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Exhibit 10.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement"), dated as of [____________], 2000,
is made by and among Harbor Global Company Ltd., a Bermuda limited duration
company ("Harbor Global"), Calypso Management LLC, a Delaware limited liability
company ("Calypso"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("Kasnet") and State Street Bank and
Trust Company, as escrow agent ("Escrow Agent").
This is the Escrow Agreement referred to in the Administration and
Liquidation Agreement of even date herewith by and between Harbor Global and
Calypso (the "Administration Agreement"), and the Employment Agreement of even
date herewith by and between Calypso and Kasnet, (the "Employment Agreement").
Capitalized terms used without specific definition herein shall have the
meanings ascribed to them in the Administration Agreement, a copy of which is
attached hereto.
The parties, intending to be legally bound, hereby agree as follows:
1. Establishment of Escrow
(a) As soon as practicable following the Time of Distribution, Harbor
Global shall deposit with Escrow Agent an amount equal to US$1,800,000 in
immediately available funds (as increased by any earnings thereon and as reduced
by any disbursements hereunder or losses on investments, the "Escrow Fund"),
together with a written notice to Escrow Agent (i) identifying such amount as
the deposit being made under this Agreement and (ii) identifying the date of the
Time of Distribution. Escrow Agent promptly shall acknowledge receipt thereof.
(b) Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
2. Investment of Escrow Fund
The Escrow Fund shall be invested in accordance with the written
direction of Harbor Global and Kasnet and Escrow Agent shall not be responsible
or liable for any loss accruing from any investment made in accordance
therewith. Escrow Agent is authorized to liquidate in accordance with its
customary procedures any portion of the Escrow Fund consisting of investments to
provide for payments required to be made
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under this Agreement. Absent its timely receipt of such specific written
investment instruction from Harbor Global and Kasnet, Escrow Agent shall invest
the Escrow Fund in United States Treasury Bills with a maturity of no more than
[ ] days. All earnings received from the investment of the Escrow Fund 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 Fund). Escrow Agent shall have no
liability for any investment losses where such investments were made in
accordance with this Agreement, including any losses on any investment required
to be liquidated prior to maturity in order to make a payment required
hereunder.
3. Termination of Kasnet Employment
(a) If by or before the second anniversary of the Time of Distribution
(as certified to Escrow Agent pursuant to Section 1(a) above), Harbor Global
gives a written notice (a "Notice") to Escrow Agent, Kasnet and Calypso stating
that there has been an Employment Termination Event (as defined below), Escrow
Agent shall pay and distribute to Harbor Global the entire balance of the Escrow
Fund at the end of the 30-day period following its receipt of such a Notice,
unless prior to such time Kasnet or Calypso gives a notice to Harbor Global and
Escrow Agent disputing such Employment Termination Event (a "Counter Notice").
If a Counter Notice is received by Escrow Agent within thirty days of its
receipt of a Notice of an Employment Termination Event, Escrow Agent shall
distribute the Escrow Fund only (i) in accordance with joint written
instructions of Harbor Global and Kasnet, (ii) to Kasnet's estate as provided in
Section 3(c) below, upon receipt by Escrow Agent of a certificate described in
Section 3(c), together with an official certificate of the death of Kasnet,
(iii) following and in accordance with a final determination by an arbitrator
(made as provided in Section 6 hereof) determining whether or not there has been
an Employment Termination Event, or (iv) in accordance with Section 4 below
(whichever is soonest to occur). Any such final determination by an arbitrator
shall be evidenced by written notice to Escrow Agent from either Kasnet or
Harbor Global certifying that there has been such a final determination
(accompanied by a copy of a final order, decree or judgment of a court in the
United States of America, if requested by Escrow Agent as provided in Section
6), together with a written legal opinion of counsel for the presenting party to
the effect that the order is final. Escrow Agent shall be authorized to act on
such final determination and legal opinion without further question. Except as
provided in Section 5 hereof, upon payment and distribution of the Escrow Fund
in accordance with this Section 3, this Agreement shall be terminated. Upon its
receipt of any Notice or Counter Notice, Escrow Agent shall be entitled to
presume that a copy likewise has been received by Kasnet and Calypso, but shall
notify Kasnet and Calypso no less than seven days prior to any distribution
pursuant to a Notice of the date of such intended distribution.
