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EXHIBIT 2.3
ESCROW AGREEMENT
This Escrow Agreement (this "ESCROW AGREEMENT") is made and entered into as
of October 13, 2000 (the "EFFECTIVE TIME") by and among DELANO TECHNOLOGY
CORPORATION, an Ontario corporation ("DELANO"); DIGITAL ARCHAEOLOGY CORPORATION,
a Kansas corporation ("DA"); the undersigned security holders of DA
(collectively the "HOLDERS"); William Reisler, as the representative of the
Holders (the "INDEMNIFICATION REPRESENTATIVE"); and Montreal Trust Company of
Canada, as custodian of the Escrow Shares and Cash Escrow (as defined below)
(the "CUSTODIAN").
A. Delano/DA Acquisition Corp., a Kansas corporation and wholly owned
subsidiary of Delano ("MERGER SUB") DA, and certain stockholders of DA (the
"HOLDERS") have entered into an Agreement and Plan of Merger dated as of October
13, 2000 (the "MERGER AGREEMENT") setting forth certain terms and conditions
pursuant to which Merger Sub is being merged into DA (the "MERGER").
B. Pursuant to Section 2.2 of the Merger Agreement, Delano Merger Shares
and Delano Merger Cash (as defined therein) are to be issued to the Holders.
C. The Merger Agreement provides that fifteen percent (15%) (the "ESCROW
PERCENTAGE") of the Merger Consideration issued for Outstanding DA Shares
pursuant to the Merger will be placed in an escrow account to secure certain
indemnification obligations of the Holders to Delano under Article X 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.
The foregoing recitals are made by the parties other than the Custodian.
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. Delano shall deposit immediately on the
Holders' behalf with the Custodian stock certificates with stock powers of
attorney duly endorsed in blank for transfer representing the Escrow Shares
issued pursuant to the Merger registered in respective names of the Holders and
in the respective amounts set forth on EXHIBIT 1.1 hereto (the "INITIAL ESCROW
SHARES"). Any shares of Delano 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 ("ADDITIONAL SHARES") shall be
delivered to the Custodian and shall be held by the Custodian in accordance with
this Escrow Agreement. Unless otherwise indicated, as used in this Escrow
Agreement, the term "ESCROW SHARES" includes the Initial Escrow Shares and any
Additional Shares. The Custodian 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.
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1.2 CASH ESCROW. Delano shall deposit immediately on the Holders'
behalf with the Custodian cash in United States currency paid pursuant to the
Merger in the relative amounts as set forth on EXHIBIT 1.1 hereto. The cash
deposited in connection with this Escrow Agreement is referred to as the "CASH
ESCROW." The Escrowed Shares and the Cash Escrow are sometimes collectively
referred to as the "TOTAL ESCROW."
1.3 ESCROW ACCOUNT. The Custodian shall maintain the Cash Escrow in a
separate, interest bearing account. Such interest shall remain a part of the
Cash Escrow under this Escrow Agreement.
1.4 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 Delano 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 Delano and the
Custodian, but only as directed in writing by Delano, shall take all steps
necessary to allow the exercise of such rights. While the Escrow Shares remain
in the Custodian'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.
1.5 NO ENCUMBRANCE. None of the Total Escrow or any beneficial
interest therein may be pledged, sold, 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 thereof by the Custodian or Delano to such Holder pursuant
to this Escrow Agreement.
1.4 POWER TO TRANSFER TOTAL ESCROW. The Custodian is hereby granted
the power to effect any transfer of the Total Escrow provided for in this Escrow
Agreement.
