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Exhibit 2.16
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") dated as of June 29,
2000, is made by and among AppliedTheory Corporation, a Delaware corporation
("Parent"), Xxx Xxxxxxxxx, Art Xxxxxxx and Xxxxx Xxxxx (the "Stockholders"),
Team Tech International, Inc., a Texas corporation (the "Company") and Xxxxx
Fargo Investment Management & Trust (the "Escrow Agent").
WHEREAS, Parent, the Company, AppliedTheory TT Acquisition Corp., a
Texas corporation and a wholly-owned subsidiary of Parent ("Merger Sub") and
the Stockholders have entered into an Agreement and Plan of Merger dated June
10, 2000 (the "Merger Agreement"), which provides that Merger Sub will be
merged with and into the Company (the "Merger"), with the Company being the
surviving corporation and becoming a wholly-owned subsidiary of Parent;
WHEREAS, the Merger Agreement contemplates the establishment of an
escrow account to secure the indemnification and other obligations of the
Company and the Stockholders under the Merger Agreement;
WHEREAS, the closing of the transactions contemplated by the Merger
Agreement is taking place as of the date hereof and the execution of this
Escrow Agreement by the parties is an express condition thereto; and
WHEREAS, Parent has relied upon the representations, warranties and
covenants of the Company and the Stockholders provided in the Merger Agreement
and in the Schedules, Exhibits and other instruments or agreements delivered to
and in favor of Parent pursuant to the Merger Agreement.
NOW, THEREFORE, to induce Parent to proceed with the Closing and the
Merger, and in further consideration of the mutual covenants and agreements
contained herein and in the Merger Agreement, and intending to be legally
bound, the parties hereto do hereby agree as follows:
1. Defined Terms. Capitalized terms used and not otherwise defined in
this Escrow Agreement shall have the meanings assigned to them in the Merger
Agreement. In case of any conflict between the terms hereof and those of the
Merger Agreement, the terms of the Merger Agreement shall prevail.
2. Appointment of the Escrow Agent. Parent and the Stockholders hereby
appoint Xxxxx Fargo Investment Management & Trust to serve as escrow agent to
hold, safeguard and disburse the Escrow Fund (as defined below) subject to and
in accordance with the provisions of this Agreement. Escrow Agent hereby
accepts such appointment to act as escrow agent and agrees to hold, safeguard
and disburse the Escrow Fund pursuant to the terms hereof.
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3. Creation of the Escrow Fund. Upon the Closing of the Merger, the
Escrow Agent shall acknowledge receipt of and hold in an account 51,628 shares
of Parent Common Stock (the "Escrow Shares"), the per share value thereof to be
as set forth in section 5 hereof and such deposit to constitute an escrow fund
(the "Escrow Fund") to be governed by the terms set forth herein. The Escrow
Shares shall be (i) held in the Escrow Fund and (ii) beneficially owned by the
Stockholders.
4. Claims Against Escrow Fund. Subject to the provisions of Article VII
of the Merger Agreement, the Stockholders have agreed to indemnify and hold
harmless each of Parent and the Surviving Corporation from and against, and
shall compensate and reimburse each of them for, Losses, as set forth therein.
Upon compliance with the terms hereof, Parent shall be entitled to receive
payment in Escrow Shares from the Escrow Fund for amounts owing in respect of
any indemnification obligations or other claims under or pursuant to the Merger
Agreement.
(a) Parent shall give written notice (a " Claim Notice") to the
Stockholders and the Escrow Agent specifying in reasonable detail the nature
and dollar amount of any claim (a "Claim") it is asserting under the Merger
Agreement; provided, however, that Parent may make more than one Claim with
respect to any underlying state of facts. If any Stockholder wishes to object
to any Claim raised in the Claim Notice, he shall provide Parent and Escrow
Agent with a notice, executed by him, specifying in reasonable detail the basis
for his objection to the Claim (an "Objection Notice") within 30 business days
following the date upon which the Stockholders received the Claim Notice. If no
Stockholder shall have objected to any Claim raised in the Claim Notice, the
Stockholders shall each promptly countersign the Claim Notice and return a copy
to each of the Parent and the Escrow Agent.
