Escrow Agreement

EXHIBIT 10.16


ESCROW AGREEMENT
----------------


This Escrow Agreement (this "Escrow Agreement") is made as of __________ ___, 2000 by and among The Bank of New York, a New York banking corporation as escrow agent (the "Escrow Agent"), America Online Latin America, Inc. ("AOLA"), a Delaware corporation, AOL Brasil Ltda. ("AOLB"), a Brazilian limited liability quota company, and Banco Itau, S.A. ("Itau"), a Brazilian banking institution, in connection with, among other documents, a Strategic Interactive Services and Marketing Agreement, dated as of the date hereof, among AOLA, AOLB and Itau (the "Marketing Agreement"). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Marketing Agreement.


WHEREAS, as more fully described in the Marketing Agreement, Itau has undertaken certain marketing commitments with respect to AOLA's and AOLB's Brazilian internet online service, including, without limitation, the requirement to make certain Reference Payments to AOLA if such service fails to achieve certain levels of Verified Members and Verified Revenues as of certain dates.


WHEREAS, as more fully described in the Marketing Agreement, Itau has also undertaken to pay to AOLA liquidated damages in an amount up to $[76% of IPO price] (the "Termination Fee") in the event that Itau commits a Material Itau Breach under the Marketing Agreement.


WHEREAS, to secure payment by Itau of any Reference Payments under the Marketing Agreement (including, without limitation, Acceleration Payments), Itau is delivering to the Escrow Agent the following five (5) promissory notes (copies of which are attached hereto as Exhibit A), each made payable to AOLA
--------- and dated as of the date hereof (collectively, the "Reference Payment Notes (Brazil)"):


Promissory note in the maximum principal amount of $[first year maximum]
(the "First Anniversary Reference Payment Note (Brazil)")


Promissory note in the maximum principal amount of $[second year maximum]
(the "Second Anniversary Reference Payment Note (Brazil)")


Promissory note in the maximum principal amount of $[third year maximum]
(the "Third Anniversary Reference Payment Note (Brazil)")


Promissory note in the maximum principal amount of $[fourth year maximum]
(the "Fourth Anniversary Reference Payment Note (Brazil)")


Promissory note in the maximum principal amount of $[fifth year maximum]
(the "Fifth Anniversary Reference Payment Note (Brazil)")


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WHEREAS, to further secure payment by Itau of any Reference Payments under the Marketing Agreement (including, without limitation, Acceleration Payments), Itau is delivering to the Escrow Agent the following five (5) promissory notes (copies of which are attached hereto as Exhibit B) each dated as of the date
--------- hereof, made by Banco Itau S.A., Grand Cayman Branch, a branch of Itau doing business in the Cayman Islands, in favor of AOLA (collectively, the "Reference Payment Notes (Caymans)"):


Promissory note in the maximum principal amount of $[first year maximum]
(the "First Anniversary Reference Payment Note (Caymans)")


Promissory note in the maximum principal amount of $[second year maximum]
(the "Second Anniversary Reference Payment Note (Caymans)")


Promissory note in the maximum principal amount of $[third year maximum]
(the "Third Anniversary Reference Payment Note (Caymans)")


Promissory note in the maximum principal amount of $[fourth year maximum]
(the "Fourth Anniversary Reference Payment Note (Caymans)")


Promissory note in the maximum principal amount of $[fifth year maximum]
(the "Fifth Anniversary Reference Payment Note (Caymans)")


WHEREAS, to secure payment by Itau of any Termination Fee under the Marketing Agreement, Itau is delivering to the Escrow Agent the following five (5) promissory notes (copies of which are attached hereto as Exhibit C), each made
--------- payable to AOLA and dated as of the date hereof (collectively, the "Termination Fee Notes (Brazil)"):


Promissory note in the maximum principal amount of $[first year maximum]
(the "First Anniversary Termination Fee Note (Brazil)")


