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Exhibit 2.5
THIS TAX ESCROW AGREEMENT (the "Escrow Agreement") dated as of January
5, 2000, is made by and among AppliedTheory Corporation, a Delaware corporation
("Parent"), AppliedTheory Reef Acquisition Corp., a Delaware Corporation (the
"Merger Sub"), United States Trust Company of New York (the "Escrow Agent"), and
CRL Network Services, Inc. ("CRL") for the benefit of those parties who are
holders of capital stock of CRL on the date hereof (collectively the
"Stockholders" and individually a "Stockholder"), as contemplated by that
certain Agreement and Plan of Merger, dated as of December 3, 1999, by and among
Parent, the Merger Sub, CRL and Xxxxx X. Xxxxx (the "Agreement and Plan of
Merger"). Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Agreement and Plan of Merger.
WHEREAS, Parent, the Merger Sub, CRL and Xx. Xxxxx have entered into
the Agreement and Plan of Merger to provide for the merger of the Company and
the Merger Sub and the corresponding transfer to the Parent of all the ownership
interests of CRL (the "Merger");
WHEREAS, the closing of the transactions contemplated by the Agreement
and Plan of Merger 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 CRL and Xx. Xxxxx provided in the Agreement and Plan of Merger and
in the Schedules, Exhibits and other instruments or agreements delivered to and
in favor of Parent pursuant to the Agreement and Plan of Merger.
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 Agreement and Plan of Merger, and intending to be
legally bound, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITION
For purposes of this Escrow Agreement, with respect to each
Stockholder or a group of Stockholders, "Ownership Share" shall mean that
proportion of the total Company Stock outstanding as of the date hereof which is
owned by such Stockholder or number of shares such group of Stockholders, as the
case may be. Attached hereto as Schedule A is a list identifying the Ownership
Share for each Stockholder and any group of Stockholders who hold their Company
Stock together, expressed as a percentage.
ARTICLE II
ESCROW FUND
SECTION 2.1. Contemporaneous with the execution of this Escrow
Agreement, Parent shall deposit at Closing 19,882.35 shares of Parent Common
Stock
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and $97,882.35 with the Escrow Agent, such deposit to constitute an escrow fund
(the "Escrow Fund") to be governed by the terms set forth herein.
SECTION 2.2. The Escrow Agent shall hold, safeguard and dispose of the
Escrow Fund in accordance with the terms hereof and shall treat such Escrow Fund
as an escrow fund in accordance with the terms hereof.
SECTION 2.3. For purposes of this Escrow Agreement, the per share
value of the Stock Consideration shall be $16.00, the same per share value as
such Stock Consideration has pursuant to the Agreement and Plan of Merger.
ARTICLE III
ESCROW PERIOD; NOTICE OF TERMINATION
The shares of Parent Common Stock and cash deposited in the Escrow
Fund shall remain in the Escrow Fund for the period beginning on the date hereof
and ending five days following the later to occur of (a) the day upon which
Parent or the Merger Sub (the "Receiving Party"), as the case may be, shall
receive from the United States Internal Revenue Service any tax refund (the
"1997 Refund") to which Parent or the Merger Sub shall be entitled in respect of
taxes previously paid by or for CRL for the fiscal year ending December 31,
1997, or (b) the day upon which it shall have been finally determined that
neither CRL, nor the Merger Sub, nor Parent are entitled to a 1997 Refund (such
period being the "Escrow Period"). Prior to the termination of the Escrow Period
pursuant to this Article III, either Parent or the Merger Sub shall notify CRL
and its counsel in writing of the facts giving rise to the termination of the
Escrow Period, of the amount of any 1997 Refund received and of the date upon
which the Escrow Period shall terminate pursuant to this Article III, such
notice to be provided as further described in Article XIV of this Escrow
Agreement.
ARTICLE IV
DISTRIBUTION IF 1997 REFUND IN EXCESS OF $416,000
In the event that the Receiving Party shall receive a 1997 Refund in
an amount equal to or less than $416,000, the Receiving Party shall be entitled
to payment from the Escrow Fund of a pro rata portion of the Stock Consideration
and Cash Consideration equal to the difference between $416,000 and the amount
of the 1997 Refund and the Stockholders shall collectively be entitled to
payment of the balance of the Escrow Fund. In the event that it shall have been
finally determined that neither CRL, nor the Merger Sub, nor Parent are entitled
to a 1997 Refund, at the termination of the Escrow Period the Parent or, at the
Parent's option, the Merger Sub, shall be entitled to payment of all Parent
Common Stock and cash in the Escrow Fund.