(b) Upon the receipt by Parent and Escrow Agent of an Objection
Notice, Parent and the Stockholders shall attempt in good faith to agree upon
the rights of the respective parties with respect to each disputed Claim within
30 days. If Parent and the Stockholders are able to resolve the issues raised
in the Objection Notice, Parent and the Stockholders shall provide the Escrow
Agent with a written notice (a "Settlement Notice") executed by each
Stockholder and by an officer of the Parent and setting forth the substance of
such resolution of disputed issue(s).
(c) If at any time prior to the expiration of this Escrow Agreement,
Escrow Agent receives a Settlement Notice, a final non-appealable order of a
court of competent jurisdiction, or other joint written instructions from both
Parent and the Stockholders, to make payment to Parent, then Escrow Agent shall
make such payment out of the Escrow Fund to the Parent in accordance with such
instructions, unless the Escrow Fund shall be insufficient to comply with such
instructions. In such a case, the Escrow Agent shall pay the Escrow Fund, or
any remaining portion thereof, to Parent and shall advise the Parent and the
Stockholders in writing of the amount of such payment.
(d) If no such agreement can be reached after good faith negotiation
(a "Dispute") within thirty (30) days after the receipt by Parent and Escrow
Agent of the Objection Notice, such Dispute shall be submitted to mandatory and
binding arbitration
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within 15 days of the end of such 30-day period. The arbitration shall be
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA") and the decision of the arbitrators as to the validity
and amount of any Claim that is the subject of a Dispute shall be binding and
conclusive upon the parties to this Agreement and Escrow Agent shall be
entitled to act in accordance with such decision and make or withhold payments
out of the Escrow Fund in accordance with the arbitrator's award. The
arbitration hearing shall be held in Denver, Colorado. The arbitration panel
will have no power or authority, under the Commercial Arbitration Rules of the
AAA or otherwise, to relieve the parties from their agreement hereunder, to
arbitrate or otherwise to amend or disregard any provision of this Agreement,
including without limitation, the provisions of this Section 4. It is
understood and agreed that the artibrator's award in such arbitration shall
relate solely to the dispute described in the Objection Notice, shall determine
only whether or not the party giving the Claim Notice is entitled to all or
part of the amounts claimed in the Claim Notice, and shall in no way involve
any other matter relating to the Merger Agreement or this Escrow Agreement
unless Parent and the Stockholders shall otherwise agree through written
directions to the arbitrator, which directions must be executed by Parent and
the Stockholders. Further, in the event that the resolution of such dispute
shall depend on the final disposition of a claim made by an unaffiliated third
party against Parent, Stockholders, or the Company, such arbitrator shall defer
final resolution of such dispute until such third party claim has been resolved
or appropriate provision therefor has been made. Any award rendered by the
arbitration panel will be final, conclusive and binding upon the parties and
any judgment hereon may be entered and enforced in any court of competent
jurisdiction. All costs and expenses of such arbitration (including legal
expenses of either party) shall be paid as directed by the arbitrator or, in
the absence of such a direction, responsibility of the party having incurred
such expenses. The intent of the parties hereto is that, to the extent a party
prevails in the arbitration, the other party shall be obligated to reimburse
the prevailing party for its costs and expenses. In no event shall any of such
costs or expenses be paid or payable by the Escrow Agent, and Parent and the
Stockholders (to the extent directed by the arbitrator in accordance with the
foregoing) shall reimburse Escrow Agent for any costs incurred thereby or in
connection therewith.
5. Valuation of Parent Common Stock. Parent and the Stockholders hereby
agree that for the purposes of this Escrow Agreement, the Escrow Shares shall
be valued at $21.50 per share.
6. Expiration Of Escrow Period.
(a) The Escrow Fund shall remain in existence for a period of twelve
(12) months commencing on the Closing of the Merger (the "Escrow Period");
provided, however, that any Escrow Shares which shall continue to be maintained
in the Escrow Fund beyond the Escrow Period pursuant to Section 6(b) shall be
held subject to the terms hereof and such extended period will be treated as
part of the Escrow Period for purposes of this Escrow Agreement.