Promissory note in the maximum principal amount of $[second year maximum]
(the "Second Anniversary Termination Fee Note (Brazil)")


Promissory note in the maximum principal amount of $[third year maximum]
(the "Third Anniversary Termination Fee Note (Brazil)")


Promissory note in the maximum principal amount of $[fourth year maximum]
(the "Fourth Anniversary Termination Fee Note (Brazil)")


Promissory note in the maximum principal amount of $[fifth year maximum]
(the "Fifth Anniversary Termination Fee Note (Brazil)")


WHEREAS, to further secure payment by Itau of any Termination Fee under the Marketing Agreement, Itau is delivering to the Escrow Agent the following five (5) promissory notes (copies


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of which are attached hereto as Exhibit D) each dated as of the date hereof,
--------- made by Banco Itau S.A., Grand Cayman Branch, a branch of Itau doing business in the Cayman Islands, in favor of AOLA (collectively, the "Termination Fee Notes (Caymans)"):


Promissory note in the maximum principal amount of $[first year maximum]
(the "First Anniversary Termination Fee Note (Caymans)")


Promissory note in the maximum principal amount of $[second year maximum]
(the "Second Anniversary Termination Fee Note (Caymans)")


Promissory note in the maximum principal amount of $[third year maximum]
(the "Third Anniversary Termination Fee Note (Caymans)")


Promissory note in the maximum principal amount of $[fourth year maximum]
(the "Fourth Anniversary Termination Fee Note (Caymans)")


Promissory note in the maximum principal amount of $[fifth year maximum]
(the "Fifth Anniversary Termination Fee Note (Caymans)")


NOW, THEREFORE, in consideration of the foregoing and the mutual promises of the parties herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties


hereto agree as follows:


1. Definitions.
-----------


(a) "Anniversary Date" shall mean each calendar anniversary date of the Launch
Date, provided, however, if with respect to a particular Anniversary Date,
-------- -------
AOLA, AOLB and Itau deliver a certificate to the Escrow Agent in the form
of Exhibit E attached hereto (an "Anniversary Date Certificate"), such
---------
Anniversary Date shall be the date set forth in such certificate; provided,
--------
further, however, if the Escrow Agent shall receive a decision of an
------- -------
arbitrator appointed under Sections 1.5 or 2.2 of the Marketing Agreement
or of a court of competent jurisdiction, which decision determines an
Anniversary Date under the Marketing Agreement, the Anniversary Date shall
be the date set by such arbitral or judicial decision. If an Anniversary
Date is extended beyond the date that would be the calendar anniversary
date of the Launch Date, then all subsequent Anniversary Dates, unless
extended in accordance with the provisions of this Section 1(a), shall be
the calendar anniversary date of such extended Anniversary Date.


(b) "Business Day" shall mean any day other than Saturday, Sunday or a day on
which banks in New York, N.Y. or Sao Paulo, Brazil, are required or
permitted to close.


(c) "Launch Date" shall mean April 23, 2001; provided, however, if AOLA, AOLB
-------- -------
and Itau deliver a certificate to the Escrow Agent in the form of Exhibit F
---------
attached hereto (a "Launch Date Certificate"), the Launch Date shall be the
date set forth in such certificate;


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provided, further, however, if the Escrow Agent shall receive a decision of
-------- ------- -------
an arbitrator appointed under the Marketing Agreement or of a court of
competent jurisdiction, which decision determines the Launch Date under the
Marketing Agreement, the Launch Date shall be the date set by such arbitral
or judicial decision.


2. Establishment of Escrow.
-----------------------


(a) Appointment of Escrow Agent. AOLA, AOLB and Itau hereby appoint the Escrow
---------------------------
Agent as escrow agent to serve in such capacity in accordance with the
provisions of this Escrow Agreement. The Escrow Agent hereby accepts such
appointment.


