EXECUTION COPY
INDEMNIFICATION AND ESCROW AGREEMENT dated as of
November 22, 1999 (this "Agreement"), among LYCOS, INC., a
Delaware corporation ("Parent"), STATE STREET BANK AND TRUST
COMPANY, as Escrow Agent (the "Escrow Agent"), the
stockholders of the Company (as defined below) listed on the
signature pages hereto (the "Stockholders") and XXXXX
XXXXXXX, as representative of the Stockholders.
WHEREAS Parent, Barbados Acquisition Corp., a Delaware corporation and
a wholly owned subsidiary of Parent ("Sub"), and Xxxxxxxxxx.xxx, Inc., a
Delaware corporation (the "Company"), propose to enter into an Agreement and
Plan of Merger of even date herewith (as the same may be amended or
supplemented, the "Merger Agreement") providing for the merger of Sub with and
into the Company (the "Merger") upon the terms and subject to the conditions set
forth in the Merger Agreement;
WHEREAS, each Stockholder is the record and beneficial owner of the
number of shares of Company Class A Common Stock (such term and each other term
used but not defined herein shall have the meaning assigned to it in the Merger
Agreement), Company Class B Common Stock and Company Series A Preferred Stock
set forth opposite such Stockholder's name on Schedule A hereto;
WHEREAS, share certificates representing 10% of the shares (the
"Escrow Shares" or the "Escrow Fund") of Parent Common Stock to be issued in the
Merger in accordance with the terms of the Merger Agreement, shall be deposited
in escrow pursuant to Section 2.01(d) of the Merger Agreement by Parent on
behalf of the Stockholders, with the same effect as if Parent had delivered such
shares to the Stockholders and the Stockholders had delivered such Shares to the
Escrow Agent, to be held and disposed of by the Escrow Agent as provided herein;
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Sub have requested that the Stockholders enter into this
Agreement.
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the
Merger Agreement, and in consideration of the premises and the representations,
warranties and agreements contained herein, the parties agree as follows:
ARTICLE I
Indemnification
SECTION 1.01. Survival of Covenants, Agreements, Representations and
Warranties. For purposes of this Agreement (and notwithstanding anything to the
contrary provided under applicable law or in the Merger Agreement), the
representations, warranties, covenants and agreements (x) of the Company
contained in the Merger Agreement or in the Company Disclosure Schedule or any
certificate delivered pursuant thereto or in connection therewith and (y) of the
Stockholders contained in this Agreement, in each case shall be deemed to
survive the Closing and to remain in full force and effect for the period set
forth in Section 1.04 and no longer, regardless of any investigation made by or
on behalf of any party hereto; provided that any and all rights of
indemnification and any and all other remedies relating thereto shall be subject
to Section 1.04 and all other limitations contained in this Agreement.
SECTION 1.02. Indemnification by the Stockholders. (a) "Losses" of any
person shall mean any and all losses, damages, liabilities, Taxes, costs and
expenses incurred by such person, including interest, penalties, reasonable
attorneys' fees and expenses, fines, judgments, awards and financial
responsibility for investigation and cleanup costs. "Losses" of Parent or its
Affiliates (other than the Company) shall also include any Losses incurred by
the Company or its subsidiaries (provided that the existence of any breach or
inaccuracy of any representation or warranty set forth in Section 1.02(c)(i)
shall be determined on the basis set forth in such Section 1.02(c)(i)). As used
in this Article I, an "Affiliate" of Parent shall include any direct or indirect
subsidiary of Parent and any officer, director or employee of Parent or any such
subsidiary. As used in this Article I, an "Indemnifying Party" shall mean, with
respect to any Loss, the person or persons that have agreed to indemnify and
hold harmless Parent and its Affiliates with respect to such Loss pursuant to
Section 1.02(b), 1.02(c), 1.02(d) or 1.02(e), as provided below.
(b) Each Stockholder agrees, severally and not jointly, to indemnify
and hold harmless each Indemnitee (such term and each other term used herein but
not defined in the Merger Agreement shall have the meaning assigned to it in
Article VIII or elsewhere in this Agreement) from and
against any and all Losses (other than Losses relating to Taxes, for which
indemnification provisions are set forth in Section 1.02(d)) incurred by such
Indemnitee which arise out of or in connection with:
(i) any inaccuracy in, or any breach of, any representation or
warranty of such Stockholder contained in Article VII of this Agreement or
in any schedule to this Agreement delivered by such Stockholder;
(ii) the failure by such Stockholder to perform any covenant,
agreement, obligation or undertaking in this Agreement or in any schedule
to this Agreement delivered by such Stockholder; and
(iii) any and all actions, suits, proceedings, demands, assessments,
judgments, damages, awards, costs and expenses (including fees) incident to
any of the foregoing or incurred in connection with the enforcement of the
rights of any Indemnitee with respect to the foregoing.
(c) Each Stockholder agrees, severally and not jointly, to indemnify
and hold harmless, from and after the Effective Time, each Indemnitee from and
against any and all Losses (other than Losses relating to Taxes, for which
indemnification provisions are set forth in Section 1.02(d)) incurred by such
Indemnitee which arise out of or in connection with:
(i) any inaccuracy in, or any breach of, any representation or
warranty of the Company contained in the Merger Agreement, or in the
Company Disclosure Schedule or any certificate delivered by the Company
pursuant to or in connection with the transactions contemplated thereby (it
being agreed that for purposes of determining the existence of any such
inaccuracy or breach, all such representations and warranties of the
Company that are directly or indirectly qualified as to materiality shall
be deemed to be not so qualified);
(ii) the failure by the Company to perform any covenant or agreement
in the Merger Agreement or in any certificate, instrument, document or
agreement delivered by the Company pursuant to or in connection with the
Merger Agreement, in each of the above cases which is required to be
performed at or prior to the Effective Time; and
(iii) any and all actions, suits, proceedings, demands, assessments,
judgments, damages, awards, costs and expenses (including reasonable
attorneys' fees) incident to any of the foregoing or incurred in
connection with the enforcement of the rights of any person indemnified
under this Section with respect to the foregoing.
(d) (i) Each Stockholder agrees, severally and not jointly, to
indemnify and hold harmless, from and after the Effective Time, each Indemnitee
from and against, (A) all liability for Taxes (as a result of Treasury
regulation Section 1.1502-6 or any comparable provision of state, local or
foreign Tax law) of any person other than the Company or any of its subsidiaries
which at any time prior to the Closing is or has ever been affiliated with the
Company or any of its subsidiaries or with which at any time prior to the
Closing the Company or any of its subsidiaries joins or has ever joined or is or
has ever been required to join in filing any affiliated, consolidated, combined,
unitary or aggregate Tax Return; (B) all liability for Taxes that result from
the Company's (or any of its subsidiaries') failure to withhold from amounts
paid by the Company or any of its subsidiaries prior to the Closing Date; (C)
all liability for Taxes of the Company or any of its subsidiaries for any
Post-Closing Tax Period that result by reason of the application in a
Pre-Closing Tax Period of Section 481 of the Code or any comparable provisions
of state, local, domestic or foreign Tax law, except to the extent attributable
to a change from the cash method of accounting to the accrual method of
accounting; (D) all liability for Taxes of the Company as a result of a breach
of a representation or warranty set forth in Section 3.07 of the Merger
Agreement; (E) all liability for Taxes required to be paid after the Closing
Date by the Company or any of its subsidiaries under any Tax sharing, Tax
indemnity, Tax allocation or similar contract (whether or not written) to which
the Company or any of its subsidiaries is or was a party prior to the Closing;
and (F) all liability for reasonable legal and accounting fees and expenses for
or with respect to any item in clause (A), (B), (C), (D) or (E) above.
