Exhibit 2.2
ESCROW AGREEMENT
by and between
State Street Bank and Trust Company of California, N.A.
and
Cisco Systems, Inc.
and
2M Invest A/S
This Escrow Agreement is made as of 29 September 1999 by and among State Street
Bank and Trust Company of California, N.A. ("Escrow Agent"), Cisco Systems,
Inc., a California corporation ("Cisco"), and 2M Invest A/S, a Danish
corporation registered with the Companies' Registrar as company no. A/S 209.034,
as agent ("Shareholders' Agent") of the Sellers under the Share Purchase
Agreement of 14 September 1999, being the former shareholders, the lender under
a convertible subordinated loan, and holders of warrants to subscribe for common
stock of COCOM A/S, a Danish corporation registered with the Companies'
Registrar as company no. A/S 220.522 (the "Company"). Terms not otherwise
defined herein shall have the meaning set forth in the Share Purchase Agreement
(as defined below), a copy of which is attached hereto.
WITNESSETH
WHEREAS, Cisco and the Sellers have entered into a Share Purchase
Agreement of 14 September 1999 (the "Share Purchase Agreement") providing for
the acquisition by Cisco of the Company Equity Capital by way of an exchange of
shares; and
WHEREAS, pursuant to Section 12 of the Share Purchase Agreement,
entitled "Escrow and Indemnification" (the "Escrow and Indemnification Terms"),
an escrow fund (the "Escrow Fund") will be established to compensate Cisco for
certain Damages (as defined in the Escrow and Indemnification Terms) arising out
of any misrepresentation or breach or default in connection with any of the
representations, warranties, covenants and agreements given or made by the
Sellers in the Share Purchase Agreement, the Disclosure Schedule or any exhibit
or schedule to the Share Purchase Agreement; and
WHEREAS, the Shareholders' Agent has been constituted as agent for
and on behalf of the Sellers to undertake certain obligations specified herein
and in the Escrow and Indemnification Terms; and
WHEREAS, the Escrow and Indemnification Terms provides for an Escrow
Fund of 94,019 shares, being ten (10) per cent. of the Cisco Shares, exclusive
of the Cisco Shares relating to the Company's treasury stock, such escrow to be
held by the Escrow Agent; and
WHEREAS, the parties hereto desire to set forth further terms and
conditions in addition to those set forth in the Escrow and Indemnification
Terms relating to the operation of the Escrow Fund.
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NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants contained herein, and intending to be legally bound, hereby agree as
follows:
1. Escrow and Escrow Shares.
Pursuant to the Escrow and Indemnification Terms and subject to any
Cisco Recapitalization, Cisco shall deposit in escrow with the Escrow
Agent within five (5) business days of the Effective Date (as defined
in the Share Purchase Agreement), 94,019, in writing ninety four
thousand and nineteen, Cisco Shares (the "Escrow Shares") which shall
be registered in the name of the Escrow Agent as nominee for the
Sellers. The Escrow Shares shall be held and distributed by the Escrow
Agent in accordance with the terms and conditions of the Escrow and
Indemnification Terms and this Agreement. The number of Escrow Shares
beneficially owned by each Seller, the percentage interest of each
Seller in the Escrow Fund, the address of each Seller and the taxpayer
identification of each Seller are set forth in Annex 1 attached
hereto.
2. Rights and Obligations of the Parties.
The Escrow Agent shall be entitled to such rights and shall perform
such duties of the escrow agent as set forth herein and in the Escrow
and Indemnification Terms (collectively, the "Duties"), in accordance
with the terms and conditions of this Agreement and the Escrow and
Indemnification Terms. Cisco, the Company and the Shareholders' Agent
shall be entitled to their respective rights and shall perform their
respective duties and obligations as set forth herein and in the
Escrow and Indemnification Terms, in accordance with the terms hereof
and thereof. In the event that the terms of this Agreement conflict in
any way with the provisions of the Escrow and Indemnification Terms,
the Escrow and Indemnification Terms shall control.
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3. Escrow Period.
