ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into
as of
December 22, 1999 (the "Effective Date"), by and among The TriZetto
Group, Inc.,
a Delaware corporation ("TriZetto"), the parties listed on Exhibit A
attached
hereto (collectively, the "Finserv Securityholders," and each
individually, a
"Finserv Securityholder"), Stuart Schloss as the representative of the
Finserv
Securityholders (the "Representative"), and Bankers Trust Company of
California,
N.A. as escrow agent (the "Escrow Agent").
RECITALS
WHEREAS, TriZetto, Finserv Health Care Systems, Inc., a New York
corporation ("Finserv"), and the Finserv Securityholders have entered
into an
Agreement and Plan of Merger dated as of December 22, 1999 (the "Merger
Agreement"), pursuant to which Finserv Acquisition Corp., a Delaware
corporation
and wholly-owned subsidiary of TriZetto ("Merger Sub"), shall be merged
with and
into Finserv (the "Merger"), with Finserv to be the surviving
corporation of the
Merger.
WHEREAS, the Merger Agreement provides that 20,000 shares of the
Merger
Consideration (as defined in the Merger Agreement) will be withheld from
the
Finserv Securityholders and will be placed in an escrow established in
accordance with this Agreement to secure the indemnification obligations
under
Article 8 of the Merger Agreement and to secure adjustments to the
Consideration
pursuant to Sections 2.5 and 2.6 of the Merger Agreement.
WHEREAS, the parties desire to enter into this Agreement to
establish the
terms and conditions under which the escrow will be established and
maintained.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises,
representations, warranties, covenants and agreements herein contained,
the
parties hereto, intending to be legally bound, hereby agree as follows:
1. CERTAIN DEFINED TERMS.
1.1 TERMS DEFINED IN MERGER AGREEMENT. Capitalized terms
used in
this Agreement and not otherwise defined herein shall have the same
meanings
given to such terms in the Merger Agreement.
1.2 ESCROW. As used herein, the "Escrow" means the escrow
and the
Escrow Account (as defined in Section 3.1 below) established pursuant to
this
Agreement in which the Escrowed Property (as defined in Section 1.3
below) will
be held to secure the indemnification obligations of the Finserv
Securityholders
in accordance with Article 8 of the Merger Agreement and to secure
adjustments
to the Consideration pursuant to Sections 2.5 and 2.6 of the Merger
Agreement.
1.3 ESCROWED PROPERTY. As used herein, the "Escrowed
Property"
means, collectively: (a) 20,000 shares of TriZetto Common Stock issued
in
respect of the conversion of all outstanding shares of Finserv Stock in
the
Merger (the "Escrow Shares") and the Stock Powers (as defined in Section
3.1
below) executed and delivered by the Finserv Securityholders; and the
Stock
2
Powers executed and delivered by the Finserv Securityholders; (b) all
interest
or other amounts paid with respect to such Escrow Shares; and (c) all
other
property (not including cash dividends but including Distributions and
Secondary
Distributions (as defined in Section 3.2 below)) other than cash
dividends
issued or paid with respect to any Escrow Shares that are deposited in
the
Escrow Account pursuant to this Agreement, all of which shall be deemed
to be
"Escrowed Property" upon deposit in the Escrow Account. The number of
Escrow
Shares of each Finserv Securityholder that will be placed in the Escrow
Account
is equal to each Finserv Securityholder's proportionate share of the
Escrowed
Property set forth on Exhibit A hereto (the "Pro Rata Share").
1.4 TERMINATION DATE. "Termination Date" means the one year
anniversary of the Effective Time of the Merger.
2. AGREEMENT.
2.1 INDEMNIFICATION BY FINSERV SECURITYHOLDERS. By virtue of
the
Finserv Securityholders' execution and delivery of the Merger Agreement,
the
Finserv Securityholders have agreed, and by executing this Agreement
each
Finserv Securityholder hereby confirms that such Finserv Securityholder
agrees,
subject to the terms and conditions of this Agreement, Article 8 of the
Merger
Agreement and Sections 2.5 and 2.6 of the Merger Agreement:
(a) to indemnify and hold harmless TriZetto, its officers,
directors,
stockholders, employees and agents from and against any and all Claims
and
Liabilities to the extent provided in Article 8 of the Merger Agreement;
(b) to establish the Escrow pursuant to this Agreement to
secure the
indemnification obligations of the Finserv Securityholders under Article
8 of
the Merger Agreement and to secure the adjustment to the Consideration
which may
be made under Sections 2.5 and 2.6 of the Merger Agreement;
(c) without limiting such Finserv Securityholder's obligations
under
paragraphs (a) and (b) above, that:
(i) in the event TriZetto, its officers, directors,
stockholders, employees and agents (hereinafter, collectively,
"TriZetto")
incurs any Claims and Liabilities provided in Article 8 of the Merger
Agreement,
the Escrowed Property shall, subject to the provisions of the Merger
Agreement
and this Agreement, be transferred to TriZetto to compensate TriZetto
for such
Claims and Liabilities, with the portion of the Escrowed Property to be
so
transferred pro rata as to each Claim and Liability among the Finserv
Securityholders according to each Finserv Securityholder's Pro Rata
Share; and
(ii) to the extent necessary under Sections 2.5 and 2.6
of the
Merger Agreement, the Escrowed Property with a value equal to the amount
of the
necessary adjustment to the Consideration, subject to the provisions of
the
Merger Agreement and this Agreement, shall be transferred to TriZetto to
adjust
the Consideration accordingly, which Escrowed Property shall be pro rata
based
on each Finserv Securityholder's Pro Rata Share;
(d) to appoint the Representative as the Finserv
Securityholders'
representative, attorney-in-fact and agent for purposes of this
Agreement to act
for and on behalf of each Finserv Securityholder as provided herein, and
to the
taking by the Representative of any and all
2
3
actions and the making of any decisions required or permitted to be
taken or
made by the Representative on the Finserv Securityholders' behalf under
this
Agreement; and
(e) to all of the other terms and conditions of this Agreement.