(e) Each Stockholder agrees, severally and not jointly, to indemnify
and hold harmless each Indemnitee from and against all costs and expenses
incurred by the Company or any of its subsidiaries relating to the pursuit or
consummation of the Merger, including all attorneys' fees, brokers' fees,
accountants' fees and consultants' fees related thereto other than (i) costs and
expenses related to Taxes for which indemnification provisions are set forth in
Section 1.02(d) of this Agreement and (ii) any amount deducted from the
aggregate purchase price pursuant to Section 2.01(c) of the Merger Agreement.
(f) As between the Parent and the Stockholders (collectively, the
"Interested Parties"), for the purposes
of the indemnity provided in this Section 1.02, any Losses hereunder shall be
determined on the basis of the net effect after giving effect to any actual cash
payments, setoffs or recoupment or any payments in each case actually received,
realized or retained by the Indemnitee as a result of any event giving rise to a
claim for such indemnification. The amount of any Losses for which
indemnification is provided hereunder shall be net of any amount actually
recovered by the Indemnitee under insurance policies with respect to such
Losses. To the extent that an Indemnitee (or its Affiliate) has rights under
insurance policies or similar rights in respect of any Loss it shall use its
reasonable efforts to exercise such rights. Except as set forth on Schedule I
hereto, no claim for indemnification under this Article I shall be brought by
Parent unless and until the aggregate amount of all claims for indemnification
under this Article I exceeds $250,000, and then only to the extent of any such
excess.
(g) As between the Interested Parties, all Losses (including Losses
relating to Taxes) under this Article I shall be calculated in a manner such
that the net after-Tax effect of the indemnification payment received by an
Indemnitee equals the net after-Tax Loss (including any Loss relating to Taxes)
suffered or payable by such Indemnitee for which such indemnification payment is
being made. Without limiting the generality of the foregoing, for the purposes
of the indemnity provided in this Section 1.02, all Losses (including Losses
relating to Taxes) hereunder shall be increased to take into account any net Tax
cost incurred by the Indemnitee as a result of the receipt or accrual of such
indemnification payment and shall be decreased to reflect any net Tax benefit to
the Indemnitee. Any indemnification payment under this Agreement shall be
treated as an adjustment to purchase price.
SECTION 1.03. Third-Party Claims. (a) If a claim by a third party (a
"Third Party Claim") is made against Parent or any of its affiliates arising out
of a matter for which Parent or such affiliate is entitled to be indemnified
pursuant to Section 1.02, Parent shall promptly notify the Representative in
writing of such claim. The failure to notify promptly the Representative
hereunder shall not relieve the Stockholders of their obligations hereunder
except to the extent (and only to the extent) that the Stockholders are actually
and materially prejudiced by such failure. In no event shall the Stockholders be
liable for the fees and expenses of more than one counsel (in addition to any
local counsel) for all indemnified parties in connection with any one action or
separate but similar or related actions arising out of the same general
allegations or circumstances.
(b) The Stockholders shall be entitled to participate in the defense
of a Third Party Claim, individually or jointly, through their counsel, at their
own expense.
(c) So long as the Stockholders are participating in the defense of a
Third Party Claim in good faith, Parent shall reasonably cooperate with such
Stockholders by providing records and information that are reasonably relevant
to such Third Party Claim. Parent shall not settle, compromise, admit to
liability or confess to judgment with respect to any Third Party Claim without
the written consent of the Representative, which consent will not be
unreasonably withheld or delayed. No such consent will be required if Parent
agrees in writing to forego all claims for indemnification from the Stockholders
with respect to such Third Party Claim, or Parent reasonably believes itself to
be potentially or actually exposed to Losses in excess of amounts reasonably
expected to be received from the Stockholder or to non-monetary remedies;
provided, however, that Parent uses reasonable efforts to obtain in such
settlement a release of the Stockholders and the Company with respect to all
such Third Party Claims.
SECTION 1.04. Termination of Indemnification. The Escrow Fund shall be
held by the Escrow Agent on the terms and subject to the conditions set forth
herein until, and the obligations of any Stockholders to any Indemnitee pursuant
to this Agreement shall terminate at, the close of business on the first
anniversary of the Effective Time (the "Expiration Date"), except that, solely
with respect to such amount, if any, as provided in Section 3.07, to be retained
to satisfy any Indemnity Claims with respect to matters not absolute as to
liability or not liquidated as to amount at such date but with respect to which
Parent shall have given the notice described in Section 3.01 hereof, the Escrow
Fund shall be so held, and the obligations of the Stockholders hereunder shall
continue solely until such time as such liability is determined pursuant to the
provisions hereof. Parent shall provide written notice of the Effective Time
promptly following the occurrence thereof.
SECTION 1.05. Sole and Exclusive Remedy Against the Stockholders. (a)
Subject to Section 1.05(b) and notwithstanding any other provision of this
Agreement to the contrary, claims against the Escrow Fund pursuant to Article
III constitute the Indemnitee's sole and exclusive remedy for damages and relief
against the Stockholders or any of their respective affiliates, and Parent
agrees that no suit, action or proceeding may be brought against any Stockholder
or any of such Stockholder's affiliates by any Indemnitee, in each case with
respect to any Losses or any other matters herein or arising out of the Merger
or the
Merger Agreement or any certificate or other document delivered pursuant thereto
or in connection therewith.
(b) The limitations set forth in Section 1.05(a), including with
respect to the bringing of any suit, action or proceeding, shall not apply to
any Stockholder with respect to, but only with respect to, Losses that
constitute Excess Losses (as defined below) and that (i) arise out of and relate
solely to any fraud committed by such Stockholder or (ii) are included within an
Indemnity Claim certificate delivered pursuant to Section 3.01 on or prior to
June 30, 2000 and arise out of and relate solely to any fraud committed by the
Company. "Excess Losses" means Losses that would be payable out of the Escrow
Fund pursuant to the provisions of this Agreement but for the fact that the
Escrow Fund has been fully depleted at the time such payment would otherwise be
made.
ARTICLE II
Appointment of Escrow Agent;
Creation of Escrow
SECTION 2.01. Appointment of Escrow Agent. Parent and the
Representative hereby appoint the Escrow Agent, and the Escrow Agent hereby
agrees to act, as depository and administrator of the Escrow Fund, upon the
terms and conditions set forth below.
SECTION 2.02. Creation of Escrow Fund; Deposit of Escrow Shares. (a)
Pursuant to the Merger Agreement, at the Effective Time Parent shall deposit (on
behalf of the Stockholders with the same effect as if Parent had delivered such
shares to the Stockholders and the Stockholders had delivered such shares to the
Escrow Agent) in escrow with the Escrow Agent, as escrow agent, a stock
certificate or certificates representing the Escrow Shares which shall be
registered in the name of the Escrow Agent, as escrow agent hereunder, or in the
Escrow Agent's discretion, into the name of its nominee. The Escrow Agent shall
have no responsibility for the genuineness, validity, market value, title or
sufficiency for any intended purpose of the Escrow Fund. The Escrow Fund shall
be held and distributed by the Escrow Agent in accordance with the terms and
conditions of this Agreement. The number of Escrow Shares beneficially owned by
each Stockholder is set forth in Schedule 2.04 attached hereto. The Stockholders
hereby authorize Parent to deliver directly to the Escrow Agent all dividends
and other distributions paid in Parent Common Stock made in respect of any
Escrow Shares held in the Escrow Fund, all of which dividends and distributions
(excluding cash dividends or distributions of property (other than securities))
shall
be added to and become part of the Escrow Fund held for the respective
Stockholders on account of whose shares such dividends or distributions were
paid. Any cash dividends or distributions of property (other than securities)
received by the Escrow Agent in respect of the Escrow Fund shall not be added to
the Escrow Fund, but shall be promptly paid by the Escrow Agent to the
Stockholders according to the Escrow Shares held by it for each Stockholder.
