Indemnity Escrow Agreement - 3dfx Interactive Inc. and GigaPixel Corp.
INDEMNITY ESCROW AGREEMENT
THIS INDEMNITY ESCROW AGREEMENT (the "Agreement") made and entered into
as of the 20th day of July, 2000, by and among 3dfx Interactive, Inc., a
California corporation ("3dfx"), GigaPixel Corporation, a Delaware corporation
("GigaPixel"), on behalf of its holders of its Common Stock and Preferred Stock
and of the Warrant prior to the Effective Time of the Merger (the
"Securityholders"), Galapagos Acquisition Corp., a Delaware corporation
("Newco"), the Securityholder Representative named in Section 9 hereof, and U.S.
Trust Company, N.A., as escrow agent (the "Agent").
WITNESSETH:
WHEREAS, pursuant to the Agreement and Plan of Reorganization dated as
of March 27, 2000 (the "Acquisition Agreement"), by and among 3dfx, Newco and
GigaPixel, each of the parties has agreed to effect the Merger;
WHEREAS, the Acquisition Agreement provides, as a condition to the
closing of the Merger, that the parties execute and deliver this Agreement
whereby a certain portion of the consideration to be payable to the
Securityholders following the Merger would be placed in escrow for a period of
time.
NOW, THEREFORE, for and in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms, and subject to the
conditions hereinafter set forth, the parties hereto do agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the meaning ascribed to them in the Acquisition Agreement.
2. Appointment of Agent. 3dfx, Newco, GigaPixel and the Securityholder
Representative hereby appoint Agent as escrow agent in accordance with the terms
and conditions set forth herein, and the Agent hereby accepts such appointment.
3. Deposit of Shares of 3dfx Common Stock.
(a) At the Closing, 3dfx and Newco shall, in accordance with Section
3.1 of the Acquisition Agreement, deposit with the Agent certificates for
the number of shares of 3dfx Common Stock described on Exhibit A hereto,
with the Agent's interest as escrow agent set forth on the face thereon
(the "Escrowed Shares"), which Escrow Shares shall be held by the Agent in
accordance with Section 4 below.
(b) All taxable dividends with respect to the Escrowed Shares shall be
distributed currently to the Securityholders.
(c) Voting of Escrowed Shares. Until such time as 3dfx shall have
delivered a notice to the Agent as described in the first sentence of
Section 4(a) of this Agreement, the Securityholder Representative shall
have the right to direct the Agent as to the manner of voting of the
Escrowed Shares. Such Securityholder Representative shall use its
reasonable best efforts to vote the Escrowed Shares in accordance with the
directions of the beneficial holders thereof.
4. Disposition of Escrowed Shares.
(a) If the Agent shall receive a written notice from 3dfx at any time
from the date of this Agreement through the date that is three hundred
eighty (380) days from the Closing Date certifying (i) that during the one
(1) year period following the Closing Date 3dfx has suffered 3dfx Losses as
a result of the Company's breach of any of its representations and
warranties or its failure to perform any of its covenants, in each case as
set forth in the Acquisition Agreement, and that, as a result, 3dfx is
entitled to payment hereunder pursuant to Article X of the
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Acquisition Agreement, (ii) the total amount that 3dfx is entitled to be
paid from the Escrowed Shares and the basis of calculation of such amount
(a "Claim") with respect to such 3dfx Losses, (iii) a description of the
asserted Claim and the basis thereof, and (iv) that 3dfx has delivered a
copy of such notice to the Securityholder Representative (as defined and
described in Section 9 hereof) with respect to such Claim, then the Agent
shall promptly (and in any event within ten (10) days following receipt of
such notice from 3dfx) deliver a copy of such notice to the Securityholder
Representative. If the Agent does not, within twenty (20) days after its
delivery of such notice, receive a written objection from the
Securityholder Representative with respect to such Claim, then the Agent
shall promptly deliver to 3dfx a number of Escrowed Shares, the value of
which (based on the closing price of such Escrowed Shares on the Closing
Date) equals the amount that 3dfx shall have specified as its Claim. If the
Agent shall receive a written objection from the Securityholder
Representative within such twenty (20) day period, then a conflict shall be
deemed to have arisen, and the Agent shall, within five (5) days of the
Agent's receipt of the written objection from the Securityholder
Representative, deliver notice of such conflict to the parties hereunder.
