EXHIBIT 4.5
ESCROW AND INDEMNITY AGREEMENT
THIS ESCROW AND INDEMNITY AGREEMENT (the "Agreement") is made this ____
day of __________, 1998, by and among Clarus Corporation, formerly known as SQL
Financials International, Inc., a Delaware corporation ("SFI"), Elekom
Corporation ("Elekom"), the undersigned former holders of preferred stock of
Elekom as shown on Schedule 1 hereto (collectively the "Preferred Shareholders"
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and individually a "Preferred Shareholder"), and NationsBank, N.A. (the "Escrow
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Agent").
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W I T N E S S E T H :
WHEREAS, SFI has entered into an Agreement and Plan of Reorganization dated
as of August 31, 1998 (the "Merger Agreement") with Elekom Corporation, a
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Washington corporation ("Elekom") pursuant to which SFI has acquired all of the
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stock and going business of Elekom pursuant to a forward triangular merger (the
"Merger"); and
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WHEREAS, pursuant to the Merger Agreement, Elekom has agreed to place $2.5
million of the cash proceeds of the Merger to its shareholders (the
"Shareholders") in an escrow account to secure its obligations under Article IX
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of the Merger Agreement; and
WHEREAS, the Preferred Shareholders owned shares of preferred stock of
Elekom and the Preferred Shareholders acknowledge and agree that the Merger and
the payment of the merger consideration to the Preferred Shareholders by SFI is
a direct and substantial benefit to the Preferred Shareholders; and
WHEREAS, as a material inducement to SFI to enter into the Merger Agreement
and consummate the Merger, Elekom has agreed to cause each of the Preferred
Shareholders to enter into this Agreement providing for indemnification of SFI
for the obligations of Elekom under the Merger Agreement to the extent such
obligations exceed the amount of the Escrow Funds (as defined below); and
NOW, THEREFORE, for and in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged by each party, the parties hereto
agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms have
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the meanings indicated below:
"Contesting Direction" means a written direction from the representative of
the Shareholders appointed pursuant to Section 9 of this Agreement (the
"Shareholder Representative"), which direction contests an SFI Direction in
whole or in part and specifies the amount contested and the amount, if any, not
contested. Each Contesting Direction must
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be delivered to the Escrow Agent in the manner set forth in Section 16 hereof,
and copies of such direction must be delivered in like manner to SFI.
"Escrow Funds" has the meaning ascribed to such term in Section 2 hereof.
"Escrow Termination Date" means April 30, 2000.
"Estimated Indemnified Amount" means a good-faith estimate by SFI of an
Indemnified Amount.
"SFI Direction" means a written direction from SFI specifying that a claim
referred to in Article IX of the Merger Agreement and covered by a particular
Notice of Claim has been made, and further specifying the aggregate Indemnified
Amount. Each SFI Direction must be delivered to the Escrow Agent in the manner
set forth in Section 16 hereof, and copies of such direction must be delivered
in like manner to the Shareholder Representative.
"Indemnification Holdback" has the meaning ascribed to such term in Section
4.2 hereof.
"Indemnified Amount," with respect to any Notice of Claim, means the
aggregate amount of indemnification determined to be due to SFI pursuant to
Article IX of the Merger Agreement.
"Joint Direction" means a written direction relating to (i) a Notice of
Claim, (ii) the investment of the Escrow Funds, or (iii) removal of the Escrow
Agent in accordance with Section 12 hereof, in each case executed by SFI and the
Shareholder Representative, and delivered to the Escrow Agent in the manner set
forth in Section 16 hereof.
"Notice of Claim" means a written notice from SFI delivered to the Escrow
Agent and the Shareholder Representative in the manner set forth in Section 16
hereof on or before the Escrow Termination Date, specifying that facts exist
which may give rise to an indemnifiable claim under Article IX of the Merger
Agreement, also specifying the Estimated Indemnified Amount and describing in
reasonable detail the nature of the matter or matters covered by the Notice of
Claim and the Estimated Indemnified Amount.
2. ESTABLISHMENT OF ESCROW. On the date hereof, concurrently with the
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closing of the Merger, SFI has deposited with Escrow Agent the sum of US Two
Million Five Hundred Thousand Dollars ($2,500,000.00) in immediately available
funds (the "Escrow Funds"), which sum Escrow Agent hereby accepts and agrees to
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hold for Shareholders in escrow subject to the terms of this Escrow Agreement
(the "Escrow"). Escrow Agent hereby confirms to SFI, Shareholders and the
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Preferred Shareholders receipt by Escrow Agent of the Escrow Funds. The Escrow
Funds represent a portion of the merger consideration paid to the Shareholders
in the Merger and has been withheld from the cash consideration received by such
Shareholders pursuant to the terms of Section 1.5
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of the Merger Agreement in order to secure the obligations of Elekom pursuant to
Article IX of the Merger Agreement.