Parent, upon depositing the Escrow Shares (and upon depositing any dividends and
other distributions made in respect of the Escrow Shares which are paid in
securities) with the Escrow Agent in the Escrow Fund, as hereinabove provided,
shall deliver to the Escrow Agent three copies of a schedule, signed by an
officer of Parent, identifying the securities being deposited by Parent in the
Escrow Fund, two copies of which schedule shall be countersigned by an
appropriate officer of the Escrow Agent, acknowledging the deposit of such
securities in the Escrow Fund, and returned by the Escrow Agent to Parent and
the Representative. The Escrow Agent shall hold the Escrow Fund in a separate
account and shall invest such account (to the extent of any cash held therein)
and disburse such account as hereinafter provided. The Escrow Fund, less any
amounts therefrom disbursed to Parent, shall be disbursed by the Escrow Agent to
the Stockholders on or after the Expiration Date in accordance with the
provisions of this Agreement.
(b) If any dividends or distributions made on or in respect of the
Escrow Shares that are required to be deposited by the Escrow Agent in the
Escrow Fund as provided pursuant to clause (a) above are received by any
Stockholder prior to the release of such Escrow Share to such Stockholder in
accordance with the provisions of this Agreement, such dividends or
distributions shall not be commingled by such Stockholder with any of its other
funds or property but shall be held separate and apart therefrom, shall be held
in trust for the benefit of the Escrow Agent and shall be forthwith delivered to
the Escrow Agent in the same form as so received (with any necessary
endorsement). The Escrow Agent shall have no responsibility to compel the
delivery of such dividends or other distributions.
(c) Parent and each Stockholder acknowledge and agree that, to the
extent and so long as any of the Escrow Shares are held by the Escrow Agent
hereunder, Parent shall have, as of and from the date such Escrow Shares are
received by the Escrow Agent, a perfected first priority security interest in
such Escrow Shares to secure the payment of the amount, if any, payable by a
Stockholder pursuant to Article I of this Agreement. In connection therewith,
each Stockholder expressly agrees (i) that the Escrow Agent shall perfect
Parent's first priority security interest in the Escrow Shares, (ii) to execute
and deliver
such instruments as Parent may from time to time reasonably request for the
purpose of evidencing and perfecting such security interest and (iii) to execute
and deliver such instruments as Parent and the Representative may from time to
time reasonably request for the purpose of evidencing the release of such
security interest with respect to any Escrow Shares distributed to the
Stockholders in accordance with the provisions of this Agreement. In the event
that any cash portion of the Escrow Shares is invested pursuant to Section 4.01,
the Escrow Agent shall take all actions necessary, including, but not limited
to, appropriate identification on the Escrow Agent's books and records, to
ensure that all such investments are deemed held by the Escrow Agent as Parent's
agent for the purpose of perfecting Parent's first-priority security interest
therein.
SECTION 2.03. Stockholder Rights. While any Escrow Shares are held in
escrow in the Escrow Fund, and pending the disbursement thereof to Parent or the
Stockholders, as the case may be, in connection with any disbursement of
property from the Escrow Fund in accordance with Article III hereof, the
Stockholders will have all rights with respect thereto (including, without
limitation, the right to vote such shares), except (i) the right of possession
thereof, (ii) the right to sell, assign, pledge, hypothecate or otherwise
dispose of such Escrow Shares or any interest therein and (iii) the right to
receive any dividends or other distributions in respect thereof paid in
securities. The Escrow Agent grants a proxy to the Stockholders to the extent
necessary for them to vote their Escrow Shares. The Parent shall deliver any
stockholder communications directly to the Stockholders, and the Escrow Agent
shall not be responsible for voting with regard to the Escrow Shares. The Escrow
Agent shall be under no obligation to exercise rights in the Escrow Shares, and
shall be responsible for only reasonable measures to maintain the physical
safekeeping thereof, and otherwise to perform and observe such duties on its
part as are expressly set forth in this Agreement.
SECTION 2.04. Stockholder Percentage Interest in Escrow Fund. Attached
hereto as Schedule 2.04 is a schedule listing each Stockholder, such
Stockholder's address and Social Security or other tax identification number,
the number of Escrow Shares delivered to the Escrow Agent at the Effective Time
on behalf of such Stockholder, and each Stockholder's percentage interest in the
Escrow Fund. At the time of its delivery to the Escrow Agent of any shares of
Parent Common Stock, Parent shall notify the Escrow Agent of the Stockholder's
account for which such shares are delivered.
ARTICLE III
Distributions from Escrow
SECTION 3.01. Claims by Parent. In the event of the occurrence of an
event that Parent asserts (on or prior to the Expiration Date) constitutes a
Loss against which an Indemnitee is entitled to indemnification pursuant to
Article I of this Agreement (each an "Indemnity Claim"), Parent shall notify the
Representative and the Escrow Agent promptly (and in any event on or prior to
the Expiration Date) of such event, and shall deliver for receipt by the Escrow
Agent a certificate signed by an officer of Parent: (1) stating the aggregate
amount of Parent's Losses or a good faith estimate thereof and (2) specifying in
reasonable detail and with reasonable specificity the individual items of Losses
included in the amount so stated, the date each such item was paid or properly
accrued or arose, or the basis for such anticipated liability, and the nature of
the misrepresentation, breach of warranty or covenant or other matter to which
such item is related.
SECTION 3.02. Claims Not Disputed by Representative. If, within 20
business days after receipt of the notice described in Section 3.01 hereof, the
Representative does not give the notice provided for in Section 3.03 hereof,
Parent shall be entitled to make written demand upon the Escrow Agent that it
retain for future return to Parent as and when the amount of the Loss is
determined pursuant to the provisions hereof, if it is not then determined, or
that it then disburse to Parent, if the amount of the Loss has then been
determined, a number of Escrow Shares having a value equal to the lesser of (i)
the full amount set forth in the notice described in Section 3.01 (plus the
value of all securities held in the Escrow Fund which constitutes, or arose in
respect of, dividends and distributions on such Escrow Shares) and (ii) the
entire Escrow Fund. For purposes of this Agreement, the value of each Escrow
Share returned to Parent in satisfaction of Indemnity Claims shall be equal to
the Closing Date Average Closing Price, as certified by Parent in its Indemnity
Claim.
SECTION 3.03. Claims Disputed by the Representative. If the
Representative disputes an Indemnity Claim described in a notice from Parent
given pursuant to Section 3.01 hereof, or the amount that Parent is claiming on
account of such Indemnity Claim, the Representative shall, within 20 business
days after his receipt of such notice given by Parent, notify the Escrow Agent
and Parent of such dispute in writing, setting forth the basis therefor in
reasonable detail, based on his then good faith belief (the "Dispute Notice").
