EXHIBIT E
INDEMNIFICATION AND ESCROW AGREEMENT
THIS INDEMNIFICATION AND ESCROW AGREEMENT (this "Agreement") is
entered into as of the ____ day of ____________, 2000 by and among Reckson
Service Industries, Inc., a Delaware corporation ("RSI"), CarrAmerica Realty
Corporation, a Maryland corporation ("CarrAmerica") and [other shareholders to
be added per CarrAmerica's instructions, collectively, the "Shareholders" and
individually a "Shareholder")] and ____________________, a __________
corporation, as escrow agent (the "Escrow Agent") hereunder.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, RSI, CarrAmerica, VANTAS Incorporated, a Nevada corporation
("VANTAS"), and HQ Global Workplaces, Inc., a Delaware corporation ("HQGW"),
have entered into an Agreement and Plan of Merger dated as of January __, 2000
(the "Merger Agreement") pursuant to which VANTAS will merge with and into
HQGW ("the Merger");
WHEREAS, on the date hereof, pursuant to an agreement among
[the/certain] Shareholders and RSI dated as of January __, 2000 (the "Stock
Purchase Agreement"), [certain/each] of the Shareholders are selling to RSI,
and RSI is purchasing from such Shareholders, that number of the shares of
voting common stock, par value $.01 per share (the "Voting Common Stock"), and
non-voting common stock, par value $.01 per share (the "Non-Voting Common
Stock" and together with the Voting Common Stock, collectively, the "Shares"),
of HQGW as set forth in, and subject to the terms and conditions of, the Stock
Purchase Agreement for $____ per share in cash for an aggregate purchase price
of $______ (the "Share Consideration");
WHEREAS, on the date hereof, pursuant to the Merger Agreement, each
issued and outstanding share of (A) Common Stock, par value $.01 per share
("VANTAS Common Stock"), of VANTAS shall be converted into the right to
receive $_____ per share in cash and (B) (i) Series A Convertible Preferred
Stock, par value $ ___ per share, of VANTAS (the "Series A Stock"), (ii)
Series B Convertible Preferred Stock, par value $____ per share, of VANTAS
(the "Series B Stock"), (iii) Series C Convertible Preferred Stock, par value
$ _______ per share, of VANTAS (the "Series C Stock"), (iv) Series D
Convertible Preferred Stock, par value $ _______ per share, of VANTAS (the
"Series D Stock"), and (v) Series E Convertible Preferred Stock, par value
$____ per share of VANTAS (the "Series E Stock"), other than shares of Series
A Stock, Series B Stock, Series C Stock, Series D Stock and Series E Stock
held in the treasury of VANTAS, are, by virtue of the Merger and without any
action on the part of the holder thereof, being converted into the right to
receive ______ shares of Voting Common Stock ("VANTAS' Share Consideration");
WHEREAS, as a condition to the consummation by VANTAS and/or RSI, as
applicable, of the transactions contemplated by the Merger Agreement, the
Stock Purchase Agreement and that certain agreement by and between VANTAS and
CarrAmerica with respect to the purchase and sale of all of the outstanding
capital stock of Omni Offices (UK) Limited ("HQ UK") and Omni Offices (Lux)
1929 Holding Company, S.A. ("HQ LuxCo") (the "UK Agreement"), the Shareholders
hereby have agreed to indemnify and hold harmless RSI from and against certain
losses from certain matters upon the terms and conditions provided herein;
WHEREAS, as a condition to the consummation by HQGW and the
applicable Shareholders of the transactions contemplated by the Merger
Agreement, the Stock Purchase Agreement and the UK Agreement, RSI has agreed
to indemnify and hold harmless the Shareholders from and against certain
losses from certain matters upon the terms and conditions provided herein;
WHEREAS, in connection with the Shareholders' indemnification
obligations, the parties have agreed that the Shareholders are depositing an
aggregate of ___ shares of Voting Common Stock and ____ shares of Non-Voting
Common Stock (collectively, the "Shareholder Indemnification Shares") and/or
certain cash (the "Shareholder Cash Collateral") with the Escrow Agent to be
held and disbursed by the Escrow Agent in accordance with this Agreement;
WHEREAS, in connection with RSI's indemnification obligations, the
parties have agreed that RSI is depositing an aggregate of ____ shares of
Voting Common Stock (the "RSI Indemnification Shares", and together with the
Shareholder Indemnification Shares, the "Indemnification Shares") with the
Escrow Agent to be held and disbursed by the Escrow Agent in accordance with
this Agreement;
WHEREAS, capitalized words and phrases used and not defined herein
shall have the meanings ascribed to them in the Merger Agreement; and
WHEREAS, the Escrow Agent is willing to establish and administer
this escrow on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
1. Certain Definitions. As used in this Agreement, certain
capitalized terms not otherwise defined herein shall have
the following respective meanings:
"Cash Collateral" shall mean the Shareholder Cash Collateral and any
cash deposited by RSI or any Shareholder in its Escrow Account in substitution
of RSI Indemnification Shares or Shareholder Indemnification Shares in
accordance with Section 2(b).
"Company Level Loss" shall mean any loss, liability, claim, damage
or expense (including reasonable legal fees and expenses) directly or
indirectly incurred by HQGW or its Subsidiaries and VANTAS or its Subsidiaries
respectively; it being understood that a Company Level Loss shall not include
any consequential, incidental or punitive damages or any Direct Loss.
"Loss" or "Losses" shall mean a Company Level Loss or a Direct Loss.
"Direct Loss" shall mean any loss, liability, claim, damage or
expense (including reasonable legal fees and expenses) incurred by (i) any
Shareholder Indemnitee arising from, relating to or as a result of the
inaccuracy at the time made or deemed made of any of the representations or
warranties set forth in: (a) Section 5(B) of the Merger Agreement; and (b)
Section 5 of the Stock Purchase Agreement; or (ii) RSI Indemnitees arising
from, relating to, or as a result of the inaccuracy at the time made or deemed
made of any of the representations or warranties set forth in: (a) Section
4(B) of the Merger Agreement; (b) Section 4 of the Stock Purchase Agreement
and (c) Article II, Section (B) of the UK Agreement; it being understood that
a Direct Loss shall not include (x) any consequential, incidental or punitive
damages, (y) any loss or damages suffered by such party as a result of the
diminution in value (either directly or indirectly) of the interest held by
such party in the Surviving Corporation, or (z) any Company Level Loss.
"Market Value" shall mean $_____ per share [the price of a share of
Common Stock under the Stock Purchase Agreement].
"Ownership Percentage" shall mean, with respect to a Shareholder,
the percentage set forth opposite such Shareholder's name on Schedule A
attached hereto [calculated as a fraction, the numerator of which is the
number of shares of all classes of capital stock of HQGW held by such person
immediately prior to the Effective Time, and the denominator of which is the
total number of shares of all classes of capital stock of HQGW held by all
Shareholders who are parties to this Agreement immediately prior to the
Effective Time].
"RSI Indemnitees" shall mean RSI and its directors, officers,
employees, shareholders, agents and representatives.
"RSI's Indemnification Share" shall mean one (1) minus the
Shareholder's Indemnification Share.
"Shareholder Indemnitees" shall mean each Shareholder and its
directors, officers, employees, shareholders, agents and representatives.
