exv10w2



 





EXHIBIT 10.2




ESCROW AGREEMENT




     Escrow Agreement (the “Agreement”) dated January 31, 2008 among Blackboard Inc., a
Delaware corporation (“Parent”), Pace Holdings, LLC, a Delaware limited liability company
(“Pace”), and American Stock Transfer & Trust Company, as escrow agent (the “Escrow
Agent”).



RECITALS




     A. This is the escrow agreement referred to in the Agreement and Plan of Merger dated as of
January 11, 2008 (the “Merger Agreement”) among Parent, Bookstore Merger Sub, Inc., a
Delaware corporation (“Merger Sub”), The NTI Group, Inc., a Delaware corporation (the
“Company”), and Pace pursuant to which Merger Sub will merge with and into the Company,
with the Company surviving (the “Merger”). Capitalized terms used in this agreement
without definition shall have the respective meanings given to them in the Merger Agreement, a copy
of which has been furnished to Escrow Agent solely for the purpose of enabling it to reference such
meanings.



     B. In connection with the Merger, Pace and the other Equityholders have agreed that 55,218
shares of Parent Common Stock representing a portion of the total merger consideration to be paid
to the Equityholders pursuant to the Merger Agreement, shall be deposited with Escrow Agent to
secure the Parent’s rights under section 2.8 of the Merger Agreement (the “Working Capital
Escrow Shares”).



     C. In connection with the Merger, Pace has agreed that 345,113 shares of Parent Common Stock,
representing a portion of the total merger consideration to be paid to Pace pursuant to the Merger
Agreement, shall be deposited with Escrow Agent to secure Parent’s rights under Article X of the
Merger Agreement (the “Indemnity Escrow Shares”).



AGREEMENT




     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the
parties hereby agree as follows:



     1. Establishment of Escrow.



          (a) Parent is depositing with the Escrow Agent an aggregate of 400,331 shares of Parent Common
Stock (the “Escrow Account”). Any dividends paid or distributions made on the shares of
Parent Common Stock deposited in the Escrow Account shall be retained in the Escrow Account and
released in accordance with this Agreement.




          (b) For purposes of this Agreement, the value of one share of Parent Common Stock shall be
deemed to equal the Parent Average Closing Price, as equitably adjusted to reflect any stock split,
stock dividend, reclassification, recapitalization or similar event.




 









 








          (c) The Escrow Agent hereby agrees to act as escrow agent and to hold, safeguard and disburse
the Escrow Account pursuant to the terms and conditions hereof.




     2. Establishment of Separate Funds. Of the initial Escrow Account:



          (a) The Working Capital Escrow Shares, together with any dividends paid or distributions made
on such shares, shall be maintained on the books of the Escrow Agent as the “Working Capital
Escrow Account”; and




          (b) The Indemnity Escrow Shares, together with any dividends paid or distributions made on
such shares, shall be maintained on the books of the Escrow Agent as the “Indemnity Escrow
Account.”




     3. Working Capital Escrow Account.



          (a) Upon receipt by the Escrow Agent of:




               (i) a written instruction jointly signed by the Parent and Pace (a “Joint
Instruction”) with respect to the disposition of the Working Capital Escrow Account,



               (ii) a written notice from the Parent to Pace and the Escrow Agent (a “Parent
Instruction”) certifying that the Net Working Capital Adjustment Statement has been duly
delivered to Pace pursuant to Section 2.8(a)(i) of the Merger Agreement, that 30 days have expired
without Pace having delivered a Notice of Objection thereto, or a notice from Pace that the Net
Working Capital Adjustment Statement has been accepted without objection (a “Pace’s
Acceptance”), in each case stating if the Closing Date Net Working Capital is less than the
Estimated Net Working Capital and if so, specifying the amount of such deficit (the “Working
Capital Deficit”), or



               (iii) a written determination of the Independent Accounting Firm specifying the amount of the
Final Net Working Capital and stating if the Final Net Working Capital is less than the Estimated
Net Working Capital and if so, specifying the amount of such deficit (the “Final Working
Capital Deficit”) (if any),


the Escrow Agent shall (A) deliver an amount of the Working Capital Escrow Shares to the Parent,
from the available balance in the Working Capital Escrow Account (but not in excess of such
balance), having a value (as determined pursuant to Section 1(b) hereof) equal to (x) the amount
specified in the Joint Instruction, (y) the Working Capital Deficit (if any) specified in the
Parent Instruction, or Pace’s Acceptance, or (z) the Final Working Capital Deficit (if any), and
(B) disburse any remaining balance in the Working Capital Escrow Account upon receipt of Joint
Instruction, Pace’s Acceptance, or the Final Working Capital Deficit, to the Equityholders in
accordance with the percentages set forth on Schedule A hereto.