In the event the Representative
disputes the entire Indemnity Claim, the Escrow Agent shall not distribute any
amount with respect thereto until the Escrow Agent receives a written agreement
signed by the Representative and Parent stating the amount to which Parent is
entitled in connection with such Indemnity Claim, or delivery of a copy of the
final decision of the majority of the arbitrators made in accordance with
Section 3.05 setting forth instructions to the Escrow Agent as to the
distribution of Escrow Shares, if any, that shall be made with respect to any
disputed claim (the "Arbitration Award"), at which time the Escrow Agent shall
disburse to Parent the lesser of (i) a number of Escrow Shares having a value
(determined in accordance with the final sentence of Section 3.02 hereof) equal
to the amount set forth in such agreement or Arbitration Award (plus the value
of all securities held in the Escrow Fund which constitutes, or arose in respect
of, dividends and distributions on such Escrow Shares) and (ii) the entire
Escrow Fund.
SECTION 3.04. Claims Disputed by Representative in Part. In the event
the Representative notifies the Escrow Agent that it disputes part of, but not
all of, an Indemnity Claim, the Escrow Agent shall, if the amount is
undetermined, retain, or, if the amount is determined, distribute to Parent, the
lesser of (i) a number of Escrow Shares having a value (determined in accordance
with the last sentence of Section 3.02 hereof) equal to an amount attributable
to that portion of the Indemnity Claim which is not disputed by the
Representative (together with the value of all securities held in the Escrow
Fund which constitutes, or arose in respect of, dividends and distributions on
such Escrow Shares) and (ii) the entire Escrow Fund. The Escrow Agent shall not
distribute any amount with respect to the balance of the Indemnity Claim except
in accordance with the procedures set forth in Section 3.03.
SECTION 3.05. Arbitration. If the Representative disputes an Indemnity
Claim described in a notice from Parent given pursuant to Section 3.01 hereof,
or the amount that Parent is claiming on account of such Indemnity Claim (the
"Contested Amount"), the matter shall be settled by binding arbitration in
Wilmington, Delaware. All claims shall be settled by three arbitrators in
accordance with the Commercial Arbitration Rules then in effect of the American
Arbitration Association (the "AAA Rules"). If the Representative and Parent are
unable to resolve any such dispute within 45 days after delivery of the Dispute
Notice, the Representative and Parent shall each designate one arbitrator within
15 days after the termination of such 45- day period. The Representative and
Parent shall cause such designated arbitrators mutually to agree upon and
designate a third arbitrator; provided, however, that (i) failing such agreement
within 70 days of delivery of the Dispute Notice,
the third arbitrator shall be appointed in accordance with the AAA Rules and
(ii) if either the Representative or Parent fails to timely designate an
arbitrator, an arbitrator shall be appointed in accordance with AAA Rules.
Parent shall notify the Escrow Agent and the Representative of the selection of
arbitrators pursuant to this Section 3.05 within three business days after the
appointment of the last of such arbitrators, and a summary of the dispute being
submitted to such arbitrators. The non-prevailing party shall pay the fees and
expenses of the three arbitrators. The Representative and Parent shall cause the
arbitrators to decide the matter to be arbitrated pursuant hereto within 30 days
after the appointment of the last arbitrator. The arbitrators' decision shall
relate solely to whether Parent is entitled to receive the Contested Amount (or
a portion thereof) pursuant to the applicable terms of this Agreement. The final
decision of the majority of the arbitrators shall be furnished to the
Representative, Parent and the Escrow Agent in writing and shall constitute the
conclusive determination of the issue in question binding upon the
Representative, the Stockholders and Parent, and shall not be contested by any
of them. Such decision may be used in a court of law only for the purpose of
seeking enforcement of the arbitrators' decision.
SECTION 3.06. Notice To Withhold on Expiration Date; Distribution
Following Expiration Date. (a) On or prior to the Expiration Date, Parent shall
notify the Escrow Agent and the Representative of the amount, if any, to be
retained after the Expiration Date on account of Indemnity Claims with respect
to which Parent has given the notice specified in Section 3.01 hereof which are
not, at such time, absolute as to liability or liquidated as to amount, such
notice to contain the information specified in Section 3.01 to the extent it
requires supplementation or change based on Parent's then knowledge, whereupon
the Escrow Agent shall retain Escrow Shares having a value (determined in
accordance with Section 3.02 hereof) equal to the amount set forth in the notice
given by Parent pursuant to this Section 3.06(a) (plus the value of all shares
held in the Escrow Fund which constitute, or arose in respect of, dividends and
distributions on such Escrow Shares); provided, however, that such amount shall
not exceed the sum (without duplication) of (x) the aggregate amount of all
unresolved Contested Amounts, (y) the aggregate amount of all Indemnity Claims
that are not Contested Amounts but have not been satisfied pursuant to Section
3.02 and (z) the aggregate amount of all Indemnity Claims not disputed by the
Representative but as to which the 20 business day period provided in Section
3.02 has not then elapsed. In the event Parent does not timely provide the
notice required by this Section 3.06(a) all remaining property held in the
Escrow
Fund shall be distributed by the Escrow Agent to the Stockholders promptly after
the Expiration Date.
(b) As soon as practicable following the Expiration Date, such number
of Escrow Shares (including any fractional shares) and such other property as
shall remain in the Escrow Fund, less all Escrow Shares required by Parent to be
retained in the Escrow Fund pursuant to notice given under clause (a) of this
Section 3.06, shall be released from the provisions of this Agreement, submitted
by the Escrow Agent to Parent's transfer agent for transfer, and, upon return,
distributed promptly by the Escrow Agent to the Stockholders, in the proportions
indicated on Schedule 2.04, by first class mail or expedited courier service to
each Stockholder at the address indicated on such Schedule, or such other
address as shall have been specified in a written notice to the Escrow Agent
from the relevant Stockholder or the Representative, with any cash amounts paid
in the form of a check issued by and drawn on the Escrow Agent.
SECTION 3.07. Retention of Escrow Fund After Expiration Date. Upon
receipt of a notice pursuant to Section 3.06(a) hereof, the Escrow Agent shall
continue to hold after the Expiration Date, with respect to each Indemnity Claim
included in such notice, the amount specified by such notice in respect of such
Indemnity Claim until such time as the Escrow Agent receives a written agreement
signed by the Representative and Parent stating the amount, if any, which Parent
is entitled to receive from the Escrow Fund in connection with such Indemnity
Claim, or a copy of an Arbitration Award with respect to such Indemnity Claim,
at which time the Escrow Agent shall return to Parent's transfer agent, with
respect to such Indemnity Claim, Escrow Shares having a value (determined in
accordance with the final sentence of Section 3.02 hereof) equal to the amount
specified in such agreement or Arbitration Award (plus the value of all
securities held in the Escrow Account which constitutes, or arose in respect of,
dividends and distributions on such Escrow Shares) and shall distribute to the
Stockholders, in the proportions indicated on Schedule 2.04, such property, if
any, which the Escrow Agent was holding after the Expiration Date pursuant to
Section 3.06(a) by reason of such Indemnity Claim and which is in excess of the
amount so distributed to Parent with respect thereto; provided, however, that,
to the extent the distribution of such property from the Escrow Fund to the
Stockholders would cause the value of the property remaining in the Escrow Fund
after such distribution to fall below the amount (as stipulated in Parent's
Section 3.06(a) notice) of all still unresolved Indemnity Claims identified in
the Section 3.06(a) notice, such property shall be retained by the Escrow Agent
in the Escrow Fund and shall be
available for distribution to Parent upon the resolution of any unresolved
Indemnity Claims, and such property shall not be distributed to the Stockholders
until such time, if any, as such distribution can be made without causing the
value of all property remaining in the Escrow Fund to fall below the amount of
all remaining unresolved Indemnity Claims identified in the Section 3.06(a)
notice.