3. INVESTMENT OF THE FUNDS. During the period specified in this
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Agreement, the Escrow Agent shall hold the Escrow Funds (i) in an interest-
bearing account or other investment vehicle specified by Elekom, with a maturity
no greater than thirty (30) days and which is backed by the United States
Government or such financial institutions insured by the Federal Deposit
Insurance Corporation, having a net worth of not less than US One Hundred
Million Dollars ($100,000,000) or (ii) in such other account or investment as
may be specified in a Joint Direction. The payments of interest on such account
and other distributions thereon shall be added to and become a part of the
Escrow Funds. Any and all interest which may be earned and received on the
Escrow Funds shall be for the account of the Shareholders and shall not
constitute part of the Escrow Funds.
4. ADMINISTRATION OF ESCROW FUNDS
4.1 CLAIMS AGAINST ESCROW FUNDS
If, on or before the Escrow Termination Date, the Escrow Agent receives a
Notice of Claim from SFI, then, in each instance in which such a Notice of Claim
is received, the Escrow Agent shall, from and after its receipt of that Notice
of Claim, hold the portion of the Escrow Funds equal to the Estimated
Indemnified Amount or the remainder of the Escrow Funds should it be less than
the Estimated Indemnified Amount (the "Indemnification Holdback") until such
time (whether before or after the Escrow Termination Date) as the conditions of
Section 4.2 hereof have been complied with as to such Notice of Claim.
4.2 DISTRIBUTIONS
4.2.1 DISTRIBUTIONS ON JOINT DIRECTION
If at any time, or from time to time, prior to, or on the Escrow
Termination Date, the Escrow Agent receives a Joint Direction regarding a Notice
of Claim, the Escrow Agent shall comply with such Joint Direction.
4.2.2 DISTRIBUTION ON SFI DIRECTION
(a) If at any time, or from time to time, prior to, or on the Escrow
Termination Date, the Escrow Agent receives an SFI Direction, and if the Escrow
Agent does not within 30 days after the date of its receipt of that SFI
Direction receive a related Contesting Direction, then the Escrow Agent shall,
within 3 business days after such 30th day and after confirmation with SFI of
the amount, pay to SFI the Indemnified Amount, as specified in the SFI
Direction, or the remainder of the Escrow Funds should it be less than the
Indemnified Amount.
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(b) If the Escrow Agent does receive a Contesting Direction within such 30-
day period, then it shall (i) within 10 days of the receipt of such Contesting
Notice, distribute to SFI such portion of the Indemnified Amount which is not
disputed in the Contesting Direction (or the remainder of the Escrow Funds
should it be less than such undisputed portion of the Indemnified Amount) and
(ii) continue to hold any Indemnification Holdback amount necessary to cover any
disputed portion of the Indemnified Amount until such time as the Escrow Agent
receives either a Joint Direction, or a notice from SFI or the Shareholder
Representative directing the Escrow Agent with respect to the disbursement,
release or any other disposition of the amount of the Indemnification Holdback
accompanied by a copy of the final order, judgment or decree from a court of
competent jurisdiction with respect to such claim, and the Escrow Agent has
received an opinion of legal counsel (the reasonable fees and cost for which
shall be an additional Loss hereunder) acceptable to the Escrow Agent that as to
such order, judgment or decree all rights of appeal have expired or been waived.
Within 5 days of the receipt by the Escrow Agent of such Joint Direction or such
notice and legal opinion contemplated by the immediately preceding sentence, the
Escrow Agent shall distribute to SFI or the Shareholder Representative (as
specified in such Joint Direction or such notice) the Indemnified Amount
specified in such Joint Direction or the amount contemplated by such notice, as
the case may be, or the remainder of the Escrow Funds should it be less.
4.2.3 DISTRIBUTIONS ON ESCROW TERMINATION DATE
On the Escrow Termination Date, without further notice or request, the
Escrow Agent shall distribute to the Shareholder Representative on behalf of the
Shareholders of Elekom in the manner set forth in Section 4.3 hereof any amounts
remaining in the Escrow Funds which are not subject to Indemnification Holdback.
Amounts remaining in the Escrow Funds which are subject to Indemnification
Holdback will be distributed when the conditions of Section 4.2.2 hereof are
satisfied.