ARTICLE V
EXPIRATION OF ESCROW PERIOD
and
PAYMENT OF THE ESCROW FUND
Upon the expiration of the Escrow Period, if the Stockholders shall be
entitled to a payment pursuant to Article IV hereof, the Escrow Agent shall
deliver to
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each Stockholder his Ownership Share of the Stock Consideration and the Cash
Consideration in the Escrow Fund; provided, that such Stockholder shall have
delivered his or her shares of Company Stock to Parent or the Merger Sub on or
before the expiration of the Escrow Period. In the event that upon the
expiration of the Escrow Period one or more Stockholders shall have failed to
deliver his or her certificates representing shares of Company Stock
(collectively the "Non-Delivering Stockholders" and individually a
"Non-Delivering Stockholder"), at that time the Escrow Agent shall deliver the
Non-Delivering Stockholders' Ownership Share of the Escrow Fund to Parent;
provided, that following the Expiration of the Escrow Period, Parent and the
Merger Sub hereby agree to deliver to any Non-Delivering Stockholder a payment
of Stock Consideration and Cash Consideration corresponding to his or her
Ownership Share of the Stock Consideration and the Cash Consideration in the
Escrow Fund, such payment to be made as described in that certain letter
agreement, dated as of the date hereof, between Parent and CRL.
ARTICLE VI
DISTRIBUTION OF ESCROW FUND
In the event that the 1997 Refund shall be any amount greater than
$416,000, upon the Expiration of the Escrow Period the Stockholders shall
collectively be entitled to receive Merger Consideration from Parent and the
Merger Sub having a value equal to the amount by which the 1997 Refund exceeds
$416,000; provided, that 23.52941% of such Merger Consideration shall take the
form of Cash Consideration and 76.47059% of such Merger Consideration shall take
the form of Stock Consideration; provided, further that the parties hereto
understand that each Stockholder shall receive his Ownership Share of the Stock
Consideration and the Cash Consideration to be paid pursuant to this Article VI;
and provided further that Parent and the Merger Sub shall not be required to pay
any Stockholder pursuant to this Article VI and upon the expiration of the
Escrow Period unless such Stockholder shall have delivered his or her shares of
Company Stock to Parent or the Merger Sub on or before the expiration of the
Escrow Period; and provided further that Parent and the Merger Sub hereby agree
to pay any Non-Delivering Stockholder his or her Ownership Share of the Stock
Consideration and the Cash Consideration due pursuant to this Article VI in
accordance with that certain letter agreement, dated as of the date hereof,
between Parent and CRL.
ARTICLE VII
ESCROW AGENT'S RIGHTS AND RESPONSIBILITIES
To induce the Escrow Agent to act hereunder, it is further agreed
that:
(a) Any recitals contained in this Escrow Agreement shall be deemed to
be those of the principals and not those of the Escrow Agent.
(b) 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.
(c) The Escrow Agent may engage legal counsel who may not be counsel
for any party to the Escrow Agreement and may act upon advice of counsel in
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reference to any matter connected herewith and shall not be liable for any
acts or omissions taken or suffered 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.
(d) 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 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 believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons.
(e) The Escrow Agent shall not be liable for the outlawing of any
rights under any statute of limitations with respect to this Escrow
Agreement or any documents deposited with the Escrow Agent.
(f) 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, and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, 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 or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
(g) The Escrow Agent is authorized to rely on the written instructions
of CRL as being the acts of CRL.
(h) 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.
(i) The Escrow Agent shall not be called upon to advise any party as
to its rights and obligations hereunder.
(j) 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 in good faith, the other parties hereto agree, jointly and severally,
to indemnify and hold the Escrow Agent 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 the Escrow Agent for all its expenses, including 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 the Escrow Agent
shall
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incur no liability whatsoever except for willful misconduct or gross
negligence so long as it has acted in good faith. This paragraph (j) shall
survive the termination of the Escrow Agreement.
(k) The Escrow Agent may execute any of the duties under this Escrow
Agreement by or through agents or receivers.
(l) Unless specifically required by this Escrow Agreement, the Escrow
Agent shall not be required to give any bond or surety or report to any
court despite any statute, custom or rule to the contrary.
(m) 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.
(n) The Escrow Agent shall not be obligated to risk its own funds in
the administration of the Escrow Fund and shall have a lien against any
funds, securities or other property in its possession or control for its
fees, expenses and advancements. The Escrow Agent need not take any action
under this Escrow Agreement which may involve it in any expense or
liability until indemnified to its satisfaction for any expense or
liability it reasonably believes may occur.