3. FORMATION OF ESCROW ACCOUNT.
3.1 DELIVERY AND DEPOSIT OF ESCROWED PROPERTY. Upon the
execution of
this Agreement by all parties hereto: (a) TriZetto will promptly deliver
to the
Escrow Agent the Escrow Shares in the form of duly authorized and
executed stock
certificates issued in the respective names of the Finserv
Securityholders,
representing each Finserv Securityholder's Pro Rata Share of the Escrow
Shares
and (b) each Finserv Securityholder will promptly deliver to the Escrow
Agent
duly executed Assignments Separate From Certificate for such Finserv
Securityholder's Escrow Shares in the form of Exhibit B ("Stock
Powers"), signed
in blank by such Finserv Securityholder. The Escrow Agent agrees to
accept
delivery of the above-mentioned Escrowed Property, which shall be
clearly
designated by TriZetto as "Escrowed Property", and to hold the same in
escrow in
an escrow account (the "Escrow Account"), subject to the terms and
conditions of
this Agreement. The Escrow Agent shall deliver a Receipt and
Acknowledgement to
the Representative upon receipt of any Escrowed Property.
3.2 DISTRIBUTIONS, CONVERSIONS, VOTING AND RIGHTS OF
OWNERSHIP. So
long as the Escrow is in effect, dividends payable in stock or
securities of
TriZetto or of any other person, firm or entity or any other property,
other
than cash dividends which shall be distributed to Finserv
Securityholders, or
other distributions of any kind (including without limitation shares of
TriZetto
Stock issued in connection with a subdivision, split or recapitalization
of
TriZetto Stock) that are paid, issued or made by TriZetto in respect of
the
Escrow Shares that are issuable by TriZetto or a third party upon the
conversion
or other exchange of Escrow Shares in a merger, consolidation,
liquidation,
exchange of shares or other transaction affecting the Escrow Shares or
other
Escrowed Property (the "Distributions"), or in respect of any such
Distributions
("Secondary Distributions"), will be immediately delivered to the Escrow
Agent
and will be held in the Escrow on the same terms and conditions as those
applied
hereunder to the Escrow Shares and the Finserv Securityholders will
promptly
sign and deliver to the Escrow Agent new Stock Powers or other
applicable
instruments of transfer for such Distributions and/or Secondary
Distributions
(duly executed in blank by the Finserv Securityholders) to be held in
the Escrow
as Escrowed Property pursuant to this Agreement. As used herein, the
terms
"Escrowed Property" includes all Distributions and Secondary
Distributions on
Escrowed Property and the term "Escrow Shares" includes all
Distributions and
Secondary Distributions on Escrowed Property consisting of stock or
other
securities. The Finserv Securityholders will have the right to exercise
any and
all rights to vote the Escrow Shares deposited in the Escrow Account for
their
account so long as such Escrow Shares are held in the Escrow and have
not been
released to TriZetto as provided herein and TriZetto will take all steps
necessary to allow the exercise of such rights. While the stock
certificates
representing, and Stock Powers for, Escrow Shares remain in the Escrow
Agent's
possession pursuant to this Agreement, the Finserv Securityholders, will
(subject to the provisions of Sections 3.3 and 3.4 below) retain and be
able to
exercise all other incidents of ownership of the Escrow Shares that are
not
inconsistent with the terms and conditions of this Agreement. If
reasonably
requested to do so by TriZetto or the Escrow Agent, each Finserv
Securityholder
shall promptly execute and deliver to the Escrow Agent (or to TriZetto,
as to
Escrow Shares that are released to TriZetto as provided herein)
replacement
Stock Powers for any Escrow Shares or other shares of stock or
securities that
are or become Escrowed Property. If requested by TriZetto, due to the
failure of
any Finserv Securityholder to promptly execute and
3
4
deliver replacement Stock Powers as herein provided, the Representative,
acting
as attorney-in-fact for each Finserv Securityholder, shall promptly
execute on
behalf of such Finserv Securityholder, and deliver to the Escrow Agent,
replacement Stock Powers for any Escrow Shares or other shares of stock
or
securities that are or become Escrowed Property.
3.3 NO TRANSFER OR ENCUMBRANCE. Except to the extent
expressly
permitted by the provisions of this Section 3.3, no Escrowed Property or
any
beneficial interest therein may be sold, assigned, pledged, encumbered
or
otherwise transferred (including without limitation by operation of law,
other
than an exchange or conversion of shares in a merger or consolidation)
by any
Finserv Securityholder or be taken or reached by any legal or equitable
process
in satisfaction of any debt or other liability of a Finserv
Securityholder
(other than such Finserv Securityholder's obligations under this
Agreement)
prior to the delivery and release to the Finserv Securityholders of the
Escrowed
Property by the Escrow Agent in accordance with the provisions of
Section 6
hereof; provided, however, that any Finserv Securityholder may transfer
its
share of the Escrowed Property hereunder so long as such transfer is by
(I)
gift, (ii) upon death or permanent incapacity to his guardian,
conservator,
executor, administrator, trustees or beneficiaries under his will, (iii)
to his
spouse, children, stepchildren, grandchildren, parents, siblings or
legal
dependents, (iv) to a trust of which the beneficiary or beneficiaries of
the
corpus and the income shall be such a person and all such persons agree
to be
bound by the terms hereof, or (v) to partners of a Finserv
Securityholder that
is a partnership, provided that all of such partners execute a joinder
agreement
specifically agreeing to be bound by the terms hereof.
3.4 TREATMENT OF ESCROWED PROPERTY. The Escrowed Property
shall be
held by the Escrow Agent as a trust fund and shall not be subject to any
lien,
attachment, trustee process or any other judicial process of any
creditor of any
party hereto.