2. RESOLUTION OF CLAIMS
2.1 INDEMNIFICATION OBLIGATIONS. The Total Escrow shall serve as the
sole source of payment for the indemnity obligations of the Holders under
Article X of the Merger Agreement, except as specifically provided otherwise
therein. For the purposes of this Escrow Agreement, those obligations shall
continue in accordance with Article X of the Merger Agreement, notwithstanding
the merger of Merger Sub into DA pursuant to the Merger Agreement. Payment for
any amount determined as provided below to be owing to Delano under such
indemnity obligations under the Merger Agreement ("DAMAGES") and any award of
attorneys' fees and charges owing to Delano pursuant to Section 2.3(c)(iv) or
11.2 of this Agreement (a "PREVAILING PARTY AWARD") shall be made by the release
of Escrow Shares and Cash Escrow to Delano (each such release, an "ESCROW
ADJUSTMENT"), subject to the limitations set forth in Section 10.4 of the Merger
Agreement. Any Prevailing Party Award to the Holders shall be paid to the
Holders. Pursuant to the Merger, each of the Holders is deemed to have agreed to
be bound by the indemnification provisions set forth in Article X of the Merger
Agreement and to have confirmed that the issuance of the Merger Consideration is
subject to this Escrow Agreement. Any Escrow Adjustments and corresponding
release to Delano of Escrow Shares and Cash Escrow shall be made in proportion
to each of the Holders' interest in the Escrow Shares and Cash Escrow as of the
date or dates specified and the manner provided for in this Escrow Agreement.
Each Escrow Adjustment to the Total Escrow shall be made by the release to
Delano of
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Escrow Shares and Cash Escrow having an aggregate value equal to the Damages and
any Prevailing Party Award, with the per share value of such shares being based,
for all purposes under this Escrow Agreement on the average closing price of the
Delano Common Stock (adjusted for any share dividend, reclassification, stock
split, subdivision or combination of shares, recapitalization, merger or other
events) for the 10 trading days ending two business days before the payment. In
lieu of releasing any fractional Escrow Shares, any fraction of a released
Escrow Share that would otherwise be released shall be rounded up or down to the
nearest whole Escrow Share.
2.2 NOTICE OF CLAIMS. Promptly after the receipt by Delano of notice or
discovery of any claim, damage, or legal action or proceeding giving rise to
indemnification rights under the Merger Agreement (a "CLAIM"), Delano shall give
the Indemnification Representative written notice of such Claim and shall
provide a copy of such notice to the Custodian. Each notice of a Claim by Delano
(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). No Claim shall be submitted
by Delano until the Threshold Amount (as defined in the Merger Agreement) has
been met.
2.3 RESOLUTION OF CLAIMS. Any Notice of Claim received by the
Indemnification Representative and the Custodian pursuant to Section 2.2 above
shall be resolved as follows:
(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),
Delano may deliver to the Custodian, with a copy to the Indemnification
Representative, a written demand by Delano (a "DELANO 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). Within thirty (30) calendar days after receipt of the Delano Demand, the
Indemnification Representative may object in a written notice delivered to
Delano and the Custodian 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 Custodian nor Delano shall make any of the Escrow Adjustments until
either: (i) Delano and the Indemnification Representative shall have given the
Custodian 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 Custodian, as directed in writing by Delano, and Delano
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 Delano and the Custodian 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 Delano or
DA in a litigation or arbitration proceeding shall await the final decision,
award or settlement of such litigation or arbitration, while matters that arise
between Delano on the one hand and DA 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 Delano and the Indemnification
Representative shall be resolved as set forth above in Section 2.3(a). If
written notice is received by the Custodian that a Notice of Claim is contested
by the Indemnification Representative, then the Custodian shall hold hereunder
after what would otherwise be the Release Date (as defined in Section 3.1
below), the number of Escrow Shares and amount of Cash Escrow specified in the
Release Notice or as otherwise provided in Section 3.1,
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until the earlier of: (i) receipt of a settlement agreement executed by Delano
and the Indemnification Representative setting forth a resolution of the Notice
of Claim and the Escrow Adjustments; (ii) receipt of a written notice from
Delano (a "DELANO DISTRIBUTION NOTICE") attaching a copy of the final award or
decision of the arbitrator and setting forth the Escrow Adjustments (Delano
shall at the same time provide a copy of the Delano 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 Delano). If the earliest of the three events described in
the preceding sentence is (i) or (ii), the Custodian shall, within twenty (20)
calendar days of receipt of the settlement agreement or the Delano Distribution
Notice, as applicable, (a) release to Delano the number of Escrow Shares and
amount of Cash Escrow specified in the Escrow Adjustments and (b) if the Release
Date has occurred, and there are no remaining unresolved Contested Claims,
release to the Holders the balance of the Escrow Shares and the Cash Escrow. If
the earliest of the three events described above is (iii) and the Release Date
has occurred, the Custodian shall, within twenty (20) calendar days of receipt
of the Representative Distribution Notice, release to the Holders the Retained
Escrow (as defined in, and subject to the provisions of, Section 3.1), in
accordance with the Holders' interests therein, provided that if the Release
Date has not occurred the Escrow Shares and Cash Escrow shall continue to be
held pursuant to the terms of this Agreement. If the award or decision of the
arbitrator concludes that Escrow Shares and Cash Escrow are to be released to
Delano either in satisfaction of Damages or as Prevailing Party Awards, the
arbitrator shall specify the number of Escrow Shares and amount of Cash Escrow
to be so released to Delano either in the arbitrator's final award or decision
or a supplementary report or finding.