          (b) In the event that that the disputed items are submitted for resolution to an Independent
Accounting Firm and Pace owes any amounts to the Independent Accounting Firm,
Pace shall be entitled to use the amounts in the Working Capital Escrow Account to pay such
expenses.





 









 








          (c) In the event that Working Capital Escrow Shares, if any, would otherwise be distributable
to Optionholders or Unaccredited Stockholders pursuant to Section 3(b), Parent shall instead
deliver cash in lieu of Working Capital Escrow Shares (valued at the Parent Average Closing Price)
to such Optionholders or Unaccredited Stockholders and Parent shall be entitled to receive from the
Working Capital Escrow Account such Working Capital Escrow Shares for which each Optionholders or
Unaccredited Stockholders, as the case may be, was paid pursuant to this provision.




     4. Indemnity Escrow Account.



          (a) From time to time on or before January 31, 2009 (the “Escrow Period”), Parent may,
on behalf of itself or any Indemnified Party, give written notice (a “Notice”) to Pace and
the Escrow Agent of any claim it has for Damages under Section 10.2 of the Merger Agreement (an
“Indemnity Claim”). Each Notice shall (x) specify in reasonable detail and in good faith
the nature of the Indemnity Claim underlying the specific provision of the Merger Agreement and (y)
specify the dollar amount of the Indemnity Claim and the amount of such Indemnity Claim that
exceeds the minimum amounts set forth in Section 10.3(c) of the Merger Agreement.




          (b) If Pace gives written notice to Parent and the Escrow Agent disputing any Indemnity Claim
or amount thereof (a “Counter Notice”) within 30 days following receipt by the Escrow Agent
of the Notice regarding such Indemnity Claim, such Indemnity Claim shall be resolved as provided in
Section 5(d). If no Counter Notice is received by the Escrow Agent within such 30-day period, then
the amount claimed by the Parent shall be deemed established for purposes of this Agreement and the
Merger Agreement on the first business day following the expiration of such 30-day period, the
Escrow Agent shall deliver to the applicable Indemnified Party the amount equal to the amount
claimed in the Notice from (and only to the extent of) the Indemnity Escrow Account. The Escrow
Agent shall not inquire into or consider whether an Indemnity Claim falls within the category
specified by Parent or complies with the requirements of the Merger Agreement.




          (c) If a timely Counter Notice is given with respect to an Indemnity Claim, the Escrow Agent
shall make a payment with respect thereto only in accordance with (i) a Joint Instruction or (ii) a
certified copy of a final non-appealable order or judgment of a court of competent jurisdiction (a
“Final Judgment”). The Escrow Agent shall act on such court order without further
question. Each Joint Instruction or Final Judgment shall identify the Indemnity Claim to which it
pertains and shall state the amount, if any, to be paid to the applicable Indemnified Party in
respect thereof. The parties hereto acknowledge that Escrow Agent is not expected to analyze
judicial actions or arbitrational awards in order to determine their finality, their
nonappealability or the jurisdiction or authority of the courts or arbitrators rendering them.
Accordingly, it is agreed that for purposes hereof, jurisdiction, finality and nonappealability
shall be deemed conclusively established upon the Escrow Agent’s receipt of a certificate of the
prevailing party to the effect that 30 days has elapsed since entry of the order, judgment, decree
or arbitration award in question and no appeal or motion seeking to set aside the effect of the
order, judgment or decree in question has been filed by the non-prevailing party.





 









 








          (d) If at the time the Escrow Agent is required to make a payment to an Indemnified Party with
respect to an Indemnity Claim pursuant to this Section 4 and the balance in the Indemnity Escrow
Account is insufficient to make the required payment in full, the Escrow Agent shall so notify the
Parent, and shall pay the remaining balance in the Indemnity Escrow Account (but not in excess of
such balance) to the Indemnified Parties in proportion to the amounts they are due.