3.5 INVESTMENT OF FUNDS. The cash portion of the Escrowed
Property,
if any, shall be invested and reinvested by the Escrow Agent, upon the
instruction of the Representative, in U.S. Treasury obligations having a
maturity of not more than 90 days or in such other certificates of
deposit or
instruments. All brokerage commissions and similar fees incurred in
connection
with the investments shall be paid out of the Escrowed Property. All
interest
income generated by such U.S. Treasury obligations, certificates of
deposit or
instruments shall be deemed part of the Escrowed Property and at the
Termination
Date, the income from the funds in the Escrow, if any, shall be paid to
the
Finserv Securityholders in accordance with each Finserv Securityholder's
Pro
Rata Share. Subject to the provisions of Section 9, the Escrow Agent
shall not
have any liability for loss sustained as a result of (I) any investment
made
pursuant to the instructions of the Representative, (ii) any liquidation
of any
investment prior to its maturity, or (iii) the failure of the
Representative to
give the Escrow Agent any instruction to invest or reinvest the cash
portion of
the Escrowed Property or any earnings thereon.
4. ADMINISTRATION OF ESCROW ACCOUNT. The Escrow Agent shall
administer the
Escrow Account as follows:
4.1 CLAIM NOTICE. If TriZetto asserts a claim for
indemnification under
Article 8 of the Merger Agreement or a claim for adjustment to the
Consideration
under Section 2.5 or 2.6 of the Merger Agreement on or prior to the
Termination
Date, then TriZetto shall promptly give written noticeof such claim (a
"Claim
Notice"), including a copy of such claim and/or process and all legal
pleadings
in connection therewith, to the Representative in accordance with
Article 8 of
the Merger
4
5
Agreement and the Escrow Agent in accordance with this Section 4. Each
Claim
Notice shall state the amount of claimed Claims and Liabilities (the
"Claimed
Amount") and the basis for such claim.
4.2 RESPONSE NOTICE. Within 30 days after delivery of a
Claim Notice
to the Representative, the Representative shall give to TriZetto, with a
copy to
the Escrow Agent, a written response (the "Response Notice") in which
the
Representative shall either:
(a) agree that such portions of the Escrowed Property
having a
value (computed in accordance with Section 4.4 below) equal to the full
Claimed
Amount may be released from the Escrow Account and delivered to
TriZetto; or
(b) agree that a portion of the Escrowed Property having
a value
(computed in accordance with Section 4.4 below) equal to a specified
part, but
not all, of the Claimed Amount (the "Agreed Amount") may be released
from the
Escrow Account to TriZetto and contest the remaining portion of the
Escrowed
Property; or
(c) contest that any of the Escrowed Property may be
released
from the Escrow Account to TriZetto.
The Representative may contest the release of Escrowed Property
only based
upon a good faith belief that all or such portion of the Claimed Amount
(I) does
not constitute Claims and Liabilities, or does not constitute the actual
amount
of Claims and Liabilities incurred for which TriZetto is entitled to
indemnification under Article 8 of the Merger Agreement or (ii) does not
constitute an adjustment to the Consideration to which TriZetto is
entitled
under Section 2.5 or 2.6 of the Merger Agreement. If no Response Notice
is
delivered by the Representative within such 30 day period, then the
Representative shall be deemed to have agreed that the full Claimed
Amount may
be released and delivered from the Escrow Account to TriZetto.
4.3 RELEASE WITHOUT CONTEST.
(a) If in his Response Notice the Representative
agrees (or if
the Representative fails to deliver a Response Notice within the
required time
period and as such is deemed to have agreed) that the Escrowed Property
having a
value (computed in accordance with Section 4.4 below) equal to the full
Claimed
Amount may be released from the Escrow Account to TriZetto, then the
Escrow
Agent shall promptly thereafter deliver to TriZetto from the Escrow
Account
Escrowed Property having a value (computed in accordance with Section
4.4 below)
equal to the Claimed Amount (or such lesser amount as is then held in
the Escrow
Account).
(b) If the Representative in the Response Notice
agrees that
Escrowed Property having a value (computed in accordance with Section
4.4 below)
equal to the Agreed Amount may be released from the Escrow Account to
TriZetto
in the respective amounts set forth in the Response Notice, then the
Escrow
Agent shall promptly thereafter deliver to TriZetto such Agreed Amount
or such
lesser amount as is then held in the Escrow Account, and the provisions
of
Section 5 shall apply to the contested portion of the Claimed Amount.
The
amounts of Escrowed Property equal to the Agreed Amount that are to be
released
by the Escrow Agent to TriZetto from the Escrow Account under this
Section 4.3
shall be in such proportions of Escrow Shares, and other Escrowed
Property as
may be requested by the Representative (subject to the availability of
such
type(s) of Escrowed Property at such time and subject to whether such
Claim and
Liability is assessed against the indemnification obligations of the
Finserv
Securityholders set forth in Article 8
5
6
of the Merger Agreement or the adjustments to the Consideration set
forth in
Section 2.5 or 2.6 of the Merger Agreement).
4.4 VALUE OF ESCROWED PROPERTY. For purposes of determining
the
amount of Escrowed Property to be delivered out of the Escrow to
TriZetto as all
or part of any Claimed Amount hereunder and determining the value of any
Escrowed Property for any other purpose hereunder Escrowed Property that
is cash
will be deemed to have a value equal to the amount of such cash in U.S.
Dollars.
The Escrowed Shares of TriZetto Stock will be deemed to have a fair
market value
determined as follows: (I) the average of the closing sales prices of
TriZetto
Stock for the 20 trading days immediately preceding the anticipated date
of
transfer of such shares as reported on the Nasdaq National Market System
("NMS")
(or such other exchange or similar market on which TriZetto Stock is
regularly
traded if not then traded on the NMS), or (ii) if not traded on an
exchange or
similar market, then as determined by the Board of Directors of TriZetto
in good
faith. If the Representative disagrees with the fair market value as
determined
by the Board of Directors, then the Representative may submit the
dispute to
Arbitration pursuant to Section 5 below.