The Escrow Period shall terminate (i) for those matters that are not
expected to be encountered and resolved in the audit of Cisco's
financial statements for its fiscal year because of materiality
considerations or otherwise, at the one year anniversary of the
Effective Date or (ii) for all other matters at the earlier of the one
year anniversary of the Effective Date or the date set forth in an
Officers' Certificate of Cisco, delivered to the Escrow Agent, as
being the date of the issuance of the audited consolidated financial
statements of Cisco for its fiscal year which include the results of
the Company; provided, however, that a portion of the Escrow Fund,
which is necessary to satisfy any unsatisfied claims specified in any
Officer's Certificate theretofore delivered to the Escrow Agent prior
to termination of the Escrow Period with respect to facts and
circumstances existing prior to expiration of the Escrow Period, shall
remain in the Escrow Fund until such claims have been resolved. Cisco
immediately shall deliver to the Escrow Agent a certificate specifying
the Effective Date and, later, shall deliver to the Escrow Agent a
certificate setting forth the date on which the Escrow Period
terminates. Upon the expiration of the Escrow Period, Cisco shall
deliver to the Escrow Agent a certificate setting forth as of the date
of such termination the Nasdaq National Market closing price of Cisco
Common Stock (the "Termination Stock Price").
4. Duties of Escrow Agent.
In addition to the Duties set forth in the Escrow and Indemnification
Terms, the Duties of the Escrow Agent shall include the following:
4.1 The Escrow Agent shall hold and safeguard the Escrow Shares during the
Escrow Period, shall treat such Escrow Fund as a trust fund in
accordance with the terms of this Agreement and the Escrow and
Indemnification Terms and not as the property of Cisco, and shall hold
and dispose of the Escrow Shares only in accordance with the terms
hereof.
4.2 The Escrow Shares shall be voted by the Escrow Agent in accordance
with the instructions received by the Escrow Agent from the beneficial
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owners of such shares. In the absence of such instructions, the Escrow
Agent shall be under no obligation to vote such shares. The Escrow
Agent need not forward proxy information, annual or other reports or
other information received from Cisco with respect to the Escrow
Shares.
4.3 Promptly following termination of the Escrow Period as set forth in
Section 3 hereof, if necessary, the Escrow Agent (i) shall deposit
with the Cisco's stock transfer agent (which is currently Boston
EquiServe LP) the number of Escrow Shares and other property in the
Escrow Fund which is in excess of the amount of such Escrow Shares or
other property (as set forth in a certificate of Cisco) which is
determined to be sufficient to satisfy any unsatisfied claims made by
Cisco and delivered to the Escrow Agent prior to termination of the
Escrow Period, and to pay expenses as provided in Section 9.2 hereof
and (ii) shall cause such transfer agent to transfer such Escrow
Shares and other property to the Sellers. As soon as all such claims
have been resolved, the Escrow Agent shall cause such transfer agent
to deliver to such Sellers all of the Escrow Shares and other property
remaining in the Escrow Fund and not required to satisfy such claims
and expenses. Each Seller shall receive that number of Escrow Shares
equivalent to such Seller's percentage interest in the Escrow Fund as
set forth in Annex 1 hereto.
4.4 Pursuant to Section 12 of the Share Purchase Agreement, for the
purpose of compensating Cisco for its Damages pursuant to the Share
Purchase Agreement, the Escrow Shares shall be valued on the basis of
the closing price of Cisco Common Stock on the Nasdaq National Market
on the trading day before the date of an Officer's Certificate
presented pursuant to Section 12.5 of the Share Purchase Agreement
(the "Claim Stock Price"). The Claim Stock Price shall be set forth in
such Officer's Certificate. If the value to be distributed to Cisco
(or to any Seller upon a termination of the escrow) is not evenly
divisible by the Claim Stock Price or the Termination Stock Price, as
applicable, the Escrow Agent shall round down the number of shares to
be distributed to the next highest number of shares and shall cause
the transfer agent of the Escrow Shares to distribute that number. In
lieu of the fractional interest not distributed, Cisco shall furnish
to the Escrow Agent, and the Escrow Agent (or such stock transfer
agent) in turn
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will distribute to Cisco, cash equal to such fractional interest times
the Claim Stock Price or the Termination Stock Price, as applicable.
Cisco shall be deemed to have purchased such fractional interests with
respect to which it has furnished funds to the Escrow Agent.
Accordingly, the Escrow Agent, upon receipt of such funds, shall
deliver the corresponding number of shares to Cisco. In all events,
Cisco shall so purchase only a whole number of shares. Any cash so
received from Cisco and not so immediately distributed by the Escrow
Agent shall be retained by the Escrow Agent as part of the Escrow
Fund, but need not be invested.