(c) ARBITRATION.
(i) ARBITRATION RULES. Any Arbitrable Claim, and any dispute
between the Holders and Delano 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 Custodian, the Indemnification Representative,
the Holders and Delano and will constitute a conclusive determination of the
issue in question, binding upon the Holders, the Indemnification Representative
and Delano. 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, as
determined by the arbitrator, in any arbitration pursuant to this Agreement
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 Delano by or on account of the
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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.
(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 TOTAL ESCROW SHARES. The Total Escrow shall be
released by the Custodian and Delano 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 and Cash Escrow delivered to or deliverable to Delano in satisfaction of
Uncontested Claims or Contested Claims which have been settled by the parties
hereto, and (b) any of the Escrow Shares and Cash Escrow subject to possible
delivery to Delano in accordance with Section 2.3(b) with respect to any then
pending Contested Claims. Within ten (10) of the Custodian's business days
("BUSINESS DAYS") after the Release Date, Delano and the Indemnification
Representative shall deliver to the Custodian a written notice (a "RELEASE
NOTICE") setting forth the number of Escrow Shares and amount of Cash Escrow to
be released by the Custodian and Delano (the "RELEASED ESCROW") including the
number of Escrow Shares to be released to each Holder and the number of Escrow
Shares and amount of Cash Escrow to be retained as provided in this Section 3.1
(the "RETAINED ESCROW"). Delano and the Indemnification Representative shall
make a good faith effort to agree on a reasonable portion of the Escrow Shares
and Cash Escrow to retain for pending Contested Claims 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 Total Escrow 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 and
Initial Cash Escrow. 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, Delano shall instruct the Custodian 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
and checks for the amount of cash payable to such Holders. The Custodian shall
not be required to take such action until the Custodian has received the Release
Notice executed by Delano and the Indemnification Representative or, in the
event Delano 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 Custodian to Delano and/or to the Holders in accordance with
Section 2.3(b), this Section and as otherwise provided for in this Escrow
Agreement. The Custodian and Delano shall cause the transfer agent to transfer
to Delano the number of Escrow Shares and amount of Cash Escrow to be released
to Delano pursuant to written direction and 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 Custodian pending the
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resolution of Contested Claims and/or Prevailing Party Awards. Any Escrow Shares
released from escrow to Delano shall be subject to cancellation by Delano
without requiring Delano to pay any consideration whatsoever in receipt thereof
to DA 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 as an Uncontested Claim to be paid out of
the Cash Escrow on a pro rata basis among the contributors to the Total Escrow,
for all services performed pursuant to the Merger Agreement and this Escrow
Agreement. The Custodian shall follow the joint written instructions of the
Indemnification Representative and Delano concerning the release of Cash Escrow
relating to the reimbursement of the Indemnification Representative. If upon
termination of this 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.
3.4 INCUMBENCY CERTIFICATE PROVISION. Each of Delano and the
Indemnification Representative shall file with the Custodian a certificate of
incumbency setting forth the names of the individuals authorized to give
instructions, directions or other instruments to the Custodian (each an
"Authorized Person"), together with specimen signatures of such persons, and the
Custodian shall be entitled to rely on the latest certificate of incumbency
filed with it unless it receives notice, in accordance with section 11.4 of this
Escrow Agreement, of a change in Authorized Persons with updated specimen
signatures.