"Shareholder Litigation" shall mean the legal proceedings disclosed
in Schedule 4(p) of the Merger Agreement under the caption "Omni Offices, Inc.
and CarrAmerica Realty Corporation v. Xxxxxx Xxxxxxxx and Xxxxxx Xxxxxx" and
any and all other future claims, counterclaims, causes of actions or other
proceedings threatened or initiated by or on behalf of Xxxxxx Xxxxxx
("Arcoro") or Xxxxxx Xxxxxxxx ("Kaidanow") that relate to facts or
circumstances or alleged facts or alleged circumstances arising on or prior to
the Closing Date, other than any such claims, causes of action or other
proceedings with respect to and only to the extent of allegations thereon that
any information supplied in writing by RSI to CarrAmerica for inclusion in
materials that HQGW delivers to Arcoro or Kaidanow in connection with the
Merger contains any untrue statement of a material fact with respect to RSI or
VANTAS or omits to state a material fact necessary in order to make the
statements therein with respect to RSI or VANTAS not misleading.
"Shareholders' Indemnification Share" shall mean the
aggregate percentage ownership interest of the Voting Common Stock and
Non-Voting Common Stock of Holdco owned by the Shareholders immediately after
the Closing.
2. Establishment of Escrow Account.
(a) Each Shareholder and RSI are contemporaneously with the
execution and delivery of this Agreement by each of the parties delivering the
number of Indemnification Shares and/or the amount of Cash Collateral set
forth opposite its name on Schedule A hereto to the Escrow Agent for deposit
into separate escrow accounts (each, an "Escrow Account" and collectively, the
"Escrow Accounts") by the Escrow Agent and the Escrow Agent hereby
acknowledges receipt of the same. All Indemnification Shares and Cash
Collateral in the Escrow Accounts shall be available for distribution by the
Escrow Agent, subject to the provisions of this Agreement, to reimburse any
RSI Indemnitee or any Shareholder Indemnitee, as the case may be, in respect
of any Losses that are indemnifiable pursuant to this Agreement.
Notwithstanding the escrow of the Indemnification Shares, dividends and other
distributions declared and paid on Indemnification Shares held in escrow shall
continue to be paid by HQGW to the respective Shareholders and RSI, all voting
rights with respect to such shares shall inure to the benefit of and be
enjoyed by the respective Shareholders and RSI, and such Shareholders and RSI
shall be the legal and beneficial owners of such shares for all purposes
subject to the terms of this Agreement; provided, that the parties agree that
(i) the Surviving Corporation shall deposit with the Escrow Agent any
securities issued to the Shareholders or RSI in respect of any Indemnification
Shares held in escrow as a result of a stock split or combination of shares of
Voting Common Stock or Non-Voting Common Stock, as the case may be, payment of
a stock dividend or other stock distribution made without receipt of
consideration therefor in or on the Voting Common Stock or Non-Voting Common
Stock, as the case may be, or change of shares of the Voting Common Stock or
Non-Voting Common Stock, as the case may be, into any other securities
pursuant to or as part of a business combination or otherwise, and (ii) such
securities shall be held by the Escrow Agent as, and shall be included within
the definition of, Indemnification Shares, as the case may be; provided,
however, notwithstanding the foregoing proviso, to the extent that any such
distribution of securities is properly taxable as a dividend for federal
income tax purposes, HQGW shall distribute such securities to the respective
Shareholders and RSI. The Escrow Agent agrees that it shall invest any Cash
Collateral in an interest-bearing money market account. The Escrow Agent shall
not have any liability for any loss sustained as a result of any investment
made pursuant to the preceding sentence or as a result of any liquidation of
any such investment prior to its maturity. Any interest earned on any Cash
Collateral shall not be used to increase the amount of the Escrow Account of
any party hereto and shall be paid to the applicable depositor of the Escrow
Account from time to time upon demand, to the extent possible.
(b) At any time and from time to time after the Closing Date, any or
all of the Indemnification Shares deposited by any Shareholder or RSI in its
Escrow Account on the Closing Date may be withdrawn upon at least five (5)
business days' prior notice by RSI or the Shareholders, as applicable, to the
other, but if and only if simultaneously with such withdrawal the withdrawing
party delivers immediately available funds to the Escrow Agent for deposit
into such party's Escrow Account in an amount equal to the aggregate Market
Value of the number of Indemnification Shares so withdrawn.
3. Tax Indemnification.
(a) Tax Indemnification by Shareholders. Subject to the limitations
of indemnification pursuant to Section 5, the Shareholders severally, based on
each such Shareholder's Ownership Percentage, shall indemnify the RSI
Indemnitees against and hold them harmless from (i) any Loss incurred by
reason of any liability of HQGW and its Subsidiaries for Taxes for any
Pre-Closing Tax Period, (ii) any Loss incurred by reason of any liability for
Taxes of the Shareholders or any other person (other than HQGW) which is or
has ever been affiliated with HQGW and its Subsidiaries, and (iii) any Loss
incurred by reason of any liability for reasonable legal, accounting,
appraisal, consulting or similar fees and expenses for any item attributable
to any item in clause (i) or (ii) above.
(b) Tax Indemnification by RSI. Subject to the limitations of
indemnification pursuant to Section 5, RSI shall indemnify the Shareholder
Indemnitees against and hold them harmless from (i) any Loss incurred by
reason of any liability of VANTAS and its Subsidiaries for Taxes for any
Pre-Closing Tax Period, (ii) any Loss incurred by reason of any liability for
Taxes of RSI or any other person (other than VANTAS and its Subsidiaries)
which has ever been affiliated with RSI and its Subsidiaries, and (iii) any
Loss incurred by reason of any liability for reasonable legal, accounting,
appraisal, consulting or similar fees and expenses for any item attributable
to any item in clause (i) or (ii) above.
(c) Straddle Period. For purposes of subparagraphs (a) and (b)
above, in the case of any taxable period that includes (but does not end on)
the Closing Date (a "Straddle Period"):
(i) real, personal and intangible property Taxes ("Property Taxes")
of HQGW and its Subsidiaries and VANTAS and its Subsidiaries,
respectively, for any Pre-Closing Tax Period (other than Taxes imposed in
connection with the Merger or otherwise in connection with this Agreement
or the transactions contemplated hereby) shall be equal to the amount of
such Property Taxes of HQGW and its Subsidiaries and VANTAS and its
Subsidiaries, respectively, for the entire Straddle Period (limited,
however, to those Taxes attributable to the assets of HQGW and its
Subsidiaries and VANTAS and its Subsidiaries, respectively, owned prior
to the Closing Date) multiplied by a fraction, the numerator of which is
the number of days during the Straddle Period that are in the Pre-Closing
Tax Period and the denominator of which is the number of days in the
Straddle Period; and
(ii) the Taxes of HQGW and its Subsidiaries and VANTAS and its
Subsidiaries, respectively (other than Property Taxes and other than
Taxes referred to in Section 6(e) of this Agreement, which Taxes will be
governed by such Section), for the Pre-Closing Tax Period shall be
computed as if such taxable period ended as of the close of business on
the Closing Date. The indemnity obligations of the Shareholders in
respect of Taxes for a Straddle Period shall, subject to the limitations
on indemnification pursuant to Section 5, equal the excess of (x) such
Taxes for the Pre-Closing Tax Period over (y) the sum of (i) the amount
of such Taxes for the Pre-Closing Tax Period paid by the Shareholders or
any of their affiliates (other than HQGW) at any time and (ii) the amount
of such Taxes paid by HQGW and its Subsidiaries on or prior to the
Closing Date (which includes any payments of estimated taxes or similar
amounts made by HQGW and its Subsidiaries on or prior to the Closing Date
and any amounts of Taxes for which a reserve has been reflected on the
Company Balance Sheet, even though the amount reflected for such reserve
has not yet been paid, based on each such Shareholder's Ownership
Percentage, to the applicable taxing authority). The Shareholders
severally, based on each such Shareholder's Ownership Percentage, shall
initially pay such excess to RSI upon the later of (A) five days prior to
the date on which the Tax Return (including any Tax Return with respect
to estimated Taxes) with respect to the liability for such Taxes is
required to be filed (and if no such Tax Return is required to be filed,
five days prior to the date satisfaction of the Tax liability is required
by the relevant taxing authority) or (B) ten days after the receipt from
RSI of notice that such amount is required to be paid pursuant hereto.