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(b) If, upon expiration of the Escrow Period, Parent shall have
asserted a Claim and such Claim is pending or unresolved on the date of the
expiration of the Escrow Period, the Escrow Agent shall retain in the Escrow
Fund that portion of the Escrow Fund, net of any distributions made or to be
made with respect to other Claims, equal in value to the Loss asserted in such
Claim until such matter is finally resolved. If it is determined that Parent is
entitled to recovery on account of such Claim, in compliance with the
provisions of section 4 hereof the Escrow Agent shall withdraw and distribute
to Parent an amount of Escrow Shares having a value equal to the amount due and
payable with respect to such Claim and Parent shall become the beneficial owner
thereof.
(c) To the extent that no Claims are made or are pending by or at the
end of the Escrow Period, an applicable portion of the Escrow Fund shall be
disbursed to the Stockholders, pro rata in proportion with the number of Escrow
Shares to which each Stockholder would be entitled if there were no
distributions from the Escrow Fund in satisfaction of Claims.
(d) Schedule I hereto identifies the number and percentage of Escrow
Shares to which each of the Stockholders will be entitled if none of the Escrow
Shares are distributed to Parent pursuant to a Claim in accordance with this
Escrow Agreement. If any portion of the Escrow Fund is distributed to Parent
pursuant to a Claim, the Escrow Agent shall determine the number of Escrow
Shares to which each Stockholder is entitled upon the termination of the Escrow
Period or in connection with any payment arising under Section 6(c) hereof by
reference to the percentage ownership of Escrow Shares by each Stockholder, as
set forth on Schedule I hereto.
7. Escrow Agent's Rights And Responsibilities. To induce the Escrow
Agent to act hereunder, it is further agreed that:
(a) The Escrow Agent shall not be under any duty to give the property
held hereunder any greater degree of care than it gives its own similar
property.
(b) The Escrow Agent may engage legal counsel who is not counsel to
either Parent or the Stockholders and may act upon the advice of such counsel
in reference to any matter connected herewith and shall not be liable for any
acts or omissions taken or suffered in good faith pursuant to the opinion of
such counsel. The fees and expenses of such counsel shall be deemed to be a
proper expense for which the Escrow Agent will have a lien against the Escrow
Fund.
(c) The Escrow Agent shall not be liable in any respect on account of
the identity, authority or rights of Parent or the Stockholders executing or
delivering or purporting to execute or deliver this Escrow Agreement or any
documents or papers deposited or called for hereunder. The Escrow Agent shall
be protected in acting upon any notice, request, consent, certificate, order,
affidavit, letter, telegram or other paper or document reasonably believed by
it to be genuine and correct and to have been signed or sent by the
Stockholders or an officer of Parent.
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(d) The Escrow Agent is authorized to rely on the written instructions
of Parent or the Stockholders as being the acts thereof.
(e) The duties of the Escrow Agent shall be as expressed under this
Escrow Agreement, and the Escrow Agent shall have no implied duties. The
permissive right or power to take any action shall not be construed as a duty
to take action under any circumstances, and the Escrow Agent shall not be
liable except in the event of its gross negligence or willful misconduct.
(f) The Escrow Agent shall not be called upon to advise Parent or the
Stockholders as to their rights and obligations hereunder.
(g) In consideration of its acceptance of the appointment as the
Escrow Agent, and except with respect to the Escrow Agent's own gross
negligence or willful misconduct or acts or omissions by the Escrow Agent not
taken in good faith, the Parent and the Stockholders agree, jointly and
severally, to indemnify and hold the Escrow Agent, its directors, officers,
employees, affiliates or agents harmless as to any loss or liability incurred
by it to any person, firm or corporation by reason of its having accepted the
same or in carrying out any of the terms hereof, and to reimburse Escrow Agent
for all its expenses, including reasonable attorney's fees, incurred by reason
of its position hereunder or actions taken pursuant hereto. The Escrow Agent
shall have no liability under, or duty to inquire into, the terms and
provisions of this Escrow Agreement, and it is agreed that its duties are
purely ministerial in nature and that Escrow Agent shall incur no liability
whatsoever except for willful misconduct or gross negligence so long as it has
acted in good faith. In no event shall the Escrow Agent be liable for indirect,
punitive, special or consequential damages. This Section 7(g) shall survive the
termination of the Escrow Agreement.
