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EXHIBIT 10.2
ESCROW AGREEMENT
This ESCROW AGREEMENT (this "Agreement") is entered into as of January 3,
2001 by and among AVT Corporation, a Washington corporation ("AVT"), Raven
Acquisition Corp., a Washington corporation and wholly owned subsidiary of AVT
("Acquisition Sub"), Brett Warthen (the "Shareholder Representative"), as
representative of the stockholders (the "Holders") of Infinite Technologies,
Inc., a Maryland corporation (the "Company"), and Mellon Investor Services LLC,
as escrow agent (the "Escrow Agent").
RECITALS
A. AVT, Acquisition Sub, the Company and the Holders have entered into an
Agreement and Plan of Merger, dated January 3, 2001 (the "Merger Agreement"),
pursuant to which AVT will acquire all of the outstanding shares of capital
stock of the Company (the "Company Shares") through a merger of the Company with
and into Acquisition Sub (the "Merger").
B. Pursuant to the Merger Agreement, a portion of the cash to be paid and
a portion of the shares of common stock of AVT, par value $.01 per share ("AVT
Common Stock"), to be issued to the Holders for the Company Shares will be
deposited in escrow with the Escrow Agent. The cash and shares of AVT Common
Stock so deposited will remain subject to any indemnification claims the AVT
Indemnified Parties may have under Article X of the Merger Agreement until
released by the Escrow Agent pursuant to the terms hereof.
C. Pursuant to Article X of the Merger Agreement, a copy of which is
attached hereto as Exhibit A, the Shareholder Representative has been duly
appointed by the Holders.
D. The execution and delivery of this Agreement by the parties is a
condition precedent to the obligations of the parties to the Merger Agreement.
E. Capitalized terms used but not otherwise defined herein, shall have
the meanings set forth in the Merger Agreement. In the event of any conflict
between the terms of this Agreement (other than those terms that affect the
rights, indemnification, duties or obligations of the Escrow Agent, which shall
be governed exclusively by the terms of this Agreement) and the Merger
Agreement, the terms of the Merger Agreement shall prevail.
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties agree as follows:
1. Delivery of Escrow Amount; Indemnification
(a) At the Effective Time, five percent (5%) of the cash payable to the
Holders under Sections 3.2(a)(ii) and (b)(ii) of the Merger Agreement (an
aggregate amount equal to $ 462,501) (the "Cash Escrow Amount") shall be
deposited in escrow with the Escrow Agent. In addition, certificates
representing five percent (5%) of the number of shares of AVT Common Stock
issuable to the Holders under Sections 3.2(a)(i) and (b)(i) of the Merger
Agreement (the "Escrow Shares" and, together with the Cash Escrow Amount, the
"Escrow Amount") shall be deposited in escrow with the Escrow Agent. The Escrow
Amount shall include any interest subsequently accruing to the Cash Escrow
Amount. The number of Escrow Shares will be equal to $ 403,571 divided by the
Closing Average. The Escrow Agent shall have no duty to confirm or verify the
accuracy of the amount of any Escrow Shares deposited with it hereunder.
Fractional shares of AVT Common Stock will not be deposited in escrow. Instead,
the number of Escrow Shares will be rounded up to the nearest whole number of
shares.
(b) Subject to Section 10.4 of the Merger Agreement, the AVT Indemnified
Parties shall be entitled pursuant to Section 10.2 of the Merger Agreement to
recover from the Escrow Amount the full dollar amount of any Losses that may be
suffered by the AVT Indemnified Parties.
(c) The indemnification period with respect to the Escrow Amount shall
survive the Closing until 45 days after the date on which AVT's independent
accountants issue an audit report for AVT and its consolidated subsidiaries for
the year ended December 31, 2001, but in no event later than July 1, 2002 (the
"Escrow Period"). AVT will promptly notify the Escrow Agent in writing of the
issue date of such audit report. During the Escrow Period, the AVT Indemnified
Parties may make claims from the Escrow Amount for any Losses in accordance with
Section 1 hereof and Article X of the Merger Agreement. Nevertheless, indemnity
may be sought from the Escrow Amount after expiration of the Escrow Period if a
Claim Notice specifying the Losses (including the amount thereof) giving rise to
such right to indemnity shall have been delivered to the Shareholder
Representative prior to expiration of the Escrow Period.