(b) Receipt of Marketing Agreement. The Escrow Agent hereby acknowledges
------------------------------
receipt of a copy of the Marketing Agreement. Except for reference thereto
for definitions of certain terms not defined herein, the Escrow Agent is
not charged with any duties or responsibilities with respect to, and shall
not otherwise refer to, the Marketing Agreement. In the event of a
conflict between the provisions of this Escrow Agreement and the provisions
of the Marketing Agreement relating to the subject matter of this Escrow
Agreement, the provisions of this Escrow Agreement shall govern such
conflict.


(c) Delivery of Notes. Itau has herewith delivered to the Escrow Agent and the
-----------------
Escrow Agent hereby acknowledges receipt of the original Reference Payment
Notes (Brazil), the Reference Payment Notes (Caymans), the Termination Fee
Notes (Brazil), and the Termination Fee Notes (Caymans) (collectively, the
"Notes").


3. Custody of Notes. Unless otherwise directed in writing by AOLA, AOLB and
---------------- Itau, the Notes shall be held by the Escrow Agent in a vault or similar secure location. The Notes held by the Escrow Agent pursuant to the provisions hereof shall be for the exclusive benefit of AOLA, AOLB and their successors and assigns, and no other person or entity shall have any right, title or interest therein other than Itau`s right to receive delivery of such documents as provided herein.


4. Release of Reference Payment Notes From Escrow Upon Receipt of Audit
-------------------------------------------------------------------- Certificate. -----------


(a) Within three (3) Business Days of receipt of a completed and signed
certificate in the form of Exhibit G attached hereto (an "Audit Certificate
---------
(Reference Payments)"), stating that (i) a Reference Payment has been
computed by the Auditor in accordance with the Marketing Agreement as of a
particular Anniversary Date, or (ii) the Auditor has concluded that Itau
has failed to provide the Auditor with information sufficient to enable the
Auditor to compute a Reference Payment as of a particular Anniversary Date,
the Escrow Agent shall send written notification in the form of Exhibit H
---------
attached hereto (a "Notice of Entitlement to Release of Notes") by
facsimile to AOLA, AOLB and Itau setting the forth the date that the Escrow
Agent received the Audit Certificate (Reference Payments) and attaching a
copy of the Audit Certificate (Reference Payments) received by the Escrow
Agent, and


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(1) (A) if such Audit Certificate (Reference Payments) states that (i) a Reference Payment greater than $0 has been computed as of the first Anniversary Date, or (ii) that Itau has failed to provide the Auditor with information sufficient to enable the Auditor to compute a Reference Payment as of the first Anniversary Date, then, within three (3) Business Days of delivery of such Notice of Entitlement to Release of Notes, the Escrow Agent shall deliver to AOLA and AOLB, at their election, either the First Anniversary Reference Payment Note (Brazil) or the First Anniversary Reference Payment Note (Caymans) by hand delivery or by reputable overnight mail service; or


(B) if such Audit Certificate (Reference Payments) states that the Reference
Payment is less than or equal to $0 as of the first Anniversary Date, then,
within three (3) Business Days of delivery of such Notice of Entitlement to
Release of Notes, the Escrow Agent shall deliver to Itau the First
Anniversary Reference Payment Note (Brazil) and the First Anniversary
Reference Payment Note (Caymans) by hand delivery or by reputable overnight
mail service; or


(2) (A) if such Audit Certificate (Reference Payments) states that (i) a Reference Payment greater than $0 has been computed as of the second Anniversary Date, or (ii) that Itau has failed to provide the Auditor with information sufficient to enable the Auditor to compute a Reference Payment as of the second Anniversary Date, then, within three (3) Business Days of delivery of such Notice of Entitlement to Release of Notes, the Escrow Agent shall deliver to AOLA and AOLB, at their election, either the Second Anniversary Reference Payment Note (Brazil) or the Second Anniversary Reference Payment Note (Caymans) by hand delivery or by reputable overnight mail service; or