SECTION 3.08. Allocation of Shares Distributed to Parent. In the event
Escrow Shares are retained by the Escrow Agent or distributed to Parent pursuant
to any provisions of this Article III, such Escrow Shares shall be taken from
the Escrow Shares deposited by each Stockholder in proportion to such
Stockholder's percentage interest in the Escrow Fund as set forth on Schedule
2.04. In distributing the Escrow Fund hereunder to satisfy an Indemnity Claim or
to distribute the balance of the Escrow Fund, as the case may be, the Escrow
Agent shall round down the number of shares representing each Shareholder's
portion of the Escrow Fund being delivered to the Parent or to a Shareholder, as
the case may be, so that only a whole number of shares are distributed.
ARTICLE IV
Investment of Escrow Deposit and Accounting
SECTION 4.01. Investment of Escrow Fund. All cash held in the Escrow
Fund shall be invested by the Escrow Agent in an insured, interest-bearing money
market account, or in such other investments as Parent and the Representative
may agree in a writing delivered to the Escrow Agent. All interest and other
income earned on the Escrow Fund shall be added to and become part of the Escrow
Fund, and the distribution thereof shall be subject to the terms of this
Agreement. Any losses on investments will be debited to the Escrow Fund, and the
Escrow Agent shall have no liability for investment losses, including losses on
investments required to be liquidated before maturity in order to make a
required distribution from the Escrow Fund.
SECTION 4.02. Accounting. In the event cash is held in the Escrow
Fund, the Escrow Agent shall supply a written account to Parent and the
Representative at the end of each month prior to the Expiration Date in which
there is cash in the Escrow Fund (and thereafter to the extent any amounts
remain in escrow pursuant to Section 3.07 hereof) listing all transactions with
respect to the Escrow Fund during the immediately preceding month.
SECTION 4.03. Sale Instructions. (a) In connection with any sale of
the Escrow Shares pursuant to
Section 5.03(d) or Section 6.01(d) of this Agreement for purposes of paying fees
pursuant to such Sections, the Escrow Agent shall receive and be entitled to
rely upon, prior to taking any action in that regard, written direction from the
Representative as to the manner and method to be undertaken in carrying out such
sale, including without limitation written direction (i) identifying the number
of Escrow Shares to be sold, (ii) identifying the brokerage firm the
Representative requests to be used or instructing the Escrow Agent to use its
affiliated brokerage service and (iii) setting forth any necessary or special
instructions with respect to the sale (including any stop loss or minimum price
per share instruction); and Parent shall execute and deliver any instruments
reasonably required by the Escrow Agent in order to carry out such sale or
liquidation.
(b) The Escrow Agent shall have no responsibility in connection with
such sale other than to make delivery of the Escrow Shares to the selected
brokerage firm, with instructions (including any special instructions provided
by the Representative), and to receive and deposit into the Escrow Fund (to be
administered and distributed in accordance with this Agreement) any net sale
proceeds received therefrom. The Escrow Agent shall have no liability for any
actions or omissions of any such brokerage firm, and shall have no liability for
the price or execution achieved. Without limiting the generality of the
foregoing, the Representative expressly acknowledges that (a) the Escrow Shares
may need to be sent to a transfer agent to be reissued in saleable form, (b) the
Escrow Shares may be subject to transfer restrictions that may limit their
marketability and impose restrictions upon the number or types of purchasers to
whom they can be offered or sold and (c) the Escrow Agent shall have no
liability for any failure or delay (or any price change during any such delay)
on the part of the Representative or any transfer agent, or caused by any
necessary registration or delivery procedures, or compliance with any applicable
transfer restrictions, involved in the transfer of such Escrow Shares.
(c) The net sale proceeds of any such sale of Escrow Shares received
by the Escrow Agent shall be apportioned among the Stockholders on a pro rata
basis as set forth in Schedule 2.04 less a $5.00 per Stockholder fee for the
proration of the net sales price and individual 1099-B Reporting (the "Sales
Administration Fee"). The Sales Administration Fee shall be assessed each day a
sale is effected until the total number of shares specified in a written
direction from the Representative are sold.
SECTION 4.04. Tax Reporting. The parties hereto agree that, for Tax
reporting purposes, all interest or other income earned from the investment of
the Escrow Fund
shall be allocable to the Stockholders in the proportions set forth at Schedule
2.04 as such proportions may be modified due to the receipt by the Escrow Agent
of any additional shares of Parent Common Stock.
SECTION 4.05. Certification of Tax Identification Number. The
Representative agrees to provide the Escrow Agent with each Stockholder's
certified Tax identification number on a completed and executed Form W-9 (or
Form W-8, in the case of non-U.S. persons), to deliver such Form W-9s (or Form
W-8s, in the case of non-U.S. persons) to the Escrow Agent within 30 days from
the date hereof. The Representative has advised the Stockholders that, in the
event their Tax identification numbers are not certified to the Escrow Agent,
the Code may require withholding of a portion of any interest or other income
earned on the investment of the Escrow Fund in accordance with the Code.
ARTICLE V
Representative; Successor Representative
SECTION 5.01. Appointment of Representative. (a) Each of the
Stockholders hereby irrevocably constitutes and appoints Xxxxx Xxxxxxx as such
Stockholder's true and lawful agent and attorney-in-fact to act on such
Stockholder's behalf with respect to any and all Indemnity Claims. In such
representative capacity, Xxxxx Xxxxxxx, or any person who shall succeed in such
representative capacity pursuant to the terms of this Agreement, is referred to
in this Agreement as the "Representative". The Representative shall take, and
the Stockholders agree that the Representative shall take, any and all actions
which he believes are necessary or appropriate under this Agreement for and on
behalf of the Stockholders, as fully as if the Stockholders were acting on their
own behalf, including, without limitation, defending all Indemnity Claims,
consenting to, compromising or settling all Indemnity Claims, conducting
negotiations with Parent and its representatives regarding such claims, dealing
with Parent and the Escrow Agent under this Agreement with respect to all
matters arising under this Agreement, taking any and all other actions specified
in or contemplated by this Agreement and engaging counsel, accountants or other
representatives in connection with the foregoing matters. Parent and the Escrow
Agent shall have the right to rely upon all actions taken or omitted to be taken
by the Representative pursuant to this Agreement, all of which actions or
omissions shall be legally binding upon each of the Stockholders. The
Representative shall have reasonable access to information of and concerning any
Indemnity Claim and which is in the possession, custody or control of the
Company and the
reasonable assistance of the Company's officers and employees for purposes of
performing the Representative's duties under this Agreement and exercising its
rights under this Agreement, including for the purpose of evaluating any
Indemnity Claim against the Escrow Fund by Parent; provided that the
Representative shall treat confidentially and not disclose any nonpublic
information from or concerning any Indemnity Claim to anyone (except to the
Representative's attorneys, accountants and other advisers, to former
stockholders of the Company whose shares are held in escrow pursuant to this
Agreement, to the arbitrators appointed to resolve disputes pursuant to this
Agreement, and on a need- to-know basis to other individuals who agree to keep
such information confidential).