The payments to be made pursuant to this paragraph by the Shareholders
with respect to a Straddle Period shall be appropriately adjusted to
reflect any final determination (which shall include the execution of
Form 870-AD or any successor form) with respect to Taxes for the Straddle
Period.
RSI shall cause the Surviving Company to within 10 days of the
receipt thereof, pay to each of the Shareholders an amount equal to such
Shareholder's Ownership Percentage, an amount equal to 100% of any refund
of any Taxes of HQGW with respect to any Pre-Closing Tax Period received
by HQGW, any of its Subsidiaries or the Surviving Company at any time
after the Closing Date (including for this purpose any credit against
Taxes owed for any taxable period ending after the Closing Date, if such
credit is attributable to a taxable period ending on or prior to the
Closing Date, any refund of estimated tax payments made on or prior to
the Closing Date or any application of such payments to either a taxable
period commencing after the Closing Date or a portion of a Straddle
Period that is subsequent to the Closing Date, and any interest received
by HQGW, any of its Subsidiaries or the Surviving Company with respect to
any of the foregoing from the applicable taxing authority) unless (and
only to the extent) that the amount of such refund for Taxes was
reflected as an asset on the Company Balance Sheet.
4. Other Indemnification.
(a) Other Indemnification by the Shareholders. (W) The Shareholders
severally, based on each such Shareholder's respective Ownership Percentage,
shall indemnify the RSI Indemnitees against and hold them harmless from any
Company Level Loss (other than any relating to Taxes, for which
indemnification provisions are set forth in Section 3(a), and any relating to
Shareholder Litigation, for which indemnification provisions are set forth in
Section 4)(a)(X)) arising from, relating to or otherwise in respect of any
inaccuracy of any representation or warranty of HQGW contained in the Merger
Agreement (other than the representations set forth in Sections 4(A)(b) and
4(A)(ee) of the Merger Agreement, for which indemnification provisions are set
forth in Section 4(a)(X) below) or in any certificate delivered pursuant
thereto at the time made or deemed made (regardless of whether or not VANTAS
or RSI was aware of such failure on or prior to the Effective Time).
(X) All Shareholders severally, based on each such Shareholder's
respective Ownership Percentage, shall indemnify the RSI Indemnitees against
and hold them harmless from any claims, causes of action or other proceedings
arising from, relating to, or otherwise in respect of (i) the failure to
obtain any consent required from the Mercury Executive Offices L.P. (unless as
a result of a breach by RSI of Section 5.4 of the UK Agreement) in connection
with the transactions contemplated by the Merger Agreement or the UK Agreement
(unless VANTAS or RSI fails to perform its obligations under Section 5.4 of
the UK Agreement) or (ii) any inaccuracy of the representations set forth in
Sections 4(A)(b) and 4(A)(ee) of the Merger Agreement. CarrAmerica shall
indemnify the RSI Indemnitees against and hold them harmless from any claims,
causes of action or other proceedings arising from, relating to, or otherwise
in respect of the Shareholder Litigation.
(Y) Each Shareholder severally with respect to any Direct Loss
attributable to itself only shall indemnify the RSI Indemnitees against and
hold them harmless from any such Direct Loss directly or indirectly suffered
or incurred by any such RSI Indemnitee.
(Z) CarrAmerica shall indemnify the RSI Indemnitees against and hold
them harmless from any Company Level Loss directly or indirectly suffered or
incurred by any such RSI Indemnitee arising from, relating to or otherwise in
respect of any inaccuracy of the representations and warranties of HQ UK and
HQ LuxCo contained in the UK Agreement or in any certificate delivered
pursuant thereto at the time made or deemed made (regardless of whether or not
VANTAS or RSI was aware of such failure on or prior to the Closing Date).
(b) Other Indemnification by RSI. (Y) RSI shall indemnify the
Shareholder Indemnitees against and hold them harmless from any Company Level
Loss or Direct Loss (other than any relating to Taxes, for which
indemnification provisions are set forth in Section 3(a)) directly or
indirectly suffered or incurred by them arising from, relating to or otherwise
in respect of any inaccuracy of any representation or warranty of RSI or
VANTAS contained in the Merger Agreement (other than the representations set
forth in Section 5(A)(b) of the Merger Agreement, for which indemnification
provisions are set forth in Section 5(b)(Z) below), the UK Agreement or the
Stock Purchase Agreement or in any certificate delivered pursuant to either of
the foregoing at the time made or deemed made (regardless of whether or not
any Shareholders were aware of such failure on or prior to the Effective
Time).
(Z) RSI shall indemnify the Shareholder Indemnitees against and hold
them harmless from any claims, causes of actions or other proceedings (i)
arising from, relating to, or otherwise in respect of the matter disclosed in
clause (ii) of Schedules 5(r) or 5(u) to the Merger Agreement or any
inaccuracy of the representations set forth in Section 5(A)(b) of the Merger
Agreement or (ii) threatened or initiated by or on behalf of any holder of
VANTAS Common Stock or Preferred Stock that relate to the execution and
delivery of the Merger Agreement or to any of the transactions contemplated
therein.
5. Limitations on Indemnification. Any claim brought under Section 3
or 4 is subject in each case to the following limitations and restrictions:
(a) Damages Net of Insurance, etc. The amount of any Company Level
Loss for which indemnification is provided under this Agreement shall be net
of any amounts actually recovered by the Surviving Corporation under insurance
policies with respect to such Company Level Loss (which the Surviving
Corporation shall use commercially reasonable efforts to recover under such
policies) and the amount of any Loss shall be (i) increased to take account of
any net Tax cost incurred by the indemnified party arising from the receipt of
indemnity payments hereunder (grossed up for such increase), and (ii) reduced
to take account of any net Tax benefit realized by the Surviving Company
arising from the incurrence or payment of any such Loss. In computing the
amount of any such Tax cost or Tax benefit, the indemnified party or the
Surviving Company, as the case may be, shall be deemed to recognize all other
items of income, gain, loss, deduction or credit before recognizing any item
arising from the receipt of any indemnity payment hereunder or the incurrence
or payment of any indemnified Loss. Any indemnity payment under this Agreement
shall be treated as an adjustment to the Merger Consideration for tax
purposes, unless a final determination (which shall include the execution of a
Form 870-AD or successor form) with respect to the indemnified party causes
any such payment not to be treated as an adjustment to the Merger
Consideration for United States Federal income tax purposes.
