this Agreement notice thereof in the manner set
forth in this Section 12.
13. Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, the Escrow Agent
may resign and be discharged from its duties or obligations hereunder by
delivering a resignation to the parties to this Escrow Agreement, not less than
60 days' prior to the date when such resignation shall
-12-
13
take effect. The Buyer may appoint a successor Escrow Agent without the consent
of the Indemnification Representatives so long as such successor is a bank with
assets of at least $500 million, and may appoint any other successor Escrow
Agent with the consent of the Indemnification Representatives, which shall not
be unreasonably withheld. If, within such notice period, the Buyer provides to
the Escrow Agent written instructions with respect to the appointment of a
successor Escrow Agent and directions for the transfer of any Escrow Shares then
held by the Escrow Agent to such successor, the Escrow Agent shall act in
accordance with such instructions and promptly transfer such Escrow Shares to
such designated successor. If no successor escrow agent is named by the Buyer,
the Escrow Agent may apply to a court of competent jurisdiction for appointment
of a successor escrow agent.
14. Tax-Related Terms
(a) Tax Reporting. The Interested Parties agree that, for tax reporting
purposes, all interest or other income earned from the investment of the Escrow
Funds in any tax year shall (i) to the extent such interest or other income is
distributed by the Escrow Agent to any person or entity pursuant to the terms of
this Agreement during such tax year, be allocated to such person or entity, and
(ii) otherwise shall be allocated to the parties on the attached schedule in the
percentage listed next to such parties' name.
(b) Certification of Tax Identification Number. The Interested Parties
hereto agree to provide the Escrow Agent with a certified tax identification
number by signing and returning a Form W-9 (or Form W-8, in case of non-U.S.
persons) to the Escrow Agent prior to the date on which any income earned on the
investment of the Escrow Funds is credited to the Escrow Funds. The Interested
Parties understand that, in the event their tax identification numbers are not
certified to the Escrow Agent, the Internal Revenue Code, as amended from time
to time, may require withholding of a portion of any interest or other income
earned on the investment of the Escrow Funds.
(c) Tax Indemnification. Each of the Interested Parties agree, jointly
and severally, (i) to assume any and all obligations imposed now or hereafter by
any applicable tax law with respect to any payment or distribution of the Escrow
Funds or performance of other activities under this Agreement, (ii) to instruct
the Escrow Agent in writing with respect to the Escrow Agent's responsibility
for withholding and other taxes, assessments or other governmental charges, and
to instruct the Escrow Agent with respect to any certifications and governmental
reporting that may be required under any laws or regulations that may be
applicable in connection with its acting as Escrow Agent under this Agreement,
and (iii) to indemnify and hold the Escrow Agent harmless from any liability or
obligation on account of taxes, assessments, additions for late payment,
interest, penalties, expenses and other governmental charges that may be
assessed or asserted against the Escrow Agent in connection with or relating to
any payment made or other activities performed under the terms of this
Agreement, including without limitation any liability for the withholding or
deduction of (or
-13-
14
the failure to withhold or deduct) the same, and any liability for failure to
obtain proper certifications or to report properly to governmental authorities
in connection with this Agreement, including costs and expenses (including
reasonable legal fees and expenses), interest and penalties, except those caused
by the Escrow Agent's gross negligence, bad faith or willful misconduct. The
foregoing indemnification and agreement to hold harmless shall survive the
termination of this Agreement.
15. General.
a. Governing Law, Assigns. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts without regard to conflict-of-law principles and shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns.
b. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
c. Entire Agreement. Except for those provisions of the Merger
Agreement referenced herein, this Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements or understandings, written or
oral, between the parties with respect to the subject matter hereof.
d. Waivers. No waiver by any party hereto of any condition or of
any breach of any provision of this Escrow Agreement shall be effective unless
in writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
e. Amendment. This Agreement may be amended only with the written
consent of the Buyer, the Escrow Agent and the Indemnification Representatives.
f. Dispute Resolution. It is understood and agreed that should any
dispute arise with respect to the delivery, ownership, right of possession,
and/or disposition of the Escrow Account, or should any claim be made upon the
Escrow Agent or the Escrow Account by a third party, the Escrow Agent upon
receipt of notice of such dispute or claim is authorized and shall be entitled
(at its sole option and election) to retain in its possession without liability
to anyone, all or any of said Account until such dispute shall have been settled
either by the mutual written agreement of the parties involved or by a final
order, decree or judgment of a court in the United States of America, the time
for perfection of an appeal of such order, decree or judgment having expired.
The Escrow Agent may, but shall be
-14-
15
under no duty whatsoever to, institute or defend any legal proceedings which
relate to the Escrow Fund.
g. Consent to Jurisdiction and Service.. Each of the Interested
Parties hereby absolutely and irrevocably consent and submit to the jurisdiction
of the courts in the Commonwealth of Massachusetts and of any Federal court
located in said Commonwealth in connection with any actions or proceedings
brought against any of the Interested Parties (or each of them) by the Escrow
Agent arising out of or relating to this Escrow Agreement. In any such action or
proceeding, the Interested Parties each hereby absolutely and irrevocably (i)
waives any objection to jurisdiction or venue, (ii) waives personal service of
any summons, complaint, declaration or other process, and (iii) agrees that the
service thereof may be made by certified or registered first-class mail directed
to such party, as tb case may be, at their respective addresses in accordance
with Section 12 hereof.
h. Force Majeure. The Escrow Agent shall not be responsible for
delays or failures in performance resulting from acts beyond its control. Such
acts shall include but not be limited to acts of God, strikes, lockouts, riots,
acts of war, epidemics, governmental regulations superimposed after the fact,
fire, communication line failures computer viruses power failures, earthquakes
or other natural disasters.
i. Reproduction of Documents. This Agreement and all documents
relating thereto. including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, and (b) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk; micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
BUYER:
ECLIPSYS CORPORATION
By: /s/ Robert J. Colletti
------------------------------------
Name: Robert J. Colletti
Title: Vice President
-15-
16
INDEMNIFICATION REPRESENTATIVES
Matthew Ehrlich
/s/ Matthew Ehrlich
----------------------------------------
As Indemnification Representative
Stephen K. Reidy
/s/ Stephen K. Reidy
----------------------------------------
As Indemnification Representative
STATE STREET BANK AND
TRUST COMPANY
By: /s/ E. Decker Adams
-----------------------------------
Name: E. Decker Adams
Title: Vice President
-16-
17
ATTACHMENT A
Indemnifying Stockholder
Indemnifying Stockholder Address Percentage
- ------------------------ ------------------------ ----------
Matthew Ehrlich 23.6841%
Paul Ehrlich 23.6841
Cathryn Ehrlich Duncan 8.5563
Glenn Goldfarb 3.2909
Harold Cohan 1.6454
Erik Krag 0.1703
Robert Strangio 0.3406
Danielle Larocca 0.0213
Euclid Partners IV, L.P. 37.9082
Michael Breedlove 0.1896
Peter Tong 0.5092
--------
Total 100.0000%