(B) if such Audit Certificate (Reference Payments) states that the Reference
Payment is less than or equal to $0 as of the second Anniversary Date,
then, within three (3) Business Days of delivery of such Notice of
Entitlement to Release of Notes, the Escrow Agent shall deliver to Itau the
Second Anniversary Reference Payment Note (Brazil) and the Second
Anniversary Reference Payment Note (Caymans) by hand delivery or by
reputable overnight mail service; or


(3) (A) if such Audit Certificate (Reference Payments) states that (i) a Reference Payment greater than $0 has been computed as of the third Anniversary Date, or (ii) that Itau has failed to provide the Auditor with information sufficient to enable the Auditor to compute a Reference Payment as of the third Anniversary Date, then, within three (3) Business Days of delivery of such Notice of Entitlement to Release of Notes, the Escrow Agent shall deliver to AOLA and AOLB, at their election, either the Third Anniversary Reference Payment Note (Brazil) or the Third Anniversary Reference Payment Note (Caymans) by hand delivery or by reputable overnight mail service; or


(B) if such Audit Certificate (Reference Payments) states that the Reference
Payment is less than or equal to $0 as of the third Anniversary Date, then,
within three


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(3) Business Days of delivery of such Notice of Entitlement to Release of
Notes, the Escrow Agent shall deliver to Itau the Third Anniversary
Reference Payment Note (Brazil) and the Third Anniversary Reference Payment
Note (Caymans) by hand delivery or by reputable overnight mail service; or


(4) (A) if such Audit Certificate (Reference Payments) states that (i) a Reference Payment greater than $0 has been computed as of the fourth Anniversary Date, or (ii) that Itau has failed to provide the Auditor with information sufficient to enable the Auditor to compute a Reference Payment as of the fourth Anniversary Date, then, within three (3) Business Days of delivery of such Notice of Entitlement to Release of Notes, the Escrow Agent shall deliver to AOLA and AOLB, at their election, either the Fourth Anniversary Reference Payment Note (Brazil) or the Fourth Anniversary Reference Payment Note (Caymans) by hand delivery or by reputable overnight mail service; or


(B) if such Audit Certificate (Reference Payments) states that the Reference
Payment is less than or equal to $0 as of the fourth Anniversary Date,
then, within three (3) Business Days of delivery of such Notice of
Entitlement to Release of Notes, the Escrow Agent shall deliver to Itau the
Fourth Anniversary Reference Payment Note (Brazil) and the Fourth
Anniversary Reference Payment Note (Caymans) by hand delivery or by
reputable overnight mail service; or


(5) (A) if such Audit Certificate (Reference Payments) states that (i) a Reference Payment greater than $0 has been computed as of the fifth Anniversary Date, or (ii) that Itau has failed to provide the Auditor with information sufficient to enable the Auditor to compute a Reference Payment as of the fifth Anniversary Date, then, within three (3) Business Days of delivery of such Notice of Entitlement to Release of Notes, the Escrow Agent shall deliver to AOLA and AOLB, at their election, either the Fifth Anniversary Reference Payment Note (Brazil) or the Fifth Anniversary Reference Payment Note (Caymans) by hand delivery or by reputable overnight mail service; or


(B) if such Audit Certificate (Reference Payments) states that the Reference
Payment is less than or equal to $0 as of the fifth Anniversary Date, then,
within three (3) Business Days of delivery of such Notice of Entitlement to
Release of Notes, the Escrow Agent shall deliver to Itau the Fifth
Anniversary Reference Payment Note (Brazil) and the Fifth Anniversary
Reference Payment Note (Caymans) by hand delivery or by reputable overnight
mail service.


(b) Whenever any of the Reference Payment Notes (Brazil) or the Reference
Payment Notes (Caymans) are released from escrow to AOLA and AOLB in
accordance with the provisions of Section 4(a) above,


(1) the Note selected by AOLA and AOLB to be released from escrow shall be
referred to as the "Released Reference Payment Note," and the Note that is
not selected


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by AOLA and AOLB to be released from escrow shall be referred to as the
"Retained Reference Payment Note;" and


(2) except as provided in Section 11 hereof, the Retained Reference Payment
Note shall not be released from escrow and shall remain in the custody of
the Escrow Agent.