(b) Minimum Claim Amounts.
(i) Claims made by the RSI Indemnitees with respect to Losses for
which indemnification is provided pursuant to Section 3(a), 3(c), 4(a)(W)
or 4(a)(Z) shall be required to be paid if and only if the aggregate
amount of all such Losses, but for this Section 5(b)(i), exceed on a
cumulative basis $_________ [$5,000,000 divided by RSI's Indemnification
Share] (the "Holder Basket"), in which event the entire amount of such
Losses shall be recoverable; it being understood that claims with respect
to Losses or damages arising from claims, causes of action or other
proceedings for which indemnification is provided pursuant to Section
4(a)(X) and 4(a)(Y) shall not be subject to the foregoing limitation.
(ii) Claims made by the Shareholder Indemnitees with respect to
Losses for which indemnification is provided pursuant to Section 3(b),
3(c) or 4(b)(Y) (with respect to claims for Company Level Losses) shall
be required to be paid if and only if the aggregate amount of all such
Losses, but for this Section 5(b)(ii), exceed on a cumulative basis
$_________ [$5,000,000 divided by fraction representing the Shareholders'
Indemnification Share] (the "RSI Basket"), in which event the entire
amount of such Losses shall be recoverable; it being understood that
claims with respect to Direct Losses for which indemnification is
provided pursuant to Section 4(b)(Y) or Losses, claims, causes of action
or other proceedings pursuant to Section 4(b)(Z) shall not be subject to
the foregoing limitation.
(iii) In determining whether the Shareholder Indemnitees or RSI
Indemnitees, as the case may be, is or are entitled to indemnification
under Section 4, the representations and warranties of the Shareholders
and HQGW, or RSI and VANTAS, as applicable, shall not be deemed qualified
by any references to material or materiality contained therein and any
inaccuracies therein shall be determined without regard to whether such
inaccuracy constitutes a Company Material Adverse Effect or a VANTAS
Material Adverse Effect; provided, however, in no event will any
Shareholder Indemnitees or RSI Indemnitees, as the case may be, be
entitled (A) to recovery for any Loss relating to or arising out of an
inaccuracy of any representation or warranty of VANTAS, RSI, HQGW or any
Shareholder, as the case may be, even if such Shareholder Indemnitee or
RSI Indemnitee, as applicable, would be entitled to indemnification
pursuant to Section 5(b)(i) or 5(b)(ii), but for this Section 5(b)(iii),
unless the Loss related thereto exceeds $50,000, (B) to aggregate items
referred to in clause (A) of this Section 5(b)(iii) for the purpose of
exceeding the limitation set forth in clause (A) of this Section
5(b)(iii), or (C) to otherwise submit the items referred to in clause (A)
of this Section 5(b)(iii) as Losses reimbursable pursuant to this Section
5.
(c) Percentage Recovery.
(i) If cumulative Company Level Losses under Sections 3(a), 3(c),
4(a)(W) and 4(a)(Z) exceed the Holder Basket, the indemnification amount
to be paid to the applicable RSI Indemnitees shall be equal to RSI's
Indemnification Share of the entire amount of Company Level Losses. In
all events, 100% of the entire amount of Losses under Sections (4)(a)(X)
and 4(a)(Y) shall be paid to the applicable RSI Indemnitees.
(ii) If cumulative Company Level Losses under Sections 3(b), 3(c)
and 4(b)(Y) exceed the RSI Basket, the indemnification amount to be paid
to the applicable Shareholder Indemnitees shall be equal to the
Shareholders' Indemnification Share of the entire amount of Company Level
Losses. In all events, 100% of the entire amount of Losses that
constitute Direct Losses of any Shareholder Indemnitee shall be paid to
the applicable Shareholder Indemnitees.
(d) Other Limitations on Recovery.
(i) Except as otherwise provided in the immediately following
sentence, claims made by any RSI Indemnitee against any Shareholder
pursuant to this Agreement shall be made solely against the Shareholder
Indemnification Shares or Cash Collateral deposited into the Escrow
Account by such Shareholder. Claims made by any RSI Indemnitee against
any Shareholder with respect to Direct Losses shall be made first against
the Shareholder Indemnification Shares or Cash Collateral deposited into
the Escrow Account by such Shareholder in accordance with Section 7, but
only after any and all amounts in respect of Valid Claims with respect to
the Company Level Losses shall have first been disbursed in accordance
with Section 7; provided, that if the amount available in such Escrow
Account (valuing any Indemnification Shares in accordance with Section 7)
is less than the full amount of the claim, or if the Escrow Accounts have
been terminated, a claim may be made directly against such Shareholder,
which shall be personally liable for the remaining amount of the claim.
Except as set forth in the preceding sentence, no Shareholder shall have
any personal liability to any RSI Indemnitee in any respect pursuant to
this Agreement or otherwise.
(ii) Except as otherwise provided in the immediately following
sentence, claims made by any Shareholder Indemnitee against RSI pursuant
to this Agreement shall be made solely against the RSI Indemnification
Shares or Cash Collateral deposited into the Escrow Account by RSI.
Claims made by any Shareholder Indemnitee against RSI with respect to
Direct Losses shall be made first against the RSI Indemnification Shares
or cash collateral deposited into the Escrow Account by RSI in accordance
with Section 7, but only after any and all amounts in respect of Valid
Claims with respect to Company Level Losses shall have first been
disbursed in accordance with Section 7; provided that if the amount
available in such Escrow Account (valuing any Indemnification Shares in
accordance with Section 7) is less than the full amount of the claim, or
if the Escrow Accounts have been terminated, a claim may be made directly
against RSI, which shall be personally liable for the remaining amount of
the claim. Except as set forth in the immediately preceding sentence, RSI
shall not have any personal liability to any Shareholder Indemnitee in
any respect pursuant to this Agreement or otherwise.
(e) Termination of Indemnities. Notwithstanding anything in this
Agreement to the contrary, the obligations of the Shareholders and RSI to
provide indemnification under this Agreement shall terminate and be
extinguished forever at the close of business on June 30, 2001, except for (i)
claims under Section 3 hereof and claims under Section 4 hereof that relate to
the representations concerning authorization and benefit plan matters set
forth in Sections 4(b), 4(r), 5(b) and 5(k) of the Merger Agreement and
Sections 2.2 and 2.16 of the UK Agreement and the representations set forth in
the Stock Purchase Agreement, which claims may be made until the expiration of
the applicable statute of limitations; provided, however, that the obligations
of the Shareholders and/or RSI to provide indemnification under this Agreement
shall not terminate at such time with respect to any claim that has been
properly asserted by delivering a notice of such claim to the indemnifying
party in accordance with the terms hereof and such claim has not been paid or
otherwise resolved as of the date on which such indemnity obligation would
otherwise terminate pursuant to this Section 5(e). If a claim has been
properly asserted and not paid or resolved as described above, the indemnity
obligations of the Shareholders or RSI, as applicable, shall continue beyond
June 30, 2001, but (i) the indemnity obligation shall continue only with
respect to the claim in question, and only until such claim is paid or
otherwise finally resolved, and (ii) any amounts in the Escrow Account not
reasonably determined by the indemnified party to be needed to cover the
disputed claim shall be released from the Escrow Account to the Shareholders
or RSI, as applicable.