3.5 DUTIES ONLY AS SET FORTH. In the event that the Custodian shall
be uncertain as to its duties or rights hereunder or shall receive instructions
with respect to the Escrow Agreement which, in its sole determination, are in
conflict either with other instructions received by it or with any provision of
this Escrow Agreement, it (a) shall be entitled to hold the Total Escrow, or a
portion thereof, pending the resolution of such uncertainty to the Custodian's
sole satisfaction, by final judgment of a court of competent jurisdiction, or
(b) at its sole option, may deposit the Total Escrow, or a portion thereof, with
the clerk of a court of competent jurisdiction. Upon deposit by the Custodian of
the Total Escrow, or such portion thereof, with the clerk of any court, the
Custodian shall be relieved of any further obligations hereunder, and released
from all liability arising after such deposit, with respect to such deposit.
4. CUSTODIAN
4.1 DUTIES. The duties and responsibilities of the Custodian
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 Custodian 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. The duties and obligations of the
Custodian shall be determined by the provisions hereof and by the provisions of
applicable law and accordingly, the Custodian shall only be responsible for the
performance of such duties and obligations as it has undertaken herein or as
required by applicable law. The Custodian shall retain the right not to act and
shall be held not to be liable for refusing to act unless it has received clear
and reasonable documentation which complies with the terms of this trust
agreement. Such
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documentation must not require the exercise of any discretion or independent
judgment on the part of the Custodian.
4.2 LEGAL OPINIONS. As to any questions arising in connection with
the administration of this Escrow Agreement, the Custodian may rely absolutely
upon the joint instruction of Delano and the Indemnification Representative or
the opinions given to the Custodian by its outside counsel and shall be free of
liability for acting or refraining from acting in reliance on such opinions. The
Custodian may employ or retain such counsel, who may but need not be counsel for
Delano, the Holders or Indemnification Representative, and such other experts,
advisors, agents or agencies as it may in its discretion require for the purpose
of discharging its duties hereunder and the Custodian may act and shall be
protected in acting in good faith on the opinion or advice or on information
obtained from any such parties and shall not be responsible for any misconduct
on the part of any of them. The costs of such services shall be added to and be
part of the Custodian's fees hereunder.
4.3 SIGNATURES. The Custodian 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 Custodian 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 Custodian 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 Custodian.
4.5 REFRAIN FROM ACTION. The Custodian shall be entitled to refrain
from taking any action contemplated by this Escrow Agreement in the event it
becomes aware of any dispute between DA, the Holders and Delano as to any
material facts or as to the happening of any event precedent to such action.
4.6 OTHER PROVISIONS. The Custodian 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 Custodian shall be
under no duty to inquire into or investigate the validity, accuracy or content
of any such document. The Custodian 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 Custodian's willful misconduct, gross negligence or bad
faith was the primary cause of a loss to Delano, the Indemnification
Representative, or the Holders. In the administration of this Escrow Agreement,
the Custodian 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
Custodian 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.
4.7 DISBURSEMENT OF FUNDS. The Custodian will disburse moneys
according to this Escrow Agreement only to the extent such monies have been
received by it. No provision of this Escrow Agreement shall require the
Custodian to expend or risk its own funds or otherwise incur financial liability
in the performance of its duties or in the exercise of any of its rights or
powers unless indemnified as aforesaid.
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4.8 PAYMENTS BY CUSTODIAN. The forwarding of a cheque by the
Custodian will satisfy and discharge the liability for any amounts due to the
extent of the sum or sums represented thereby (plus the amount of any tax
deducted or withheld as required by law) unless such cheque is not honoured on
presentation; provided that in the event of non-receipt of such cheque by the
payee, or loss or destruction thereof, the Custodian upon being furnished with
reasonable evidence of such non-receipt, loss or destruction and indemnity
reasonably satisfactory to it, will issue to such payee a replacement cheque for
the amount of such cheque.