(h) In the event the Escrow Agent becomes involved in litigation by
reason hereof, it is hereby authorized to deposit with the clerk of the court
in which the litigation is pending any and all funds, securities or other
property held by it pursuant hereto, less its fees, expenses and advances, and
thereupon shall stand fully relieved and discharged of any further duties
hereunder. Also, in the event the Escrow Agent is threatened with litigation by
reason hereof, it is hereby authorized to implead all interested parties in any
court of competent jurisdiction and to deposit with the clerk of such court any
such funds, securities or other property held by it pursuant hereto, less its
fees, expenses and advances, and thereupon shall stand fully relieved and
discharged of any further duties hereunder.
(i) Parent, on the one hand, and Stockholders, on the other hand,
shall pay Escrow Agent compensation (as payment in full) for the services to be
rendered by Escrow Agent hereunder in the amount of $3,000.00 upon Escrow
Agent's receipt of the Escrow Fund and up to $1,500.00 bi-annually thereafter
and agree to reimburse Escrow Agent for all reasonable expenses, disbursements
and advances incurred or made by Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses and disbursements of Escrow
Agent's counsel). Further, Parent and the
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Stockholders hereby agree with the Escrow Agent that payment shall be due and
payable upon their receipt of an invoice from Escrow Agent.
8. Resignation Of Escrow Agent. The Escrow Agent, or any successor, may
resign as Escrow Agent hereunder by giving 30 days' written notice thereof to
the Stockholders and Parent by registered or certified mail. Such resignation
shall become effective following such written notice upon the earlier of the
appointment by Parent and the Stockholders of a successor escrow agent, jointly
designated by the other parties hereto in writing, that accepts the appointment
and agrees to be bound by the provisions of an agreement substantially similar
to this Escrow Agreement or the expiration of 30 days thereafter. Upon the
effectiveness of such resignation, all duties hereunder of the Escrow Agent so
resigning shall cease. If at that time Escrow Agent has not received a
designation of a successor Escrow Agent, Escrow Agent's sole responsibility
after that time shall be to retain and safeguard the Escrow Fund until receipt
of a designation of successor Escrow Agent, a joint written disposition
instruction by the other parties hereto or a final non-appealable order of a
court of competent jurisdiction. The Stockholders and Parent shall have the
right to terminate the appointment of the Escrow Agent hereunder by giving
written notice thereof to the Escrow Agent, specifying the date upon which such
termination shall take effect. A condition precedent to such termination shall
be the designation of a successor escrow agent, selected by Parent and the
Stockholders, that has accepted the appointment. In the event of such
termination, the Escrow Agent shall deliver to such successor escrow agent the
Escrow Fund, and any other sums and the records and instruments held by it
under this Escrow Agreement.
9. Voting. During the term of this Escrow Agreement, each of the
Stockholders shall be deemed the owner of his pro rata portion of the Escrow
Shares held in the Escrow Fund and shall have voting power over such Escrow
Shares.
10. Records. The Escrow Agent shall maintain a record of all Claims
against the Escrow Fund filed with it pursuant to section 4 hereof, a record of
all such Claims which shall become payable thereunder and a record of all
payments from the Escrow Fund to Parent.
11. Dividends and Distributions. During the term of this Escrow
Agreement, any dividends or other distributions on the Escrow Shares that are
made in the form of cash or any other form of property, except for ownership
rights in Parent or any subsidiary thereof, shall be distributed to the
Stockholders, pro rata in proportion with their respective ownership of the
Company prior to the Closing. During the term of this Escrow Agreement, any
dividends or other distributions on the Escrow Shares that are made in the form
of capital stock or any other form of ownership interest in Parent or any of
its subsidiaries shall remain in the Escrow Fund until the end of the term of
this Escrow Agreement.
12. Ownership for Tax Purposes. Stockholders agree that, for purposes
of federal and other taxes based on income, Xxx Xxxxxxxxx, Art Xxxxxxx, and
Xxxxx
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Xxxxx will be treated as the owner of 33 1/3%, 33 1/3% and 33 1/3% of the
Escrow Fund, respectively, and that Xxx Xxxxxxxxx, Art Xxxxxxx, and Xxxxx Xxxxx
will report all income, if any, that is earned on, or derived from, the Escrow
Fund as their income, in such proportions, in the taxable year or years in
which such income is properly includible and pay any taxes attributable
thereto.