5. ARBITRATION OF CONTESTED RELEASES.
5.1 ARBITRATION OF DISPUTES OVER ESCROW RELEASE. If the
Representative
gives a Response Notice contesting the release of Escrowed Property
equal to all
or any part of the Claimed Amount set forth in the applicable Claim
Notice, as
provided in Section 4.2 above (the "Contested Amount"), then such
dispute shall
be settled by mandatory binding arbitration in Orange County, California
in
accordance with the provisions of this Section 5 and the Commercial
Arbitration
Rules of the American Arbitration Association then in effect (the "AAA
Rules"),
unless TriZetto and the Representative settle such dispute in a written
settlement agreement executed by TriZetto and the Representative on
behalf of
and binding on each of the Finserv Securityholders and TriZetto.
Theprovisions
of this Section 5 shall prevail and govern in the event of any conflict
between
such provisions and the AAA Rules.
5.2 ARBITRATOR. Unless otherwise mutually agreed by TriZetto
and the
Representative, the arbitration will be heard and decided by a single
arbitrator
who shall be selected as provided in Section 5.3.
5.3 SELECTION OF ARBITRATOR. TriZetto and the Representative
will
mutually agree on an arbitrator selected from a list of arbitrators who
are
attorneys-at-law who practice business law and have significant
experience with
respect to the representation of companies which develop computer
services and
technology; provided that the arbitrator cannot have represented either
TriZetto
or any of the Finserv Securityholders in any previous matter. If
TriZetto and
the Representative cannot agree on the selection of the arbitrator from
the
above list of arbitrators, then the arbitrator shall be chosen by the
American
Arbitration Association.
5.4 TIME FOR ARBITRATION DECISION; EFFECT. The arbitrator shall
decide
each dispute to be arbitrated pursuant hereto within 90 days after the
selection
of the arbitrator. The arbitrator's decision shall relate solely to
whether
TriZetto is entitled to receive the Contested Amount (or a portion
thereof)
pursuant to the applicable terms of the Merger Agreement and this
Agreement. The
final decision of the arbitrator shall provide directions to the Escrow
Agent as
provided in Section 5.5 and shall be furnished to TriZetto, the
Representative,
and the Escrow Agent in writing and shall constitute a conclusive
determination
of all issues in question, binding upon TriZetto, the Representative,
the
Finserv Securityholders, and the Escrow Agent and shall not be
6
7
contested by any of them. Upon the conclusion of any arbitration
proceedings
hereunder, the arbitrator will render findings of fact and conclusions
of law
and a written opinion setting forth the basis and reasons for any
decision
reached and instructions (if applicable) to the Escrow Agent as to the
release
of Escrowed Property and will deliver such documents to TriZetto, the
Representative and the Escrow Agent, along with a signed copy of the
award and
the instructions (if any) to the Escrow Agent. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend
or
otherwise affect the terms of this Section 5 or the provisions of this
Agreement
or the Merger Agreement. Judgment upon the award rendered by the
arbitrator may
be entered in any court having competent jurisdiction over the subject
matter
thereof.
5.5 ACTIONS OF ESCROW AGENT PENDING ARBITRATION. After
delivery of a
Response Notice in which any or all of the Claimed Amount is contested
by the
Representative, the Escrow Agent shall continue to hold in the Escrow
Account
Escrowed Property having a value (computed in accordance with Section
4.4 of
this Agreement) sufficient to cover the Contested Amount (but only to
the extent
that there is Escrowed Property remaining in the Escrow after payment to
TriZetto of all uncontested Claimed Amounts), notwithstanding the
occurrence of
the Termination Date, until: (a) delivery of a copy of a settlement
agreement
executed by TriZetto and the Representative setting forth instructions
to the
Escrow Agent as to the release of such Escrowed Property that shall be
made with
respect to the Contested Amount; (b) delivery of a copy of the final
decision of
the arbitrator setting forth instructions to the Escrow Agent as to the
release
of Escrowed Property that shall be made with respect to the Contested
Amount; or
(c) receipt of a court order or judgment directing Escrow Agent to act
with
respect to the distribution of any Escrowed Property. The Escrow Agent
shall
thereupon release Escrowed Property from the Escrow Account (to the
extent
Escrowed Property is then held in the Escrow Account) in accordance with
such
settlement agreement, arbitrator's instructions, court order or
judgment, as
applicable. The Escrowed Property released by the Escrow Agent to
TriZetto from
the Escrow Account shall be in such proportions of Escrow Shares and/or
other
Escrowed Property, as may be requested by the Representative (subject to
the
availability of such type(s) of Escrowed Property at such time).
5.6 NO RESPONSIBILITY OF ESCROW AGENT TO RESOLVE DISPUTE. If
any
controversy arises involving any party to this Agreement (other than the
Escrow
Agent) concerning the subject matter of this Agreement, including a
Contested
Amount, the Escrow Agent will not be required to determine the
controversy or to
take any action until such dispute has been resolved.
5.7 RIGHT TO COUNSEL. TriZetto (on behalf of itself and any
Indemnified Person(s)) and the Representative shall each have the right
to
employ its or his own legal counsel to at its own expense represent such
person
in any disputes arising under this Agreement.
5.8 COMPENSATION OF ARBITRATOR; ATTORNEYS' FEES. The
arbitrator will
be compensated for his or her services at a rate to be determined by the
parties
or by the American Arbitration Association, but based upon reasonable
hourly or
daily consulting rates for the arbitrator in the event the parties are
not able
to agree upon his or her rate of compensation. TriZetto, on the one
hand, and
the Finserv Securityholders, on the other hand, will each pay 50% of the
compensation to be paid to the arbitrator in any such arbitration and
50% of the
costs of transcripts and other normal and regular expenses of the
arbitration
proceedings (collectively, the "Arbitration Expenses"), with the portion
of such
Arbitration Expenses required to be borne by the Finserv Securityholders
to be
shared by the Finserv Securityholders based on the Finserv
Securityholder's
respective Pro Rata Share of the Escrowed Property. Unless the
Arbitrator
provides to the contrary in the decision, each side shall pay its own
attorneys'
fees.