     5. Release and Termination of Indemnity Escrow Account. Within 10 days following
receipt by the Escrow Agent of written notice from Parent or Pace relating to the distribution
described in this Section 5, the Escrow Agent shall deliver and distribute the balance remaining in
the Indemnity Escrow Account as of January 31, 2009 (the “Distribution Date”) to Pace (the
“Final Escrow Distribution”) unless any Indemnity Claims are then pending, in which case an
amount equal to the amount of the good faith estimate by Parent of its indemnifiable Damages in
respect of such Indemnity Claim (“Good Faith Damages Estimate”) (as shown in the Notices of
such Indemnity Claims or any amendments thereto) shall be deducted from the Final Escrow
Distribution and retained by the Escrow Agent in the Escrow Account; provided that such
distribution does not occur prior to the Distribution Date. Upon receipt by the Escrow Agent of a
Joint Instruction or a Final Judgment as contemplated by Section 5(d) as to any pending Indemnity
Claim, the Escrow Agent shall within 10 days after receipt thereof disburse to the appropriate
Indemnified Parties the amount of Damages due to such Indemnified Party as set forth in the Joint
Instructions or Final Judgment. For purposes of this section 5, all “amounts” may include
Indemnity Escrow Shares valued as set forth in Section 1(b) hereof.



     6. Compensation and Expenses. In consideration for its services as Escrow Agent, the
Escrow Agent shall be entitled to receive the compensation set forth in Schedule B hereto, as well
as the reimbursement of all reasonable out-of-pocket costs and expenses actually incurred by the
Escrow Agent in the performance of its duties hereunder. Parent and the Equityholders shall each
pay half of such compensation and expenses related to the Working Capital Escrow Account and Parent
and Pace shall each pay half of such compensation and expenses related to the Indemnity Escrow
Account. Any fees or expenses owed by the Equityholders or Pace, as the case may be, shall be, in
Pace’s sole discretion, either paid by Pace in cash or deducted from the relevant Escrow Accounts;
provided that, Escrow Agent shall provide reasonable notice to Pace and the Parent prior to
deducting any payments from the Indemnity Escrow Account or the Working Capital Escrow Account, as
applicable; provided, further, that any reimbursement for reasonable out-of-pocket costs and
expenses actually incurred by the Escrow Agent described in Section 20(d) shall be borne solely by
Parent; provided, further, that the Escrow Agent shall provide an itemized schedule showing the
amount of its compensation and reimbursed costs breaking out separately those costs described in
Section 20(d). In the event that amounts are not available in the applicable escrow account to pay
amounts owing by Equityholders or Pace, such amounts will be payable by Parent.



     7. Fractional Shares. No fractional shares of Parent Common Stock shall be retained
in or released from the Escrow Account pursuant to this Agreement. In connection with any
release of Working Capital Escrow Shares or Indemnity Escrow Shares from the Escrow



 









 







Account, Parent
and the Escrow Agent shall be permitted to “round down” or to follow such other rounding procedures
as Parent reasonably determines to be appropriate in order to avoid retaining any fractional shares
in the Escrow Account and in order to avoid releasing any fractional shares from the Escrow
Account.



     8. Stock Splits. All numbers contained in, and all calculations required to be made
pursuant to, this Agreement with respect to the Working Capital Escrow Shares and Indemnity Escrow
Shares shall be adjusted as appropriate to reflect any stock split, stock dividend,
reclassification, recapitalization or similar event after the date hereof; provided, however, that
the Escrow Agent shall have received notice of such stock split, stock dividend, reclassification,
recapitalization or similar event and shall have received the appropriate number of additional
shares of Parent Common Stock or other property. In the event of any such stock split, stock
dividend, reclassification, recapitalization or similar event, Parent shall deliver to Pace and the
Escrow Agent a notice setting forth the new number of Escrow Shares held in the Escrow Fund.
Unless and until the Escrow Agent receives the certificates representing additional shares of
Parent Common Stock or other property, the Escrow Agent may assume without inquiry that no such
stock or other property has been or is required to be issued with respect to Working Capital Escrow
Shares or Indemnity Escrow Shares.



     9. Stock Transfer. [Reserved.]



     10. Exculpation and Indemnification.



          (a) The obligations and duties of the Escrow Agent are confined to those specifically set
forth in this Agreement. In the event that any of the terms and provisions of any other agreement
between any of the parties hereto conflict or are inconsistent with any of the terms and provisions
of this Agreement, the terms and provisions of this Agreement shall govern and control in all
respects. Except as set forth herein, the Escrow Agent shall not be subject to, nor be under any
obligation to ascertain or construe the terms and conditions of any other instrument, whether or
not now or hereafter deposited with or delivered to the Escrow Agent or referred to in this
Agreement, nor shall the Escrow Agent be obligated to inquire as to the form, execution,
sufficiency, or validity of any such instrument nor to inquire as to the identity, authority, or
rights of the person or persons executing or delivering same.