5. INDEMNIFICATION
5.1 WAIVER AND INDEMNIFICATION. Delano, DA, the Indemnification
Representative and 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 Custodian arising out of or relating to the execution or performance by the
Custodian of this Escrow Agreement, unless such suit, claim, demand or cause of
action is based upon the willful neglect or gross negligence or bad faith of the
Custodian. Delano, DA and the Holders further agree, jointly and severally, to
indemnify and hold Custodian 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 Custodian is
authorized to rely pursuant to the terms of this Escrow Agreement. In addition,
to and not in limitation of the immediately preceding sentence, Delano, DA and
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 Custodian's performance under this
Escrow Agreement, provided the Custodian has not acted with gross negligence,
willful neglect or bad faith. The provisions of this Section 5.1 shall survive
the termination of this Escrow Agreement and the resignation or removal of the
Custodian for any reason. Anything in this Escrow Agreement to the contrary
notwithstanding, in no event shall the Custodian be liable for special, indirect
or consequential loss or damage of any kind whatsoever (including but not
limited to lost profits), even if the Custodian has been advised of such loss or
damage and regardless of the form of action. Notwithstanding the foregoing, a
Holder's liability under this Section 5.1 shall not exceed such Holder's share
of the Retained Escrow.
5.2 CONDITIONS TO INDEMNIFICATION. In case any litigation is brought
against the Custodian in respect of which indemnification may be sought
hereunder, the Custodian 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 Custodian; provided that failure of the Custodian
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. At its own expense, the Custodian may employ
separate counsel and participate in the defense, provided that if the Custodian
reasonably determines that a conflict of interest or other circumstance wherein
its best interests would not be adequately represented exist that make
representation by counsel chosen by the parties not advisable, the reasonable
fees and disbursements of such other counsel shall be paid by the parties hereto
and not by the Custodian. The parties hereto shall not be liable for any
settlement without their respective consents.
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6. ACKNOWLEDGMENT BY THE CUSTODIAN
By execution and delivery of this Escrow Agreement, the Custodian
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 CUSTODIAN; SUCCESSOR
7.1 RESIGNATION OR TERMINATION. The Custodian may resign from its
duties and obligations hereunder upon giving to the Indemnification
Representative and Delano not less than thirty (30) days prior notice in writing
or such shorter notice as the Indemnification Representative and Delano may
accept as sufficient. If the Custodian resigns, is dissolved, becomes bankrupt,
goes into liquidation or otherwise becomes incapable of acting hereunder, the
Indemnification Representative and Delano shall forthwith appoint a new
custodian, failing such appointment the retiring custodian at Delano's expense
may apply to a Judge of Ontario Court (General Division) on such notice as such
judge may direct for the appointment of a new custodian. Any successor appointed
under this provision shall be a corporation authorized to carry on business of a
trust company in the Province of Ontario. On any new appointment, the new
custodian shall be vested with the same powers, rights, duties, and
responsibilities as if it had been originally named herein as Custodian, without
any further assurance, conveyance, act or deed, but there shall immediately be
executed at the expense of the Indemnification Representative and Delano all
such conveyances or other instruments as may, in the opinion of counsel, be
necessary or advisable for the purpose of assuring the same to the new
custodian. At the request of the Indemnification Representative and Delano or
the new custodian, the retiring Custodian, upon payment of the amounts, if any,
due to it, shall duly assign, transfer and deliver to the new custodian all
funds, agreements and other documents kept by the retiring Custodian hereunder
or in connection herewith. Should the Indemnification Representative and Delano
fail to appoint a new Custodian, notice of which is to be provided to the
Custodian, then the retiring Custodian shall cease its functions at the
expiration of the period of notice and may retain all and any property in its
possession hereunder on a merely safekeeping basis, at a fee to be reasonably
determined by the Custodian.
Any corporation into or with which the Custodian may be merged or consolidated
or amalgamated, or any corporation succeeding to the corporate trust and/or
stock transfer business of the Custodian, shall be a successor to the Custodian
hereunder without any further act on its part or of any of the parties hereto,
provided that such corporation would be eligible for appointment as a new
Custodian under this subsection.