(d) Upon termination of the Escrow Period, AVT and the Shareholder
Representative shall jointly notify the Escrow Agent that the Escrow Period has
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terminated and supply the Escrow Agent with a Schedule (as defined in Section
2(b) hereof), updated as of the last day of the Escrow Period, setting forth the
portion of the Cash Escrow Amount and the aggregate number of Escrow Shares to
be released from Escrow (the "Released Escrow Amount"), including the specific
amount of cash and the specific number of Escrow Shares to be released to each
Holder, as well as the Cash Escrow Amount and the aggregate number of Escrow
Shares subject to a claim for any Losses which constitutes an indemnifiable
claim under Article X of the Merger Agreement, or which is pending determination
as an indemnifiable claim. The Released Escrow Amount shall be returned by the
Escrow Agent to the Holders in accordance with instructions set forth on such
updated Schedule and to the addresses indicated on such updated Schedule within
ten (10) days of the Escrow Agent's receipt of the Schedule. Upon the final
determination of any pending indemnifiable claims, the Escrow Amount being held
pending such determination shall be distributed by the Escrow Agent (together
with all interest earned on such Escrow Amount being distributed) upon receipt
and in accordance with the terms of the relevant notice or memorandum stipulated
in Section 4 hereof, which in each case shall set forth the precise amount of
cash and the precise number of Escrow Shares to be released to each Holder
and/or AVT.
(e) For purposes of this Agreement, the satisfaction of any Losses owed
under Section 1(b) of this Agreement and Article X of the Merger Agreement shall
be made by delivery by the Escrow Agent to the applicable AVT Indemnified Party
of the appropriate Escrow Amount as follows: (i) fifty-three percent (53%) of
the dollar amount of such Losses shall be satisfied out of the Cash Escrow
Amount, and (ii) forty-seven percent (47%) of the dollar amount of such Losses
shall be satisfied by transferring that number of Escrow Shares calculated by
dividing forty-seven percent (47%) of the dollar amount of such Losses by the
Closing Average, provided that, notwithstanding the percentage allocation set
forth in this Section 1(e), to the extent that either the Cash Escrow Amount or
the Escrow Shares are insufficient to satisfy that portion of the Losses to be
satisfied by delivery of the Cash Escrow Amount or the Escrow Shares, as the
case may be, then that portion of such Losses not so satisfied shall be
satisfied by delivery of any available Cash Escrow Amount or Escrow Shares.
The Escrow Agent shall have no duty or responsibility to make or verify any of
the foregoing calculations, its sole responsibility being the disbursement of
explicitly specified portions of the Cash Escrow Amount and Escrow Shares in
accordance with specific written instructions provided to it in accordance with
the provisions of this Agreement.
(f) The Escrow Agent shall hold the Escrow Amount in accordance with the
terms and conditions of this Agreement. All obligations of the Escrow Agent
shall terminate upon final delivery of any Escrow Amount to the appropriate
party or parties
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in accordance with the terms of this Agreement. This Agreement shall terminate
upon final delivery of the Escrow Amount in accordance with the preceding
sentence.
2. Administration
(a) The Escrow Agent shall accept, hold and safeguard the Escrow Amount
during the term of the Escrow Period and shall administer, hold and dispose of
such Escrow Amount only in accordance with the explicit terms of this Agreement
and as instructed in writing by AVT and the Shareholder Representative, as
applicable, which instructions shall be in accordance with this Agreement and
Article X of the Merger Agreement.
(b) A schedule of the Holders of record as of the close of business on the
day prior to the Closing Date reflecting each such Holder's pro rata interest in
the Cash Escrow Amount and the Escrow Shares, and reflecting also the facsimile
number and mailing address of each Holder is attached hereto as Schedule A (the
"Schedule"). AVT shall keep such information current based on any information
supplied in writing by the Shareholder Representative or by any Holder in
accordance with the notice provisions of this Agreement. AVT shall advise the
Escrow Agent in writing of changes to the Schedule, and AVT shall make the
Schedule, as it may be updated from time to time, available for inspection by
the Shareholder Representative upon his reasonable request.