5. Distribution.
Any cash dividends, dividends payable in securities or other
distributions of any kind (but excluding any shares of Cisco capital
stock received upon a stock split or stock dividend) shall be promptly
distributed by the Escrow Agent to the beneficial holder of the Escrow
Shares to which such distribution relates, by check mailed via first
class mail, to the Sellers at their addresses, and in the percentage
interests, set forth in Annex 1. Any shares of Cisco common stock
received by the Escrow Agent upon a stock split made in respect of any
securities in the Escrow Fund shall be added to the Escrow Fund and
become a part thereof. Any provision hereof or of the Escrow and
Indemnification Terms shall be adjusted to appropriately reflect any
stock split or reverse stock split, as set forth in a revised version
of Annex 1 delivered to the Escrow Agent and the Shareholders' Agent.
6. Exculpatory Provisions.
6.1 The Escrow Agent shall be obligated only for the performance of such
Duties as are specifically set forth herein and in the Escrow and
Indemnification Terms and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or
parties. The Escrow Agent shall not be liable for forgeries or false
personations. The Escrow Agent shall not be liable for any act done or
omitted hereunder as escrow agent except for gross negligence or
willful misconduct. The Escrow Agent shall, in no case or event be
liable for any representations or warranties of the Company or Cisco
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or for punitive, incidental or consequential damages. Any act done or
omitted pursuant to the advice or opinion of counsel shall be
conclusive evidence of the good faith of the Escrow Agent.
6.2 The Escrow Agent is hereby expressly authorized to disregard any and
all warnings given by any of the parties hereto or by any other
person, excepting only orders or process of courts of law or
arbitrations as provided in Sections 12.7 and 14.3 of the Share
Purchase Agreement, and is hereby expressly authorized to comply with
and obey orders, judgments or decrees of any court or rulings of any
arbitrators. In case the Escrow Agent obeys or complies with any such
order, judgment or decree of any court or such ruling of any
arbitrator, the Escrow Agent shall not be liable to any of the parties
hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment, decree or arbitrators'
ruling being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
6.3 The Escrow Agent shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering
or purporting to execute or deliver the Agreement or any documents or
papers deposited or called for thereunder.
6.4 The Escrow Agent shall not be liable for the outlawing of any rights
under any statute of limitations with respect to the Agreement or any
documents deposited with the Escrow Agent.
7. Resignation and Removal of the Escrow Agent.
The Escrow Agent may resign as Escrow Agent at any time with or
without cause by giving at least thirty (30) days' prior written
notice to each of Cisco and the Shareholders' Agent, such resignation
to be effective thirty (30) days following the date such notice is
given. In addition, Cisco and the Shareholders' Agent may jointly
remove the Escrow Agent as escrow agent at any time with or without
cause, by an instrument (which may be executed in counterparts) given
to the Escrow Agent, which instrument shall designate the effective
date of such removal. In the event of any such resignation or removal,
a successor escrow agent which shall be a bank or trust company
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organized under the laws of the United States of America or of the
State of California having (or if such bank or trust company is a
member of a bank company, its bank holding company shall have) a
combined capital and surplus of not less than $50,000,000, shall be
appointed by the Shareholders' Agent with the approval of Cisco, which
approval shall not be unreasonably withheld. Any such successor escrow
agent shall deliver to Cisco and the Shareholders' Agent a written
instrument accepting such appointment, and thereupon it shall succeed
to all the rights and duties of the escrow agent hereunder and shall
be entitled to receive the Escrow Fund.
8. Further Instruments.
If the Escrow Agent reasonably requires other or further instruments
in connection with performance of the Duties, the necessary parties
hereto shall join in furnishing such instruments.
9. Escrow Fees and Expenses.
9.1 Cisco shall pay the fees of the Escrow Agent.
9.2 Any out-of-pocket expenses incurred by the Shareholders' Agent shall
be paid out of the Escrow Fund in preference to other distributions
from such Escrow Fund; provided, however, that the aggregate of such
payments shall not exceed $15,000, and provided further that under no
circumstances will the Shareholders' Agent have personal liability for
any such expenses.
10. Indemnification.
In consideration of the Escrow Agent's acceptance of this appointment,
Cisco and the Shareholders' Agent, on behalf of the Sellers of the
Company and not individually, jointly and severally, agree to
indemnify and hold the Escrow Agent harmless as to any liability
incurred by it to any person, firm or corporation by reason of its
having accepted such appointment or in carrying out the terms hereof
and of the Escrow and Indemnification Terms, and to reimburse the
Escrow Agent for all its costs and expenses, including, among other
things, counsel fees and expenses, reasonably incurred by reason of
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any matter as to which an indemnity is paid; provided, however, that
no indemnity need be paid in case of the Escrow Agent's negligence,
willful misconduct or breach of this Agreement.