Thereafter, the Agent shall be entitled to refrain from taking any action
until the Agent shall be directed otherwise in accordance with Section 4(b)
below.
(b) If a conflict shall have arisen as described in Section 4(a) above,
then upon receipt by the Agent during the term of this Agreement of (i)
joint written instructions signed by 3dfx and the Securityholder
Representative directing payment of all or a portion of the Escrowed
Shares, or (ii) a final, non-appealable judgment or order of a court of
competent jurisdiction directing the payment of an amount of the Escrowed
Shares held hereunder, the Agent shall promptly deliver to the person or
persons specified, out of the escrow created hereunder and in the manner
specified in the applicable instructions, judgment or order, or as
otherwise agreed in writing by 3dfx and the Securityholder Representative,
(A) the number of Escrowed Shares specified therein, or (B) a number of
Escrowed Shares the value of which (based on the closing price of such
Escrowed Shares on the Closing Date) equals the amount specified in such
instructions, judgment or order, and the Agent shall thereupon be relieved
and discharged from any responsibility or obligation with respect to such
amount or amounts of the Escrowed Shares delivered in accordance with this
Agreement.
(c) Unless otherwise notified by a joint instruction signed by 3dfx and
the Securityholder Representative, in the event the escrow created
hereunder is not sooner terminated pursuant to the provisions of Section
4(e) below or extended pursuant to the provisions of this Section 4(c), the
escrow period and the escrow created hereunder shall terminate at the close
of business on the date that is three hundred eighty (380) days from the
Closing Date (the "Escrow Period"). Upon such termination, the Agent shall
release and deliver to the Securityholders the Escrowed Shares remaining in
escrow; provided, however, if 3dfx has filed a Claim with the Agent and the
Securityholder Representative for a 3dfx Loss suffered during the one (1)
year period following the Closing Date prior to such termination, which
Claim has not been resolved in accordance with Section 4(a) or (b) above by
the date of termination, the Agent shall release and pay to the
Securityholders only the number of Escrowed Shares the value of which
(based on the closing price of such Escrowed Shares on the Closing Date)
exceeds the aggregate amount of the outstanding and unresolved Claim(s) of
3dfx. Upon resolving all remaining Claims in accordance with this Section
4, including any distributions to 3dfx (which may be after the period
provided herein, in which case the Escrow Period shall be extended to such
time in which all Claims are resolved), the Agent shall release and pay to
the Securityholders all Escrowed Shares held in escrow hereunder and close
the escrow, whereupon the Escrow Period and the escrow created hereunder
shall be terminated.
(d) Notwithstanding the provisions of Section 4(c) above, at the
conclusion of the Escrow Period, if any Claim has not been resolved in
accordance with the terms hereof, the Agent shall have the right, in its
sole discretion, to deposit with the registry of any state or federal court
located in San Jose, California, the number of Escrowed Shares the value of
which (based on the closing price of such Escrowed Shares on the Closing
Date) equals the aggregate amount of the outstanding and unresolved
Claim(s) of 3dfx. The Agent shall implead 3dfx and the Securityholders in
any action filed with such court.
(e) Unless otherwise notified in a joint instruction signed by 3dfx and
the Securityholder Representative, if the Agent disburses to 3dfx all
Escrowed Shares held in escrow in accordance with the terms of this Section
4 prior to the date that is the one (1) year anniversary of the Closing
Date, then the Escrow Period and the escrow created hereunder shall
immediately terminate, and the Agent shall close the escrow and give notice
thereof to 3dfx and the Securityholder Representative.