(c) Until the termination of this Agreement, the Cash Escrow Amount shall
be fully invested as directed by the Shareholder Representative by written
instruction to the Escrow Agent from time to time solely in a treasury money
market fund. All interest earned on the Cash Escrow Amount from such fund shall
be paid to AVT or the Holders in proportion to such portion of the Cash Escrow
Amount being distributed to AVT or the Holders, as the case may be.
(d) Notwithstanding the escrow of the Escrow Shares, dividends or other
distributions declared and paid on such shares shall continue to be paid by AVT
to the Holders and all voting rights with respect to such shares shall inure to
the benefit of and be enjoyed by the Holders; provided, however, that in the
event that any Escrow Shares are delivered to the AVT Indemnified Parties in
satisfaction of any Losses pursuant to Article X of the Merger Agreement, the
Holders shall forfeit to the AVT Indemnified Parties any unpaid dividends or
other distributions associated with such Escrow Shares. Any securities received
by the Escrow Agent in respect of any Escrow Shares held in escrow as a result
of any stock split or combination of shares of AVT Common Stock, payment of a
stock dividend or other stock distribution in or on shares of AVT Common Stock,
or change of shares of AVT Common Stock into any
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other securities pursuant to or as part of a merger, consolidation, acquisition
of property or stock, separation, reorganization, or liquidation of AVT, or
otherwise, shall be held by the Escrow Agent as, and shall be included within
the definition of, the Escrow Shares, as the case may be. Any voting notices,
proxies, ballots, etc. with respect to the Escrow Shares received by the Escrow
Agent shall be forwarded to the Holders and the Escrow Shares shall be voted by
the Holders thereof. The Escrow Agent shall have no duty to monitor or take any
action, other than as specifically set forth in this paragraph, with regard to
the voting rights of any Holder.
3. Issuance of New Stock Certificates
When Escrow Shares are to be delivered hereunder (other than if delivered
in full to AVT), the Escrow Agent shall deliver the certificate(s) then
evidencing the appropriate number of Escrow Shares to AVT, who shall cause
replacement certificates to be promptly redeposited in escrow hereunder or
delivered to the Holders, as the case may be, in accordance with the terms of
this Agreement and the Merger Agreement.
4. Indemnification and Reimbursement Procedures; Claims Against the Escrow
4.1 Indemnification Claim Notice
In the event that an AVT Indemnified Party sustains or incurs any Losses in
respect of which indemnification may be sought pursuant to Section 1(b) hereof
or Article X of the Merger Agreement, such AVT Indemnified Party will assert a
claim for indemnification by giving written notice (the "Claim Notice") to the
Shareholder Representative and the Escrow Agent, which will describe in
reasonable detail the facts and circumstances on which the asserted claim for
indemnification is based as well as explicitly set forth the specific portion of
the Cash Escrow Amount and the specific number of Escrow Shares to be disbursed
to AVT; provided, however, that the delay to so notify the Shareholder
Representative shall not relieve the Holders of any obligation or liability that
the Holders may have to the AVT Indemnified Parties except to the extent that
the Shareholder Representative demonstrates that the Holders' ability to defend
or resolve such claim is adversely affected thereby. The Claim Notice will also
specify how the AVT Indemnified Party intends to recover such funds pursuant to
the Merger Agreement or this Agreement. Unless the claim described in the Claim
Notice is contested by the Shareholder Representative by written notice to the
AVT Indemnified Party of the amount of the claim that is contested, given within
thirty (30) days of the receipt by the Shareholder Representative of the Claim
Notice, the AVT Indemnified Party may recover such undisputed amount of the
claim
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described in the Claim Notice from the Holders by giving written notice of such
claim to the Escrow Agent and certifying that the Shareholder Representative has
not contested such claim in the appropriate time period. In such event, the
Escrow Agent shall be entitled to rely on any such notice and distribute the
undisputed claim amount from the Escrow Amount in accordance with the terms of
such Claim Notice.
