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Exhibit 10.24 - Escrow Agreement
ESCROW AGREEMENT
ESCROW AGREEMENT made this 30th day of April 1999, by and among
SalesLogix Corporation, a Delaware corporation ("Parent"); SLX Merger Company,
an Arizona corporation ("Newco"); ▇▇▇▇▇▇ Trust Company of California (the
"Escrow Agent"); and the four shareholders of Enact Incorporated ("Enact") whose
names are set forth as Shareholders (and not spouses) on the signature page of
this Agreement (collectively, the "Shareholders").
Parent, Newco and Enact have entered into a Plan of Reorganization and
Agreement of Merger (the "Merger Agreement"), dated as of April 30, 1999,
relating to the merger of Enact into Newco (the "Merger") and providing for,
among other things, the delivery into escrow of a portion of the shares of
Parent's Class A Common Stock (the "Parent Common Stock") to be issued to the
Shareholders upon and after the Merger, and a portion of the cash consideration
to be paid to certain Shareholders upon and after the Merger, all as set forth
in Schedule 2.01(E) of the Merger Agreement (pertinent sections of the Merger
Agreement, including Schedule 2.01(E) thereto, are attached hereto as Exhibit
A). The Shareholders and Parent desire to provide for the administration of the
escrow provisions of the Merger Agreement in the manner set forth herein. Escrow
Agent is willing to serve as such under this Agreement. Capitalized terms used
herein and not otherwise defined herein shall have the meanings expressly
assigned thereto in the portions of the Merger Agreement attached hereto as
Exhibit A unless the context or usage requires otherwise.
NOW, THEREFORE, the parties agree as follows:
1. THE ESCROW
1.1 Deposit of Parent Common Stock. Pursuant to Section 2.05 of the
Merger Agreement, Parent hereby deposits into escrow on behalf of and in the
name of the Shareholders: (i) 40,753 shares of Parent Common Stock, representing
the Escrowed Parent Shares described in Section 2.05(A)(2) and Schedule 2.01(E)
of the Merger Agreement; (ii) an additional 20,189 shares of Parent Common
Stock, representing the Escrowed Chase Shares described in Section 2.05(C) and
Schedule 2.01(E) of the Merger Agreement; (iii) the cash sum of $399,999.90,
representing the Escrowed Cash Consideration described in Section 2.05(A)(2) and
Schedule 2.01(E) of the Merger Agreement; and (iv) and the cash sum of $10,000,
representing the Escrowed Burgh Fees described in Section 2.05(D) and Schedule
2.01(E) of the Merger Agreement. Schedule 2.01(E) of the Merger Agreement sets
forth on which Shareholder's behalf the Escrowed Parent Shares, Escrowed Chase
Shares, Escrowed Cash Consideration, and Escrowed Burgh Fees are being
deposited. The Escrowed Parent Shares and Escrowed Chase Shares shall
collectively be referred to as the "Escrowed Shares," while the Escrowed Cash
Consideration and Escrowed Burgh Fees shall collectively be referred to as the
"Escrowed Cash."
1.2 Escrow Property. The Escrowed Shares and all stock dividends or
shares in respect of stock splits related to the Escrowed Shares, and the
Escrowed Cash and all interest earned thereon (collectively "Escrow Property")
shall be held by the Escrow Agent for the benefit of the
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Shareholders, Parent and Newco on the terms set forth herein. The Shareholders
shall be entitled to receive all dividends and distributions (other than stock
dividends or from stock splits) on the Escrowed Shares, and Parent shall be
responsible for ensuring that such dividends and distributions are delivered
directly to the Shareholders rather than to the Escrow Agent.
1.3 Money-Market Account. Escrow Agent shall deposit the Escrowed Cash
into a money-market account, and all interest received on the Escrowed Cash in
such account shall be retained in the account, credited to the Shareholders in
proportion to their interests (as shown on Schedule 2.01(E)) in the Escrowed
Cash, and added to the Escrow Property for the purposes of this Agreement.
1.4 Voting Rights of Shares in Escrow. All voting rights with respect
to any Escrowed Shares comprising a part of the Escrow Property may be exercised
by the Shareholders in accordance with their proportionate interests therein (as
shown on Schedule 2.01(E)), and the Escrow Agent shall, upon receipt of Parent's
instructions from time to time, execute and deliver to the Shareholders such
proxies, consents, or other documents as provided by Parent as may be necessary
to enable the Shareholders to exercise such rights.