          (b) The Escrow Agent shall not be personally liable for any act that it may do or omit to do
hereunder in good faith and in the exercise of its own best judgment. Any act done or omitted to
be done by the Escrow Agent pursuant to the advice of its attorneys shall be deemed conclusively to
have been performed or omitted in good faith by the Escrow Agent.




          (c) In the event the Escrow Agent is notified of any dispute, disagreement or legal action
between Parent and Pace and any third party relating to or arising in connection with the escrow,
the Escrow Account, or the performance of the Escrow Agent’s duties under this Agreement, the
Escrow Agent will not be required to determine the controversy or to take any action regarding it.
The Escrow Agent may hold all documents and funds and may wait for settlement of any such
controversy by final appropriate legal proceedings, arbitration, or other
means as, in the Escrow Agent’s discretion, it may require. In such event, the Escrow Agent will




 









 







not be liable for interest or damage. Furthermore, the Escrow Agent may, at its option, file an
action of interpleader requiring the parties to answer and litigate any claims and rights among
themselves. The Escrow Agent is authorized, at its option, to deposit with the Clerk of the Court
all documents and funds held in escrow, except all costs, expenses, charges, and reasonable
attorneys’ fees incurred by the Escrow Agent due to the interpleader action and which shall be
split equally between Parent and Pace. Upon initiating such action, the Escrow Agent shall be
fully released and discharged of and from all obligations and liability imposed by the terms of
this Agreement.




          (d) Parent and Pace hereby agree, jointly and severally, to indemnify and hold the Escrow
Agent, and its directors, officers, employees, and agents, harmless from and against all costs,
damages, judgments, attorneys’ fees (whether such attorneys shall be regularly retained or
specifically employed), expenses, obligations and liabilities of every kind and nature which the
Escrow Agent, and its directors, officers, employees, and agents, may incur, sustain, or be
required to pay in connection with or arising out of this Agreement, unless the aforementioned
results from the Escrow Agent’s fraud, gross negligence or willful misconduct, and to pay the
Escrow Agent on demand the amount of all such costs, damages, judgments, attorneys’ fees, expenses,
obligations, and liabilities. The costs and expenses of enforcing this right of indemnification
also shall be split equally between Parent and Pace. The foregoing indemnities in this paragraph
shall survive the resignation or substitution of the Escrow Agent or the termination of this
Agreement.




     11. Notices. All notices, consents and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given when (a) delivered by hand, (b)
sent by telecopier (with receipt confirmed), provided that a copy is mailed by registered mail,
return receipt requested, or (c) when received by the addressee, if sent by Express Mail, Federal
Express or other express delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers
as a party may designate as to itself by notice to the other parties):




	 	(a)	 	If to Parent, to:




Blackboard Inc.

1899 L Street, NW

5th Floor

Washington, DC 20036

Facsimile: (202) 466-7195

Attention: Matthew H. Small





	 	 	 	with a copy (which shall not constitute notice) to:




Dewey & LeBoeuf LLP

260 Franklin Street

Boston, MA 02110

Facsimile: 617-897-9000

Attention: Terrence W. Mahoney





 









 









	 	(b)	 	If to Pace, to:




Pace Holdings, LLC

c/o Kinderhook Industries LLC

888 Seventh Avenue, Suite 1600

New York, NY 10106

Attention: Managing Member

Facsimile: (212) 201-6790

Attention: Robert Michalik





	 	 	 	with copies (which shall not constitute notice) to:




Kirkland & Ellis LLP

Citigroup Center

153 East 53rd Street

New York, NY 10022-4611

Facsimile: (212) 446-4900

Attention: W. Brian Raftery





	 	 	 	and




Latham & Watkins LLP

12636 High Bluff Drive

San Diego, California 92130

Facsimile: (858) 523-5450

Attention: Scott N. Wolfe, Esq.





	 	(c)	 	If to the Escrow Agent:




American Stock Transfer & Trust Company

59 Maiden Lane

New York, NY 10038

Facsimile: (718) 765-8718

Attention: Barry Rosenthal




     12. Jurisdiction. Each of the parties to this Agreement irrevocably and
unconditionally (i) agrees that any suit, action or other legal proceeding arising out of this
Agreement shall be brought in any state court of general jurisdiction located in New York, New York
(or, if no such court has jurisdiction or accepts jurisdiction, in any United States District Court
located in New York, New York); (ii) consents to the jurisdiction of any such court in any such
suit, action or proceeding; and (iii) waives any objection that such party may have to the laying
of venue of any such suit, action or proceeding in any such court. Each of the parties to this
Agreement hereby agrees that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Each of the parties to this Agreement hereby irrevocably consents to



 









 







service of process in the manner provided for notices in Section 11. Nothing in this Agreement
shall affect the right of any party to this Agreement to serve process in any other manner
permitted by applicable law.