6. Other Tax Matters
(a) For any taxable period of HQGW that includes (but does not end
on) the Closing Date, RSI shall, or shall cause the Surviving Company to,
timely prepare and file with the appropriate taxing authorities all Tax
Returns required to be filed; provided, however, that no such Tax Return shall
be filed without the written consent of the Representative, which consent
shall not be unreasonably withheld. The Shareholders shall reimburse RSI (in
accordance with the procedures set forth in Sections 3(a) and 3(c)) for any
amount owed by the Shareholders to RSI pursuant to such Sections (subject to
the limitation set forth in Section 5) with respect to the taxable periods
covered by such Tax Returns. For any taxable period of HQGW that ends on or
before the Closing Date, HQGW shall timely prepare and file with the
appropriate taxing authorities all Tax Returns required to be filed and shall
pay all Taxes due with respect to such Tax Returns; provided, however, that no
such Tax Return shall be filed without the prior written consent of RSI and
the Represntative, which consent shall not be unreasonably withheld. RSI and
the Shareholders agree to cause HQGW to file all Tax Returns for the taxable
period including the Closing Date on the basis that the relevant taxable
period ended as of the close of business on the Closing Date, unless the
relevant taxing authority will not accept a Tax Return filed on that basis.
(b) The Shareholders shall cause HQGW to, and the Shareholders, RSI
and the Surviving Company shall, reasonably cooperate, and cause their
respective Affiliates, officers, employees, agents, auditors and other
representatives reasonably to cooperate, in preparing and filing all Tax
Returns and in resolving all disputes and audits with respect to all taxable
periods relating to Taxes, including by maintaining and making available to
each other all records necessary in connection with Taxes, provided, however,
in no event shall RSI be required to provide any Tax Return to the
Shareholders and the Shareholders shall not be required to provide to RSI any
Tax Return not actually in their possession. RSI recognizes that the
Shareholders will need access, from time to time, after the Closing Date, to
certain accounting and Tax records and information held by the Surviving
Company to the extent such records and information pertain to events occurring
prior to the Closing Date acting as representative for the Shareholders;
therefore, RSI agrees after the Closing to cause the Surviving Company to
allow the Representative, and its agents and other representatives, at times
and dates mutually acceptable to the parties, reasonable access to such
records from time to time, during normal business hours and at the
Shareholders' expense.
(c) An amount equal to 100% of the amount or economic benefit of any
refunds, credits or offsets of Taxes of HQGW for any Pre-Closing Tax Period
(including that portion of a Straddle Period ending on the Closing Date) shall
be for the account of the Shareholders. Notwithstanding the foregoing, (i) any
such refunds, credits or offsets of Taxes shall be for the account of the
Surviving Company and RSI to the extent such refunds, credits or offsets of
Taxes are attributable (determined on a marginal basis) to the carryback from
a taxable period beginning after the Closing Date (or the portion of a
Straddle Period that begins on the day after the Closing Date) of items of
loss, deduction or credit, or other tax items, of the Surviving Company (or
any of its Affiliates, including RSI) and (ii) to the extent RSI or the
Surviving Company, depending on which entity made such payment, pays after the
Closing Date any amount with respect to Taxes for any such Pre-Closing Tax
Period, refunds of such Taxes (determined on a first-in, first-out basis)
shall be for the account of RSI or the Surviving Company, depending on which
entity made such payment. The amount or economic benefit of any refunds,
credits or offsets of Taxes of HQGW or the Surviving Company for any taxable
period beginning after the Closing Date shall be for the account of the
Surviving Company and RSI. The amount or economic benefit of any refunds,
credits or offsets of Taxes of HQGW or the Surviving Company for any Straddle
Period shall be equitably apportioned between the Shareholders, on the one
hand, and RSI and the Surviving Company, on the other hand. Each party shall
forward, and shall cause its Affiliates to forward, to the party entitled
pursuant to this Section 6(c) to receive the amount or economic benefit of a
refund, credit or offset to Tax the amount of such refund, or the economic
benefit of such credit or offset to Tax, within 30 days after such refund is
received or after such credit or offset is allowed or applied against other
Tax liability, as the case may be; provided, however, that any such amounts
payable pursuant to this Section 6(c) shall be net of any Tax cost or Tax
benefit to the party making payment pursuant to this Section 6(c) and its
Affiliates attributable to the receipt of such refund, credit or offset to Tax
and/or the payment of such amounts pursuant to this Section 6(c). RSI and the
Shareholders shall treat any amounts payable pursuant to this Section 6(c) as
an adjustment to the Merger Consideration unless a final determination (which
shall include the execution of a Form 870-AD or successor form) causes any
such payment not to be treated as an adjustment to the Merger Consideration
for United States Federal income Tax purposes.
(d) The Shareholders shall supply any necessary information to
enable the Surviving Corporation to file any amended consolidated, combined or
unitary Tax Returns for taxable years ending on or prior to the Closing Date
which are required as a result of examination adjustments made by the IRS or
by the applicable state, municipal, provincial, local or foreign taxing
authorities for such taxable years as finally determined; provided, however,
that no such Tax Return shall be filed without the prior written consent of
the Representative and RSI, which consent shall not be unreasonably withheld.
For those jurisdictions in which separate Tax Returns are filed by
HQGW, any required amended returns resulting from such examination
adjustments, as finally determined, shall be prepared by the Surviving Company
or RSI and furnished to the Representative, for approval at least 30 days
prior to the due date for filing such Tax Returns.
(e) All transfer, documentary, sales, use, registration and other
such Taxes (including all applicable real estate transfer or gains Taxes and
stock transfer Taxes) and related fees (including any penalties, interest and
additions to Tax) incurred in connection with the Merger or otherwise in
connection with this Agreement and the transactions contemplated hereby that
are attributable to the assets of HQGW and its Subsidiaries shall be paid by
the Shareholders and that are attributable to the assets of VANTAS and its
Subsidiaries shall be paid by RSI. The Representative and RSI shall cooperate
in timely preparing and filing all Tax Returns as may be required to comply
with the provisions of such Tax laws.
7. Indemnification Procedures
(a) Notice of a Claim. In order for a party to be entitled to
indemnification pursuant to this Agreement, the indemnified party shall notify
the indemnifying party in writing of any claim that it reasonably believes is
likely to result in a Loss within ten (10) days of the date such party
receives written notice or otherwise becomes aware of the claim, describing in
reasonable detail the claim (including whether such claim is for Direct Losses
or Company Level Losses) and the estimated amount of the claim; provided,
however, that the failure of an indemnified party so to notify the
indemnifying party of the claim shall not relieve the indemnifying party of
its obligations under this Agreement except to the extent the indemnifying
party shall have been actually prejudiced as a result of such failure (except
that the indemnifying party shall not be liable for any expenses incurred
during the period in which the indemnified party failed to give notice). The
indemnified party shall deliver to the indemnifying party copies of all
notices and documents (including court papers) received by the indemnified
party relating the claim along with the notice referred to above. If the
indemnifying party does not object in writing to the availability of the
indemnity under this Agreement within twenty (20) days after receiving such
notice, then the claim set forth in the notice by such party shall be
considered a valid claim under this Agreement (a "Valid Claim"), and such
Valid Claim (to the extent payable after giving effect to the limitations set
forth in Section 5(b)) shall be paid in accordance with Section 7 hereof. If
any indemnifying party objects in writing as to the availability of the
indemnity with respect to such claim within such twenty (20) day period, then
the indemnifying party and the indemnified party shall proceed in good faith
to negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved by litigation in an appropriate
court of competent jurisdiction.