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5. Duties and Obligations.
(a) The Agent shall have no duty to enforce any obligation of any
person to make any payment or delivery, or to direct or cause any payment
or delivery to be made, or to enforce any obligation of any persons to
perform any other act. The Agent shall not be liable to 3dfx or the
Securityholder Representative or to anyone else by reason of any failure on
the part of any party hereto or any other person to perform such party's or
such person's obligations under any document or agreement.
(b) The Agent shall not be liable to 3dfx and the Securityholder
Representative or to anyone else for any action taken or omitted by it, or
any action suffered by it to be taken or omitted, in good faith and in the
exercise of its own best judgment. The Agent may rely conclusively and
shall be protected in acting upon any order, notice, demand, certificate,
opinion or advice of counsel (including counsel chosen by the Agent),
statement, instrument, report or other paper or document (not only as to
its due execution and the validity and effectiveness of its provisions, but
also as to the truth and acceptability of any information therein
contained) that is believed by the Agent to be genuine and to be signed or
presented by the proper person or persons.
(c) The Agent shall not be responsible for the sufficiency or accuracy
of the form of, or the execution, validity, value or genuineness of, any
document or property received, held or delivered by it hereunder, or of any
signature or endorsement thereon, or for any lack of endorsement thereon,
or for any description therein, nor shall the Agent be responsible or
liable to 3dfx or the Securityholder Representative or to anyone else in
any respect on account of the identity, authority, or rights of the persons
executing or delivering or purporting to execute or deliver any document or
property or this Agreement. The Agent shall not be liable to 3dfx or the
Securityholder Representative or to anyone else for any loss that may be
incurred by reason of any investment of any monies it holds hereunder.
(d) To the extent that the Agent becomes liable for the payment of
taxes, including withholding taxes, in respect of income derived from the
investment of funds held hereunder or any payment made hereunder, the Agent
may pay such taxes. The Agent may withhold from any payment of monies held
by it hereunder such amount as the Agent estimates to be sufficient to
provide for the payment of such taxes not yet paid, and may use the sum
withheld for that purpose. The Agent shall be indemnified and held harmless
from and against any liability for taxes and for any penalties or interest
in respect of taxes on such investment income or payments in the manner
provided in Section 5(e) below. At the signing of the agreement, each
relevant party shall provide a W-8 or W-9 to the Escrow Agent.
(e) The Agent shall be indemnified and held harmless jointly and
severally by 3dfx and the Securityholder Representative from and against
any and all expenses, including attorneys' fees and disbursements, or
losses suffered by the Agent in connection with any action, suit or other
proceeding involving any claim, or in connection with any claim or demand
that directly or indirectly arises out of or otherwise relates to this
Agreement, the services of the Agent hereunder, the monies or other
property held by the Agent hereunder or any income earned from investment
of such monies, other than expenses or losses arising as a result of the
Agent's gross negligence or willful misconduct.
6. Compensation and Reimbursement of Agent. The Agent shall be entitled to
compensation and reimbursement from GigaPixel after the Closing for all
reasonable expenses paid or incurred by it in the administration of its duties
hereunder, including, but not limited to, all reasonable attorneys' and agents'
fees and disbursements and all taxes or other governmental charges. The Escrow
Agent's first-year fee is due at the execution of this Agreement.
7. Further Assurances. From time to time on and after the date hereof, 3dfx
and the Securityholder Representative shall deliver or cause to be delivered to
the Agent such further documents and instruments and shall do and cause to be
done such further acts as the Agent shall reasonably request to carry out more
effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected in acting
hereunder.
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8. Termination of Agreement and Resignation of Agent.
(a) This Agreement shall terminate upon the termination of the escrow
created hereunder as provided in Section 4(c), provided that the rights of
the Agent and the obligations of 3dfx, Newco and the Securityholders under
Sections 5, 6 and 10 shall survive any termination hereof.