4.2 Dispute Notice
(a) If, within thirty (30) days of the receipt by the Shareholder
Representative of the Claim Notice, the Shareholder Representative contests in
writing to the AVT Indemnified Party and the Escrow Agent that such Losses
constitute an indemnifiable claim pursuant to Article X of the Merger Agreement
(the "Dispute Notice"), then the AVT Indemnified Party and the Shareholder
Representative, acting in good faith, shall attempt to reach agreement with
respect to such claim. If the AVT Indemnified Party and the Shareholder
Representative should so agree, a memorandum setting forth such agreement shall
be prepared and signed by the AVT Indemnified Party and the Shareholder
Representative and shall be furnished to the Escrow Agent, such memorandum
explicitly setting forth the specific portion of the Cash Escrow Amount and the
specific number of Escrow Shares to be disbursed to AVT. The Escrow Agent shall
be entitled to rely on any such memorandum and distribute the requested amount
from the Escrow Amount in accordance with the terms thereof.
(b) The Shareholder Representative shall not object to any Claim Notice
unless (i) he believes in good faith that the AVT Indemnified Party is not
entitled to be indemnified with respect to the Losses specified therein, or (ii)
he lacks sufficient information to assess the validity or amount of the claim.
If the Shareholder Representative objects to a Claim Notice on the basis that he
lacks sufficient information, the Shareholder Representative shall promptly
request from the AVT Indemnified Party any additional information reasonably
necessary to assess such claim and the AVT Indemnified Party shall, to the
extent the AVT Indemnified Party reasonably can, provide additional information
reasonably requested. Upon receipt of such additional information, the
Shareholder Representative shall review it as soon as reasonably practicable and
notify the AVT Indemnified Party of any withdrawal or modification of the
objection.
4.3 Arbitration of Contested Amounts
If the Shareholder Representative and the AVT Indemnified Party are unable
to resolve any such dispute within 45 days after delivery of the Dispute Notice,
the matter shall be settled by binding arbitration in Seattle, Washington. All
claims shall
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be settled by three arbitrators in accordance with the Commercial Arbitration
Rules then in effect of the American Arbitration Association (the "AAA Rules").
The Shareholder Representative and the AVT Indemnified Party shall each
designate one arbitrator within 15 days after the termination of such 45-day
period. The Shareholder Representative and the AVT Indemnified Party shall cause
such designated arbitrators mutually to agree upon and designate a third
arbitrator; provided, however, that (i) failing such agreement within seventy
(70) days of delivery of the Dispute Notice, the third arbitrator shall be
appointed in accordance with the AAA Rules and (ii) if either the Shareholder
Representative or the AVT Indemnified Party fails to timely designate an
arbitrator, the dispute shall be resolved by the one arbitrator timely
designated. All of the fees and expenses of the three arbitrators shall be paid
from the Escrow Amount in accordance with the terms of Section 1(e) of this
Agreement by written request of AVT and the Shareholder Representative, such
request explicitly setting forth the specific portion of the Cash Escrow Amount
and the specific number of Escrow Shares to be disbursed. The Shareholder
Representative and the AVT Indemnified Party shall cause the arbitrators to
decide the matter to be arbitrated within 30 days after the appointment of the
last arbitrator. The arbitrators' decision shall relate solely to whether the
AVT Indemnified Party is entitled to receive the contested amount (or a portion
thereof) pursuant to the applicable terms of the Merger Agreement and this
Agreement. The final decision of the majority of the arbitrators (which shall
explicitly set forth the specific portion of the Cash Escrow Amount and the
specific number of Escrow Shares to be disbursed to AVT) shall be furnished to
the Shareholder Representative, the AVT Indemnified Party and the Escrow Agent
in writing and shall constitute the conclusive determination of the issue in
question binding upon the Shareholder Representative, the Holders, the AVT
Indemnified Party and the Escrow Agent, and shall not be contested by any of
them. Such decision may be used in a court of law only for the purpose of
seeking enforcement of the arbitrators' decision.
