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Exhibit 2.8
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") dated as of May 23,
2000, is made by and among AppliedTheory Corporation, a Delaware corporation
("Parent"), and Xxxxxx X. Xxxxxxxx (the "Company Stockholder").
WHEREAS, Parent, The Cordada Group, Inc., a Washington corporation
(the "Company"), AppliedTheory Seattle Corporation, a Delaware corporation and
a wholly-owned subsidiary of Parent ("Merger Sub") and the Company Stockholder
have entered into an Agreement and Plan of Merger dated May 15, 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 Company Stockholder 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 Company Stockholder 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 Company
Stockholder hereby appoint Parent to serve as escrow agent ("Escrow Agent") to
hold, safeguard and disburse the Escrow Fund (as defined below) subject to and
in accordance with the provisions of this Agreement, and Escrow Agent hereby
accepts such appointment.
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3. Creation of the Escrow Fund. Upon the Closing of the Merger,
Parent as Escrow Agent shall hold in an account 160,000 shares of Parent Common
Stock (the "Escrow Shares"), 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 Company
Stockholder.
4. Claims Against Escrow Fund. Subject to the provisions of Article
IX of the Merger Agreement, the Company Stockholder has 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 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
Company Stockholder 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 the Company Stockholder wishes to object to a
Claim, he shall provide Parent with a notice, executed by the Company
Stockholder, specifying in reasonable detail the basis for his objection to the
Claim (an "Objection Notice") within fifteen (15) business days following the
date the Company Stockholder received the Claim Notice. If he shall not object
to any Claim raised in the Claim Notice, he shall promptly countersign the
Claim Notice and return a copy to each of the Parent and the Escrow Agent.
(b) Upon the receipt by Parent of an Objection Notice, Parent and
the Company Stockholder shall attempt in good faith to agree upon the rights of
the respective parties with respect to each disputed Claim. If Parent and the
Company Stockholder are able to resolve the issues raised in the Objection
Notice, Parent and the Company Stockholder shall provide Escrow Agent with a
written notice executed by both the Company Stockholder and an officer of
Parent setting forth the substance of such agreement.
(c) If no such agreement can be reached after good faith negotiation
(a "Dispute") within thirty (30) days after the receipt by Parent of the
Objection Notice, such Dispute shall be submitted to mandatory and binding
arbitration within fifteen (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 therewith. The
arbitration hearing shall be held in New York, New York. 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. Any award
rendered by the arbitration panel will be final, conclusive and
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binding upon the parties and any judgment hereon may be entered and enforced in
any court of competent jurisdiction.
5. Valuation of Parent Common Stock. Parent and the Company
Stockholder hereby agree that for the purpose of determining the number of
Escrow Shares necessary to satisfy a Claim, the Escrow Shares shall be valued
at the last price per share as quoted on the Nasdaq Stock Market on the last
trading day immediately preceding the day when such shares are transferred to
Parent in satisfaction of such Claim, pursuant to Parent's right to
indemnification under Article IX of the Merger Agreement.
6. Expiration Of Escrow Period.
(a) The Escrow Fund shall remain in existence for a period of twelve
(12) months commencing on the Closing Date 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.
(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, Parent shall withdraw and become the beneficial
owner of the amount of Escrow Shares having a value equal to the amount due and
payable with respect to such Claim.
(c) In the event that no Claims are made or are pending by or at the
end of the Escrow Period, and to the extent that stated Claims or Disputes do
not implicate all of the Escrow Shares, the remaining portion of the Escrow
Fund shall be disbursed to the Company Stockholder.
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 may not be counsel
to either Parent or the Company Stockholder and may act upon advice of such
counsel in 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.
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(c) The Escrow Agent shall not be liable in any respect on account
of the identity, authority or rights of the Company Stockholder 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 Company
Stockholder.
(d) The Escrow Agent is authorized to rely on the written
instructions of the Company Stockholder as being the acts of the Company
Stockholder.
(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 the Company
Stockholder as to his 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
in good faith, the Company Stockholder agrees 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.
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(i) The Company Stockholder acknowledges that Parent may have a
conflict of interest with respect to its duties as Escrow Agent, and in such
regard Parent will act in its own best interests.
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 Company Stockholder 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 Company Stockholder 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.
The Company Stockholder 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 Company Stockholder, that
has accepted the appointment and agreed to be bound by the provisions of an
escrow agreement substantially similar to this Escrow Agreement. 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, the Company
Stockholder shall be deemed the owner of and shall have voting power over all
Escrow Shares held in the Escrow Fund.
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 Company
Stockholder. 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. 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.
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13. 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
0000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
Senior Vice President and 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 Company Stockholder: Xxxxxx X. Xxxxxxxx
c/o The Cordada Group, Inc.
0000-000xx Xxxxxx, Xxxxxxxxx, X-000
Xxxxxxxx, XX 00000-0000
with a copy to: Xxxxxxx Xxxxx & Xxxxx
000 0xx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: G. Xxxxx Xxxxxxxxx, Esq.
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)).
14. Successors And Assigns. This Escrow Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the parties
hereto.
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15. 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.
16. Expenses. Except as provided in Section 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.
17. 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 CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Vice President, Corporate
Development
COMPANY STOCKHOLDER
/s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