(b) Each Stockholder hereby ratifies and confirms, and hereby agrees
to ratify and confirm, any action taken by the Representative in the exercise of
the agency and power of attorney granted to the Representative pursuant to this
Section 5.01, which agency and power of attorney, being coupled with an
interest, is irrevocable and a durable agency and power of attorney and shall
survive the death, incapacity or incompetence of such Stockholder.
(c) Each Stockholder agrees and acknowledges that the Representative
shall represent and bind all the Stockholders and that Parent and the Escrow
Agent shall be entitled to rely exclusively on the Representative for all
purposes specified herein, and that no suit, action or proceeding may be brought
against Parent, the Escrow Agent or any of their respective affiliates by any
Stockholder with respect to any matter herein that is to be effected by the
Representative.
(d) Until notified in writing by the Representative that he has
resigned or by a majority in interest of the Stockholders that he has been
removed, the Escrow Agent may act upon the directions, instructions and notices
of the Representative who is an original party to this Agreement, and
thereafter, upon the directions, instructions and notices of any successor named
in a writing executed by a majority-in-interest of the Stockholders filed with
the Escrow Agent.
SECTION 5.02. Reliance. In the performance of his duties hereunder,
the Representative shall be entitled to rely upon any document or instrument
reasonably believed by him to be genuine, accurate as to content and signed by
any Stockholder or Parent. The Representative may assume that any person
purporting to give any notice in accordance with the provisions hereof has been
duly authorized to do so.
SECTION 5.03. Liability. (a) If the Representative is required by the
terms hereof to determine the occurrence of any event or contingency, the
Representative shall, in making such determination, be liable to the
Stockholders only for his proven bad faith or wilful misconduct, as determined
in light of all the circumstances, including the time and facilities available
to him in the ordinary conduct of business. In determining the occurrence of any
such event or contingency, the Representative may request from any of the
Stockholders or any other person such reasonable additional evidence as the
Representative in his sole discretion may deem necessary to determine any fact
relating to the occurrence of such event or contingency, and may at any time
inquire of and consult with others, including any of the Stockholders, and the
Representative shall not be liable to any Stockholder for any damages resulting
from his delay in acting hereunder pending his receipt and examination of
additional evidence requested by him.
(b) The Representative is authorized, in his sole discretion, to
comply with final, nonappealable orders issued or process entered by any court
of competent jurisdiction with respect to the Escrow Fund. If any portion of the
Escrow Fund is disbursed to the Representative and 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 and in any such event, the Representative is authorized, in his
sole discretion, but in good faith, to rely upon and comply with any such order,
writ, judgment or decree which he is advised by legal counsel selected by him is
binding upon him without the need for appeal or other action; and if the
Representative complies with any such order, writ, judgment or decree, he shall
not be liable to any Stockholder or to any other Person by reason of such
compliance even though such order, writ, judgment or decree may be subsequently
reversed, modified, annulled, set aside or vacated.
(c) In no event shall the Representative be liable to any Stockholder
for incidental, indirect, special, consequential, or punitive damages.
(d) The Representative shall be entitled to reimbursement on demand
out of the Escrow Fund for expenses in an aggregate amount not to exceed
$2,000,000 that are incurred in connection with his performance hereunder. If
the aggregate amount of such expenses exceeds $2,000,000, then each Stockholder
shall be liable for its proportionate
percentage of the expenses (including reasonable attorneys' fees) paid or
incurred by the Representative that exceeds $2,000,000. Following all
distributions of the Escrow Fund required to be made to Parent under the terms
of this Agreement, if any, the Representative shall be entitled, but not limited
to, reimbursement of any such expenses from the Escrow Fund prior to any
distribution thereof to the Stockholders.
SECTION 5.04. Successor Representative. If Xxxxx Xxxxxxx resigns (by
giving at least 60 days' written notice of such resignation to Parent and the
Escrow Agent) or dies or becomes incapable of continuing to act as the
Representative for any reason, a successor Representative shall be appointed by
a writing signed by Stockholders holding in the aggregate a majority of the
Stockholders' interest in the Escrow Fund, such appointment to become effective
upon the delivery of executed counterparts of such writing to Parent and the
Escrow Agent, together with an acknowledgment signed by the successor
Representative named in such writing that he or she accepts the responsibility
of successor Representative and agrees to perform and be bound by all provisions
of this Agreement applicable to the Representative. Pending the election of a
successor Representative, the Stockholder that owns the largest number of Escrow
Shares immediately following the Effective Time (excluding the former
Representative) shall act as the interim Representative. Failing such
appointment, the Escrow Agent or any Stockholder may apply to a court of
competent jurisdiction for the appointment of a successor Representative.
SECTION 5.05. Removal of Representative. Stockholders who in the
aggregate hold at least a majority of the Stockholders' interest in the Escrow
Fund shall have the right at any time during the term of this Agreement to
remove the then-acting Representative and to appoint a successor Representative;
provided, however, that neither such removal of the then acting Representative
nor such appointment of a successor Representative shall be effective until the
delivery to Parent and the Escrow Agent of executed counterparts of a writing
signed by each such Stockholder with respect to such removal and appointment,
together with an acknowledgment signed by the successor Representative appointed
in such writing that he or she accepts the responsibility of successor
Representative and agrees to perform and be bound by all of the provisions of
this Agreement applicable to the Representative.
SECTION 5.06. Authority of Successor Representative. Each interim and
successor Representative shall have all of the power, authority, rights and
privileges conferred by this Agreement upon the original
Representative, and the term "Representative" as used herein shall be deemed to
include any interim or successor Representative.
SECTION 5.07. Notices. Any notices given by Parent or the Escrow Agent
while there is no Representative shall be sufficiently given if given to the
other, with a copy provided directly to the Stockholder holding the largest
number of Escrow Shares immediately following the Effective time (excluding the
former Representative) pursuant to Schedule 2.04. A copy of all such notices
shall be delivered to the successor Representative upon his or her appointment
and he or she shall have 30 days thereafter to take such actions as may be
required under the terms of this Agreement in connection with any such notice.
ARTICLE VI
Escrow Agent
SECTION 6.01. Escrow Agent Duties, Protections, Indemnifications, Etc.
(a) The other parties hereto acknowledge and agree that the Escrow Agent (i)
shall not be responsible for any of the agreements referred to herein but shall
be obligated only for the performance of such duties as are specifically set
forth in this Escrow Agreement; (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 making any
investigation into the facts or matters set forth therein or otherwise
determining the accuracy or rightfulness thereof; and (iv) may consult counsel
satisfactory to it, including in-house counsel, and the written 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 written advice or opinion of such counsel.
(b) Neither the Escrow Agent nor any of its directors, officers or
employers 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.
Parent and the Stockholders as a group, in proportion to their respective
percentage interests in the Escrow Fund, jointly and severally, covenant and
agree to indemnify the Escrow Agent and hold it harmless without limitation from
and against any loss, liability or expense of any nature incurred by the Escrow
Agent arising out of or in connection with this Agreement or with the
administration of its duties hereunder, including, but not limited to, 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 the Escrow Agent's gross negligence, bad
faith or willful misconduct. In no event shall the Escrow Agent be liable for
indirect, punitive, special or consequential damages.
(c) The Stockholders, severally and not jointly, in proportion to
their respective percentage interests in the Escrow Fund, 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 the Escrow Agent harmless from and against any additions for late
payment, interest, penalties and other expenses, that may be assessed against
the Escrow Agent on any such payment or other activities under this Agreement.