4.4 Third-Party Claims
(a) With respect to claims for indemnification resulting from or in
connection with any legal proceeding commenced by a third party, the AVT
Indemnified Party shall give the Claim Notice to the Shareholder Representative
and the Escrow Agent no later than twenty (20) days prior to the time any
initial answer or response to the asserted claim is legally required under any
applicable court or procedural rule; provided, however, that the failure or
delay to so notify the Shareholder Representative or the Escrow Agent shall not
relieve the Holders of any obligation or liability that it may have to such AVT
Indemnified Party except to the extent that the Shareholder Representative
demonstrates that the Holders' ability to defend or resolve such third party
claim is adversely affected thereby.
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(b) Subject to the rights of any insurer or other third party having
potential liability therefor, the Holders shall have the right, upon written
notice by the Shareholder Representative given to such AVT Indemnified Party and
the Escrow Agent within 30 days after receipt of the Claim Notice relating to a
third party claim, to assume the defense or handling of such third party claim,
at the Holders' sole expense. The Shareholder Representative shall select
counsel reasonably acceptable to the AVT Indemnified Party in connection with
conducting the defense or handling of such third party claim, and the
Shareholder Representative shall defend or handle the same in consultation with
the AVT Indemnified Party and shall keep the AVT Indemnified Party timely
apprised of the status of such third party claim. The Shareholder
Representative shall not, without the prior written consent of the AVT
Indemnified Party, agree to a settlement of any third party claim, unless (i)
the settlement provides an unconditional release and discharge of the AVT
Indemnified Party and the AVT Indemnified Party is reasonably satisfied with
such discharge and release and (ii) the AVT Indemnified Party shall not have
reasonably objected to any such settlement on the ground that the circumstances
surrounding the settlement could result in an adverse impact on the business,
operations, assets, liabilities (absolute, accrued, contingent or otherwise),
condition (financial or otherwise) or prospects of AVT. The AVT Indemnified
Party shall cooperate with the Shareholder Representative and shall be entitled
to participate in the defense or handling of such third party claim with its own
counsel and at its own expense.
(c) If, within 30 days after receipt of a Claim Notice relating to a third
party claim, the Shareholder Representative does not give written notice to the
AVT Indemnified Party and the Escrow Agent of the Shareholder Representative's
election to assume the defense or handling of such third party claim, the AVT
Indemnified Party may, at the Holders' expense (which shall be paid from time to
time by the Holders as such expenses are incurred by the AVT Indemnified Party),
select counsel in connection with conducting the defense or handling of such
third party claim and defend or handle such third party claim in such manner as
it may deem appropriate, provided, however, that the AVT Indemnified Party shall
keep the Shareholder Representative timely apprised of the status of such third
party claim and shall not settle such third party claim without the prior
written consent of the Shareholder Representative, which consent shall not be
unreasonably withheld. If the AVT Indemnified Party defends or handles such
third party claim, the Shareholder Representative shall cooperate with the AVT
Indemnified Party and shall be entitled to participate in the defense or
handling of such third party claim with its own counsel and at its own expense.
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4.5 Fractional Shares
To the extent it is necessary to satisfy a claim by the AVT Indemnified
Parties or a Third Party Claim by delivering to AVT a fractional Escrow Share,
the Escrow Agent shall round such fractional Escrow Share to the nearest whole
share, with one half of such Escrow Share being rounded downward.
5. Provisions Regarding the Escrow Agent
5.1 Liability of the Escrow Agent
The duties of the Escrow Agent hereunder are purely ministerial in nature.
In performing any duties under this Agreement, the Escrow Agent shall not be
liable to any party for damages, losses, or expenses, except for gross
negligence or willful misconduct on the part of the Escrow Agent (each as
finally determined by a court of competent jurisdiction). The Escrow Agent
shall be fully protected in relying on and shall not incur any liability for any
action taken, suffered or omitted to be taken in reliance on any instrument,
including any written statement, memorandum, decision, notice or affidavit
provided for in this Agreement that the Escrow Agent shall believe to be
genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority,
provided that the Escrow Agent believed that such forgeries, fraud, or
impersonations were genuine and acted without gross negligence or willful
misconduct (each as finally determined by a court of competent jurisdiction).