1.5 Distributions on Escrowed Shares. All dividends and other
distributions (whether in cash, securities, or other property) paid or made on
the Escrowed Shares shall be deemed to have been paid or made to the
Shareholders in proportion to their ownership of the Escrowed Shares (as shown
on Schedule 2.01(E)). As stated in Section 1.2 above, Parent shall be
responsible for ensuring that any dividends and distributions, other than stock
dividends or from stock splits, are delivered directly to the Shareholders
rather than the Escrow Agent. Any dividends and distributions in the form of
stock dividends or from stock splits shall be delivered to the Escrow Agent and
shall be held by the Escrow Agent as Escrow Property.
1.6 Taxes and Charges on Escrow Property. Each Shareholder shall
maintain such Shareholder's Escrow Property free and clear of all liens and
encumbrances and shall, promptly upon request by the Escrow Agent, pay and
discharge all taxes, assessments, and governmental charges imposed on or with
respect to the Escrow Property.
1.7 Administration of the Escrow Pursuant to the Merger Agreement. The
Escrow Agent shall administer the Escrow Property pursuant to this Agreement.
Parent, Newco and the Shareholders have agreed that the Escrow Property shall be
qualified for release in full to the Shareholders pursuant to Section 2.05 of
the Merger Agreement unless a Claim Notice is filed with the Shareholders and
the Escrow Agent by Parent on or before the 270th day after the date of this
Agreement. In the event a Claim Notice is not timely filed by Parent, Escrow
Agent may release the Escrow Property as described in Section 3.2 below. In the
event a Claim Notice is timely filed by Parent, the Escrow Agent shall continue
to hold the Escrow Property until: (a) it receives one or more "Joint Direction
Letters" (as defined below), which have provided for the complete disposition of
the Escrow Property; (b) Parent delivers a "Distribution Certification" (as
defined below) to which no Shareholder delivers a timely "Written Objection" (as
defined below); or (c) it receives a court order (or an arbitration award that
has been converted into a judgment), instructing the Escrow Holder concerning
the manner in which the Escrow Property should be distributed among the
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Shareholders and/or Parent. As used herein a "Joint Direction Letter" shall mean
a joint letter of direction addressed to the Escrow Agent and executed by Parent
and at least three of the four Shareholders.
2. PURCHASE PRICE ADJUSTMENT
Sections 2.1 and 2.2 below explain the manner in which any charges
against the Escrow Property arising out of Losses shall be determined. Nothing
in this Agreement shall be construed as requiring the Escrow Agent to perform or
verify any of the calculations, or the factual bases therefore, set forth in
these sections.
2.1 Adjustment Procedure. Parent and the Shareholders have agreed that
in the event Newco or Parent shall sustain one or more Losses (as defined in
Section 12.01 of the Merger Agreement), the amount of Escrow Property available
for distribution to the Shareholders upon termination of the Escrow shall be
reduced by an amount of Escrow Property equal to the value of the Total Losses,
as determined below. The amount of Total Losses shall not be charged against the
Escrow Property until after the final resolution of all Claims and the final
determination of all Losses and the completion of the 270 day Escrow period;
provided, however, that Parent, at its option, may accelerate the completion of
the 270 day Escrow period and forego its right to make additional Claims if, at
any time, Parent believes the amount of Losses determined to date exceeds the
then current value of the Escrow Property.