5. Release of Reference Payment Notes On Account of Acceleration Payment.
----------------------------------------------------------------------


(a) Within three (3) Business Days of receipt by the Escrow Agent of an
arbitrator's decision or award finding that Itau is obligated under the
Marketing Agreement to pay an Acceleration Payment on account of the
occurrence of a Material Payment Breach, the Escrow Agent shall send a
Notice of Entitlement to Release of Notes by facsimile to AOLA, AOLB and
Itau setting forth the date that the Escrow Agent received such decision or
award and attaching a copy of such decision or award received by the Escrow
Agent, and


(1) if such decision or award states that the Material Payment Breach first
occurred as a result of Itau's failure to pay a Reference Payment owing as
of the First Anniversary Date, then, within three (3) Business Days of the
delivery of such Notice of Entitlement to Release of Notes, the Escrow
Agent shall deliver to AOLA and AOLB, at their written instruction, either
(i) the First, Second, Third, Fourth and Fifth Reference Payment Notes
(Brazil), or (ii) the First, Second, Third, Fourth and Fifth Reference
Payment Notes (Caymans), by hand delivery or by reputable overnight mail
service;


(2) if such decision or award states that the Material Payment Breach first
occurred as a result of Itau's failure to pay a Reference Payment owing as
of the Second Anniversary Date, then, within three (3) Business Days of the
delivery of such Notice of Entitlement to Release of Notes, the Escrow
Agent shall deliver to AOLA and AOLB, at their written instruction, either
(i) the Second, Third, Fourth and Fifth Reference Payment Notes (Brazil),
or (ii) the Second, Third, Fourth and Fifth Reference Payment Notes
(Caymans), by hand delivery or by reputable overnight mail service;


(3) if such decision or award states that the Material Payment Breach first
occurred as a result of Itau's failure to pay a Reference Payment owing as
of the Third Anniversary Date, then, within three (3) Business Days of the
delivery of such Notice of Entitlement to Release of Notes, the Escrow
Agent shall deliver to AOLA and AOLB, at their written instruction, either
(i) the Third, Fourth and Fifth Reference Payment Notes (Brazil), or (ii)
the Third, Fourth and Fifth Reference Payment Notes (Caymans), by hand
delivery or by reputable overnight mail service;


(4) if such decision or award states that the Material Payment Breach first
occurred as a result of Itau's failure to pay a Reference Payment owing as
of the Fourth Anniversary Date, then, within three (3) Business Days of the
delivery of such Notice of Entitlement to Release of Notes, the Escrow
Agent shall deliver to AOLA and AOLB, at their


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written instruction, either (i) the Fourth and Fifth Reference Payment
Notes (Brazil), or (ii) the Fourth and Fifth Reference Payment Notes
(Caymans), by hand delivery or by reputable overnight mail service;


(5) if such decision or award states that the Material Payment Breach first
occurred as a result of Itau's failure to pay a Reference Payment owing as
of the Fifth Anniversary Date, then, within three (3) Business Days of the
delivery of such Notice of Entitlement to Release of Notes, the Escrow
Agent shall deliver to AOLA and AOLB, at their written instruction, either
(i) the Fifth Reference Payment Notes (Brazil), or (ii) the Fifth Reference
Payment Notes (Caymans), by hand delivery or by reputable overnight mail
service;


(b) Whenever either the series of Reference Payment Notes (Brazil) or the
series of Reference Payment Notes (Caymans) are released from escrow to
AOLA and AOLB in accordance with the provisions of Section 5(a) above,


(1) the series of Notes selected by AOLA and AOLB to be released from escrow
shall be referred to as the "Released Acceleration Payment Notes," and the
series of Notes that is not selected by AOLA and AOLB to be released from
escrow shall be referred to as the "Retained Acceleration Payment Notes;"
and