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(b) For purposes hereof, "Employment Termination Event" shall mean the
termination of the Administration Agreement by Harbor Global before the two-year
anniversary of the Time of Distribution as a result of (A) ▇▇. ▇▇▇▇▇▇'▇ death,
(B) ▇▇. ▇▇▇▇▇▇'▇ disability (as set forth in Section 4 of the Employment
Agreement), (C) a voluntary termination of employment with Calypso or Harbor
Global by ▇▇. ▇▇▇▇▇▇, (D) an act by ▇▇. ▇▇▇▇▇▇ in connection with the
performance of his services with Calypso or Harbor Global constituting bad
faith, fraud or willful misconduct or (E) a willful failure by ▇▇. ▇▇▇▇▇▇ to
carry out a vote of the Board of Directors of Harbor Global resulting in
material economic harm to Harbor Global.
(c) If on the death of Kasnet, Kasnet's estate does not receive
$1,800,000 in life insurance because Harbor Global has not reimbursed Calypso
for the life insurance premium referenced in Section 3(b) of the Employment
Agreement, the executor of the estate of Kasnet shall be entitled to present a
written notice to Escrow Agent (i) certifying that the death of Kasnet has
occurred and that the person giving such notice is the executor of the estate of
Kasnet, (ii) certifying that Kasnet's estate has not received such amount of
life insurance for the reason described in this Section 3(c), (iii) confirming
that enclosed therewith is (or that such executor has otherwise caused to be
provided to Escrow Agent) an official certificate of the death of Kasnet, and
(iv) instructing Escrow Agent to make payment from the Escrow Fund of the amount
of $1,800,000 to the estate of Kasnet (in accordance with payment instructions
set forth therein). Upon Escrow Agent's receipt of such certificate, together
with an official certificate of the death of Kasnet (and provided the Escrow
Fund has not sooner been distributed pursuant to the terms of this Agreement),
Escrow Agent shall distribute $1,800,000 of the Escrow Fund (or the amount of
the Escrow Fund then remaining, if less) to the estate of Kasnet in accordance
with such certificate.
4. Payments from and Termination of Escrow
(a) If, on or before the second anniversary of the Time of Distribution
(as certified to Escrow Agent pursuant to Section 1(a)), Escrow Agent has not
received a Notice of an Employment Termination Event, Escrow Agent shall pay and
distribute from the Escrow Fund (A) the lesser of (i) $1,800,000 or (ii) the
entire Escrow Fund to Kasnet and (B) 100% of any remaining balance of the Escrow
Fund to Harbor Global, in accordance with the payment instructions provided by
each party entitled to a distribution hereunder.
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(b) If, as of the second anniversary of the Time of Distribution (as
certified to the Escrow pursuant to section 1(a)), a Notice of an Employment
Termination Event has been received by Escrow Agent, the Escrow Fund shall be
distributed only in accordance with Section 3 above; provided, however, that if
a Counter Notice has been received by Escrow Agent (within the 30-day period
described in Section 3) with respect to such Notice, and Escrow Agent
subsequently receives written notice (from or on behalf of Harbor Global, Kasnet
or Calypso) that an arbitrator has made a final determination that there has not
been an Employment Termination Event (accompanied by an opinion of counsel to
the effect that such determination is final; and, if requested by Escrow Agent,
accompanied by a copy of a final order, decree or judgment of a court in the
United States of America), then Escrow Agent shall administer and distribute the
Escrow Fund in accordance with Section 4(a) above as though such Notice of
Employment Termination Event has not been received.
5. Agreements Relating to Escrow Agent
(a) Harbor Global, Calypso and Kasnet acknowledge and agree that Escrow
Agent (i) shall not be responsible for any of the agreements referred to herein
(including, without limitation, the Administration Agreement or the Employment
Agreement) but shall be obligated only for the performance of such duties as are
specifically set forth in this Agreement, each of which is 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 Escrow Agent; (ii) shall not be obligated to take any legal or other
action hereunder which might in its judgment involve expense or liability unless
it shall have been furnished with indemnity acceptable to it; (iii) may rely on
and shall be protected in acting or refraining from acting upon any written
notice, instruction (including, without limitation, wire transfer instructions,
whether incorporated herein or provided in a separate written instruction),
instrument, statement, request or document furnished to it hereunder and
believed by it to be genuine and to have been signed or presented by the proper
person, and shall have no responsibility for determining the accuracy thereof;
and (iv) may consult counsel satisfactory to it, including in-house counsel, and
the advice or opinion of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(b) Neither Escrow Agent nor any of its directors, officers or
employees shall be liable to anyone for any action taken or omitted to be taken
by it or any of its directors, officers or employees hereunder except in the
case of gross negligence, bad faith or willful misconduct. Harbor Global, on one
hand, and Calypso and Kasnet on the other, jointly and severally, covenant and
agree to indemnify Escrow Agent and hold it harmless
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without limitation from and against any loss, liability or expense of any nature
incurred by Escrow Agent arising out of or in connection with this Agreement or
with the administration of its duties hereunder, including, but not limited to,
legal fees and expenses and other costs and expenses of defending or preparing
to defend against any claim of liability in the premises, unless such loss,
liability or expense shall be caused by Escrow Agent's gross negligence, bad
faith or willful misconduct. In no event shall Escrow Agent be liable for
indirect, punitive, special or consequential damages.