The Stockholders undertake to instruct the Escrow Agent in writing with respect
to the Escrow Agent's responsibility for withholding and other Taxes,
assessments or other governmental charges, certifications and governmental
reporting in connection with its acting as Escrow Agent under this Agreement.
(d) Parent, on the one hand, and the Stockholders, on the other hand,
agree to each pay or reimburse one-half of the Escrow Agent's fees and expenses
(up to an aggregate $1,800) for any legal fees and expenses incurred in
connection with the preparation of this Agreement and to each pay one-half of
the Escrow Agent's reasonable compensation for its normal services hereunder in
accordance with the fee schedule attached as Schedule 6.01(d) hereto, which may
be subject to change on an annual basis. The Escrow Agent shall be entitled to
reimbursement on demand for all expenses incurred 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 the Escrow Agent in connection with
the resolution of any claim by any party hereunder. The Escrow Agent may deduct
each Stockholder's portion of such fees and expenses from the Escrow Fund.
(e) The Escrow Agent shall have no more or less responsibility or
liability on account of any action or
omission of any book-entry depository, securities intermediary or other
subescrow agent employed by the Escrow Agent than any such book-entry
depository, securities intermediary or other subescrow agent has to the Escrow
Agent, except to the extent that such action or omission of any book-entry
depository, securities intermediary or other subescrow agent was caused by the
Escrow Agent's own negligence, bad faith or wilful misconduct in breach of this
Agreement.
(f) The provisions of paragraphs (b), (c) and (d) of this Section 6.01
shall survive the resignation or removal of the Escrow Agent or the termination
of this Agreement.
SECTION 6.02. Disputes. In the event that the Escrow Agent shall be
uncertain as to its duties or rights hereunder, or shall receive instructions
from any party hereto with respect to the Escrow Fund which, in its opinion, are
in conflict with any of the provisions of this Agreement, it shall be entitled
to refrain from taking any action at its sole discretion and election until such
time as there has been a final determination of the rights of Parent and the
Representative with respect to the Escrow Fund (or relevant portion thereof).
For purposes of this Section 6.02, there shall be deemed to have been a final
determination of the rights of Parent and the Representative with respect to the
Escrow Fund (or relevant portion thereof) at such time as the Escrow Agent shall
receive (i) an executed counterpart of an agreement between the Representative
and Parent or (ii) a copy of an Arbitration Award, which provides for the
disposition of the Escrow Fund (or relevant portion thereof).
SECTION 6.03. Resignation. The Escrow Agent may at any time resign and
be discharged of the duties imposed hereunder (but without prejudice for any
liability for bad faith, gross negligence or wilful misconduct hereunder) by
giving notice to the Representative and Parent at least 60 business days prior
to the date specified for such resignation to take effect, in which case, upon
the effective date of such resignation:
(a) all property then held by the Escrow Agent hereunder shall be
delivered by it to such person as may be designated in writing by Parent
and the Representative, whereupon the Escrow Agent's obligations hereunder
shall cease and terminate;
(b) if no such person has been designated by such date, all
obligations of the Escrow Agent hereunder shall, nevertheless, cease and
terminate, subject to clause (c) below; and
(c) the Escrow Agent's sole responsibility thereafter shall be to (i)
keep all property then held by it (and to make the investments as
hereinbefore provided) and to account for and deliver the same to the
successor escrow agent designated in writing by Parent and the
Representative or, if no such successor escrow agent shall have been so
designated, in accordance with the directions of an Arbitration Award, and
the provisions of Section 6.01(d) and Section 6.01(e) shall remain in
effect, or (ii) deposit the Escrow Fund with a court of competent
jurisdiction, whereupon its duties hereunder shall terminate.
SECTION 6.04. Removal of Escrow Agent. Parent and the Representative
may, upon at least 30 business days prior written notice to the Escrow Agent
executed by each of them, dismiss the Escrow Agent hereunder and appoint a
successor. In such event, the Escrow Agent shall promptly account for and
deliver to the successor escrow agent named in such notice the then balance of
the Escrow Fund, including all investments thereof and accrued income thereon.
Upon acceptance thereof and of such accounting by such successor escrow agent,
and upon reimbursement to the Escrow Agent of all expenses and other amounts due
to it hereunder through the date of such accounting and delivery, the Escrow
Agent shall be released and discharged from all of its duties and obligations
hereunder, but without prejudice to any liability of the Escrow Agent for its
bad faith, gross negligence or wilful misconduct hereunder.
ARTICLE VII
Representations and Warranties
SECTION 7.01. Representations and Warranties of the Stockholders. Each
Stockholder hereby, severally and not jointly, represents and warrants to Parent
as follows:
(a) Authority. Such Stockholder has all requisite power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by such Stockholder. This Agreement has been duly executed and
delivered by such Stockholder and, assuming this Agreement constitutes a valid
and binding obligation of Parent, constitutes a valid and binding obligation of
such Stockholder enforceable against such Stockholder in accordance with its
terms. Neither the execution, delivery or performance of this Agreement by such
Stockholder nor the consummation by such Stockholder of the transactions
contemplated by the Merger Agreement or hereby
will violate any Order or any Law applicable to such Stockholder or any of such
Stockholder's properties or assets, including such Stockholder's shares of
Company Capital Stock.
(b) The Shares. Such Stockholder's shares of Company Capital Stock set
forth opposite such Stockholder's name as Schedule 7.01(b) attached hereto (the
"Shares") and the certificates representing such Shares are as of the date of
this Agreement held by such Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, and such Stockholder owns such Shares, free and
clear of any Liens, proxies, voting trusts or agreements, understandings or
arrangements. Such Stockholder owns of record or beneficially no shares of
Company Class A Common Stock, Company Class B Common Stock or Company Series A
Preferred Stock other than such Stockholder's Shares and shares of Company Class
B Common Stock issuable upon the exercise of Stock Options.
SECTION 7.02. Representation and Warranty of Parent. Parent hereby
represents and warrants to such Stockholders as follows:
(a) Authority. Parent has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation by Parent of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and no other
corporate proceedings on the part of Parent are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Parent and, when executed and delivered
by the Stockholders, constitutes a legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms. Neither the
execution and delivery of this Agreement by Parent nor the consummation by
Parent of the transactions contemplated hereby will violate any Order or any Law
applicable to Parent or any of Parent's properties or assets.
ARTICLE VIII
Miscellaneous
SECTION 8.01. Term. This Agreement shall continue in force until the
final distribution of all amounts held by the Escrow Agent hereunder.
SECTION 8.02. Notices. (a) All notices, instructions and other
communications given hereunder or in connection herewith shall be in writing.
Any such notice, instruction or communication shall be sent either (i) by
registered or certified mail, return receipt requested, postage prepaid, or (ii)
via a reputable nationwide overnight courier service, in each case to the
address set forth below. Any such notice, instruction or communication shall be
deemed to have been delivered and received three business days after it is sent
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service.
If to Parent:
Lycos, Inc.
000-0 Xxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Stockholders or the Representative, to the
Representative, at:
Flatiron Partners
000 Xxxx Xxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention:Xxxxxxx Xxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Escrow Agent, to:
By Overnight or Courier:
State Street Corporation
Corporate Trust
0 Xxxxxx xx XxXxxxxxx
Xxxxxx, XX 00000-0000
By Mail:
State Street Corporation
Corporate Trust
X.X. Xxx 000
Xxxxxx, XX 00000-0000
Attention: Lycos/Barbados Escrow
Fax: (000) 000-0000
or, in each case, to such other address as may be specified in writing to the
other parties.