In addition, the Escrow Agent may consult with legal counsel in connection with
the Escrow Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or omitted to be taken by it in accordance with the
advice of counsel; provided that the Escrow Agent exercised reasonable care in
the selection of such counsel. The Escrow Agent is not responsible for
determining and verifying the authority of any person acting or purporting to
act on behalf of any party to this Agreement.
5.2 Fees and Expenses
It is understood that the fees, expenses and usual charges agreed on for
services of the Escrow Agent shall be considered compensation for ordinary
services as contemplated by this Agreement. In the event that the conditions of
this Agreement are not promptly fulfilled, or if the parties request a
substantial modification of its terms (and the Escrow Agent agrees to the such
modification), or if any controversy arises, or if the Escrow Agent is made a
party to, or intervenes in, any litigation pertaining to this escrow or its
subject matter, the Escrow Agent shall be reasonably
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compensated for such extraordinary services and shall be reimbursed for all
costs, attorneys' fees, including allocated costs of in-house counsel, and
expenses occasioned by such default, delay, controversy, or litigation and the
Escrow Agent shall have the right to retain all documents and/or other things of
value at any time held by the Escrow Agent in this escrow until such
compensation, fees, costs, and expenses are paid. AVT shall pay for the Escrow
Agent's fees and expenses incurred in connection with this Agreement, and the
Holders shall reimburse AVT for one half of the Escrow Agent's fees and expenses
incurred in connection with this Agreement.
5.3 Controversies
If any controversy arises between the parties to this Agreement, or with
any other party, concerning the subject matter of this Agreement, its terms or
conditions, 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 agreement by the
parties as provided by Section 4 of this Agreement. In such event, the Escrow
Agent will not be liable for interest or damage. The Escrow Agent is authorized
to deposit with the arbitrator all documents and funds held in escrow, except
all costs, expenses, charges, and reasonable attorneys' fees incurred by the
Escrow Agent due to the action and which the parties jointly and severally agree
to pay. 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.
In addition, in the event of any dispute between the parties to this Escrow
Agreement, or between any of them and any other person, resulting in adverse
claims or demands being made upon any of the Escrow Amount, or in the event that
the Escrow Agent, in good faith, is in doubt as to what action it should take
hereunder, the Escrow Agent may, at its option, file a suit as interpleader in a
court of appropriate jurisdiction, or refuse to comply with any claims or
demands on it, or refuse to take any other action hereunder, so long as such
dispute shall continue or such doubt shall exist. The Escrow Agent shall be
entitled to continue to refrain from acting until (i) the rights of all parties
have been fully and finally adjudicated by a court of appropriate jurisdiction
or (ii) all differences and doubt shall have been resolved by agreement among
all of the interested persons, and the Escrow Agent shall have been notified
thereof in writing signed by all such persons. The rights of the Escrow Agent
under this Section are cumulative of all other rights which it may have by law
or otherwise.
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5.4 Indemnification and Exculpation of the Escrow Agent.
AVT and the Holders agree jointly and severally to indemnify and hold the
Escrow Agent harmless against any and all losses, claims, costs, settlements,
judgments, fines, penalties, damages, liabilities, and expenses, including
reasonable costs of investigation, attorneys' fees, including allocated costs of
in-house counsel, and disbursements that may be imposed on the Escrow Agent or
incurred by the Escrow Agent in connection with its execution and delivery of
this Agreement or the performance of its duties under this Agreement, including,
but not limited to, any litigation arising from this Agreement or involving its
subject matter, unless such loss, cost, settlement, judgment, fine, penalty,
damage, liability, claim or expense shall have been finally determined by a
court of competent jurisdiction to be a result of the Escrow Agent's gross
negligence or willful misconduct. The Escrow Agent shall have no liability under
this Agreement except for its own gross negligence or willful misconduct (each
as finally determined by a court of competent jurisdiction). Anything in this
Agreement to the contrary notwithstanding, in no event shall the Escrow Agent be
liable for special, indirect, punitive, incidental or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if Escrow Agent has been advised of the likelihood of such damages and
regardless of the form of action. Any liability of the Escrow Agent will be
limited to $50,000. The obligations of AVT and the Holders under this Section
and Section 5.2 shall survive termination of this Agreement and the resignation
or substitution of the Escrow Agent.