(c) Harbor Global, on one hand, and Calypso and Kasnet, on the other,
jointly and severally, agree to assume any and all obligations imposed now or
hereafter by any applicable tax law with respect to the payment of Escrow Funds
under this Agreement, and to indemnify and hold Escrow Agent harmless from and
against any taxes, additions for late payment, interest, penalties and other
expenses, that may be assessed against Escrow Agent on any such payment or other
activities under this Agreement. Harbor Global, Calypso and Kasnet undertake to
instruct Escrow Agent in writing with respect to Escrow Agent's responsibility
for withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting in connection with its acting as
Escrow Agent under this Agreement. Harbor Global, on one hand, and Calypso and
Kasnet, on the other, jointly and severally, agree to indemnify and hold Escrow
Agent harmless from any liability on account of taxes, assessments or other
governmental charges, including without limitation the withholding or deduction
or the failure to withhold or deduct same, and any liability for failure to
obtain proper certifications or to properly report to governmental authorities,
to which Escrow Agent may be or become subject in connection with or which
arises out of this Escrow Agreement, including costs and expenses (including
reasonable legal fees and expenses), interest and penalties. Notwithstanding
anything to the contrary contained in Section 5(b) or (c) hereof, the
non-prevailing party in any dispute hereunder shall be primarily responsible for
the indemnification of Escrow Agent described in such sections.
(d) Harbor Global agrees to pay or reimburse Escrow Agent for any legal
fees and expenses incurred in connection with the preparation of this Agreement
and to pay Escrow Agent's reasonable compensation for its normal services
hereunder, both in accordance with the attached fee schedule, which may be
subject to change on an annual basis. If Escrow Agent incurs expenses in
connection with the administration of the escrow created hereby which are in
excess of its compensation for normal services hereunder, including without
limitation, payment of any legal fees and expenses incurred by Escrow Agent in
connection with the resolution of any claim by any party hereunder, Escrow Agent
shall be reimbursed for such expenses, as appropriate, by either (i) the
non-prevailing party in connection with the resolution of any claim by any party
hereunder or
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(ii) the party requesting Escrow Agent to perform services in excess of its
normal services hereunder.
(e) Escrow Agent may at any time resign as Escrow Agent hereunder by
giving thirty (30) days prior written notice of resignation to the other parties
hereto. Prior to the effective date of the resignation as specified in such
notice, Harbor Global and Kasnet will issue a joint written instruction to
Escrow Agent authorizing redelivery of the Escrow Funds to a successor escrow
agent that it selects. Such successor escrow agent shall be a bank or trust
company, organized and existing under the laws of the United States or any state
thereof, subject to examination by state or federal authorities, and have
capital and surplus in excess of $50,000,000. If no successor escrow agent is
named by Harbor Global and Kasnet within such time periods, Escrow Agent may
appoint a successor escrow agent. The provisions of this Section 5 with respect
to the protection of Escrow Agent shall survive the resignation or removal of
Escrow Agent or the termination of this Escrow Agreement.
6. 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 Fund, or should any claim be made upon such Escrow Fund by a third party,
Escrow Agent upon receipt of a written notice of such dispute or claim by the
parties hereto or a third party, is authorized and entitled to retain in its
possession without liability to anyone, all or any of said Escrow Fund until
such dispute shall have been settled either by the mutual agreement of the
parties involved or by a final determination of an arbitrator in the manner
provided in Section 10 of the Employment Agreement, as evidenced (if Escrow
Agent so requests) 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. Escrow Agent may, but shall be under no duty whatsoever
to, institute or defend any legal proceeding which relates to the Escrow Fund.
7. Force Majeure
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 disasters.