4.4 DISTRIBUTIONS TO THE SHAREHOLDER REPRESENTATIVE AND SFI
In the event that the Escrow Agent is required to distribute any part of
the Escrow Funds to the Shareholder Representative or SFI, the Escrow Agent will
make payment, by issuance of its check, delivered by first class or overnight
mail address set forth in Section 16 hereof, representing an amount equal to the
total amount then to be distributed from the Escrow Funds.
5. INDEMNIFICATION.
INDEMNIFICATION. Subject to the requirements, limitations, and exclusions
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and further provisions in Article IX of the Merger Agreement and this Agreement,
Elekom shall to the extent of the Escrow Funds, and the Preferred Shareholders
listed on Schedule 9.1 to the Merger Agreement (the Company, together with the
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Preferred Shareholders are the "Indemnitors") shall severally in proportion to
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the percentages set forth on Schedule 9.1 to
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the Merger Agreement, indemnify, defend and hold harmless SFI and its officers,
directors and affiliates (the "SFI Indemnitees") from, against, and with respect
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to any and all action or cause of action, loss, damage, claim, obligation,
liability, penalty, fine, cost and expense (including without limitation
reasonable attorneys' and consultants' fees and costs and expenses incurred in
investigating, preparing, defending against or prosecuting any litigation,
claim, proceeding, demand or request for action by any governmental or
administrative entity), of any kind or character (a "Loss")arising out of or in
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connection with any of the following:
(a) any breach of any of the representations or warranties of Elekom
contained in or made pursuant to the Merger Agreement or any of the
representations and warranties of the respective Preferred Shareholder in
any other Elekom Agreement (defined in the Merger Agreement);
(b) any failure by Elekom or the respective Preferred Shareholder to
perform or observe, or to have performed or observed, in full, any
covenant, agreement or condition to be performed or observed by it pursuant
to the Merger Agreement or any Elekom Agreement;
(c) any breach by Elekom of any representation set forth in Section
2.14 in the Merger Agreement (an "IP Claim");
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(d) any claim by a Shareholder relating to the allocation by Elekom of
the cash and stock consideration to be received by each Shareholder in
connection with the Merger;
(e) any amount that shall have been paid by SFI to Shareholders in
respect of shares of Elekom with respect to which dissenters' rights have
been perfected that shall be in excess of the amount of the value, as of
the closing date of the Merger, of the consideration such Shareholders
would have received for such shares in the Merger if they had not exercised
dissenters' rights plus any fees and expenses incurred by SFI Indemnitees
in connection with defense of such dissenters' rights claim.
Notwithstanding anything herein to the contrary, the liability of the Preferred
Shareholders hereunder will not be greater than the liability of Elekom under
Article IX of the Merger Agreement.
6. NOTICE OF CLAIM. Any SFI Indemnitee seeking to be indemnified pursuant
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to Section 5 hereof shall, within fifteen (15) days following discovery of a
Loss (or 5 days if the SFI Indemnitee has been served with a lawsuit or other
proceeding), notify the Shareholder Representative with a Notice of Claim. Each
SFI Indemnitee will serve such Notice of Claim prior to initiating any court
action seeking to enforce any such right to indemnification. The SFI Indemnitee
shall provide to the Shareholder Representative as promptly as practicable
thereafter all information and documentation reasonably requested by the
Shareholder
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Representative to verify the claim for indemnification asserted. Following
receipt of such notice (i) the Preferred Shareholders will then have the
opportunity to discuss with the SFI Indemnitees the steps the Preferred
Shareholders plan to take to mitigate any alleged Loss (defined in Section 5)
SFI may have suffered and (ii) prior to SFI initiating such court action, the
Preferred Shareholders will be given a reasonable period of time (not to exceed
30 days following receipt of such notice without the written agreement of SFI to
cure completely the events giving rise to such alleged Losses (if such events
are capable of being cured completely); provided, however, that Elekom and the
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Preferred Shareholders shall remain liable, to the extent set forth in the
Merger Agreement, for Losses actually incurred. The procedures set forth in
Section 7 shall govern Third-Party Claims.