     13. Service of Process. Process in any action or proceeding referred to in Section 12
may be served on any party anywhere in the world, whether within or without the State of New York.



     14. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original instrument and all of which together shall constitute a
single agreement.



     15. Captions. The captions in this Agreement are for convenience of reference only
and shall not be given any effect in the interpretation of this Agreement.



     16. No Waiver. The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any
waiver must be in writing.



     17. Exclusive Agreement; Amendment. This Agreement supersedes all prior agreements
among the parties with respect to its subject matter, is intended (with the documents referred to
herein) as a complete and exclusive statement of the terms of the agreement among the parties with
respect thereto and cannot be changed or terminated except by a written instrument executed by
Parent, Pace and the Escrow Agent.



     18. Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts executed in and to be performed
entirely within such State.



     19. Automatic Succession. Any bank or corporation into which the Escrow Agent may be
merged or with which it may be consolidated, or any bank or corporation to whom the Escrow Agent
may transfer a substantial amount of its Escrow business, shall be the successor to the Escrow
Agent without the execution or filing of any paper or any further act on the part of any of the
parties, anything herein to the contrary notwithstanding.



     20. Taxes.



          (a) Pace shall vote both the Working Capital Escrow Shares and the Indemnity Escrow Shares for
so long as any such Shares are held in the Escrow Account.




          (b) All cash dividends, interest and other income earned or realized on the amounts in the
Escrow Account (“Earnings”) shall be accounted for by the Escrow Agent separately from the
amount originally deposited in the Escrow Account, and Earnings shall be treated as having been
received by Pace for United States federal and state income tax purposes.
Unless otherwise required by applicable Law, the parties hereto agree that, for United States




 









 







federal and state income tax purposes, Pace shall report Earnings as its income and shall report
related expenses as its expenses. The Escrow Agent annually shall file information returns with
the United States Internal Revenue Service (“IRS”) and shall issue an IRS Form 1099 (or any
successor form) relating to such Earnings to and in the name of Pace.




          (c) The Escrow Agent may require each of Pace and Parent to provide the Escrow Agent on or
prior to the date hereof with an IRS Form W-9 or applicable Form W-8, and any other forms and
documents that the Escrow Agent may reasonably request to complete such information returns and
payee statements (collectively, the “Tax Reporting Documentation”), and the Escrow Agent
shall provide copies of any such forms and documents to Parent and Pace. The parties hereto
understand that if such Tax Reporting Documentation is not provided to the Escrow Agent, then the
Escrow Agent may be required by the Code to withhold a portion of any stated interest, imputed
interest or other payments made to Pace or to Parent. To the extent that amounts are so withheld
by the Escrow Agent, such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to Pace or Parent, as the case may be, in respect of whom such deduction and
withholding was made by the Escrow Agent.




          (d) The Escrow Agent shall be entitled to reimbursement for all reasonable out-of-pocket costs
paid to outside consultants to compute the amount, if any, of imputed interest as provided in
Section 20(c).




     21. Disbursements of Earnings.  Notwithstanding anything contained herein to the
contrary, within 15 days after the end of each calendar month, any Earnings in cash that were
earned on the Indemnity Escrow Account during such calendar month shall be paid by the Escrow Agent
to Pace.



[Signature page to follow]




 









 








     IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date
first above written.



	 	 	 	 	 
	 	BLACKBOARD INC.

 	 
	 	By:  	/s/ Matthew Small
 	 
	 	Name:  	Matthew Small 	 	 
	 	Title:  	Chief Legal Officer 	 	 
	 
	 	PACE HOLDINGS, LLC

 	 
	 	By:  	/s/ Robert E. Michalik
 	 
	 	Name:  	Robert E. Michalik 	 	 
	 	Title:  	Vice President 	 	 
	 
	 	AMERICAN STOCK TRANSFER & TRUST COMPANY

as Escrow Agent

 	 
	 	By:  	 /s/ Herbert J. Limmer	 
	 	Name:  	 Herbert J. Limmer	 
	 	Title:  	 Vice President