11. Notices.
Any notice given hereunder shall be in writing and shall be deemed
effective upon the earlier of personal delivery or the third day after
mailing by certified or registered mail, postage prepaid, or sent via
facsimile (with confirmation of receipt) to the parties at the
following address (or at such other address for a party as shall be
specified by like notice):
To Cisco:
Cisco Systems, Inc.
300 East Tasman Drive, Building 10
San Jose, CA 95134-1706
USA
Attention: Robert S. Gordon, Director, Business Development
Fax: (1) 408 526 7864
Telephone: (1) 408 526 7958
With a copy to:
Brobeck, Hale and Dorr
Hasilwood House
60 Bishopsgate
London E2N 4AJ
Attention: Thomas W. Kellerman, Esq.
Fax: (44) 171 638 5888
Telephone: (44) 171 638 6688
and
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Kromann & Munter
Radhuspladsen 14
1550 Kobenhavn V
Denmark
Attention: Lau Normann Jorgensen, Esq.
Fax: (45) 33 11 80 28
Telephone: (45) 33 11 11 10
To Shareholders' Agent:
2M Invest A/S
Gronningen 15
1270 Kobenhavn K
Denmark
Attention: Michael Mathiesen, Chairman and CEO
Fax: (45) 33 32 01 07
Telephone: (45) 33 32 39 38
With a copy to:
Horten & Partners A/S
Ved Stranden 18
1012 Kobenhavn K
Denmark
Attention: Inger S. Loft, Esq.
Fax: (45) 77 30 40 77
Telephone: (45) 77 30 40 50
To the Escrow Agent:
State Street Bank and Trust Company of California, N.A.
633 West Fifth Street, 12th Floor
Los Angeles, CA 90071
Attention: Corporate Trust Department
Fax: (1) 213 362 7357
Telephone: (1) 213 362 7338
Any notice addressed to the Escrow Agent shall be effective only upon
receipt.
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12. General.
12.1 The captions in this Escrow Agreement are for convenience only and
shall not be considered a part of or affect the construction or
interpretation of any provision of this Escrow Agreement.
12.2 This Escrow Agreement may be executed in any number of counterparts,
each of which when so executed shall constitute an original copy
hereof, but all of which together shall constitute one agreement.
12.3 No party may, without the prior express written consent of each other
party, assign this Escrow Agreement in whole or in part. This Escrow
Agreement shall be binding upon and inure to the benefit of the
respective successors and assigns of the parties hereto.
12.4 It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the
securities held by the Escrow Agent hereunder, the Escrow Agent is
authorized and directed to act in accordance with, and in reliance
upon, the terms hereof and of the Escrow and Indemnification Terms.
12.5 This Escrow Agreement shall be governed by and construed in accordance
with the laws of the Kingdom of Denmark. Any dispute or claim between
the parties under this Agreement shall be finally settled by binding
arbitration in accordance with the Rules of Procedure of the Danish
Institute of Arbitration (Copenhagen Arbitration).
13. Investment of Escrow Cash.
The Escrow Agent shall invest cash, if any, in the Escrow Fund in the
SSgA U.S. Treasury Money Market Fund, which is a money market mutual
fund registered under the Investment Company Act of 1940, the
principal of which is invested solely in obligations issued or
guaranteed by the United States Government. All interest or any other
income earned with respect to such investment shall be retained by the
Escrow Agent as part of the Escrow Fund until distributed in
accordance with other provisions of this Agreement. For tax reporting
purposes, all such income shall be allocated to the Sellers in
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accordance with their pro rata percentage interests set forth in Annex
1.
14. Tax Reporting Matters.
The Shareholders' Agent on behalf of the Sellers agrees to provide the
Escrow Agent with certified tax identification numbers for each of the
Sellers by furnishing appropriate Forms W-8 and other forms and
documents that the Escrow Agent may reasonably request (collectively,
"Tax Reporting Documentation") to the Escrow Agent within 30 days
after the date hereof. The parties hereto understand that, if such Tax
Reporting Documentation is not so certified to the Escrow Agent, the
Escrow Agent may be required by the Internal Revenue Code, as it may
be amended from time to time, to withhold a portion of the Escrow
Shares or any interest or other income earned on the investment of
monies or other property held by the Escrow Agent pursuant to this
Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date of last signature hereto.
Date:
STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A.
as Escrow Agent
By /s/ Paula Oswald
------------------------------------
Paula Oswald
Vice President
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Date:
Cisco Systems, Inc.
By Edward R. Kozel
------------------------------------
Name: Edward R. Kozel
Title:
Date:
2M Invest A/S
By /s/ Michael Mathiesen
------------------------------------
Name: Michael Mathiesen
Title:
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