7. DEFENSE. If a claim by a third party (a "Third Party Claim") is made
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against an SFI Indemnitee arising out of a matter for which the SFI Indemnitee
is entitled to be indemnified pursuant to Section 5 hereof, the Preferred
Shareholders may elect to assume the defense or the prosecution thereof. The
Preferred Shareholders shall have 30 days (which shall be shortened to 15 days
in the case of a commenced lawsuit or proceeding) after receipt of a Notice of
Claim to undertake to conduct and control, through counsel of their own choosing
as designated by the Shareholder Representative and at their sole risk and
expense, the good faith settlement or defense of such claim, and the SFI
Indemnitee(s) shall cooperate fully with the Preferred Shareholders in
connection therewith; provided that the SFI Indemnitee(s) shall be entitled to
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participate in such settlement or defense through counsel chosen by it, provided
that the fees and expenses of such counsel shall be borne by the SFI
Indemnitee(s); and provided further that the Preferred Shareholders can only
assume the defense if (a) the amount of the Third Party Claim does not exceed
the amount of the Escrow Funds held hereunder or (b) the Preferred Shareholders
provide commercially reasonable evidence that the Preferred Shareholders will
have sufficient financial resources to defend the claim and satisfy their
indemnification obligations. During the interim the SFI Indemnitee shall use
its best efforts to take all action (not including settlement) reasonably
necessary to protect against further damage or loss with respect to the alleged
Loss. The Preferred Shareholders shall obtain the written consent of the SFI
Indemnitee prior to ceasing to defend, settling or otherwise disposing of such
claim if as a result thereof the SFI Indemnitee would become subject to
injunctive, declaratory or other equitable relief or the business of the SFI
Indemnitee would be materially adversely affected in any manner. Whether or not
the Preferred Shareholders choose so to defend or prosecute such claim, all the
parties hereto shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony and shall attend such
conferences, discovery proceedings and trials as may be reasonably requested in
connection therewith. Such cooperation shall include the retention and the
provision of records and information which are reasonably relevant to such Third
Party Claim, and making employees available on a mutually convenient basis to
provide additional information. The Preferred Shareholders shall not be liable
for any settlement of any such claim effected without their prior written
consent, which shall not be unreasonably withheld. However, if the Preferred
Shareholders, fail to defend such claim within the time period necessary to
preserve the rights and defense of the SFI
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Indemnitee, the SFI Indemnitee will have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of the Preferred Shareholders, subject to the right of the Preferred
Shareholders to assume the defense of such claim at any time within the 30-day
time period after receiving Notice of Claim.
If a claim is based on any suit or proceeding by a third party for
infringement which gives rise to an IP Claim (defined in Section 5) resulting in
SFI's use of the Software (defined in Section 2.14 of the Merger Agreement)
being enjoined or otherwise restricted, the Preferred Shareholders, if the
Preferred Shareholders elect through the Shareholder Representative to assume
defense of such proceeding after receiving notice hereunder, shall be entitled
at their sole expense to do any of the following: (i) procure for SFI, Clarus
CSA, Inc. and their licensees the unrestricted right to continue using the
Software, (ii) modify the Software so that it becomes noninfringing, (iii)
settle the third party's infringement claim in a manner that gives SFI, Clarus
CSA, Inc. and their licensees the unrestricted rights to the software being
enjoined or otherwise restricted, or (iv) pay the indemnified party's claim as
provided in this Agreement, provided that any settlement under this sentence
shall require SFI's prior written approval which shall not be unreasonably
withheld. SFI shall comply with any settlement or court order made in
connection with such proceeding in the foregoing sentence provided that such
compliance by SFI shall not limit the Preferred Shareholder's indemnification
obligations hereunder. No Preferred Shareholder shall be liable for any
settlement of any such claim effected without its prior written consent, which
shall not be unreasonably withheld. Before any claim may be brought against any
of the Preferred Shareholders hereunder, or under the Merger Agreement, all the
Escrow Funds shall be used first to pay any claims made under Article IX of the
Merger Agreement or this Agreement, and SFI hereby authorizes the Preferred
Shareholders to settle such claims without consent of SFI to the extent the
Escrow Funds will fully satisfy such claim. Preferred Shareholders may also
settle any claim for which they are liable hereunder without consent of SFI so
long as the payment or performance does not either (y) exhaust the Escrow Funds
or (y) exceed the maximum liability amounts set forth below. Settlements
requiring performance or payment in excess of the maximum liability amounts
shall require SFI's prior written consent.
