Incredimail 2011 Annual Report Download - page 220

12.4 Protection of Shareholder Representative
. The Shareholder Representative will incur no liability with respect to any action taken or suffered by
it in reliance upon any notice, direction, instruction, consent, statement or other document believed by it to be genuine and to have been signed by the proper person
(and shall have no responsibility to determine the authenticity thereof), nor for any other action or inaction, except his own willful misconduct or bad faith. In all
questions arising under this Agreement, the Shareholder Representative may rely on the advice of counsel, and the Shareholder Representative will not be liable to
Participating Securityholders or Preferred Holders for anything done, omitted or suffered in good faith by the Shareholder Representative based on such advice. The
Participating Securityholders and Preferred Holders shall, severally and not jointly, indemnify, defend and hold the Shareholder Representative and its members,
managers, employees, successors and assigns harmless from and against any loss, damage, tax, liability and expense (collectively, “ Representative Losses ”)
that
may be incurred by the Shareholder Representative arising out of or in connection with the acceptance or administration of the Shareholder Representative’
s duties,
except as caused by the Shareholder Representative’
s willful misconduct or bad faith, including the legal costs and expenses of defending such Shareholder
Representative against any claim or liability in connection with the performance of the Shareholder Representative’
s duties. If not paid directly to the Shareholder
Representative by the Participating Securityholders and Preferred Holders, any such Representative Losses may be recovered by the Shareholder Representative from
(i) initially the funds in the Representative Fund (as defined below), (ii) if the funds from the Representative Fund have been exhausted, then from the amounts in the
Escrow Fund otherwise distributable to the Participating Securityholders pursuant to the terms hereof and the Escrow Agreement at the time of distribution in
accordance with written instructions delivered by the Shareholder Representative to the Escrow Agent, and (iii) if the funds from the Escrow Funds have been
exhausted then from any Deferred Payment or Contingent Payment actually payable to the Participating Securityholders pursuant to written instructions delivered by
the Shareholder Representative to Purchaser or the Paying Agent, as the case may be; provided, that while this section allows the Shareholder Representative to be
paid from the Representative Fund, the Escrow Fund, a Deferred Payment or a Contingent Payment, this does not relieve the Participating Securityholders and
Preferred Holders from their obligation to promptly pay such Representative Losses as they are suffered or incurred, nor does it prevent the Shareholder
Representative from seeking any remedies available to it at law or otherwise. Any payment by Purchaser to the Shareholder Representative pursuant to the written
instructions of the Shareholder Representative shall be considered for purposes of this Agreement to have been paid to the Participating Securityholders or the
Preferred Holders, as the case may be. The liability of the Participating Securityholders shall be allocated pro rata based on their respective Consideration
Fractions. The Preferred Holders shall have no liability to indemnify the Shareholder Representative hereunder until the Participating Securityholders shall have first
satisfied their obligations hereunder up to 80% of the aggregate Merger Consideration payable to all Participating Securityholders. Thereafter, any excess
Representative Losses shall be allocated pro rata among the Preferred Holders based on their respective Consideration Fraction for Preferred Stock up to the aggregate
of the Total Preferred Share Amount. If there are any excess Representative Losses thereafter, the liability shall be allocated pro rata among the Participating
Securityholders and the Preferred Holders based on the Merger Consideration payable under this Agreement.
12.5 Reimbursement of Shareholder Representative’s Expenses
. Each Participating Securityholder and Preferred Holder agrees to reimburse the
Shareholder Representative for its pro rata portion of all reasonable out-of-
pocket expenses incurred by the Shareholder Representative in the performance of its duties
hereunder (including but not limited to any attorney’s fees and costs incurred in connection with the Shareholder Representative’
s duties pursuant to this Agreement)
based on their respective Consideration Fraction and Consideration Fraction for Preferred Stock, as applicable, in accordance with the priority set forth in Section 12.4
above. A portion of the Closing Payment in cash in the amount of fifty thousand U.S. Dollars ($50,000) shall be set aside from the Closing Payment to cover the
expenses incurred by the Shareholder Representative (the “ Representative Fund ”),
which shall be wired to SRS by the Paying Agent upon the Closing of the
Merger, and which shall be held by the Shareholder Representative as agent and for the benefit of the Participating Securityholders in a segregated client bank account
and shall be used for the purposes of paying directly, or reimbursing the Shareholder Representative for, any third party expenses pursuant to this Agreement. The
Shareholder Representative will hold these funds separate from its corporate funds, will not use these funds for its operating expenses or any other corporate purposes
and will not voluntarily make these funds available to its creditors in the event of bankruptcy. The Participating Securityholders shall not receive interest or other
earnings on the Representative Fund and the Participating Securityholders irrevocably transfer and assign to the Shareholder Representative any ownership right that
they may have in any interest that may accrue on funds held in the Representative Fund. The Participating Securityholders acknowledge that the Shareholder
Representative is not providing any investment supervision, recommendations or advice. The Shareholder Representative shall have no responsibility or liability for
any loss of principal of the Representative Fund other than as a result of its willful misconduct or bad faith. For tax purposes, the Representative Fund shall be treated
as having been received and voluntarily set aside by the Participating Securityholders at the time of Closing. The parties agree that SRS is not acting as a withholding
agent or in any similar capacity in connection with the Representative Fund. Each Participating Securityholder agrees that Representative Losses may be deducted by
the Shareholder Representative from the Representative Fund. Any remaining amount in the Representative Fund upon the completion of the Shareholder
Representative’
s duties hereunder shall be distributed to the Paying Agent for distribution to the Participating Securityholders based on each Participating
Securityholder’s Consideration Fraction.
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