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8. Notices
Any notice permitted or required hereunder shall be deemed to have been
duly given if delivered personally, if delivered by courier, if mailed certified
or registered mail, postage prepaid, or if transmitted by confirmed telecopy
accompanied by mailing of the original on the same day by first class mail,
postage prepaid, to the parties at their addresses set forth below (or such
other address as any such party may have notified the others by advance written
notice), provided, however, that in no instance shall any notice to Escrow Agent
be deemed to have been received by it unless and until received by it:
(a) If to the Company:
Harbor Global Company Ltd.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Calypso:
Calypso Management LLC
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
Hill & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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(c) If to Kasnet:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Hill & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(d) If to Escrow Agent:
if by mail, to:
State Street Bank and Trust Company
Global Investors Services Group
Corporate Trust Department
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Harbor Global/Calypso Escrow
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if by hand delivery or by courier to:
State Street Bank and Trust Company
Global Investors Services Group
Corporate Trust Department
▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Harbor Global/Calypso Escrow
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9. Binding Effect
This Agreement shall be binding upon the respective parties hereto and
their heirs, executors, successors and permitted assigns.
10. Governing Law
This Agreement shall be governed by and construed under the laws of The
Commonwealth of Massachusetts.
11. 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 hereto 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 shall likewise be admissible in evidence.
12. Counterparts: Delivery
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original and all of which, when taken together,
will be deemed to constitute one and the same. This Agreement may be delivered
by fax.
13. Section Headings
The headings of sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation.
14. Waiver
Neither the failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents referred to in this
Agreement will operate, as a waiver of such right, power, or privilege, and no
single or partial exercise of any such right, power, or privilege will preclude
any other or further exercise of such right, power, or privilege or the exercise
of any other right, power, or privilege. To the
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maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the party to be bound; (b) no waiver that may be given by a
party will be applicable except in the specific instance for which it is given;
and (c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
15. Exclusive Agreement and Modification
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by Harbor Global,
Calypso, Kasnet and Escrow Agent.
16. Tax Reporting; Certification of Taxpayer Identification Numbers
(a) The parties agree that, for tax reporting purposes, all interest
(or other income earned from the investment of the Escrow Fund in any tax year)
shall (i) to the extent such interest or other income is distributed by Escrow
Agent to any person or entity pursuant to the terms of this Agreement during
such tax year, be reported as allocated to such person or entity, and (ii)
otherwise shall be reported as allocated to Harbor Global.
(b) Each of Harbor Global and Kasnet agree to provide 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 Escrow Agent prior to the date on
which any income earned on the investment of the Escrow Fund is credited to the
Escrow Fund. The parties understand that, in the event their tax identification
numbers are not certified to 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 Fund.
[Signature page immediately follows.]
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as an instrument under seal as of the date first written above.
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CALYPSO MANAGEMENT LLC
-----------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
HARBOR GLOBAL COMPANY LTD.
-----------------------------------
By:
Title:
STATE STREET BANK AND TRUST
COMPANY, as Escrow Agent
-----------------------------------
By:
Title:
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FEE SCHEDULE
ACCEPTANCE FEE
Waived.
ANNUAL ESCROW FEE
An annual fee for ordinary services shall be payable in the amount of
$3,500.00 per year or any part of a year (the "Annual Fee"). The Annual Fee
shall be due and payable in advance, upon signing of the Escrow Agreement;
thereafter upon each anniversary date. The Annual Fee shall be subject to
adjustment by the Escrow Agent annually, upon notice.
INVESTMENT TRANSACTION FEE; WIRE TRANSFER FEES
An investment charge to cover the purchase and sale of investments held
in escrow account under administration shall be charged as follows: (i) 40 basis
points (.4%) per annum of the average daily net assets, with respect to
investment in SSgA or other selected money market funds, and (ii) with respect
to other investments, $65.00 per buy/sell. A wire transfer fee of $20.00 per
wire shall be charged for each outgoing wire transfer.
EXTRAORDINARY ADMINISTRATIVE EXPENSES
In addition to the Annual Fee, fees for extraordinary services will be
determined and charged by appraisal. Such services may include, but are not
limited to, additional responsibilities and services incurred in case of
default, or dispute or third party claim upon the Escrowed Funds or Escrowed
Property.
OUT OF POCKET EXPENSES
Out-of-pocket expenses, such as but not limited to counsel fees and
expenses, telephone, postage, insurance, shipping charges, outside investment
charges and supplies, will be charged at cost.
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