5.5 Resignation of the Escrow Agent
The Escrow Agent may resign at any time upon giving at least thirty (30)
days' written notice to the parties; provided, however that no such resignation
shall become effective until the appointment of a successor escrow agent, which
shall be accomplished as follows: AVT and the Shareholder Representative shall
use their best efforts to mutually agree on a successor escrow agent within
thirty days after receiving such notice. If AVT and the Shareholder
Representative fail to agree on a successor escrow agent within such time, the
Escrow Agent shall have the right to appoint a successor escrow agent authorized
to do business in the State of Washington, which successor escrow agent shall be
reasonably acceptable to AVT and the Shareholder Representative. The successor
escrow agent shall execute and deliver an instrument accepting such appointment
and it shall, without further acts, be vested with all the estates, properties,
rights, powers, and duties of the predecessor escrow agent as if originally
named as escrow agent. Upon the effective appointment of a successor escrow
agent, the Escrow Agent shall be discharged from any further duties and
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liability under this Agreement. If a successor escrow agent is not appointed
within the above time frames, then the Escrow Agent may apply to a court of
competent jurisdiction for appointment of a successor escrow agent.
6. Abandonment of Transaction
In the event that the Merger Agreement is terminated and the transaction
abandoned pursuant to Article IX of the Merger Agreement: (i) no party not in
breach of its obligations hereunder shall have any liability to any other party,
including, but not limited to, liability for expenses incurred by any such other
party in connection with this Agreement and (ii) AVT shall pay the Escrow
Agent's reasonable costs and expenses incurred in connection with this
Agreement, and the Holders shall reimburse AVT for one half of the Escrow
Agent's reasonable costs and expenses incurred in connection with this
Agreement, with each Holder bearing its pro rata share of such costs and
expenses.
7. Representations and Warranties
Each of the parties represents and warrants with respect to itself only as
follows: (i) that it has full power and authority to execute, deliver and
perform its obligations under this Agreement; (ii) that all action on the part
of such party necessary for the due authorization, execution, delivery, and
performance of this Agreement, the consummation of the transactions contemplated
hereby, and the performance of each party's obligations hereunder has been
taken; (iii) that this Agreement has been duly authorized, executed, and
delivered by such party; and (iv) that this Agreement is a legal, valid, and
binding obligation of such party, enforceable against such party in accordance
with its terms.
8. Taxation of Interest Earned on Investments of Escrow Amount
The parties acknowledge that, for federal and state income tax purposes,
the interest earned on the investment of the Escrow Amount shall be income of
the Holders.
9. Amendments
This Agreement may not be amended except by an instrument signed by AVT and
the Shareholder Representative. No such amendment shall be effective to alter
or
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enlarge the Escrow Agent's rights, duties, discretion, and obligations hereunder
without its prior consent and each of the Holders has granted to the Shareholder
Representative the authority and discretion, so long as such authority and
discretion is exercised in good faith, to enter into such amendments as he
chooses in the exercise of such discretion.
10. General
10.1 Specific Enforcement
The parties expressly agree that they will be irreparably damaged if this
Agreement is not specifically enforced. Upon a breach or threatened breach of
the terms, covenants and/or conditions of this Agreement by any party, the other
parties shall, in addition to all other remedies, be entitled to a temporary or
permanent injunction, without showing any actual damage, and/or a decree for
specific performance, in accordance with the provisions of this Agreement.
10.2 Assignment
This Agreement will not be assigned by operation of law or otherwise
without the prior written consent of the other parties (acting in the case of
the Shareholders through the Shareholder Representative).