7
8
5.9 BURDEN OF PROOF. For any claim submitted to an
arbitration
hereunder, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
5.10 EXCLUSIVE REMEDY. Except to the extent provided in
Article 8 of
the Merger Agreement, and except as specifically otherwise provided in
this
Agreement, arbitration in accordance with this Section 5 will be the
sole and
exclusive remedy of the parties for any dispute arising over the release
of
Escrowed Property from the Escrow hereunder.
6. PAYMENT OF REMAINING ESCROWED PROPERTY TO FINSERV
SECURITYHOLDERS.
6.1 ON TERMINATION DATE. On the Termination Date, the Escrow
Agent
shall deliver to TriZetto and the Representative a statement of the
value
(computed in accordance with Section 4.4 hereof) of the remaining
balance of the
Escrowed Property then remaining in the Escrow Account, and the total
amount of
all claims made pursuant to Sections 4 or 5 hereof in connection with
the Escrow
Account which remain unresolved and unpaid (the excess, if any, of such
remaining balance in such Escrow Account over the total amount of such
claims
against such Escrow Account shall be referred to as the "Final Escrow
Balance").
TriZetto and the Representative each shall review the accuracy of the
Final
Escrow Balance and notify the Escrow Agent and each other of any
asserted
discrepancy within ten business days of receipt of the foregoing
statement. If
the Escrow Agent has not been notified of any discrepancy by TriZetto or
the
Representative within the ten business day period specified in the
preceding
sentence, then within 20 business days after receipt by TriZetto and the
Representative of such statement, the Escrow Agent shall deliver to each
of the
Finserv Securityholders an amount of the Escrowed Property representing
such
Finserv Securityholder's Pro Rata Share of the Final Escrow Balance
constituting
Escrowed Property, free and clear of the Escrow created by this
Agreement. After
the last claim shall have been resolved pursuant to Sections 4 and 5
hereof and
all Escrowed Property deliverable to TriZetto upon the resolution of all
such
claims has been delivered to TriZetto, the remaining balance, if any, of
the
Escrowed Property shall promptly be delivered by the Escrow Agent to
each
Finserv Securityholder pro rata, based on each Finserv Securityholder's
Pro Rata
Share, free and clear of the Escrow created by this Agreement.
6.2 DISTRIBUTION OF THE ESCROWED PROPERTY. All distributions
of
Escrowed Property to the Finserv Securityholders to be made by the
Escrow Agent
under this Section shall be made so that each Finserv Securityholder
receives
his Pro Rata Share of the total amount of each type of property
(principally
TriZetto Stock) constituting the Escrowed Property held in the Escrow
Account
immediately before such distribution.
6.3 DELIVERY METHODS. Delivery of Escrowed Property by the
Escrow
Agent shall be by nationally recognized overnight courier. The Escrow
Agent
shall not be responsible for obtaining insurance in connection with such
delivery.
6.4 POWER TO TRANSFER ESCROW AMOUNTS. The Escrow Agent is
hereby
granted the power to effect any transfer of Escrowed Property permitted
or
required by this Agreement in accordance with its terms.
7. FEES AND EXPENSES OF ESCROW AGENT AND REPRESENTATIVE.
7.1 ESCROW AGENT. TriZetto shall pay the fees of the Escrow
Agent
for the services to be rendered by the Escrow Agent hereunder; provided,
however, that any extraordinary
8
9
fees and expenses referred to in Section 7.3 below, including, without
limitation, any fees or expenses incurred by the Escrow Agent in
connection with
a dispute over the distribution of Escrowed Property will be paid 50% by
TriZetto and 50% by the Finserv Securityholders.
7.2 REPRESENTATIVE. The Representative will not be entitled
to
receive any compensation from TriZetto or the Finserv Securityholders in
connection with this Agreement; however, the Finserv Securityholders
shall
indemnify and promptly reimburse the Representative for all reasonable
expenses
actually incurred by the Representative in connection with the
performance of
his duties hereunder (including, but not limited to, all losses, costs
and
expenses which the Representative may incur as a result of involvement
in any
legal proceedings arising from the performance of his duties hereunder)
pro rata
according to the Finserv Securityholders' respective Pro Rata Share.
TriZetto
shall not have any obligation to reimburse the Representative for any
expenses
whatsoever.
7.3 ESCROW AGENT'S EXTRAORDINARY FEES. TriZetto and the
Representative hereby acknowledge that all fees and usual charges for
services
of the Escrow Agent hereunder shall be considered compensation for
ordinary
services as contemplated by this Agreement. In the event that the Escrow
Agent
renders any service not provided for in this Agreement, or if the
parties hereto
request a substantial modification of the terms of this Agreement, or if
any
controversy arises and/or the Escrow Agent is made a party to any
litigation
pertaining to this Agreement or its subject matter, then the Escrow
Agent shall
be reasonably compensated for such extraordinary services (except to the
extent
the Escrow Agent is not entitled to indemnification pursuant to Section
9.3
hereof) and reimbursed for all reasonable costs, attorney's fees and
expenses
incurred by the Escrow Agent in rendering such extraordinaryservices,
which
costs, fees and expenses shall be borne by TriZetto and the Finserv
Securityholders as provided in Section 7.1 above.
8. LIABILITY AND AUTHORITY OF REPRESENTATIVE; SUCCESSORS AND
ASSIGNEES.
8.1 LIMITS ON LIABILITY. The Representative shall incur no
liability
with respect to any action taken or suffered by him in his capacity as
Representative in reliance upon any note, direction, instruction,
consent,
statement or other documents believed by him in good faith to be
genuinely and
duly authorized, nor for other action or inaction except his own willful
misconduct or gross negligence. The Representative may, in all questions
arising
under this Escrow Agreement, rely on the advice of counsel, and for
anything
done, omitted or suffered in good faith by the Representative based on
such
advice, the Representative shall not be liable to anyone.