7.2 SUCCESSORS. Every successor appointed hereunder shall execute,
acknowledge and deliver to its predecessor, and also to the Indemnification
Representative and Delano, 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.
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7.3 NEW CUSTODIAN. 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.
7.4 RELEASE. Upon acknowledgment by any successor Custodian of the
receipt of the then remaining balance of the Escrow Shares, the then acting
Custodian 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. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their successors and assigns. In particular,
the parties acknowledge that effective June 30, 2000, Computershare Investor
Services Inc, ("Computershare") acquired the Stock Transfer business of the
Custodian. The parties hereto agree that the Custodian may assign its rights and
duties under the Agreement to Computershare, or its successor, without the need
for any further notice, advice or approval. Further, the parties hereto
acknowledge and agree that Computershare may be continued as a federal trust
company, at which time, if Computershare shall become assignee hereunder, such
trust company shall become the Custodian hereunder without further act or
formality.
7.6 DEPOSIT OF SECURITIES. The Custodian shall not be responsible or
liable in any manner whatsoever for the sufficiency, correctness, genuineness or
validity of any security deposited with it.
7.7 UNCLAIMED INTEREST ON DISTRIBUTION. Upon termination of the
Escrow, Custodian shall hold any amount of interest or other distributable
amount which is unclaimed or which cannot be paid for any reason, the Custodian
shall be under no obligation to invest or reinvest the same but shall only be
obligated to hold the same on behalf of the person or persons entitled thereto
in a current or other non-interest bearing account pending payment to the person
or persons entitled thereto. The Custodian shall be entitled to retain for its
own account any benefit earned by the holding of such amount of unclaimed or
unpaid interest or such other unclaimed or unpaid distributable amount prior to
its disposition in accordance with this section. The Custodian shall, as and
when required by law, and may at any time prior to such required time, pay all
or part of such interest or other distributable amount so held to the Public
Custodian (or other appropriate government official or agency) whose receipt
shall be a good discharge and release of the Custodian.
7.8 DELIVERY OF CERTIFICATES. The Custodian shall incur no liability
with respect to the delivery or non-delivery of any certificate or certificates
whether delivered by hand, mail or any other means.
7.9 APPOINTMENT OF AND RELIANCE ON AGENTS. The Escrow Agent may
employ such experts, advisers, agents or agencies as it may reasonably require
for the purpose of discharging its duties hereunder and shall not be responsible
for the negligent actions or misconduct of such parties or any of them.
8. FEE
The Custodian will be paid by Delano as billed for services and expenses
hereunder in accordance with the fee schedule attached hereto as EXHIBIT 8. In
the event that the Custodian is made a party to litigation with respect to the
property held hereunder, or brings an action in interpleader, or
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in the event that the conditions to this Escrow Agreement are not promptly
fulfilled, or the Custodian 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 Custodian
shall be entitled to reasonable compensation from Delano for such extraordinary
services and reimbursement for all fees, costs, liability, and expenses,
including attorneys fees and expenses. Delano shall pay to the Custodian from
time to time remuneration for its services hereunder and will pay or reimburse
the Custodian, upon its request, for all expenses, disbursements and advances
incurred or made by the Custodian in the administration or execution of this
Escrow Agreement (including the reasonable fees and disbursements of its counsel
and all other advisors and assistants not regularly in its employ), except any
such expense, disbursement or advance as may arise from its own gross
negligence, willful default, misconduct or bad faith. Any amount owing under
this Section 8 and unpaid 30 days after request for such payment, will bear
interest from the expiration of such 30 days at a rate per annum equal to the
then current rate charged by the Custodian, payable on demand. The obligation in
this Section 8 shall survive the resignation or removal of the Custodian.