(b) The Agent may resign and be discharged from its duties hereunder at
any time by giving not less than 45 days prior written notice of such
resignation to 3dfx and the Securityholder Representative, which notice
shall specify the date when such resignation shall take effect. Upon such
notice, 3dfx and the Securityholder Representative shall jointly appoint a
successor escrow agent. If 3dfx and the Securityholder Representative do
not agree upon a successor escrow agent within 45 days after such notice,
The Chase Manhattan Bank shall be appointed successor. The agent shall
continue to serve until its successor delivers to 3dfx and the
Securityholder Representative a duly executed instrument of acceptance from
such successor of the terms and conditions of this Agreement and other
property held in escrow, at which time the agent shall have no further
duties or responsibilities hereunder.
9. Appointment and Acceptance of Securityholder Representative.
(a) In order to facilitate the consummation of the transactions
contemplated by this Agreement and by the Acquisition Agreement and the
resolution of matters after the Closing, George T. Haber (the
"Securityholder Representative") shall serve as the attorney-in-fact and
agent for each of the Securityholders in his or her name, place and stead
in connection with the transactions contemplated by this Agreement in
accordance with the terms of this Agreement, such appointment being coupled
with an interest and irrevocable. By executing and delivering this
Agreement, the Securityholder Representative hereby accepts its
authorization and appointment as the Securityholder Representative and as
attorney-in-fact and agent on behalf of the Securityholders in accordance
with the terms of this Agreement.
(b) Upon approval of the Acquisition Agreement and the Merger by the
Securityholders, each Securityholder shall be deemed to have expressly
acknowledged and agreed that (i) the Securityholder Representative is
authorized to act on his or her behalf notwithstanding any dispute or
disagreement between or among the Securityholders and (ii) 3dfx and Newco
and any other person shall be entitled to rely on any and all actions taken
by the Securityholder Representative under or pursuant to this Agreement
without liability to, or obligation to inquire of, any Securityholder.
(c) The authority of the Securityholder Representative hereunder shall
continue and be effective until all of the rights and obligations of the
Securityholders hereunder, or any dispute arising hereunder, shall
terminate.
10. Consent to Service of Process. 3dfx and Newco and the Securityholder
Representative hereby irrevocably consent to the jurisdiction of the courts of
the State of California and of any federal court located in such state in
connection with any action, suit or other proceeding arising out of or relating
to this Agreement or any action taken or omitted hereunder, and each such party
waives personal service of any summons, complaint or other process and agrees
that the service thereof may be made by certified or registered mail directed to
such person at such person's address for purposes of notices hereunder.
11. Notices. Any notice, request, instruction, document or other
communication to be given hereunder by any party hereto to any other party
hereto shall be in writing and validly given if (i) delivered personally, (ii)
sent by facsimile with electronic confirmation of receipt, (iii) delivered by
overnight express, or (iv) sent by registered or certified mail, postage
prepaid, as follows:
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(i) If to 3dfx or Newco:
3dfx Interactive, Inc.
4435 Fortran Drive
San Jose, California 95134
Facsimile No.: (408) 262-5551
Telephone No.: (408) 935-4400
Attention: President
cc: Legal Department
(ii) If to the Securityholder Representative:
Mr. George T. Haber
c/o 4435 Fortran Drive
San Jose, California 95134
Facsimile No.: (408) 262-5551
Telephone No.: (408) 935-4400
(iii) If to the Agent:
U.S. Trust Company, N.A.