8.2 SUCCESSOR REPRESENTATIVES. In the event of the death or
permanent disability of the Representative, or the resignation of
Representative
as the representative of the Finserv Securityholders hereunder, a
successor
Representative shall be elected by a majority vote of the Finserv
Securityholders, with each such Finserv Securityholder (or his or her
successors
or assigns) to be given a weighted vote based on such Finserv
Securityholder's
Pro Rata Share. Each successor Representative shall have all of the
power,
authority, rights and privileges conferred by this Agreement upon the
original
Representative, and the term "Representative" as used herein shall be
deemed to
include each successor Representative.
8.3 AUTHORITY OF REPRESENTATIVE. The Representative shall
have full
power and authority to represent the Finserv Securityholders and their
successors with respect to all matters arising under this Agreement or
related
to the subject matter hereof and all actions taken by the Representative
hereunder shall be binding upon each and all of the Finserv
Securityholders and
their
9
10
successors, as if expressly confirmed and ratified in writing by each of
them.
Without limiting the generality of the foregoing, the Representative
shall have
full power and authority to interpret all of the terms and provisions of
this
Agreement, to compromise and settle any claims asserted hereunder and to
authorize payments to be made with respect thereto, on behalf of the
Finserv
Securityholders and their successors. The Finserv Securityholders have
consented
to the appointment of the Representative as representative of the
Finserv
Securityholders and as the attorney-in-fact and agent for and on behalf
of each
Finserv Securityholder for the purposes of taking actions and executing
agreements and documents on behalf of any of the Finserv Securityholders
as
provided in this Agreement, and, subject to the express limitations set
forth
below, the taking by the Representative of any and all actions and the
making of
any decisions required or permitted to be taken by him under this
Agreement,
including, but not limited to, the exercise of the power to authorize
delivery
to TriZetto of Escrowed Property and to take all actions necessary in
the
judgment of the Representative for the accomplishment of the foregoing
and all
of the other terms, conditions and limitations of this Agreement. The
Representative will have unlimited authority and power to act on behalf
of each
Finserv Securityholder with respect to this Agreement and the
disposition,
settlement or other handling of all claims, rights or obligations
arising under
this Agreement with respect to Escrowed Property so long as all Finserv
Securityholders are treated in the same manner (unless the Finserv
Securityholders otherwise consent). The Finserv Securityholders will be
bound by
all actions taken by the Representative in connection with this
Agreement, and
TriZetto will be entitled to rely on any action or decision of the
Representative.
9. LIMITATION OF ESCROW AGENT'S RESPONSIBILITY AND LIABILITY.
9.1 LIMITATION OF RESPONSIBILITY. The Escrow Agent's duties
are
limited to those set forth in this Agreement, and the Escrow Agent,
acting as
such under this Agreement, is not charged with knowledge of or any
duties or
responsibilities under any other document or agreement, including,
without
limitation, the Merger Agreement. The Escrow Agent may execute any of
its powers
or responsibilities hereunder and exercise any rights hereunder either
directly
or by or through its agents or attorneys. Nothing in this Escrow
Agreement will
be deemed to impose upon the Escrow Agent any duty to qualify to do
business or
to act as a fiduciary or otherwise in any jurisdiction. The Escrow Agent
will
not be responsible for, and will not be under a duty to examine into or
pass
upon, the validity, binding effect, execution or sufficiency of this
Escrow
Agreement or of any agreement mandatory or supplemental hereto.
9.2 LIMITATION OF LIABILITY. The Escrow Agent will incur no
liability with respect to any action taken, not taken or suffered by it
in
reliance upon any notice, direction, instruction, consent, statement or
other
document believed by it to be genuine and duly authorized, nor for any
other
action or inaction, except its own gross negligence or willful
misconduct . In
all questions arising under this Agreement, the Escrow Agent may rely on
the
advice of counsel, and for anything done, omitted or suffered in good
faith by
the Escrow Agent based on such advice, the Escrow Agent will not be
liable to
anyone, provided that the Escrow Agent shall have used reasonable care
in the
selection of such counsel. The Escrow Agent will not be required to take
any
action hereunder involving any expense unless the payment of such
expense is
made or provided for in a manner satisfactory to it. The Escrow Agent
will not
be liable for any action taken or omitted to be taken by it in good
faith unless
a court of competent jurisdiction determines that the Escrow Agent's
gross
negligence or willful misconduct was the cause of any loss to TriZetto,
the
Representative, or any Finserv Securityholder. The Escrow Agent makes no
representation or warranty with respect to, and is not responsible for,
the
Escrowed Property, other than any losses resulting from its gross
negligence or
willful misconduct. The Escrow Agent will have no duty to
10
11
solicit the delivery from TriZetto of any Escrowed Property. The Escrow
Agent
will have no obligation with respect to the Escrowed Property other than
to (I)
keep safely all property held in escrow, (ii) withhold the release of
Escrowed
Property to the Finserv Securityholders, or (iii) release the Escrowed
Property
to TriZetto, as the case may be, to the extent expressly provided in
this
Agreement.
9.3 INDEMNITY. TriZetto and each of the Finserv
Securityholders
(each an "Indemnifying Party" and together the "Indemnifying Parties"),
each
hereby jointly and severally covenants and agrees to reimburse,
indemnify and
hold harmless the Escrow Agent and its employees, officers, directors
and agents
from and against any loss, damage or liability suffered, incurred by or
asserted
against the Escrow Agent (including amounts paid in settlement of any
action,
suit, proceeding, or claim brought or threatened to be brought and
including
reasonable expenses of legal counsel) arising out of, in connection with
or
based upon any act or omission by the Escrow Agent relating in any way
to this
Agreement or the Escrow Agent's services hereunder; provided, however,
that the
liability of any Finserv Securityholder shall be limited to such Finserv
Securityholder's pro rata share of the liability of all of the Finserv
Securityholders hereunder, based on the number of shares of Finserv
stock held
by such Finserv Securityholder. This indemnity will not apply to any
such loss,
damage or liability arising from the gross negligence or willful
misconduct on
the Escrow Agent's part. Anything in this Agreement to the contrary
notwithstanding, in no event will any party be liable for special,
indirect or
consequential damage or loss of any kind whatsoever (including but not
limited
to lost profits) suffered or incurred by any other party, even if such
party has
been advised of the likelihood of such loss or damage and regardless of
the form
of action.