(b) Defense of Third Party Claims. If any Valid Claim arises out of
or involves a claim or demand made by any person against the Surviving
Corporation or the indemnified party (a "Third Party Claim"), then the
indemnifying party shall be entitled to participate in the defense thereof
and, if it so chooses and acknowledges its obligation to indemnify the
indemnified party therefor, to assume the defense thereof with counsel
selected by the indemnifying party; provided, that such counsel is not
reasonably objected to by the indemnified party; and provided further, that if
either (i) any indemnified party reasonably concludes that there may be one or
more legal defenses available to it that are different from or in addition to
(and are inconsistent with) those available to the indemnifying party, or that
a conflict or potential conflict exists between any indemnified party, on the
one hand, and any indemnifying party, on the other hand (a "Conflicting
Matter"), or (ii) the Third Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages which the indemnified
party reasonably concludes cannot be separated from any related claim for
money damages (a "Specific Performance Matter"), the indemnifying party will
not have the right to direct the defense of such action on behalf of such
indemnified party with respect to such Conflicting Matter or Specific
Performance Matter, and the indemnified party shall direct the defense of the
portion of such claim that constitutes a Conflicting Matter or Specific
Performance Matter through counsel (including a local counsel, if necessary)
of its choosing, at the expense of the indemnified party. Should the
indemnifying party so elect to assume the defense of a Third Party Claim, the
indemnifying party shall not be liable to the indemnified party for legal
expenses subsequently incurred by the indemnified party in connection with the
defense thereof. If the indemnifying party assumes such defense, the
indemnified party shall have the right to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel employed
by the indemnifying party, it being understood that the indemnifying party
shall control such defense. Notwithstanding the foregoing, the indemnifying
party shall be liable for the fees and expenses of counsel employed by the
indemnified party for any period during which the indemnifying party has
failed to assume the defense thereof (other than during the period prior to
the time the indemnified party shall have given notice of the Third Party
Claim as provided above).
If the indemnifying party so elects to assume the defense of any
Third Party Claim, the indemnified party shall cooperate with the indemnifying
party in the defense or prosecution thereof. Such cooperation shall include
the retention and (upon the indemnifying party's request) the provision to the
indemnifying party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the indemnifying party shall have
assumed the defense of a Third Party Claim, the indemnified party shall not
admit any liability with respect to, or settle, compromise or discharge, such
Third Party Claim without the indemnifying party's prior written consent
(which consent shall not be unreasonably withheld). If the indemnifying party
shall have assumed the defense of a Third Party Claim, the indemnified party
shall agree to any settlement, compromise or discharge of a Third Party Claim
which the indemnifying party may recommend and which by its terms obligates
the indemnifying party to pay the full amount of the liability in connection
with such Third Party Claim, which releases the indemnifying party completely
in connection with such Third Party Claim and which would not otherwise
adversely affect the Indemnified Party.
(c) Procedures Unique to Tax Claims. With respect to any claim made
by any taxing authority (a "Tax Claim") covered by Section 3(a) hereof, the
Representative shall control all proceedings and may make all decisions taken
in connection with such Tax Claim (including selection of counsel) and,
without limiting the foregoing, may in its sole discretion pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
any taxing authority with respect thereto, and may, in its sole discretion,
either pay the Tax claimed and xxx for a refund where applicable law permits
such refund suits or contest the Tax Claim in any permissible manner;
provided, however, that the Representative must first consult in good faith
with RSI before taking any action with respect to the conduct of a Tax Claim.
Notwithstanding the foregoing, (i) the Representative shall not settle any Tax
Claim without the prior written consent of RSI, which consent shall not be
unreasonably withheld, (ii) RSI, and counsel of its own choosing, shall have
the right to participate fully in all aspects of the defense of such Tax
Claim, (iii) the Representative shall inform RSI, reasonably promptly in
advance, of the date, time and place of all administrative and judicial
meetings, conferences, hearings and other proceedings relating to such Tax
Claim, (iv) RSI shall be entitled to have its representatives (including
counsel, accountants and consultants) attend and participate in any such
administrative and judicial meetings, conferences, hearings and other
proceedings relating to such Tax Claim and (v) the Representative shall
provide to RSI all information, document requests and responses, proposed
notices of deficiency, notices of deficiency, revenue agent's reports,
protests, petitions and any other documents relating to such Tax Claim
promptly upon receipt from, or in advance of submission to (as the case may
be), the relevant taxing authority.
With respect to any Tax Claim covered by Section 3(b) hereof, RSI
shall control all proceedings and may make all decisions taken in connection
with such Tax Claim (including selection of counsel) and, without limiting the
foregoing, may in its sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any taxing
authority with respect thereto, and may, in its sole discretion, either pay
the Tax claimed and xxx for a refund where applicable law permits such refund
suits or contest the Tax Claim in any permissible manner; provided, however,
that RSI must first consult in good faith with the Representative before
taking any action with respect to the conduct of a Tax Claim. Notwithstanding
the foregoing, (i) RSI shall not settle any Tax Claim without the prior
written consent of the Representative, which consent shall not be unreasonably
withheld, (ii) the Representative, and counsel of its own choosing, shall have
the right to participate fully in all aspects of the defense of such Tax
Claim, (iii) RSI shall inform the Representative, reasonably promptly in
advance, of the date, time and place of all administrative and judicial
meetings, conferences, hearings and other proceedings relating to such Tax
Claim, (iv) the Representative shall be entitled to have its representatives
(including counsel, accountants and consultants) attend and participate in any
such administrative and judicial meetings, conferences, hearings and other
proceedings relating to such Tax Claim and (v) RSI shall provide to the
Representative all information, document requests and responses, proposed
notices of deficiency, notices of deficiency, revenue agent's reports,
protests, petitions and any other documents relating to such Tax Claim
promptly upon receipt from, or in advance of submission to (as the case may
be), the relevant taxing authority.
The Representative and RSI shall jointly control and participate in
all proceedings taken in connection with any Tax Claim relating to Taxes of
HQGW and its Subsidiaries for a Straddle Period. Neither the Representative
nor RSI shall settle any such Tax Claim without the prior written consent of
the other.
RSI, on the one hand, and each Shareholder, on the other hand,
shall, reasonably cooperate in contesting any Tax Claim, which cooperation
shall include the retention and, upon request, the provision to the requesting
person of records and information which are reasonably relevant to such Tax
Claim, and making employees available on a mutually convenient basis to
provide additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such Tax Claim.