One Embarcadero Center
Suite 2050
San Francisco, California 94111
Facsimile No.: (415) 392-0876
Telephone No.: (415) 743-9035
Attn: Priscilla R. Dedoro, Assistant Vice President
with copies to:
Heller Ehrman White & McAuliffe LLP
601 South Figueroa, 40th Floor
Los Angeles, California 90017-5758
Facsimile No.: (213) 614-1868
Telephone No.: (213) 689-7539
Attn: Stephen E. Newton, Esq.
or at such other address for a party as shall be specified by like notice. Any
notice that is delivered personally, or sent by telecopy or overnight express in
the manner provided herein shall be deemed to have been duly given to the party
to whom it is directed upon receipt by such party. Any notice that is addressed
and mailed in the manner herein provided shall be conclusively presumed to have
been given to the party to whom it is addressed at the close of business, local
time of the recipient, on the fifth day after the day it is so placed in the
mail.
12. Entire Agreement. This Agreement constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof, and no
party shall be liable or bound to the other in any manner by any representations
or warranties not set forth herein.
13. Successors and Assigns. This Agreement and the rights and obligations
hereunder may not be assigned, except that 3dfx may assign this Agreement and
its rights and obligations hereunder to any wholly-owned subsidiary of 3dfx or
to a successor to such party's entire business. This Agreement and the rights
and obligations hereunder of the Agent may be assigned by the Agent only to a
successor to its entire business. This Agreement shall be binding upon and inure
to the benefit of each party's respective successors, heirs and permitted
assigns. No other person shall acquire or have any rights under or by virtue of
this Agreement. This Agreement is intended to be for the sole benefit of the
parties hereto, and (subject to the provisions of this Section 13) their
respective successors, heirs and assigns, and none of the provisions of this
Agreement are intended to be, not shall they be construed to be, for the benefit
of any third person.
14. Rules of Construction. This Agreement shall be construed without regard
to any presumption or other rule requiring construction against the party
causing such instrument to be drafted. The terms "hereby", "hereof", "hereunder"
and any similar terms, as used in this Agreement, refer to this Agreement in its
entirety and not only to the particular portion of this Agreement where the term
is used. The word "person" shall mean any natural person,
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partnership, corporation, government and any other form of business or legal
entity. All words or terms used in this Agreement, regardless of the number or
gender in which they are used, shall be deemed to include any other number and
any other gender as the context may require.
15. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
16. Modification and Waiver. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party that is entitled to
the benefits thereof, and this Agreement may be modified or amended by a written
instrument executed by all parties hereto. No supplement, modification, or
amendment of this Agreement shall be binding unless executed in writing by all
parties. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.
17. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED, ENFORCED, AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (WITHOUT REGARD TO ITS
CHOICE OF LAW PRINCIPLES).
18. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws, such provision
shall be fully severable, then this Agreement shall be construed and enforced as
if such illegal, invalid, or unenforceable provision had never comprised a part
of this Agreement, and the remaining provisions of this Agreement shall remain
in full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed as of the day and year first above written.
3DFX:
3DFX INTERACTIVE, INC.
By: /s/ David Zacarias
-----------------------------------------
Printed Name: David Zacarias
-------------------------------
Title: Vice President, Administration and
Chief Financial Officer
---------------------------------------
NEWCO:
GALAPAGOS ACQUISITION CORP.
By: /s/ David Zacarias
-----------------------------------------
Printed Name: David Zacarias
--------------------------------
Title: Vice President
---------------------------------------
GIGAPIXEL:
GIGAPIXEL CORPORATION
By: /s/ George T. Haber
-----------------------------------------
Printed Name: George T. Haber
--------------------------------
Title: Chief Executive Officer and President
---------------------------------------
SECURITYHOLDER REPRESENTATIVE:
/s/ George T. Haber
----------------------------------------------
George T. Haber
AGENT:
U.S. TRUST COMPANY, N.A.
By: /s/ Prisellia R. Dedoro
-----------------------------------------
Name: Prisellia R. Dedoro
----------------------------------------
Title: Assistant Vice President
---------------------------------------
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EXHIBIT "A"
SHAREHOLDERS: INDEMNITY ESCROW:
------------------------- ----------------------------------
Shareholder A shares
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Shareholder B shares
------
Shareholder C shares
------
Shareholder D shares
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