9.4 PARTICIPATION IN DEFENSE OF THE ESCROW AGENT. Each
Indemnifying
Party may participate at its own expense in the defense of any claim or
action
that may be asserted against the Escrow Agent, and if the Indemnifying
Parties
so elect, the Indemnifying Parties may assume the defense of such claim
or
action; provided, however, that if there exists a conflict of interest
that
would make it inappropriate for the same counsel to represent both the
Escrow
Agent and the Indemnifying Parties, the Escrow Agent's retention of
separate
counsel will be reimbursable as provided in Section 9.3. The Escrow
Agent's
right to indemnification hereunder will survive the Escrow Agent's
resignation
or removal as escrow agent hereunder and will survive the termination of
this
Agreement by lapse of time or otherwise.
9.5 NOTICE OF CLAIMS AGAINST ESCROW AGENT. The Escrow Agent
will
notify each Indemnifying Party by letter, or by telephone or telecopy
confirmed
by letter sent U.S. first class mail, registered or certified, of any
receipt by
the Escrow Agent of a written assertion of a claim against the Escrow
Agent
related to this Agreement, or any action commenced against the Escrow
Agent,
within ten business days after the Escrow Agent's receipt of written
notice of
such claim. However, the Escrow Agent's failure to so notify each
Indemnifying
Party will not operate in any manner whatsoever to relieve an
Indemnifying Party
from any liability that it may have otherwise than on account of this
Section 9;
provided, however, that in the event the Escrow Agent fails to so notify
each
Indemnifying Party and an Indemnifying Party is prejudiced thereby, then
such
Indemnifying Party will not have liability to Escrow Agent under this
Section 9.
9.6 RELIANCE. The Escrow Agent shall be entitled to rely
upon any
court order, judgment, certification, instruction, award, notice or
other
writing delivered to it in compliance with the provisions of this
Agreement
without being required to determine the authenticity or the correctness
of any
fact stated therein or the propriety or validity thereof. The Escrow
Agent may
act
11
12
in reliance upon any instrument comporting with the provisions of this
Agreement or signature reasonably believed by it to be genuine, and may
reasonably assume that any person purporting to give notice or receipt
or advice
or to make any statement or to execute any document in connection with
the
provisions hereof has been duly authorized to do so.
9.7 NO IMPLIED DUTIES; COLLATERAL AGREEMENTS. The Escrow
Agent shall
not be obligated to perform any duties that are not expressly set forth
in this
Agreement, and no implied covenants or obligations shall be inferred
from this
Agreement against the Escrow Agent. The Escrow Agent shall not be bound
in any
way by any contract or agreement between the other parties or among the
other
parties and any third parties, whether or not the Escrow Agent has
knowledge of
any such contract or agreement or of its terms or conditions.
10. SUCCESSOR ESCROW AGENT. In the event the Escrow Agent
becomes
unavailable or unwilling to continue in its capacity herewith, the
Escrow Agent
may resign at any time and be discharged from its duties or obligations
hereunder by giving a written resignation to the parties to this Escrow
Agreement, specifying not less than 30 days prior written notice of the
date
when such resignation shall take effect; provided, however, that no such
resignation shall become effective until the appointment of a successor
Escrow
Agent and acceptance of such appointment by such successor Escrow Agent.
TriZetto and the Representative may appoint a successor Escrow Agent
without the
consent of the Representative so long as such successor is a bank with
assets of
at least $500,000,000 which has no direct depository or lending
relationship
with TriZetto or any of the Finserv Securityholders and which is
qualified to do
business in the State of California, and may appoint any other successor
Escrow
Agentwith the written consent of the Representative, which shall not be
unreasonably withheld. If, within such notice period, TriZetto provides
to the
Escrow Agent written instructions with respect to the appointment of a
successor
Escrow Agent in accordance with this Section 10 and directions for the
transfer
of any Escrowed Property then held by the Escrow Agent to such
successor, the
Escrow Agent shall act in accordance with such instructions and promptly
transfer such Escrowed Property to such designated successor. If no
successor
Escrow Agent is appointed within 60 days of the date specified for the
Escrow
Agent's resignation to take effect, any party hereto (including the
Escrow
Agent) shall have the right to apply to a court of competent
jurisdiction for
such appointment at the expense of TriZetto. Each successor Escrow Agent
shall
execute and deliver an instrument accepting such appointment and shall,
without
further acts, be vested in all the estates, properties, rights, powers
and
duties of the Escrow Agent or any other predecessor Escrow Agent as if
originally named as Escrow Agent hereunder.
11. TERMINATION. This Agreement shall terminate upon the earlier
of (a)
the Termination Date, assuming there are no contests regarding the
Escrowed
Property, or (b) the release by the Escrow Agent of all of the Escrowed
Property
in accordance with this Agreement. In the event that a contest exists on
the
Termination Date, the Escrow shall continue in place until the dispute
is
resolved pursuant to Section 5.
12. MISCELLANEOUS.
12.1 NOTICES. All notices required or permitted hereunder
shall be
in writing and shall be deemed effectively given: (a) upon personal
delivery to
the party to be notified; (b) when sent by confirmed facsimile if sent
during
normal business hours of the recipient, if not, then on the next
business day;
(c) five business days after having been sent by registered or certified
mail,
return receipt requested; or (d) two business days after deposit with a
nationally recognized overnight courier, specifying two day delivery,
with
written verification of receipt. All communications shall
12
13
be sent to the parties at the following addresses or facsimile numbers
specified
below (or at such other address or facsimile number for a party as shall
be
designated by ten business days advance written notice to the other
parties
hereto):
(a) If to the Escrow Agent:
Bankers Trust Company of California N.A.