10.3 Notices
Any notice under this Agreement shall be given in writing and shall be
deemed effectively given (a) upon personal delivery to the party to be notified,
(b) upon confirmation of receipt by fax by the party to be notified, (c) one
business day after deposit with a reputable overnight courier, prepaid for
overnight delivery and addressed as set forth in (d), or (d) three days after
deposit with the U.S. Post Office, postage prepaid, registered or certified with
return receipt requested and addressed to the party to be notified at the
address indicated for such party below, or at such other address as such party
may designate by 10 days' advance written notice to the other parties given in
the foregoing manner.
To AVT, Acquisition Sub or the Company:
AVT Corporation
11410 N.E. 122nd Way
P.O. Box 97025
Kirkland, WA 98083
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<PAGE>
Fax: (425) 823-3606
Attention: Catherine Romero Wright
with a copy to:
Perkins Coie LLP
1201 Third Avenue, Suite 4800
Seattle, WA 98101-3099
Facsimile: (206) 583-8500
Attention: Andrew Moore
To a Holder:
at the address listed on Schedule A hereto.
with a copy to:
Venable, Baetjer and Howard
210 Alleghany Avenue
Towson, Maryland 21204
Fax: (410) 821-0147
Attention: Charles E. Rosolio
To the Shareholder Representative:
at the address listed for the Shareholder Representative on
Schedule A hereto.
with a copy to:
Venable, Baetjer and Howard
210 Alleghany Avenue
Towson, Maryland 21204
Fax: (410) 821-0147
Attention: Charles E. Rosolio
To the Escrow Agent:
Mellon Investor Services LLC
520 Pike Street, Suite 1220
Seattle, WA 98101
Attention: Relationship Manager
Fax: (206) 674-3059
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<PAGE>
with a copy to:
Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, NJ 07660
Attention: General Counsel
Fax: (201) 296-4004
10.4 Governing Law; Jurisdiction; Venue
This Agreement shall be governed by and construed under the laws of the
state of Washington without regard to principles of conflict of laws; provided,
however, that all provisions regarding the rights, duties and obligations of the
Escrow Agent shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed entirely
within such State. The parties (other than the Escrow Agent) irrevocably consent
to the jurisdiction and venue of the state and federal courts located in King
County, Washington in connection with any action relating to this Agreement.
10.5 Parties in Interest
This Agreement will be binding on and inure solely to the benefit of each
party and its permitted assigns, and nothing in this Agreement, express or
implied, is intended to or will confer on any other Person (as defined in the
Merger Agreement) any right, benefit, or remedy of any nature whatsoever under
or by reason of this Agreement.
10.6 Severability
If any term or other provision of this Agreement is determined by a court
or by arbitration to be invalid, illegal, or incapable of being enforced under
any rule of law, or public policy, all other conditions and provisions of this
Agreement will remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party.
10.7 Entire Agreement; Counterparts
This Agreement constitutes the entire agreement among the parties with
respect to this subject matter and supersedes all prior agreements and
undertakings, both written and oral, among the parties with respect to this
subject matter. This Agreement may be executed in two or more counterparts,
which together shall constitute one instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first written above.
AVT CORPORATION
By /s/ David Anastasi
-------------------------------------
Its President & CEO
---------------------------------
RAVEN ACQUISITION SUB
By /s/ David Anastasi
-------------------------------------
Its President
---------------------------------
SHAREHOLDER REPRESENTATIVE
/s/ Brett Warthen
----------------------------------------
Brett Warthen
MELLON INVESTOR SERVICES LLC,
AS ESCROW AGENT
By /s/ Joseph S. Cambell
-------------------------------------
Its Assistant Vice President
---------------------------------
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SCHEDULE A
Cash Escrow Amount Escrow Shares
-------------------------- ------------------------
Percentage Percentage
Holders Interest Value Interest Value
--------------------- ---------- ----------- ---------- -----------
JOHN MADILL 13.87% $ 64,148.89 13.87% $ 55,975.30
BRETT WARTHEN 86.13% $398,352.11 86.13% $347,595.70a
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