2.2 Allocation of Losses Across Escrow Property. Upon completion of the
270 day Escrow period (or upon Parent's exercise of its right to earlier
terminate the Escrow as set forth in Section 2.1), and any additional time
necessary to allow Parent and Shareholder's Representative to agree upon and
resolve all Claims and the amount of all Losses so that the amount of Total
Losses is known, Parent shall promptly certify in writing to the Escrow Agent
and to all Shareholders the amount of the Total Losses determined by the parties
under Article XII of the Merger Agreement, and the Parent's calculation of any
resulting appropriate charges to the four Shareholders' respective contributions
to the Escrow Property (the "Distribution Certification"). In preparing the
Distribution Certification, Parent shall charge the Total Losses to the Escrow
Property as follows: First, Parent shall determine the then current agreed value
of the Escrow Property as a whole (the "Total Escrow Value"). For Parent Common
Stock, this value shall be determined by assigning each share of Parent Common
Stock the value of either (i) the initial offering price per share at which
Parent closes on a bona fide initial public offering of the Parent Common Stock
(an "IPO") or (2), if Parent does not close on an IPO prior to the completion of
the 270 day Escrow Period, $13.00, in each case appropriately adjusted to take
into account any stock split, stock dividend, reverse stock split,
recapitalization, or like change that may occur between the date of this
Agreement and the date on which any or all of the Parent Common Stock is
released from the Escrow (the "Deemed Per Share Value"). For cash, this value
will be determined by Parent from an up to date statement provided by Escrow
Agent. Second, for each Shareholder, Parent shall determine the current agreed
value as of the Determination Date of such holder's specific contribution of
cash or Parent Common Stock to the Escrow Property (the "Holder's Escrow Value")
(for Parent Common Stock this value shall be determined again using the Deemed
Per Share Value described above). Third, Parent shall assign a specific
percentage
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(the "Allocation Percentage") to each Shareholder which shall be equal to the
percentage that the relevant Holder's Escrow Value bears to the Total Escrow
Value. Fourth, for each Shareholder, Parent shall charge against such holder's
specific contribution of cash or Parent Common Stock to the Escrow Property an
amount equal to the Total Losses multiplied by the Allocation Percentage
calculated for such holder. If Parent determines in step one that the total
Losses will exceed the Total Escrow Value, it need not perform steps two and
three, but may simply report that each holder's Allocation Percentage is one
hundred percent (100%). Notwithstanding this four-step procedure, Parent acting
together with no less than three of the Shareholders may elect to forego the
foregoing procedure by delivering a Joint Direction Letter to the Escrow Agent,
at any time, whereupon the Escrow Agent shall promptly distribute to the Parent
and/or the appropriate Shareholders the Escrowed Parent Shares, Escrowed Chase
Shares, Escrowed Cash Consideration and Escrowed Burgh Fees as specified and
directed in the Joint Direction Letter.
2.3 Escrow Agent's Distributions. Upon Parent's delivery of the
Distribution Certification, which shall describe in detail the calculation
performed under steps one through four in Section 2.2, the Shareholders, and any
of them, shall have thirty (30) calendar days from the date of the Distribution
Certification to deliver to Parent and to the Escrow Agent a written objection
("Written Objection") to the distribution proposed in the Distribution
Certification. If no timely Written Objection is received by the Escrow Agent
within said 30 day period, it shall be conclusively presumed that the
Distribution Certification has been accepted and the Escrow Agent shall
immediately thereafter distribute to the Parent and/or the appropriate
Shareholders the Escrowed Parent Shares, Escrowed Chase Shares, Escrowed Cash
Consideration and Escrowed Burgh Fees as specified and directed in the
Distribution Certification. If a timely Written Objection is received within
said 30 day period, the Escrow Agent shall continue to hold the Escrow Property
and Parent and the Shareholders shall seek to resolve the Written Objection as
set forth in Section 13.5 of the Merger Agreement. During the pendency of any
such attempts to resolve the Written Objection, Parent and the Shareholders
shall negotiate in good faith for a Joint Direction Letter that will allow the
Escrow Agent to distribute to the Shareholders any portions of the Escrow
Property which are not in dispute and which will not be affected by the ultimate
resolution of the Written Objection.
3. TERMINATION
3.1 Termination Date. The escrow created by this Agreement shall
terminate on the date that all Escrow Property has been distributed pursuant to
this Agreement ("Termination Date").
3.2 Distribution of Escrow Property. If Parent shall have failed to
file a Claim Notice with the Escrow Agent by the 270th day after the date of
this Agreement, Escrow Agent shall distribute the Escrow Property to the
Shareholders in accordance with their proportionate interests therein as shown
on Schedule 2.01(E) to the Merger Agreement.