1761 East St. Andrew Place
Santa Ana, California 92705
Attention: Alan Sueda
(b) If to TriZetto or Merger Sub, to:
The TriZetto Group, Inc.
567 San Nicolas Drive, Suite 360
Newport Beach, CA 92660
Attention: Jeffrey H. Margolis
Ph: (949) 718-4940
Fax: (949) 718-4944
Email: jeff.margolis@trizetto.com
With a copy to (which shall not constitute
notice):
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: K.C. Schaaf, Esq.
Ph: (949) 725-4155
Fax: (949) 725-4100
(c) If to Finserv, to:
Finserv Health Care Systems, Inc.
29 Delwick Lane
Short Hills, New Jersey 07078
Attn: Stuart Schloss
Ph: (973) 467-8154
Fax: (973) 467-4734
with a copy to (which shall not constitute notice):
Lasser Hochman, L.L.C.
75 Eisenhower Parkway
Roseland, New Jersey 07068
Attn: David Silver, Esq.
Ph: (973) 226-2700
Fax: (973) 226-0844
13
14
(d) If to the Finserv Securityholders:
To the address set forth on Exhibit A.
Any party hereto may designate a different address by providing
written
notice of such new address to the other parties hereto.
12.2 AMENDMENT. This Agreement may be amended by the written
agreement of TriZetto, the Escrow Agent and the Representative, provided
that,
if the Escrow Agent does not agree to an amendment agreed upon by
TriZetto and
the Representative, the Escrow Agent will resign (which resignation
shall be
effective immediately and, in any event, prior to the effective date of
the
amendment) and TriZetto will appoint a successor Escrow Agent in
accordance with
Section 10 hereof. No such amendment may treat any one Finserv
Securityholder
differently from the other Finserv Securityholders unless consented to
in
writing by Finserv Securityholders having beneficial ownership of a
majority of
the outstanding Escrowed Property, including the consent of any Finserv
Securityholder who is to be treated differently.
12.3 WAIVER. At any time prior to the Termination Date, any
party
hereto may with respect to any other party hereto (a) extend the time
for
performance of any of the obligations or other acts, (b) waive any
inaccuracies
in the representations and warranties contained herein or in any
document
delivered pursuant hereto, or (c) waive compliance with any of the
agreements or
conditions contained herein. Any such extension or waiver shall be valid
if set
forth in an instrument in writing signed by the party or parties to be
bound
thereby.
12.4 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No
failure or delay on the part of any party hereto in the exercise of any
right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein,
nor shall any single or partial exercise of any such right preclude
other or
further exercise thereof or of any other right. All rights and remedies
existing
under this Agreement are cumulative to, and not exclusive of, any rights
or
remedies otherwise available.
12.5 HEADINGS. The headings contained in this Agreement are
for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.6 SEVERABILITY. If any term or other provision of this
Agreement
is invalid, illegal or incapable of being enforced by any rule of law,
or public
policy, all other conditions and provisions of this Agreement shall
nevertheless
remain in full force and effect so long as the economic or legal
substance of
the transactions contemplated hereby is not affected in any manner
adverse to
any party. Upon such determination that any term or other provision is
invalid,
illegal or incapable of being enforced, the parties hereto shall
negotiate in
good faith to modify this Agreement so as to effect the original intent
of the
parties as closely as possible, in an acceptable manner, to the end that
transactions contemplated hereby are fulfilled to the extent possible.
12.7 ENTIRE AGREEMENT. Except as otherwise set forth in the
Merger
Agreement, this Agreement (and the schedules and exhibits attached
hereto)
constitutes the entire understanding and agreement of the parties with
respect
to the subject matter of this Agreement and supersedes all prior
agreements or
understandings, both oral and written, among the parties, or any of
them, with
respect to the subject matter hereof and, except as otherwise expressly
provided
herein.
14
15
12.8 BENEFITS; ASSIGNMENT. This Agreement shall be binding
upon and
shall inure to the benefit of the parties and their respective
successors and
assigns, as permitted hereunder. No party may assign this Agreement or
assign
its respective rights or delegate their duties (by operation of law or
otherwise), without the prior written consent of the other party (except
as
expressly contemplated in Section 3.3).
12.9 GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with the laws of the State of Delaware as
applied to
contracts that are executed and performed in Delaware, without regard to
choice
of law provisions thereof.
12.10 COUNTERPARTS. This Agreement may be executed and
delivered in
one or more counterparts, and by the different parties hereto in
separate
counterparts, each of which when executed and delivered shall be deemed
to be an
original but all of which taken together shall constitute one and the
same
agreement. This Agreement shall become effective when counterparts have
been
signed by each of the parties and delivered to all of the other parties
hereto.
12.11 GENDER. For purposes of this Agreement, references to
the
masculine gender shall include feminine and neuter genders and entities.
12.12 ADDITIONAL ACTIONS AND DOCUMENTS. Each of the parties
hereby
agrees to take or cause to be taken such further actions to execute,
deliver and
file or cause to be executed, delivered and filed such further documents
and
instruments, and to use reasonable efforts to obtain such consents, as
may be
necessary or as may be reasonably requested in order to fully effectuate
the
purposes, terms and conditions of this Agreement.
15
16
IN WITNESS WHEREOF, the parties have duly executed this Escrow
Agreement
as of the day and year first above written.
THE TRIZETTO GROUP, INC., THE "COMPANY"
By: _____________________________________
Name: ___________________________________
Title: __________________________________
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
"ESCROW AGENT"
By: _____________________________________
Name: ___________________________________
Title: __________________________________
STUART SCHLOSS, "REPRESENTATIVE" AND
"FINSERV SECURITYHOLDER"
________________________________________
"FINSERV SECURITYHOLDERS"
________________________________________
Franc Richardson
________________________________________
Olga Pizzo
________________________________________
William Nice
16