13. Parent Rights. Parent's right to payment for Losses is, in all
cases, in addition to and not in substitution of any other rights or remedies
available to Parent under the Merger Agreement, any other agreement in respect
of the transactions contemplated thereby, or by operation of law or in equity,
including the right to specific performance or injunctive relief.
14. Notices. All notices and other communications pursuant to this
Escrow Agreement shall be in writing and shall be deemed given if delivered
personally by hand (with written confirmation of receipt) sent by a nationally
recognized overnight courier (return receipt requested), or mailed by
registered or certified mail (return receipt requested), postage prepaid, or
sent by facsimile (followed with a copy sent by courier or registered or
certified mail return receipt requested) to the parties at the following
addresses (or at such other address or facsimile number for a party as shall be
specified by notice hereunder):
To Parent: AppliedTheory Corporation
0000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
Senior Vice President &
Chief Financial Officer
with a copy to: Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx, XX, Esq.
Fax: (000) 000-0000
To the Stockholders:
Xxx Xxxxxxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
512.453.5118
Art Xxxxxxx
00000 Xxxx Xxxxxx Xxxx
Xxxxxx, Xxxxx 00000
512.258.9705
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Xxxxx Xxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
512.795.8400
with a copy to: Xxxxx, Martens & Xxxxxx, LLP
0000 X. XxXxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Esq.
Fax: (000) 000-0000
To the Escrow Agent: Xxxxx Fargo
Trust and Investment Center of TX
3979 X. Xxxxx
P.O. Box 41629
Mail Station Code: T5283-013
Xxxxxx, XX 00000-0000
Attention: XxXxxx Xxxxxx Xxxx
Trust Administrator
Voice: (000) 000-0000
Fax: (000) 000-0000
All such notices and other communications shall be deemed to have been received
(a) in the case of personal hand delivery, on the date of such delivery, (b) in
the case of delivery by nationally recognized overnight courier, on the
business day following dispatch, (c) in the case of mailing, on the third
business day following such mailing, and (d) in the case of a facsimile, when
the party receiving such facsimile shall have confirmed receipt of the
communication (or when the copy sent by courier or registered or certified mail
shall have been deemed to have been received pursuant to clause (a), (b) or
(c)).
15. Successors And Assigns. This Escrow Agreement shall inure to the
benefit of and be binding upon the successors, personal representatives and
assigns of the parties hereto, except that no provision of this Escrow
Agreement shall confer rights upon any person not a party hereto.
16. Governing Law. This Escrow Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the choice of law principles thereof.
17. Expenses. Except as provided in Sections 4 and 7, in the event of
any dispute that results in a suit or other legal proceeding to construe or
enforce any provision of this Escrow Agreement or because of an alleged breach,
default or misrepresentation in connection with any of the provisions of this
Escrow Agreement, the parties hereto agree that each party shall be responsible
for its own attorneys' fees and other costs incurred in any action or
proceeding.
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18. Counterparts. This Escrow Agreement may be executed in any number
of counterparts, each of which when so executed shall constitute an original
hereof, but all of which together shall constitute one agreement.
19. Section Headings. The headings of sections in this Escrow Agreement
are provided for convenience only and will not affect its construction or
interpretation.
20. Exclusive Agreement and Modification. This Escrow Agreement
supersedes all prior agreements among the parties with respect to its subject
matter and constitutes (along with the documents referred to in this Escrow
Agreement) a complete and exclusive statement of the terms of the agreement
between the parties with respect to its subject matter. This Escrow Agreement
may not be amended except by a written agreement executed by the Parent, the
Stockholders and the Escrow Agent.
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IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement
to be effective as of the day and year first above written.
APPLIEDTHEORY CORPORATION:
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Vice President - Corporate
Development and Western
Operations
XXX XXXXXXXXX
/s/ Xxx Xxxxxxxxx
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ART XXXXXXX
/s/ Art Xxxxxxx
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XXXXX XXXXX
/s/ Xxxxx Xxxxx
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TEAM TECH INTERNATIONAL, INC.
By: /s/ Art Xxxxxxx
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Name: Art Xxxxxxx
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Title: President/CEO
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XXXXX FARGO INVESTMENT
MANAGEMENT & TRUST
By: /s/ XxXxxx Xxxxxx Xxxx
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Name: XxXxxx Xxxxxx Xxxx
Title: Trust Administrator
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