ARTICLE VIII
UNDERTAKINGS OF PARENT AND THE MERGER SUB
The Parent and the Merger Sub hereby undertake and agree with CRL that
following the closing of the Merger, they will use their best reasonable efforts
to promptly prepare and file an application with the United States Internal
Revenue Service seeking any 1997 Refund to which they are entitled; provided,
that CRL hereby understands and acknowledges that the application for any 1997
Refund shall be made in conjunction with the filing by the Parent and the Merger
Sub of the tax returns for such entities for the fiscal year ending December 31,
1999 (the "1999 Returns") and that the Parent and the Merger Sub shall have no
obligation to file any separate forms, documents or applications seeking any
1997 Refund prior to the filing by the Parent and the Merger of the 1999
Returns.
ARTICLE IX
RECORDS
The Escrow Agent shall maintain a record of all its activities as
Escrow Agent and a record of all payments from the Escrow Fund to Parent,
the Merger Sub, the Stockholders or any other party.
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ARTICLE X
RESIGNATION OF ESCROW AGENT
The Escrow Agent, or any successor, may resign as Escrow Agent
hereunder by giving 30 days' written notice thereof to CRL 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 CRL of a
successor escrow agent 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,
other than the duty to account in accordance with Article VIII. CRL 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 CRL, that has accepted the appointment and agreed to be bound by the
provisions of an escrow agreement substantially similar to this Escrow
Agreement. In event of such termination, the Escrow Agent shall turn over and
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 and render
the accounting required by Article VIII. Notwithstanding the appointment of a
successor escrow agent, the provisions of Article XVI shall govern with respect
to Parent's liability for any fees incurred with respect to the administration
of the Escrow Fund or charged by any escrow agent.
ARTICLE XI
VOTING
During the term of this Escrow Agreement, each Stockholder shall be
deemed the owner of and shall have voting power over that portion of the Parent
Common Stock that is held in the Escrow Fund and corresponds to that percentage
of all shares of Parent Common Stock outstanding as of the date hereof that is
held by such Stockholder on the date hereof.
ARTICLE XII
DIVIDENDS AND DISTRIBUTIONS ON
STOCK CONSIDERATION
During the term of this Escrow Agreement, any dividends or other
distributions on the Parent Common Stock that are made in the form of cash or
any other form of property, except for ownership rights in the Company or any
subsidiary thereof, shall be distributed to the Stockholders, pro rata in
accordance with that percentage of all shares of Parent Common Stock outstanding
as of the date hereof that is held by such Stockholder on the date hereof.
During the term of this Escrow Agreement, any dividends or other distributions
on the Parent Common Stock that are made in the form of capital stock or any
other form of ownership interest in the Company or any of its subsidiaries shall
remain in the Escrow Fund until the end of the term of this Escrow Agreement.
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ARTICLE XIII
INCOME ON CASH CONSIDERATION
AND
FEES OF ESCROW AGENT
During the term of this Escrow Agreement, any interest or other income
earned on the Cash Consideration in the Escrow Fund shall remain in the Escrow
Fund until the expiration of the Escrow Period. Upon the expiration of the
Escrow Fund, any interest or other income so earned shall be added to the Cash
Consideration and distributed in accordance with Article V hereof.
ARTICLE XIV
NOTICES
All notices and other communications pursuant to this Escrow Agreement
shall be in writing and shall be deemed given if delivered personally, sent by a
nationally recognized overnight courier, 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
for a party as shall be specified by notice hereunder):
To Parent: AppliedTheory Corporation
000 Xxxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
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 CRL: Xxxxx X. Xxxxx
Xxx 0000
Xxxxxxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
with a copy to: Sheppard, Mullin, Xxxxxxx & Xxxxxxx LLP
Four Xxxxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Attn: A. Xxxx Xxxxxx
Fax: (000) 000-0000
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To the Escrow Agent: United States Trust Company of New York
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxx Xxxxxxx
Fax: (000) 000-0000
All such notices and other communications shall be deemed to have been received
(a) in the case of personal 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)).
ARTICLE XV
SUCCESSORS AND ASSIGNS
This Escrow Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the parties hereto.
ARTICLE XV
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.
ARTICLE XVI
ESCROW FEES
Xxxxx X. Xxxxx and the Merger Sub shall each be responsible for one
half of any administration or other fees charged by the Escrow Agent and any
successor escrow agent in connection with the performance of this Escrow
Agreement.
ARTICLE XVII
EXPENSES
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 agree that each
party shall be responsible for its own attorneys' fees and other costs incurred
in any action or proceeding.
ARTICLE XVIII
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.
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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 REEF ACQUISITION CORP.:
By:
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Name: Xxxxx X. Xxxxxx
Title: Vice President - Corporate
Development and Western
Operations
APPLIEDTHEORY CORPORATION:
By:
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Name: Xxxxx X. Xxxxxx
Title: Vice President - Corporate
Development and Western
Operations
CRL NETWORK SERVICES, INC.
By:
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Name:
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Title:
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UNITED STATES TRUST COMPANY OF NEW YORK
By:
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Name:
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Title:
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