9. INDEMNIFICATION REPRESENTATIVE
9.1 APPOINTMENT AND AUTHORITY. For purposes of this Escrow Agreement,
the Holders have, by the execution of this Escrow Agreement, irrevocably
consented 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 Delano of the Escrow Shares, or any portion thereof, in
satisfaction of Claims otherwise in connection with an Escrow Adjustment, (ii)
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, (iii) resolve any Claims, and (iv) 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. Delano and the Custodian will disregard any notice or instruction
received from any Holder other than the Indemnification Representative with
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,
bad faith 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
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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 a
the Indemnification Representative, Barry Davis shall serve as the
Indemnification Representative. If Mr. Davis is unwilling or unable to serve,
then 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 Delano and the Custodian 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 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 Custodian's delivery, and Delano's release of all remaining Escrow
Shares to the Holders and/or Delano pursuant to Section 2 or 3.
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 not a
party hereto. 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 the parties hereto.
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),
but only from the Retained Escrow in the case of the Holders.
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 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
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confirmation (including the automatic confirmation that is received from the
recipient's fax machine) of receipt by the recipient of such notice:
IF TO DELANO: Delano Technology Corporation
302 TownCentre Blvd.
Markham, Ontario
L3R 0E8
Attention: David L. Lewis
Telephone No.: (905) 947-2137
Fax No.: (905) 947-2150
WITH COPIES TO:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attention: F. George Davitt
Telephone No.: (617) 248-7000
Fax No.: (617) 248-7100
IF TO DELANO'S
TRANSFER AGENT: Montreal Trust Company of Canada
c/o Computershare Investor Services
100 University Ave., 11th Floor
Toronto, Ontario
M5J 2Y1
Attention: Senior Manager, Client Services
Telephone No.: (416) 263-9200
Fax No.: (416) 981-9800
IF TO THE INDEMNIFICATION William Reisler
REPRESENTATIVE: Kansas City Equity Partners
233 West 47th Street
Kansas City, Missouri 64112
Telephone No.: (816) 960-1771
Fax No: (816) 960-1777
WITH COPIES TO:
Bryan Cave LLP
Attention:
Telephone No.:
Fax No:
IF TO THE CUSTODIAN: Montreal Trust Company of Canada
c/o Computershare Investor Services
100 University Ave., 11th Floor
Toronto, Ontario
M5J 2Y1
14
Attention: Senior Manager, Client Services
Telephone No.: (416) 263-9200
Fax No.: (416) 981-9777
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 Delano, the Indemnification Representative
and the Custodian.
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.
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 Province of Ontario and the federal laws of Canada
applicable therein. DA, the Holders 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.
11.11 ASSIGNMENT AND ENUREMENT. The parties hereto acknowledge and
agree, and any beneficiaries hereunder are hereby deemed to have acknowledged
and agree:
(a) This Escrow Agreement shall enure to the benefit of and be
binding on the parties to this Escrow Agreement and each of their heirs,
executors, administrators, successors and assigns. Any corporation which
purchases all or substantially all of the Custodian's corporate trust business
shall become a party to this Agreement without the necessity of entering into a
supplemental agreement, or of any other formality;
(b) That effective June 30, 2000, Computershare Investor
Services Inc. ("Computershare") purchased the Corporate Trust business of the
Custodian;
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(c) That the Custodian may, without the consent of any other
party, assign all of its rights and duties under this Escrow Agreement, and
under any ancillary agreements executed in connection herewith, to such federal
trust company as may result from Computershare being continued as a trust
company pursuant to the terms of the Trust and Loan Companies Act. Any such
assignment shall be effective without the need for any further notice or advice
to, or approval of, the parties hereto and without any further act or formality
whatsoever.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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[Signatures immediately follow.]
Signature Page to Escrow Agreement
IN WITNESS WHEREOF, the parties have duly executed this Escrow Agreement as
of the day and year first above written.
DELANO TECHNOLOGY CORPORATION DIGITAL ARCHAEOLOGY CORPORATION
By:
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Title: By:
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Title:
INDEMNIFICATION REPRESENTATIVE:
- --------------------------------------
William Reisler
MONTREAL TRUST COMPANY OF CANADA, AS CUSTODIAN
By:
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Authorized Signatory
By:
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Authorized Signatory
HOLDERS:
Name of Holder:
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By:
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Title, if any:
Name of Holder:
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By:
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Title, if any:
Name of Holder:
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By:
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Title, if any: