EXHIBIT 3
to AMENDMENT NO. 2
to SCHEDULE 13D
ESCROW AGREEMENT
ESCROW AGREEMENT, dated December 28, 2001 (this "ESCROW AGREEMENT"), by
and among General Atlantic Partners 74, L.P., a Delaware limited partnership,
GAP Star, LLC, a Delaware limited liability company, GAPCO GmbH & Co. KG, a
German limited partnership, and GAP Coinvestment Partners II, L.P., a Delaware
limited partnership (collectively, the "GAP PURCHASERS"), ProBusiness Services,
Inc., a Delaware corporation ("SELLER"), and JPMorgan Chase Bank, as Escrow
Agent (the "ESCROW AGENT").
WHEREAS, the GAP Purchasers and Seller are parties to the Stock
Purchase Agreement, dated as of December 20, 2001, (the "PURCHASE AGREEMENT"),
pursuant to which the GAP Purchasers are acquiring from Seller an aggregate of
1,333,334 common stock, par value $0.001 per share, of Seller (the "COMMON
STOCK");
WHEREAS, the Purchase Agreement provides for the escrow hereby
established to be held by the Escrow Agent; and
WHEREAS, capitalized terms used herein, unless otherwise indicated,
have the respective meanings ascribed to them in the Purchase Agreement.
Accordingly, the parties agree as follows:
1. ESTABLISHMENT OF ESCROW.
1.1 ESCROW DEPOSIT.
1.1.1 On December 28, 2001, pursuant to Section
1(c) of the Purchase Agreement, the GAP Purchasers will deposit with the Escrow
Agent $20,000,010 representing the entire purchase price payable by the GAP
Purchasers pursuant to Section 1(c) of the Purchase Agreement for the Purchased
Shares (the "PURCHASERS' DEPOSIT") to be held by the Escrow Agent and disbursed
in accordance with the terms hereof.
1.1.2 On December 28, 2001, pursuant to Section
1(c) of the Purchase Agreement, Seller will deposit with the Escrow Agent an
instruction letter to Xxxxx Fargo Shareowner Services, its transfer agent,
instructing such transfer agent to issue on the Escrow Release Date stock
certificates in definitive form representing the number of Purchased Shares set
forth opposite each GAP Purchaser's name on EXHIBIT A to the Purchase Agreement,
registered in the name of such GAP Purchasers, and on the Escrow Release Date,
but prior to the distributions contemplated by Section 3, the Seller shall
further deposit with the Escrow Agent such duly issued and dated stock
certificates representing the Purchased Shares (the "SELLER'S DEPOSIT" and,
together with the Purchasers' Deposit, the "DEPOSIT").
1.1.3 The Escrow Agent acknowledges receipt of and
agrees to accept the Deposit and establish and maintain a separate account for
each GAP
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Purchaser's cash portion of the Purchasers' Deposit as provided herein (the
"ESCROW ACCOUNT").
2. INVESTMENT OF PURCHASERS' DEPOSIT.
2.1 INVESTMENT. The Escrow Agent shall invest any or all
of the Purchasers' Deposit and any income or interest earned or accrued with
respect thereto only in time deposits and certificates of deposit of any
commercial bank incorporated in the United States of America of recognized
standing having capital and surplus in excess of $50,000,000. Except as
otherwise provided in Section 5.3, in no event shall the Escrow Agent have any
liability for any investment hereunder, including, without limitation, any loss
of the principal amount of any investment or in connection with the rate of
return on any investment.
2.2 DISTRIBUTION OF INTEREST. All interest accrued from
the date hereof to and including the Escrow Release Date (as defined below) on
investments made pursuant to Section 2.1 shall be for the account of each of the
GAP Purchasers. On the Escrow Release Date, the Escrow Agent shall distribute to
each of the GAP Purchasers all interest then accrued for the account of each of
the GAP Purchasers pursuant to this Section 2.2 and not theretofore distributed
hereunder.
3. DISTRIBUTIONS FROM THE ESCROW.
3.1 DISTRIBUTIONS.
3.1.1 Upon satisfaction or waiver of the
conditions set forth in Section 9 and 10 of the Purchase Agreement (the "ESCROW
RELEASE CONDITIONS"), the GAP Purchasers and Seller shall each execute and
deliver to the Escrow Agent a certificate directing the Escrow Agent to take the
action specified in Section 3.1.2 (the "DISTRIBUTION Certificate").
3.1.2 Upon receipt by the Escrow Agent of a
Distribution Certificate signed by the GAP Purchasers and the Seller stating
that the Escrow Release Conditions have been satisfied, the Escrow Agent shall
promptly, but in any case on the business day following receipt thereof, (i)
distribute to Seller the Purchasers' Deposit and (ii) deliver to the GAP
Purchasers the Seller's Deposit and the interest on the Purchasers' Deposit
payable pursuant to Section 2.2 of this Escrow Agreement.
3.1.3 For purposes of this Escrow Agreement, the
"ESCROW RELEASE DATE" shall mean the date upon which the Distribution
Certificate is delivered by the GAP Purchasers and the Seller.
3.1.4 On the earlier of (i) receipt of a joint
notice executed by all of the GAP Purchasers and Seller or (ii) 150 days after
the Closing Date (the "ESCROW TERMINATION DATE"), the Escrow Agent shall return
the Purchaser's Deposit to the GAP Purchasers and the Seller's Deposit to
Seller.
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3.2 DISPUTE NOTICE.
3.2.1 If, prior to the Escrow Termination Date,
either the GAP Purchasers or the Seller delivers written notice to the other
party and to the Escrow Agent, that such party has determined that the
conditions set forth in Sections 9 and 10 of the Purchase Agreement have been
satisfied (the "DISPUTE NOTICE"), with the basis for such determination set
forth in reasonable detail, the Dispute Notice shall constitute full authority
to the Escrow Agent to take the action provided for in this Section 3.1.1 and
shall be conclusive on all parties hereto. Upon receipt of a Dispute Notice, the
Escrow Agent shall not transfer the Deposit to either the GAP Purchasers or the
Seller until either (i) the Escrow Agent receives a Distribution Certificate
executed by the GAP Purchasers and the Seller, or (ii) there is a final decision
of an arbitrator and the Escrow Agent receives the written final decision in
accordance with Section 3.1.2 hereof. A transfer pursuant to section (ii) of the
preceding sentence shall be in accordance with such final decision. In the event
that a Dispute Notice has been delivered in accordance with this Section 3.1.1,
the provisions of Section 3.1.4(ii) shall not apply and the Escrow Agent shall
not transfer the Deposit to either the GAP Purchasers or the Seller until either
of the conditions set forth in this Section 3.1.1(i) or 3.1.1(ii) have been met.
3.2.2 If a Dispute Notice is delivered in
accordance with Section 3.1.1, then the GAP Purchasers and the Seller shall use
their best efforts to resolve such dispute in a timely manner. In the event of
resolution of such dispute, the GAP Purchasers and the Seller shall both execute
a Distribution Certificate setting forth such resolution, shall furnish such
Distribution Certificate to the Escrow Agent and the Escrow Agent shall make the
distribution in the manner specified in such Distribution Certificate. In the
event that the GAP Purchasers and the Sellers are unable to resolve such dispute
within fifteen calendar days from the Escrow Agent's receipt of any Dispute
Notice, then either party may demand, by written notice to the other, that such
issue shall be settled by binding arbitration to be held in New York, New York
(an "ARBITRATION DEMAND"). All claims shall be resolved by an arbitrator
experienced in matters of corporate finance in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association (the
"ARBITRATION RULES"), except as set forth below. The GAP Purchasers and the
Seller shall agree on the arbitrator or the arbitrator shall be selected by the
President of the American Arbitration Association within fifteen (15) calendar
days after the delivery of the Arbitration Demand. The GAP Purchasers and the
Company shall each submit written memorandum to the arbitrator and there shall
be no hearing or oral testimony. The final decision of the arbitrator shall be
furnished to the GAP Purchasers, the Seller and the Escrow Agent in writing. The
GAP Purchasers and the Seller shall each bear its own fees (including attorney's
fees) and other expenses associated with the arbitration, including fifty
percent of the fees of the arbitrator. However, the arbitrator shall have the
discretion to declare one party the prevailing party such that the
non-prevailing party bears all costs associated with such arbitration. The GAP
Purchasers and the Seller hereby accept that the decision of the arbitrator
shall be final and binding for both of them.
3.3 TAX REPORTING. Seller and each of the GAP Purchasers
shall provide the Escrow Agent with its Tax Identification Number (TIN) as
assigned by the
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Internal Revenue Service and an executed W-9 Form. All interest or other income
earned under this Escrow Agreement shall be allocated and paid as provided
herein and reported by the recipient to the Internal Revenue Service as having
been so allocated and paid.
4. TERMINATION OF THIS ESCROW AGREEMENT. This Escrow Agreement
shall terminate upon the distribution or return of all of the Purchasers'
Deposit, all of Seller's Deposit and all other sums and documents held by the
Escrow Agent pursuant to this Escrow Agreement.
5. DUTIES OF ESCROW AGENT.
5.1 DUTIES LIMITED. The Escrow Agent shall perform only
the duties expressly set forth herein, and shall not have any liability under,
or duty to inquire into, the terms and provisions of any other agreement,
including but not limited to the Purchase Agreement, except as expressly set
forth herein, in performing its duties hereunder. Except as to the due execution
and delivery of this Escrow Agreement by a duly authorized officer, the Escrow
Agent has no responsibility as to the validity of this Escrow Agreement or any
document related thereto.
5.2 RELIANCE. The Escrow Agent may rely upon, and shall
incur no liability for acting or refraining from acting upon, any written
notice, instruction, request, consent, certificate, statement or other document
furnished to it pursuant to this Escrow Agreement and believed in good faith by
it to be genuine and to have been signed or presented by the proper party or
parties, and the Escrow Agent shall be under no duty to inquire into or
investigate the validity, accuracy or content of any such document.
5.3 GOOD FAITH. In no event shall the Escrow Agent have
any liability for any error of judgment or for any act done or omitted by it in
good faith, or for any mistake of fact or law, or for anything which it may do
or refrain from doing hereunder, except for its own gross negligence or willful
misconduct arising out of or in connection with this Escrow Agreement. Anything
in this Escrow Agreement to the contrary notwithstanding, in no event shall the
Escrow Agent be liable for special, indirect or consequential loss or damage of
any kind whatsoever (including but not limited to lost profits), even if the
Escrow Agent has been advised of the likelihood of such loss or damage and
regardless of the form of action. The GAP Purchasers and Seller agree to
severally indemnify the Escrow Agent for, and defend and hold it harmless
against, any loss, liability or expense arising out of or in connection with its
actions as Escrow Agent hereunder, including the reasonable costs and expenses
incurred in defending any such claim of liability, except that none of the GAP
Purchasers or the Seller shall be liable for any loss, liability or expense
incurred on account of the gross negligence or willful misconduct on the part of
the Escrow Agent. The parties hereto acknowledge that the foregoing indemnities
shall survive the resignation or the removal of the Escrow Agent or the
termination of this Escrow Agreement. The Escrow Agent may consult with counsel
from time to time and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or omitted to be
taken by the Escrow Agent hereunder in good faith and in accordance with the
opinion of such counsel.
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5.4 LIMITED NOTICE. The Escrow Agent shall be deemed to
have no notice of, or duties with respect to, any agreement or agreements
(whether or not a copy thereof is delivered to the Escrow Agent), other than as
expressly set forth herein.
5.5 LIMITED ACTIONS. The Escrow Agent shall not take any
action by reason of any notice or instruction given by any of the parties or by
any other person, firm or corporation, except only (i) such notices or
instructions as are herein specifically provided for and (ii) orders or process
of any court entered or issued with competent jurisdiction. In the event that
the Escrow Agent shall be uncertain as to its duties or rights hereunder, it
shall be entitled to refrain from taking any action until it shall be directed
otherwise in writing by each of the GAP Purchasers and Seller or by an order of
a court of competent jurisdiction.
5.6 CONFLICTS.
5.6.1 In the event that any of the terms and
provisions of any other agreement between any of the parties conflict or are
inconsistent with any of the terms and provisions of this Escrow Agreement, the
terms and provisions of this Escrow Agreement shall govern and control in all
respects the duties and liabilities of the Escrow Agent.
5.6.2 In the event that the Escrow Agent shall be
uncertain as to its duties or rights hereunder or shall receive instructions,
claims or demands from any party hereto which, in its opinion, conflict with any
of the provisions of this Escrow Agreement, it shall be entitled to refrain from
taking any action and its sole obligation shall be to keep safely all property
held in escrow until it shall be directed otherwise in writing by all of the
other parties hereto or by a final order or judgment of a court of competent
jurisdiction.
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6. RESIGNATION; SUCCESSOR ESCROW AGENT.
6.1 RESIGNATION. The Escrow Agent may resign at any time
by giving 30 days' prior written notice of such resignation to the GAP
Purchasers and Seller. On the 30th day following delivery of such notice, the
Escrow Agent shall have no further obligation hereunder except to hold the
Deposit and any other amounts and documents held by it pursuant to this Escrow
Agreement as depositary. After resignation, the Escrow Agent shall have no
further obligation to invest amounts then in the Deposit (absent written
instructions with respect thereto executed by the Seller and the GAP Purchasers)
and shall not take any action until the GAP Purchasers and Seller have jointly
designated a successor escrow agent. If the GAP Purchasers and Seller are unable
to agree upon a successor escrow agent within 30 days of receipt of notice from
the Escrow Agent, the Escrow Agent may designate its successor, and if the
Escrow Agent declines to designate its successor, the GAP Purchasers shall
designate the successor escrow agent. In each of the foregoing cases, the
successor escrow agent shall be a bank or trust company organized under the laws
of the United State of America or of the State of California and having a
combined capital and surplus of not less than $100,000,000. The Escrow Agent
shall promptly deliver the Deposit and any other amounts and documents held by
it pursuant to this Escrow Agreement to such successor escrow agent and upon the
successor escrow agent's delivery to the GAP Purchasers and the Seller of a
written instrument accepting such appointment hereunder, the Escrow Agent shall
thereafter have no further obligations hereunder. Upon receipt of the Deposit
and other amounts and documents and upon its written acceptance of such
appointment, the successor escrow agent shall thereupon be bound by all of the
provisions hereof.
6.2 TERMINATION. The GAP Purchasers and Seller acting
jointly may terminate the appointment of the Escrow Agent hereunder upon notice
specifying the date upon which such termination shall take effect. In the event
of such termination, the GAP Purchasers and Seller shall jointly appoint and
designate in such termination notice a successor escrow agent and the Escrow
Agent shall turn over to such successor escrow agent the Deposit and any other
amounts and documents held by it pursuant to this Escrow Agreement. Upon receipt
of the Deposit and other amounts and documents and its acceptance thereof, the
successor escrow agent shall thereupon be bound by all of the provisions hereof,
and the Escrow Agent shall have no further obligations hereunder.
7. FEES AND EXPENSES OF ESCROW AGENT. The GAP Purchasers and
Seller shall each pay directly to the Escrow Agent one half of the Escrow
Agent's reasonable fees for the Escrow Agent's services hereunder as set forth
in EXHIBIT A hereto and all expenses, disbursements and advances (including
reasonable attorneys' fees) incurred in carrying out the Escrow Agent's duties
hereunder.
8. MISCELLANEOUS.
8.1 NOTICES. Any notice or other communication required
or permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, sent by facsimile transmission, overnight delivery service or
certified, registered or express mail, postage prepaid. Any such notice shall be
deemed given when so delivered
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personally, telegraphed or sent by facsimile transmission, or by overnight
delivery service, one day after the date of deposit to such overnight delivery
service or, if mailed, three days after the date of deposit in the United States
mail, as follows:
if to Seller:
ProBusiness Services, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
if to the GAP Purchasers:
c/o General Atlantic Service Corporation
0 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
if to the Escrow Agent:
JPMorgan Chase Bank
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxxxx
Telecopy: (000) 000-0000
Any party may by notice given in accordance with this Section 8.1 to the other
parties designate another address for receipt of notices hereunder. If any
notice is required to be
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given to both the Escrow Agent and another party, such notice shall be given in
a manner that results in the same effective date for each such notice.
8.1.1 In the event funds transfer instructions are
given (other than in writing at the time of execution of this Escrow Agreement),
whether in writing, by telecopier or otherwise, the Escrow Agent is authorized
to seek confirmation of such instructions by telephone call-back to the person
or persons designated in Section 8.1 above, and the Escrow Agent may rely upon
the confirmations of anyone purporting to be the person or persons so
designated. The persons and telephone numbers for call-backs may be changed only
in a writing actually received and acknowledged by the Escrow Agent. The parties
to this Escrow Agreement acknowledge that such security procedure is
commercially reasonable.
8.2 ENTIRE AGREEMENT. This Escrow Agreement is entered
into and delivered pursuant to the Purchase Agreement and sets forth the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto.
8.3 GOVERNING LAW. This Escrow Agreement shall be
governed and construed in accordance with the laws of the State of California
without regard to its principles of conflicts of laws.
8.4 BINDING EFFECT. This Escrow Agreement shall be
binding upon and inure to the benefit of the parties and their respective heirs,
legal representatives, successors and assigns.
8.5 WAIVERS AND AMENDMENTS. This Escrow Agreement may be
amended, modified, superseded, cancelled, renewed or extended, and the terms or
conditions hereof may be waived, only by a written instrument signed by the
parties, or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
8.6 COUNTERPARTS. This Escrow Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
8.7 FURTHER ASSURANCES. Each of the parties shall execute
such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and the
transactions contemplated hereby.
8.8 VARIATIONS IN PRONOUNS. All pronouns and any
variations thereof refer to the masculine, feminine or neuter, singular or
plural, as the identity of the person or persons may require.
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8.9 HEADINGS. The headings in this Escrow Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Escrow Agreement.
8.10 SUCCESSORS. Any corporation or association into which
the Escrow Agent may be merged or converted or with which it may be
consolidated, or any corporation or association to which all or substantially
all the escrow business of the Escrow Agent's corporate trust line of business
may be transferred, shall be the Escrow Agent under this Escrow Agreement
without further act.
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IN WITNESS WHEREOF, the parties have caused this Escrow
Agreement to be executed on the date first written above.
GENERAL ATLANTIC PARTNERS 74, L.P..
By: General Atlantic Partners, LLC,
its General Partner
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------------
Name: Xxxxxxx Xxxxxx
Title: A Managing Member
GAPSTAR, LLC
By: General Atlantic Partners, LLC,
its Managing Member
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------------
Name: Xxxxxxx Xxxxxx
Title: A Managing Member
GAPCO GMBH & CO. KG
By: GAPCO Management GmbH
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------------
Name: Xxxxxxx Xxxxxx
Title: A Managing Member
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------------
Name: Xxxxxxx Xxxxxx
Title: A Managing Member
PROBUSINESS SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
Address for Notice to ProBusiness Services,
Inc.:
0000 Xxxxxxx Xxxx, Xxxxxxxxxx, XX 00000
JPMORGAN CHASE BANK
Escrow Agent
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
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EXHIBIT A
Escrow Agent Fees
JPMorgan Chase Bank Escrow Agent Fees $10,000.00