8. Escrow Disbursements in Respect of Valid Claims.
(a) Upon receipt of (i) a written notice signed jointly by a duly
authorized officer of the Representative and a duly authorized officer of RSI
or (ii) a certified copy of a final, non-appealable judgment of a court of
competent jurisdiction specifying the amount of Loss to be paid to RSI or the
Shareholders, as the case may be, the Escrow Agent shall, subject to the terms
of this Agreement, distribute to the RSI Indemnitee or the Shareholder
Indemnitee, as the case may be, from each Shareholder's or RSI's, as the case
may be, Escrow Account, a number of Indemnification Shares (each such share
being deemed to have a value equal to the Market Value) and any Cash
Collateral equal in value to such Shareholders' or RSI's, as the case may be,
share of the total amount of Loss specified in such notice (taking into
account the limitations set forth in Section 5(b) hereof). If there are
insufficient Indemnification Shares (based on the Market Value) and Cash
Collateral remaining in such Shareholder's or RSI's, as the case may be,
Escrow Account to satisfy of the total amount of Loss specified in such
notice, the Escrow Agent shall, subject to the terms of this Agreement,
distribute to the RSI Indemnitee or the Shareholder Indemnitee, as the case
may be, all Indemnification Shares and Cash Collateral held in such
Shareholder's or RSI's, as the case may be, Escrow Account.
(b) Notwithstanding anything herein to the contrary, to the extent
that Indemnification Shares and/or Cash Collateral are to be distributed to
the RSI Indemnitee or the Shareholder Indemnitee, as the case may be, to pay a
Loss, in the absence of instructions pursuant to the proviso to this sentence
(of which the Escrow Agent shall have no duty or obligation to inquire about)
given through written notice to the Escrow Agent by the Shareholder or RSI
with respect to the Indemnification Shares and Cash Collateral in the relevant
Escrow Account, the Escrow Agent will satisfy the portion of such Loss payable
by such Shareholder or RSI, as the case may be, (i) first, by distributing to
the RSI Indemnitee or the Shareholder Indemnitee, as the case may be, the
Indemnification Shares deposited by such Shareholder or RSI, as the case may
be, in its Escrow Account on the Closing Date, and (ii) second, by
distributing any Cash Collateral in such Shareholder's or RSI's, as the case
may be, Escrow Account; provided, that any Shareholder or RSI, as the case may
be, by written notice to the Escrow Agent, may direct that Cash Collateral
referred to in clause (ii) above be distributed from its Escrow Account prior
to the distribution of Indemnification Shares. This provision shall be
controlling at all times unless such instructions have been received prior to
such distributions.
9. Final Distribution. At the close of business on June 30, 2001,
any Indemnification Shares and Cash Collateral remaining in an Escrow Account,
and which are not subject to retention pursuant to Section 5(e), shall be
returned by the Escrow Agent to the respective Shareholders or RSI who
contributed such Indemnification Shares or Cash Collateral upon joint
notification by the Representative and RSI.
10. Rights and Liabilities of Escrow Agent. The acceptance by the
Escrow Agent of its duties under this Agreement is subject to the following
terms and conditions.
(a) The Escrow Agent shall in no event be liable for any failure of
the conditions of this escrow or any damage caused by the exercise of its
discretion or the performance of its other duties under this Agreement, except
to the extent that such failure or damage arises from its own gross negligence
or willful misconduct.
(b) The Escrow Agent shall be protected in acting upon any written
notice, instruction, waiver, consent, receipt or other paper or document which
the Escrow Agent in good faith believes to be genuine and what it purports to
be.
(c) The Escrow Agent is neither party to nor is bound by or charged
with notice of the terms, provisions, legality, validity or sufficiency of the
documents delivered to it other than this Agreement, and it shall not be
liable or responsible for its failure to ascertain the terms or conditions, or
to comply with any of the provisions of any such document.
(d) If any dispute arises between the parties or with any third
person with respect to this escrow or its terms or conditions, the Escrow
Agent shall not be required to determine the same or take any action in
connection therewith but it may await the settlement of the same in accordance
with the provisions of this Agreement, unless it receives instructions to the
contrary signed by both RSI and the Representative.
(e) In consideration of ___________________________ acting as Escrow
Agent, RSI and the Shareholders mutually agree to indemnify
___________________________ and hold it harmless from and against any and all
losses, claims, costs, liabilities, obligations, damages and expenses
(including, without limitation, reasonable attorneys' fees) reasonably
incurred by ___________________________ resulting from any commenced or
threatened litigation or administrative proceeding which arises out of or is
in any way based on any action taken or not taken by the Escrow Agent pursuant
to this Agreement; provided, however, that RSI and the Shareholders shall not
be obligated to so indemnify the Escrow Agent for its own gross negligence or
willful misconduct.
(f) In no event shall the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action.
(g) The Escrow Agent may resign at any time by giving 60 days
written notice thereof to RSI and the Representative at the addresses referred
to in Section 7 below. Upon notice of resignation of the Escrow Agent, the
parties agree to find a replacement escrow agent within 60 days. The Escrow
Agent agrees to deliver the Indemnification Shares and any substitute
collateral in the Escrow Accounts to such replacement escrow agent upon
written notification by both the parties and the replacement escrow agent. In
the event a successor is not found within 60 days, the Escrow Agent may
petition any court of competent jurisdiction for the appointment of a
successor escrow agent or for instructions as to the disposition of the
Indemnification Shares and any substitute collateral in the Escrow Accounts
and it shall thereby be released from any and all responsibility and/or
liability to the parties.
(h) The parties understand and agree that the Escrow Agent cannot
give legal advice as to any conditions or requirements in this escrow. Each
party will seek legal counsel for any legal opinion or advice that each party
needs.
(i) The Escrow Agent may seek the advice of counsel as to any
decision required to be taken hereunder and shall be held harmless for any
such actions taken in accordance with the advice of such counsel.
(j) All fees and related expenses of the Escrow Agent for its
service hereunder (including fees of its legal counsel) shall be paid equally
by RSI and the Shareholders. Such fees and expenses shall be determined in
accordance with the fee schedule attached hereto as Schedule B or as otherwise
provided to RSI and the Representative.
11. Fractional Shares. No fractional shares shall be delivered to
satisfy any claims. If the Indemnification Shares to be so delivered from any
Shareholder's or RSI's, as the case may be, Escrow Account would include a
fractional share, the parties hereto agree that the Representative and RSI may
round such fraction to the nearest whole share.
12. Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by prepaid telex, cable or telecopy or sent, postage prepaid, by
registered, certified or express mail or reputable overnight courier service
and shall be deemed given when so delivered by hand, telexed, cabled or
telecopied, or if mailed, three days after mailing (one business day in the
case of express mail or overnight courier service), as follows:
If to the Shareholders:
At the address set forth opposite
such Shareholder's name on the
signature page hereto
with a copy to:
Xxxxx & Xxxxxxx, L.L.P.,
Columbia Square
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Telecopy No: (000) 000-0000
Attention: Xxxxxx Xxxxxxx
Xxxxx Xxxxxx; and
(ii) if to RSI:
Reckson Service Industries, Inc.
00 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Telecopy No: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
with copies to:
Xxxxx & Xxxx LLP
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy No: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Xx.
J. Xxxxxx Xxxxxxx
If to the Escrow Agent:
[To come]
or such other address as any party may from time to time specify by written
notice to the other parties hereto.