(2) except as provided in Section 11 hereof, the Retained Acceleration Payment
Notes shall not be released from escrow and shall remain in the custody of
the Escrow Agent; and


6. Release of Reference Payment Notes From Escrow Upon Lapse of Time.
-----------------------------------------------------------------


(a) If, on the second Anniversary Date, all of the following conditions are
satisfied, the First Anniversary Reference Payment Note (Brazil) and the
First Anniversary Reference Payment Note (Caymans) shall be released from
escrow and shall be delivered to Itau within three (3) Business Days of the
second Anniversary Date by hand delivery or by reputable overnight mail
service:


(i) neither the First Anniversary Reference Payment Note (Brazil) nor the First
Anniversary Reference Payment Note (Caymans) have been released from escrow
to AOLA and AOLB pursuant to Section 4 hereof,


(ii) the Escrow Agent has not received an Audit Certificate (Reference Payments)
that computes a Reference Payment as of the first Anniversary Date that is
greater than $0, and


(iii) the Escrow Agent has not received a certificate in the form of Exhibit I
--------- attached hereto (a "Claim Certificate") stating that AOLA and AOLB have made a claim that relates to the First


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Anniversary Reference Payment Note (Brazil) or the First Anniversary
Reference Payment Note (Caymans).


(b) If, on the third Anniversary Date, all of the following conditions are
satisfied, the Second Anniversary Reference Payment Note (Brazil) and the
Second Anniversary Reference Payment Note (Caymans) shall be released from
escrow and shall be delivered to Itau within three (3) Business Days of the
third Anniversary Date by hand delivery or by reputable overnight mail
service:


(i) neither the Second Anniversary Reference Payment Note (Brazil) nor the
Second Anniversary Reference Payment Note (Caymans) have been released from
escrow to AOLA and AOLB pursuant to Section 4 hereof,


(ii) the Escrow Agent has not received an Audit Certificate (Reference Payments)
that computes a Reference Payment as of the second Anniversary Date that is
greater than $0, and


(iii) the Escrow Agent has not received a Claim Certificate stating that AOLA and AOLB have made a claim that relates to the Second Anniversary Reference Payment Note (Brazil) or the Second Anniversary Reference Payment Note (Caymans).


(c) If, on the fourth Anniversary Date, all of the following conditions are
satisfied, the Third Anniversary Reference Payment Note (Brazil) and the
Third Anniversary Reference Payment Note (Caymans) shall be released from
escrow and shall be delivered to Itau within three (3) Business Days of the
fourth Anniversary Date by hand delivery or by reputable overnight mail
service:


(i) neither the Third Anniversary Reference Payment Note (Brazil) nor the Third
Anniversary Reference Payment Note (Caymans) have been released from escrow
to AOLA and AOLB pursuant to Section 4 hereof,


(ii) the Escrow Agent has not received an Audit Certificate (Reference Payments)
that computes a Reference Payment as of the third Anniversary Date that is
greater than $0, and


(iii) the Escrow Agent has not received a Claim Certificate stating that AOLA and AOLB have made a claim that relates to the Third Anniversary Reference Payment Note (Brazil) or the Third Anniversary Reference Payment Note (Caymans).


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(d) If, on the fifth Anniversary Date, all of the following conditions are
satisfied, the Fourth Anniversary Reference Payment Note (Brazil) and the
Fourth Anniversary Reference Payment Note (Caymans) shall be released from
escrow and shall be delivered to Itau within three (3) Business Days of the
fifth Anniversary Date by hand delivery or by reputable overnight mail
service:


(i) neither the Fourth Anniversary Reference Payment Note (Brazil) nor the
Fourth Anniversary Reference Payment Note (Caymans) have been released from
escrow to AOLA and AOLB pursuant to Section 4 hereof,


(ii) the Escrow Agent has not received an Audit Certificate (Reference Payments) ...