Any party may give any written notice, instruction or communication in
connection with this Agreement using any other means (including personal
delivery, telecopy or ordinary mail), but no such notice, instruction or
communication shall be deemed to have been delivered unless and until it is
actually received by the party to whom it was sent. Any party may change the
address to which notices, instructions or communications are to be delivered by
giving the other parties to this Agreement notice thereof in the manner set
forth in this Section 8.02.
(b) Wiring Instructions. Any funds to be paid to the Escrow Agent
hereunder shall be sent by wire transfer pursuant to the following instructions
(or by such method of payment and pursuant to such instruction as may have been
given in advance and in writing by the Escrow Agent, in accordance with Section
7.02(a) above).
If to the Escrow Agent:
Bank: State Street Bank & Trust Company
ABA #: 0110 0002 8
A/C #: 0000-000-0
Attn: Corporate Trust Department
Ref: Lycos/Barbados Escrow
SECTION 8.03. Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective representatives,
successors and assigns. Neither this Agreement nor any rights, duties or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the parties hereto
(except as contemplated by Article V and Article VI hereof with respect to the
successor Representative or any successor escrow agent).
SECTION 8.04. Governing Law. The parties hereto agree that this
Agreement, and the respective rights, duties and obligations of the parties
hereunder, shall be governed by and continued in accordance with the laws of the
State of Delaware, without giving effect to principles of conflicts of law
thereunder. Each of the parties hereby (i) irrevocably consents and agrees that
any legal or equitable action or proceeding arising under or in connection with
this Agreement shall be brought exclusively in any court sitting in the State of
Delaware and any court to which an appeal may be taken in any such litigation,
provided, however, that the Escrow Agent may in its discretion, bring any action
in any court sitting in Boston, Massachusetts and (ii) by execution and delivery
of this Agreement, irrevocably submits to and accepts, with respect to any such
action or proceeding, for itself and in respect of its properties and assets,
generally and unconditionally, the jurisdiction of the aforesaid courts, and
irrevocably waives any and all rights such party may now or hereafter have to
object to such jurisdiction.
SECTION 8.05. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original.
SECTION 8.06. Headings. The Article and Section headings in this
Agreement are for convenience only and do not constitute part of this Agreement.
SECTION 8.07. Amendment. This Agreement supersedes any prior
agreements among the parties relating to the subject matter hereof (except for
the Merger Agreement and the documents executed and delivered in connection
therewith) and can be amended only by a writing signed by Parent, the Escrow
Agent and the Representative or their respective successors in interest.
SECTION 8.08. Force Majeure. No party hereto shall 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.
SECTION 8.09. Reproduction of Documents. This Agreement and all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications
which may hereafter be executed and (b) certificates and other information
previously or hereafter furnished, may be reproduced by any photographic,
photostatic, microfilm, optical disk, micro-card, miniature photographic or
other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 8.10. Certain Definitions. As used in this Agreement, the
following terms shall have the meanings specified below:
"Indemnitee" shall mean Parent, any Affiliate of Parent, the Company
and any subsidiary of the Company, and their respective successors and assigns.
"Post-Closing Tax Period" shall mean all taxable periods beginning
after the Closing Date and the portion ending after the Closing Date of any
taxable period that includes (but does not end on) such day.
"Pre-Closing Tax Period" shall mean all taxable periods ending on or
before the Closing Date and the portion ending on the Closing Date of any
taxable period that includes (but does not end on) such day.
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be duly executed as of the date first written above.
LYCOS, INC.,
by /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title:Chief Operating Officer,
Chief Financial Officer
REPRESENTATIVE,
by
/s/Xxxxx Xxxxxxx
-----------------------------------
Name: Xxxxx Xxxxxxx
STATE STREET BANK AND TRUST COMPANY
as Escrow Agent, as Escrow Agent,
by
/s/Xxxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Asst. Vice President
STOCKHOLDERS:
/s/Xxxxxx X. Xxxx
----------------------------------------
Xxxxxx X. Xxxx
/s/Xxxxxx Xxxxxxx
----------------------------------------
Xxxxxx Xxxxxxx
/s/Xxxx X. Xxxxx
----------------------------------------
Xxxx X. Xxxxx
/s/Xxxxx Xxxxxxxx
----------------------------------------
Xxxxx Xxxxxxxx
/s/Xxxxxx Xxxxxxxxx
----------------------------------------
Xxxxxx Xxxxxxxxx
XXXXXX X. XXXX IRREVOCABLE
GENERATION-SKIPPING TRUST
By: /s/Xxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxx X. Xxxx
Title: Trustee
CHASE VENTURE CAPITAL ASSOCIATES,
L.P.
By: CHASE CAPITAL PARTNERS,
Its General Partner
By:
/s/Xxxxxxx Xxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxx
Title: Managing Partner
THE FLATIRON FUND 1998/99, LLC
By:
/s/Xxxxx Xxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxx
Title: Managing Member
FLATIRON ASSOCIATES, LLC
By:
/s/Xxxxx Xxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxx
Title: Managing Member
SOFTBANK TECHNOLOGY VENTURES IV,
L.P.
By: STV IV, LLC
Its General Partner
By:
/s/Xxxxxxx X. Xxx
-------------------------------
Name: Xxxxxxx X. Xxx
Title: Partner
SOFTBANK TECHNOLOGY ADVISORS FUND,
L.P.
By: STV IV, LLC
Its General Partner
By:
/s/Xxxxxxx X. Xxx
-------------------------------
Name: Xxxxxxx X. Xxx
Title: Partner
HIGHLAND CAPITAL PARTNERS IV
LIMITED PARTNERHSIP
By: HIGHLAND MANAGEMENT PARTNERS
IV LLC
Its General Partner
By:
/s/Xxxxxx Nova
-------------------------------
Name: Xxxxxx Nova
Title: Managing General
Partner
HIGHLAND ENTREPRENEUR'S FUND IV
LIMITED PARTNERSHIP
By: HIGHLAND ENTREPRENTEUR'S FUND
IV LLC
Its General Partner
By:
/s/Xxxxxx Nova
-------------------------------
Name: Xxxxxx Nova
Title: Managing General
Partner
GENERAL CATALYST, LLC
By: FC CAPITAL PARTNERS, LLC
Its General Partner
By:
/s/Xxxxx Xxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxx
Title: CEO
GAMESVILLE INVESTORS, LLC
By: FC CAPITAL PARTNERS, LLC
Its General Partner
By:
/s/Xxxxx Xxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxx
Title: CEO
THE CIT GROUP/EQUITY INVESTMENTS,
INC.
By:
/s/Xxxx Xxxxxx Xxxx
-------------------------------
Name: Xxxx Xxxxxx Veen
Title: Vice President
XXXXX X. XXXXXXX AS TRUSTEE OF THE
XXXXX X. XXXXXXX LIVING TRUST UNDER
DECLARATION OF TRUST DATED
NOVEMBER 22, 1996
By:
/s/Xxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Trustee
Schedule I to the
Indemnity and Escrow Agreement
"Any Losses arising out of the offer letter from the Company to Xxxxxxx Xxxxxxx
dated September 1, 1999, other than compensation or benefits paid in connection
with Xx. Xxxxxxx'x employment."