8. LIMITATIONS.
The obligations of Elekom or any Preferred Shareholder to indemnify any SFI
Indemnitees pursuant to Article IX of the Merger Agreement shall accrue only
after and to the extent the aggregate dollar amount of Losses incurred by an
Indemnified Party for all matters indemnifiable thereunder exceeds One Hundred
Thousand Dollars (US $100,000) (the "Basket"), and then Indemnitors shall be
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only liable for such Losses in excess of $100,000. In addition, no single Loss
in an amount of less than $10,000 may be applied to the Basket until such
threshold amount is reached, and thereafter, single claims of less than $10,000
must be aggregated so that no claim is made for an amount of less than $10,000
singly or in the aggregate. The obligations of the Indemnitors to indemnify the
SFI Indemnitees under this Agreement shall not exceed the $2,500,000 placed in
escrow
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hereunder for claims for indemnification other than (a) IP Claims, which
are addressed below, or (b) claims for indemnification related to a breach of
the representations contained in Section 2.1 of the Merger Agreement.
Notwithstanding anything in this Agreement to the contrary, the aggregate
maximum liability of the Indemnitors, for IP Claims shall not exceed (i) Twelve
Million Five Hundred Thousand Dollars ($12,500,000) for any IP Claims plus the
remaining amount of the Escrow Funds and no IP Claims may be made after the
expiration of the one (1) year period following the Closing Date of the Merger.
This Agreement and Article IX of the Merger Agreement set forth the sole
and exclusive remedy of an SFI Indemnitee for breaches of any representation,
warranty, or covenant under the Merger Agreement absent fraud or securities law
violations.
The maximum liability for claims for breach of the representation and
warranty in Section 2.1 in the Merger Agreement is the purchase price (cash paid
by SFI to Elekom's Shareholders at closing of the Merger plus the market value
of the shares transferred by SFI at closing of the Merger to the Elekom's
Shareholders), minus the amount of the cash transferred to SFI from the Escrow
Funds pursuant to this Agreement, further reduced by the aggregate amount paid
by Elekom and the Preferred Shareholders in connection with all claims for
breach of the representations and warranties made under Sections 2.14, 2.19, and
2.23(b) of the Merger Agreement. The maximum liability for claims for breach of
the representations or warranties in Sections 2.19, and 2.23(b) of the Merger
Agreement is equal to the purchase price (cash paid by SFI to Elekom's
shareholders at closing plus the market value of the shares transferred by SFI
at Closing to the Elekom's shareholders), minus the amount of the cash
transferred to SFI from the Escrow Funds, further reduced by the aggregate
amount paid by Elekom and Preferred Shareholders in connection with all claims
for breach of the representations and warranties made under Sections 2.1 or
2.14.
Notwithstanding anything in this Agreement to the contrary, no Preferred
Shareholders will have any liability for any claim that the Software infringes
the rights of a third party to the extent the claims arise from modification of
the Software by SFI after the Closing of the Merger or to the extent the
infringement claim arises out of a combination of the Software with a program,
product or material not transferred to SFI's subsidiary as of the Closing of the
Merger. In no event (except as specifically provided below) will any Preferred
Shareholder have any liability for indirect, incidental, exemplary, or
consequential damages whatsoever (including, without limitation, damages for
loss of profits, loss of data or other business information) or cover arising
under the Merger Agreement, even if the Preferred Shareholder has been advised
of the possibility of such damages; provided, however, that although this
sentence excludes claims for the lost profits, it does not limit the liability
of any Preferred Shareholder hereunder to an SFI Indemnitee for indirect,
incidental, exemplary or consequential damages to the extent such damages,
including lost profits, are included in a claim by a third party against the SFI
Indemnitee or arise as a result of such third party claim that the Software is
infringing, or claim of ownership rights in the Software (excluding Third Party
Software), and to the extent indemnification under the Merger Agreement covers
such
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third party claims. Notwithstanding the foregoing, an SFI Indemnitee shall
have the right to recover for direct out-of-pocket expenses, including its
direct, demonstrable internal costs (without overhead) and/or external costs
paid by such SFI Indemnitee to remediate any Loss, whether or not such Loss
arises in connection with a Third Party Claim.