4. RIGHTS AND OBLIGATIONS OF THE ESCROW AGENT
4.1 Liability Limitations Applicable to and Indemnification of Escrow
Agent. The
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Escrow Agent: (1) shall not be liable for any error of judgment, act done or
omitted by it in good faith, or mistake of fact or law unless caused by its own
gross negligence or willful misconduct; (2) shall be entitled to treat as
genuine any letter or other document furnished to it by Newco, Parent or
Shareholders, and believed by it to be genuine and to have been signed and
presented by the proper party or parties; (3) shall be entitled to rely upon
written instructions received from both the Parent and at least three of the
four Shareholders; and (4) shall be paid by Parent fees for its services at its
customary rates as in effect from time to time and its out-of-pocket expenses
(including but not limited to reasonable fees of counsel). The Escrow Agent
shall be indemnified, jointly and severally, and saved harmless by Parent,
Newco, and the Shareholders (collectively, the "Indemnifying Parties"), from and
against any and all liability, including all expenses reasonably incurred in its
defense, to which the Escrow Agent shall be subject by reason of any action
taken or omitted or any investment or disbursement of any part of the Escrow
Property made by the Escrow Agent pursuant to the Escrow Agreement, except as a
result of the Escrow Agent's own gross negligence or willful misconduct. The
costs and expenses of enforcing this right of indemnification shall also be paid
by the Indemnifying Parties. This right of indemnification shall survive the
termination of this Escrow Agreement, and the removal or resignation of the
Escrow Agent. The Escrow Agent undertakes to perform such duties as are
specifically set forth in this Escrow Agreement, and the Escrow Agent shall have
no duties or obligations under any other agreement or document whether or not
referred to herein or attached hereto as an exhibit, and no implied covenants or
obligations shall be read into this Escrow Agreement against the Escrow Agent.
The Escrow Agent may consult with counsel (of its choice) regarding any of its
duties or obligations hereunder, and shall be fully protected in any action
taken in good faith in accordance with such advice.
4.2 Resignation. The Escrow Agent may resign at any time by giving
written notice thereof to the other parties hereto, but such resignation shall
not become effective until a successor Escrow Agent shall have been appointed
and shall have accepted such appointment in writing. If an instrument of
acceptance by a successor Escrow Agent shall not have been delivered to the
Escrow Agent within thirty (30) days after the giving of such notice of
resignation, the resigning Escrow Agent may, at the expense of the undersigned,
petition any court of competent jurisdiction for the appointment of a successor
Escrow Agent.
4.3 Compliance with Orders and Decrees. If any property subject hereto
is at any time attached, garnished or levied upon, under any court order, or in
case the payment, assignment, transfer, conveyance or delivery of any such
property shall be stayed or enjoined by any court order, or in case any order,
judgment or decree shall be made or entered by any court affecting such
property, or any part thereof, then in any of such events, the Escrow Agent is
authorized, in its sole discretion, to rely upon and comply with any such order,
writ judgment or decree, which it is advised by legal counsel (of its own
choosing) is binding upon it, and if it complies with any such order, writ,
judgment or decree, it shall not be liable to any of the parties hereto or to
any other person, firm or corporation by reason of such compliance, even though
such order, writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
5. MISCELLANEOUS
5.1 Notices. Any notice to any party under this Agreement shall be in
writing and
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shall be effective on the earlier of (i) the date when received by such party
(including fax receipt), or (ii) the date which is five (5) days after mailing
(postage prepaid) by certified or registered mail, return receipt requested, to
the address of such party set forth herein, or to such other address as shall
have previously been specified in writing by such party to all parties hereto:
To Parent and Newco: SalesLogix Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
To Shareholders: ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇. ▇▇▇▇▇▇▇ Burgh
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Wingset Investments Ltd.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇. ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With two copies to: Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ LLP
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Copy one -- Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and
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Copy two -- Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
To Escrow Agent: ▇▇▇▇▇▇ Trust Company of California
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Escrow Administration
5.2 Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
5.3 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of Arizona.
5.4 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the
date first set forth above.
SALESLOGIX CORPORATION
By /s/ ▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇
Its: CFO
SLX MERGER COMPANY
By /s/ ▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇
Its: CFO
▇▇▇▇▇▇ TRUST COMPANY OF CALIFORNIA
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Its: Vice President
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SHAREHOLDERS
/s/ ▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇. ▇▇▇▇▇ (as spouse)
▇▇▇▇▇ ▇▇▇▇▇ [include spouse]
/s/ ▇. ▇▇▇▇▇▇▇ Burgh
▇. ▇▇▇▇▇▇▇ Burgh
/s/ ▇.▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (as spouse)
▇.▇. ▇▇▇▇▇▇ [include spouse]
Wingset Investments, Ltd.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Its: Managing Director
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