13. No Assignment or Benefit to Third Parties. This Agreement may
not be assigned by operation of law or otherwise, except by RSI to one or more
entities controlled by RSI (with RSI remaining responsible for its obligations
under this Agreement). Notwithstanding the foregoing, the rights or duties of
each of the parties under this Agreement may be assigned by such party in
connection with a sale of all or substantially all of its assets or a merger,
consolidation or other similar business combination transaction. Nothing
expressed or implied in this Agreement is intended, nor shall be construed, to
confer (a) any rights, remedies, obligations or liabilities, legal or
equitable, other than as provided in this Agreement or (b) otherwise
constitute any person (other than the Representative) a third party
beneficiary under or by reason of this Agreement (it being acknowledged that
the Representative is a third party beneficiary of this Agreement and is
entitled to enforce the relevant provisions of this Agreement).
14. Headings. The headings of the Sections of this Agreement are for
convenience only and do not constitute a part of this Agreement.
15. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each party and delivered to the others.
16. Applicable Law. This Agreement shall be construed and enforced
in accordance with, and governed by the laws of the State of
Delaware, without application of any choice of law provisions that would apply
any law other than the laws of Delaware.
17. Conflicts. In the event of any conflicts with respect to the
duties and obligations of the Escrow Agent between this Agreement
and the Merger Agreement, the provisions of this Agreement shall be deemed to
control.
18. Several Liability. Anything in this Agreement to the contrary
notwithstanding, the representations, warranties, covenants
and agreements of the Shareholders set forth herein are several and not joint.
19. Powers of the Representative. Each Shareholder by executing this
Agreement hereby appoints CarrAmerica as such Shareholder's agent and attorney
in fact (the "Representative") hereunder with full irrevocable power and
authority in the place and stead of such Shareholder and in the name of such
Shareholder to take any and all actions, and to execute any and all
instruments and other documents, which in the sole judgment of the
Representative are necessary or appropriate in handling claims for Losses made
pursuant to Section 3, 4(a)(W), 4(a)(X) and 4(b) of this Agreement. Said power
of attorney shall not be affected by the subsequent incapacity of any
Shareholder. Without limiting the generality of the foregoing, each of the
Shareholders agrees that the Representative (1) has full power and authority
to take such action on behalf of the Shareholders with respect to any
Indemnification Shares and Cash Collateral held by the Escrow Agent and with
respect to any and all claims for Losses (including, without limitation, any
decisions to accept or to challenge any claims for Losses) as the
Representative in its sole discretion may determine (except to the extent that
this Agreement provides for any action with respect to such Indemnification
Shares or Cash Collateral to be taken by the Shareholders themselves) and (2)
shall represent the Shareholders for all purposes in connection with the
claims specified above, including the receipt of notices and the exercise or
wavier of any rights with respect to RSI's obligations under this Agreement,
and resolution of disputes or uncertainties arising hereunder and thereunder
(except to the extent that any such agreement expressly provides for any
action to be taken or other matter to be dealt with by the Shareholders
themselves). The Representative shall forward the Shareholders copies of all
notices of Claims received from any RSI Indemnitee and of the disposition of
all such Claims. The Shareholders also agree that the Shareholders shall be
bound by all decisions of the Representative pursuant to the authority granted
hereunder, and that such authority may not be revoked during the term of this
Agreement.
Except as expressly set forth in this Agreement, it is understood
that the Representative is not assuming any responsibility or liability to any
person by virtue of the powers granted by the Shareholders hereby. The
Representative shall not make any representations with respect to and shall
have no responsibility for the transactions contemplated by the Merger
Agreement, the Stock Purchase Agreement or the U.K. Purchase Agreement or any
aspect thereof except as expressly set forth in such agreements. The
Representative shall not be liable to any other Shareholder for any error of
judgment or for any act done or omitted or for any mistake of fact or law
except for such Representative's own gross negligence or bad faith. Each
Shareholder agrees to indemnify the Representative and to hold the
Representative harmless against any loss, claim, damage or liability incurred
by him arising out of or in connection with acting as the Representative
pursuant to this Agreement, as well as the cost and expense of investigating
and defending against any such loss, claim, damage or liability, except to the
extent such loss, claim, damage or liability is due to the gross negligence or
bad faith of the Representative. Each Shareholder agrees that the
Representative may consult with counsel of its own choice (who may be counsel
for CarrAmerica or any affiliate thereof) and it shall have full and complete
authorization and protection for any action taken or suffered by it hereunder
in good faith and in accordance with the opinion of such counsel. It is
understood that the Representative may, without breaching any express or
implied obligation to any Shareholder hereunder, release, amend or modify any
other power of attorney granted by any other person under any related
agreement.
20. Litigation Costs. If any litigation with respect to the
obligations of the parties under this Agreement results in a final
nonappealable order of a court of competent jurisdiction that results in a
final disposition of such litigation, the prevailing party, as determined by
the court ordering such disposition, shall be entitled to reasonable
attorneys' fees as shall be determined by such court. contingent or other
percentage compensation arrangements shall not be considered reasonable
attorneys' fees.
21. Consent to Jurisdiction. CarrAmerica, on the one hand, and RSI,
on the other hand, agree to commence any action, suit or proceeding relating
hereto against the other party either in a federal court located in the State
of Delaware or if such suit, action or other proceeding may not be brought in
such court for jurisdictional reasons, in a Delaware state court. Each party
to this Agreement submits and consents to personal jurisdiction in any such
litigation. CarrAmerica, on the one hand, and RSI, on the other hand, further
agree that service of any process, summons, notice or document delivered by
U.S. registered mail to such party's respective address set forth above shall
be effective service of process for any action, suit or proceeding in Delaware
with respect to any matters to which it has submitted to jurisdiction in this
Section 21. CarrAmerica, on the one hand, and RSI, on the other hand,
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (i) any Delaware state court or (ii) any
federal court located in the State of Delaware, and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT.
22. Amendment. This Agreement may be amended by written agreement
signed by RSI and each Shareholder that would be adversely affected by such
amendment. The parties furthermore agree that the Merger Agreement will not be
amended or otherwise modified to increase the duties or liabilities of the
Escrow Agent without obtaining the prior written consent of the Escrow Agent
in each instance.
23. Waiver. Any party to this Agreement may extend the time for the
performance of any of the obligations or other acts of any other party hereto,
or waive compliance with any of the agreements of any other party or with any
condition to the obligations hereunder, in each case only to the extent that
such obligations, agreements and conditions are intended for its benefit, each
Shareholder hereby severally agreeing that any such extension or waiver by
such Shareholder may be given by the Representative and each Shareholder
hereby severally confirming that it has appointed the Representative as its
attorney-in-fact to give any such extension or waiver on behalf of such
Shareholder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
CARRAMERICA REALTY CORPORATION
By: __________________________
Name:
Title:
RECKSON SERVICE INDUSTRIES, INC.
By: __________________________
Name:
Title:
[ESCROW AGENT]
as Escrow Agent
[OTHER ADDITIONAL
STOCKHOLDERS, AS APPLICABLE]
Schedule A
[List of Indemnification Shares]
Schedule B
Reckson Service Industries, Inc.
Escrow Agent Fees
ACCEPTANCE FEE $[ ]
Includes examination of the Escrow Agreement and establishment of the security
safekeeping records.
ADMINISTRATION FEE, per year or portion thereof: $[ ]
Includes performance of duties outlined in the escrow agreement. Payable on
receipt of the shares and each year thereafter.
THIS FEE SCHEDULE IS CONFIDENTIAL AND MAY NOT BE REVEALED TO ANY
PARTY OUTSIDE THE WORKING GROUP IN THIS TRANSACTION