9. CASAHL LITIGATION. Elekom will endeavor to seek an indemnification of
the SFI and the Shareholders from Xxxxxxx.xxx, Inc. ("Xxxxxxx.xxx") covering the
claims in the litigation commenced by Elekom and Egghead Software, Inc. (now
known as Xxxxxxx.xxx) under Case No. 987331 pending in the Superior Court of
California for the County of San Francisco (the "Casahl Litigation"). Before
taking any action against the Preferred Shareholders (other than Xxxxxxx.xxx)
with respect to any Loss arising from the Casahl Litigation, SFI and Clarus CSA,
Inc. each agree to use their reasonable best efforts to enforce the following
with respect to the Casahl Litigation:
(a) The Separation Agreement, dated November 10, 1997, between Egghead
Software, Inc., now know as Xxxxxxx.xxx, Inc. and Elekom;
(b) Any reaffirmation by Xxxxxxx.xxx of the obligation in the last
sentence of Section 4.02(a) of the Separation Agreement (in favor of
Elekom, Clarus CSA, Inc. or SFI);
(c) Any other agreement with Xxxxxxx.xxx in which it agrees to defend,
indemnify, and hold harmless Elekom, its past, present and future,
successor and assigns, officers and directors, common shareholders
(specifically excluding past Shareholder Xxxxxxx.xxx and specifically
including future common shareholder Parent), the Preferred Shareholders
(other than Xxxxxxx.xxx), agents, and employees, to the extent Elekom,
Clarus CSA, Inc., or SFI is made a beneficiary of such agreement , from and
against any cost, expense, loss, liability whatsoever arising in connection
with the Casahl Litigation.
If, after notice to Xxxxxxx.xxx by SFI and Clarus CSA, Inc., Xxxxxxx.xxx fails
or refuses to honor its indemnity, or other obligations to Elekom, its past,
present and future, successors and assigns, officers and directors, agents,
employees, , and, after the Effective Time, SFI, then to the extent Elekom or an
SFI Indemnitee suffers a Loss as a result of the Casahl Litigation
notwithstanding any of the above, then in such event each of the Preferred
Shareholders identified on Schedule 9.6 to the Merger Agreement (other than
Xxxxxxx.xxx), severally in proportion which they bear to each other excluding
Xxxxxxx.xxx based on the percentage set forth in Schedule 9.6 to the Merger
Agreement, agree to defend, indemnify, and hold harmless an SFI Indemnitee from
and against any cost, expense, loss or liability resulting from the Casahl
Litigation. The indemnity obligations set forth in this Section 9 are in
addition to Section 5 and are not subject to the limitations set forth in
Section 8. Except as set forth in Section 10(a), payments made hereunder this
Section 9 by a Preferred Shareholder shall not be reimbursed from Escrow Funds
nor count toward the maximum liability of Elekom or a Preferred Shareholder. In
the event that a Preferred Shareholder fails
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to pay any amount due hereunder, such amount may be withdrawn from the Escrow
Funds by an SFI Indemnitee to the extent of that Preferred Shareholder's
proportionate share in the Escrow Funds after giving effect to Section 10(b) of
this Agreement.
10. DISBURSEMENTS AT ESCROW TERMINATION DATE.
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(a) FEES OR EXPENSES OF PREFERRED SHAREHOLDER. After April 30, 2000,
all fees, expenses and costs of any kind (including, without limitation,
attorneys' fees and costs) incurred by any Preferred Shareholder in defense of
any claim indemnified hereunder shall be reimbursed from the remaining Escrow
Funds before any such funds are distributed to Shareholders.
(b) DISTRIBUTIONS ON ACCOUNT OF COMMON SHAREHOLDINGS OF ELEKOM. After
making the distributions described in Section 10(a), holders of Elekom's Common
Shares as of the date of the Closing of the Merger Agreement will receive a
distribution of the proportionate share of the Escrow Funds, which they would
have received from the Escrow Funds in the event no Notice of Claim had been
asserted by any SFI Indemnitee hereunder asserting a claim to the Escrow Funds.
(c) DISTRIBUTIONS ON ACCOUNT OF PREFERRED SHARELHOLDINGS OF ELEKOM.
After making the distributions described in section 10(b), holders of Elekom's
Preferred Shares as of the date of the Closing of the Merger Agreement will
receive a distribution of the remaining funds in the Escrow Funds in the
proportions set forth on Schedule 9.1 to the Merger Agreement.
11. APPOINTMENT OF SHAREHOLDER REPRESENTATIVE. Elekom and the
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Shareholders hereby appoint Xxxx Xxxxxx, or his designated successor agreeable
to Preferred Shareholders holding more than fifty percent (50%) of the potential
liability set forth on Exhibit A, to serve as Shareholder Representative for all
purposes pertaining to this Agreement, who shall be authorized to make all
decisions and elections of the Shareholders hereunder and agree that the SFI
Indemnitees shall be entitled to rely on all actions, decisions, and notice of
the Shareholder Representative. The Shareholder Representative has been
appointed by Elekom and the Shareholders as their attorney-in-fact, for the
giving and receipt on their behalf of all notices, instructions and deliveries
and for the taking on their behalf of all other actions under this Agreement and
the Merger Agreement, to serve in such capacity until such time as SFI and the
Escrow Agent have received joint written notice from all Shareholders that they
have appointed a new Shareholders Representative. Accordingly, except as
otherwise set forth herein and the Merger Agreement, the Shareholder
Representative has unlimited authority and power to act on behalf of the
Shareholders with respect to this Agreement and the disposition, settlement or
other handling of all claims, rights or obligations arising hereunder, provided
such actions by the Shareholder Representative are taken in good faith in the
exercise of reasonable judgment. Except as otherwise set forth herein, the
Shareholder shall be bound by all actions taken by the Shareholder
Representative in connection with this Agreement, and the Escrow Agent,
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Elekom and SFI shall be entitled to rely on any action or decision of the
Shareholder Representative in accordance herewith. The Shareholder
Representative shall be entitled to reimbursement out of the remaining amount of
Escrow Funds on the Escrow Termination Date, prior to distribution of such
funds, for any reasonable out-of-pocket expenses incurred by the Shareholder
Representative in connection with the performance of the representation duties
under this Agreement or the Merger Agreement, including, without limitation,
legal fees and expenses. No bond shall be required of the Shareholders
Representative, and the Shareholders Representative shall not receive
compensation for his or her services. The Shareholder Representative shall not
be liable for any act done or omitted hereunder as Shareholder Representative
while acting in good faith and in the exercise of reasonable judgment. The
Shareholders on whose behalf the Escrow Funds were contributed to the Escrow
shall severally indemnify the Shareholders Representative and hold the
Shareholders Representative harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the Shareholders
Representative and arising out of or in connection with the acceptance or
administration of the Shareholders Representative's duties hereunder, including
the reasonable fees and expenses of any legal counsel retained by the
Shareholders Representative in connection with his representation of
Shareholders.
12. REMEDIES. The SFI Indemnitees need not exhaust any other remedies
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that may be available to them but may proceed directly in accordance with the
provisions of this Agreement; provided, that SFI Indemnitees must first pursue
recourse to the Escrow Funds before asserting any claim against any Preferred
Shareholder based on Article IX of the Merger Agreement. The SFI Indemnitees
may institute claims against the Escrow Funds and in satisfaction thereof may
recover Escrow Funds, in accordance with the terms of the Merger Agreement and
this Agreement, without making any other claims directly against the
Shareholders and without rescinding or attempting to rescind the transactions
consummated pursuant to the Merger Agreement. The assertion of any single claim
for indemnification hereunder will not bar the SFI Indemnitees from asserting
other claims hereunder. All rights and remedies provided to the SFI Indemnitees
hereunder shall be cumulative and shall be in addition to any other rights or
remedies available to such party at law, in equity, by contract or otherwise.
13. FEES AND EXPENSES. Escrow Agent shall be entitled to its customary
-----------------
fees for its services hereunder, and to reimbursement of all out-of-pocket
expenses incurred, including reasonable attorney's fees, which fees and expenses
shall be borne by SFI.
14. LIMITED DUTIES; INDEMNIFICATION. Escrow Agent shall have no
-------------------------------
responsibilities to SFI or the Shareholders except those specifically set forth
herein, and, in performing any of its duties under this Agreement, or upon the
claimed failure to perform its duties hereunder, the Escrow Agent shall not be
liable for any acts taken or omitted to be taken by it except for its own gross
negligence or willful misconduct. Accordingly, the Escrow Agent shall be
entitled to rely conclusively on any notice, authorization or other document
delivered to it hereunder and believed by it to be genuine, and may, at its
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discretion, obtain the advice of counsel with respect to any matter relating
hereto and shall not incur any liability with respect to (i) any action taken or
omitted to be taken in good faith upon advice of its counsel, or (ii) any action
taken or omitted to be taken in reliance upon any such notice, authorization or
other document believed to be genuine. Escrow Agent shall not
be under any obligation to institute legal proceedings of any kind with respect
hereto, and SFI and the Preferred Shareholders hereby jointly and severally
agree to hold Escrow Agent harmless in respect of any claim, suit or proceeding
based upon this Agreement or any act taken or not taken by Escrow Agent
hereunder, other than with respect to Escrow Agent's gross negligence or willful
misconduct. Provided, however, in the event of any dispute regarding the proper
distribution of the Escrow Funds, Escrow Agent shall be entitled to file an
interpleader action to tender the Escrow Funds into the registry or custody of
any court of competent jurisdiction, whereupon the Escrow Agent shall be
discharged from any further duty hereunder. The provisions of this Section
shall survive any resignation of the Escrow Agent or the termination of this
Agreement.
15. REMOVAL AND RESIGNATION. Escrow Agent agrees that SFI and the
-----------------------
Shareholders may, by their agreement, at any time remove Escrow Agent as escrow
agent hereunder, and substitute another person or entity as escrow agent, in
which event Escrow Agent shall, upon receipt of a Joint Direction requesting
such removal, account for and deliver to such substituted escrow agent all
amounts held in the Escrow, and Escrow Agent shall thereafter be discharged from
its duties hereunder. Escrow Agent may resign from serving as escrow agent
hereunder by written notice to such effect given to SFI and the Shareholder
Representative, whereupon SFI and the Shareholder Representative shall agree
upon a successor escrow agent and shall so notify Escrow Agent, which shall then
account for and deliver to such successor all amounts held in the Escrow, and
such resignation shall thereupon be effective. If no successor escrow agent is
agreed upon within a reasonable time after such notice is given, the Escrow
Agent shall be entitled to tender into the registry or custody of any court of
competent jurisdiction the Escrow Funds, together with such legal proceedings as
the Escrow Agent deems appropriate, and thereupon the Escrow Agent shall be
discharged from all further duties hereunder.
16. NOTICES. All notices, demands and other communications required or
-------
permitted hereunder shall be in writing and may be telexed or telecopied, which
shall be followed forthwith by letter, and such notice, request, demand or other
communication shall be deemed to have been received on the next business day
following dispatch and acknowledgment of receipt by the recipient's telex or
telecopy machine. In addition, notices hereunder may be delivered by hand, in
which event the notice shall be deemed effective when delivered, or by overnight
courier, in which event the notice shall be deemed to have been received on the
next business day following delivery to such courier. Notices, requests,
demands and other communications may not be given by regular or certified mail.
All notices and other communications under this Agreement shall be given to the
parties hereto at the following addresses:(or such other address for a party as
shall be specified by like notice):
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If to Company:
Elekom Corporation
Pacific First Plaza, Eighth Floor
000 - 000xx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxx, President and CEO
Facsimile: (000) 000-0000
With a copy (which shall not constitute notice) to:
Xxxxxxx Coie LLP
000 - 000xx Xxxxxx X.X.
Xxxxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
If to SFI:
Clarus Corporation, formerly known as SQL Financials
International, Inc.
0000 Xxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, President and CEO
Facsimile: (000) 000-0000
With a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxxx Xxxxxxxxx & Xxxx, PLLC
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: G. Xxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to the Shareholder Representative:
_________________________________
_________________________________
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_________________________________
_________________________________
Attention: ________________________
Facsimile No.: (_____) _____________
with a copy to:
Xxxx Xxxxxx
Xxxxxxx Coie LLP
Suite 1800, 411 - 108th Ave. N.E
Bellevue, WA 98004-5584
Attention: Xxxx Xxxxxx
Facsimile No.: (000) 000-0000
(c) If to Escrow Agent:
_________________________________
_________________________________
_________________________________
_________________________________
Attention: ________________________
Facsimile No.: (_____) _____________
Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 16.
17. INTERPRETATION. This Agreement and Article IX of the Merger Agreement
are to be read together. To the extent of any inconsistency between this
Agreement and Article IX of the Merger Agreement, the terms and provisions of
Article IX of the Merger Agreement shall control.
18. TAX REPORTING. For purposes of tax reporting, all income earned on
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the funds in the Escrow shall be deemed to have been earned for the account of
the party to whom the funds are disbursed, and Escrow Agent is authorized to act
accordingly.
19. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns.
20. GOVERNING LAW AND JURISDICTION. This Agreement shall be governed by
------------------------------
and construed according to the laws of the State of Washington, without regard
to any rules regarding choice of law. The exclusive jurisdiction for any action
by any SFI Indemnitee against Shareholders, Preferred Shareholders, or with
respect to the Escrow Funds shall be the state and federal courts situated in
Hennepin County, Minnesota.
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21. DEFINED TERMS. Capitalized terms not otherwise defined herein shall
-------------
have the meaning ascribed to such term in the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
ELEKOM CORPORATION CLARUS CORPORATION, formerly
known SQL Financials International,
Inc.
By: By:
---------------------------- -----------------------------------
Name: Xxxxxx Xxxxx Name: Xxxxxxx X. Xxxxxxx
Title: President and CEO Title: President and CEO
ESCROW AGENT:
NATIONSBANK, N.A.
By_________________________________
Name:__________________________
Title:___________________________
PREFERRED SHAREHOLDERS:
_________________________________
_________________________________
_________________________________
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